Economic conditions you need to prepare for in 2024

About the Author: Ashley Thomson
Ashley Thomson

Welcome to the first briefing of 2024, I hope you had relaxing break and are re-energised for the year ahead.

I thought I’d start the briefings this year by giving you my insights on what economic conditions are likely to influence our businesses in 2024. To do so, we need to look at the two big factors that are driving the economy: interest rates and immigration.

Two big factors driving Australia’s economy

Image prepared by Tenfold Business Coaching showing a seesaw of interest rates and immigration and a chart of Australia's target cash rate from 1994 - 2023 and a chart of Australian net overseas migration from 2013-2023

The increase in spending from the record level of immigrants is balancing out by the reduction in spending by the rest of the population, who in general have cut back on spending due to the higher interest rates.

Many people and most of the media are expecting interest rates to come down soon, just because inflation is coming down. I don’t agree, let me explain why.

Interest rates go up when economical times are buoyant and there is fear this will lead to inflation.
Interest rates come down when the economy is depressed, and the government needs us to spend more to minimise unemployment.

My point is that I believe that we’ll only see interest rates come down when:
1. the economy is lagging, AND
2. unemployment goes up to a level much higher than it currently is. By that stage people will be spending a lot less and many businesses will be struggling.

Pay attention to what is being said by the people who matter (the Reserve Bank Governor and the Australian Future Fund CEO), versus the stories in the media.

Reserve Bank: “a further increase in interest rates cannot be ruled out.”

Future Fund: “The economy remained strong and seems to be withstanding the interest rate increases, which by the way, also makes it less likely that interest rate reductions will be required.”

Plan your business for both scenarios

Scenario 1: The economy continues as it is… Scenario 2: The economy slows down significantly…
Interest rates will likely remain where they currently are. We’ll see multiple decreases in interest rates.
Consumer sentiment will be positive, people will be spending and the economy will be buoyant. People will stop spending and as a result there will be significant redundancies. The lowest performing businesses in many industries will shut down.
It will remain challenging when recruiting team members and so there will be continued pressure to increase wages. The businesses that have shut down will release people back into the job market. There will be a greater number of quality job applicants and less pressure for pay rises.

What this means for your business

In my briefing (24/10/2023: “Economic Insights: 2 Indicators to Watch in the Next 3-5 years“), I encouraged you ramp up marketing. Once again, I’m encouraging you to continue with higher levels of marketing than what you would have had to commit to during COVID.

Going forward… ensure that you’ve positioned your business in a strong niche or are taking positive steps to do so. For those businesses with marketing momentum, targeting a niche market will do well in scenario 1, but do extremely well in scenario 2.

If you’re new to Tenfold, pay particular attention when your coach discusses your niche market with you. The niche markets we target are often recession proof, have solid barriers to entry and have less price competition. You’ll want to be charting a course to one of these markets if we get stormy economic weather.

Deeper insight into which industries are doing well and which ones are struggling

I made this point earlier, “reduction in spending by the rest of the population who in general have cut back on spending due to the higher interest rates”. Let me explain further what is happening here.

The wealthiest: This group are significantly impacted by share market gains and not as much by interest rate increases. As the share market is doing very well, they’re continuing to spend money. To illustrate, luxury vehicle sales are expected grow 9.2% this year and Lamborghini shipped nearly double the number of new vehicles to Australia compared to the previous year.

Middle-income group: This group typically have a mortgage and are feeling the effects of the interest rate rises. However, because they’re reasonably well off, they’ve been able to switch to lower costs items and cut back some of their discretionary spending. Kmart, a cost-conscious shopping destination, increased their average sales per store by 14.5% last year. Where on the other hand, David Jones, a higher end department store, have seen sales drop and they recently closed their Eastland store in Melbourne.

Low-income group: This group have struggled with the cost of all of the basic items that they need to live. Whether it is food prices going up or rents increasing, this has impacted this group and they too have sought out the cheapest prices. It is estimated that Aldi’s revenue increasing between 16-18% last year.

For your businesses, if you’re selling to consumers you need to make sure you’re adjusting your marketing to appeal to the area of the market that will support your sales. Continue to target the wealthiest and/or provide a compelling ‘value’ offer to those who are cost-conscious. Keep discussing this with your coach.

Looking ahead for Tenfold clients and small businesses

Looking further ahead into 2024 we can expect even more changes as technology progresses, artificial intelligence continues to advance, and automation accelerates.

I believe that these will present opportunities for those businesses that are positioned to take advantage of them so these topics will be covered in my upcoming briefings.

You can trust that your coach and I will be looking ahead to make sure you make the most of these advancements while ensuring the long-term sustainability of your business.

If you’d like to read more about the information in this briefing, visit these sources:

As always, reach out to me or speak to your coach if you have any questions about this briefing.


Ashley Thomson B.Eng. (Hons), Grad. Dip. Mgmt, MEI

Managing Director, Tenfold Business Coaching