Australia Economic Outlook 2022
In its Statement on monetary policy this month, The Reserve Bank of Australia (RBA) reported that the Australian economy bounced back quite strongly in late 2021 as COVID- related restrictions and lockdowns eased, and domestic borders between most Australian states reopened.
The RBA expects the Australian economy to perform well in 2022 but acknowledges ongoing uncertainty around health outcomes associated with COVID-related issues. A resurgence of the current variant or the emergence of new variants might require a return to some further restrictions and consequent disruptions to business and economic recovery.
Accordingly, the RBA has developed three scenarios regarding Australian economic performance in 2022. The central scenario forecasts a GDP growth of 4.25 percent over 2022 before an anticipated slowing in 2023 to 2.0 percent.
The RBA has also developed upside and downside scenarios.
Australian business leaders are optimistic about growth prospects in 2022. A PwC survey of Australian CEOs of major companies across all sectors revealed that they have ‘underlying confidence about business growth’ in 2022 despite the lingering uncertainty concerning COVID-19 issues and the outcome of a looming Federal Election this year.
Economists predict that mining commodities, energy, infrastructure construction and healthcare sectors will be strong growth sectors in 2022. The Arts and hospitality sectors will remain challenged.
There will be a Federal election by May 2022. Polls indicate the outcome will be close, but there is informed consent that the current Liberal/National Coalition government led by Prime Minister Scott Morrison is in significant trouble. It is quite possible we will see a change in government, with a new Labour Government taking up office federally.
A fundamental issue in this election is leadership or the perceived lack thereof by the current government, particularly regarding climate change and the response to the COVID crisis. COVID response management failures include a slow vaccination program rollout, a flawed quarantine program, and poor management of aged-care facilities, leading to a high number of deaths in these centres.
Lack of action on diversity, equity and inclusion (DEI) issues and a federal corruption watchdog promised in the last election but not acted upon also drive a desire for change.
A new Labour government is expected to be more active on these issues, especially regarding climate change initiatives. It may also provide an opportunity to reset the dialogue with Australia’s major trading partner in the APAC region which has become increasingly tense during the current government’s tenure.
The PwC survey of CEOs of major Australian companies across all sectors revealed that they believed the three major risks which could potentially damage growth prospects for their organisations in 2022 are:
- Cybersecurity issues
- Climate change
- Talent/skills shortage
The issue of talent/skills shortage in Australia is acute, especially in healthcare and infrastructure/electrotechnology and energy construction sectors.
Two thirds of CEOs surveyed indicated that they were worried about the impact of COVID-19 and health and mental wellbeing issues on attracting and retaining talent in 2022.
Another report by the Gartner Institute revealed that 25 percent of people surveyed in late 2021 stated that they were intending to change jobs in 2022. They cited three reasons for leaving their present employer:
- Burn-out (lack of work/life balance)
- Poor leader/manager behaviour
- Organisational culture (not feeling valued and/or respected at work)
Workplace culture is currently a major focus of concern in Australia, both within government and non-government sectors.
The Rio Tinto experience highlights this concern. A recent independent review of the workplace within Rio led by a prominent sex discrimination commissioner prompted the Rio CEO to declare his company’s culture as ‘deeply disturbing’.
This is not surprising: the review found that sexism, bullying and racism ran rampant within the business. Among the 10,000 employees surveyed of Rio’s 45,000-strong workforce, 25 percent of women stated they had experienced sexual harassment and almost 50 percent of the workforce had been bullied.
Rio has accepted all 26 recommendations and pledged to implement major changes in its corporate culture.
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