As business owners, we’re in a unique point in history. While you’re discussing your goals and plans for this year with your business coach, I want to give you a perspective on what the next couple of years might look like.
There are good reasons you should be very confident to grow your business in Australia in 2021-2024.
Strong trends in the Australian economy
Firstly, let’s look at several indicators that show us the mood of businesses and families in Australia.
After one of the fastest slides, the Australian stock market has recovered nearly all of the losses that occurred in early 2020. See this chart of the ASX200 over the last 12 months:
New home sales are thriving. A report from the Housing Industry Association shows that new home sales in December 2020 nearly doubled compared to any other month last year. It’s the second strongest month of new home sales in the 20-year history of the survey, (the record is held by March 2001).
Source: HIA New Home Sales report – 19 January 2021
The demand for new homes is being driven by the HomeBuilder grant, low interest rates, improved lending assessment and rising prices of established homes.
Prices of established dwellings are also up. Over the 12 months of 2020, house prices increased across Australia with an average increase in capital cities of 2.0% (the exception was Melbourne, at -1.3%). Regional areas saw stronger performance with an average increase of 6.9%.
Industry experts are forecasting house price growth in 2021 in the range of 5% to 15%, with the main demand factor of low interest rates expecting to remain steady.
What is driving the uplift in the price of assets, like property and shares?
1. Lockdown savings
Businesses and families were unable to maintain their normal spending patterns during the lockdown and so now with the loosening of restrictions, businesses and people are making up for lost time by spending more. Consider your own spending patterns as evidence of this.
2. Massive government support
(JobKeeper, personal tax cuts and business tax incentives)
It is acknowledged that JobKeeper was very successful in supporting business, in fact some economic commentators have said it was too successful. The result of this financial support is that businesses are well capitalised to be able to grow. We know of many Tenfold clients who in recent months have invested in new vehicles and equipment, more spending than we would normally see. The flow-on effect of this type of spending results in other businesses and employees having more money to spend themselves.
3. The lowering of interest rates
The official cash rate is currently 0.10%, which is the lowest ever in Australia’s history. The costs of borrowing are cheaper than ever for people to buy a house rather than rent and it is cheaper for businesses to own their office, shop or factory rather than sign a lease with a landlord.
These three factors combined have raised the mood of businesses and households, and have resulted in people being willing to take a risk and bargain up the prices of property and shares.
But will this spending end soon ?
I see two main factors that will continue to encourage confidence in Australia’s economic recovery.
1. Infrastructure stimulus will drive economic recovery
Since the start of the pandemic, I’ve been reiterating that the Australian government will use infrastructure spending to drive the economy out of the downturn. It has now been revealed that nearly $225 billion will be pumped into infrastructure funding by the federal and state governments over the next four years to FY2023-24. The investment is an increase of 26% over last year’s budgets, that’s an additional $59 billion!
Source: Infrastructure Partnerships Australia calculations, based on 2020-21 Budgets
To give you context on the scale of the investment, compare the funding for infrastructure against the JobKeeper scheme:
2. Low interest rates will remain
As I mentioned in my briefing of 2 December 2020, the governor of the RBA, Dr Philip Lowe, has said that the official cash rate is likely to remain at the low level of 0.10% for 3 years.
What these signals mean for your business
Aside from some outlying industry sectors (e.g., those that rely on international visitors such as travel and tertiary education), the Australian economy is buoyant.
The current conditions make it a very good time to grow your business. While not all sectors or businesses will directly benefit from the infrastructure funding, it’s important to remember that a rising tide lifts all boats.
My perspective for Australian businesses and clients of Tenfold Coaching is:
Be confident in the growth opportunities and pursue them with vigour, because the economic conditions now and over the next 3 years are ripe for smart businesses with good strategies to advance.
This year through these briefings I’ll be explaining more about Tenfold’s proprietary model for growing a business. The strategies, tools and methods we use have been developed over many years, and many of our long-term clients can attest to the significant wealth they have created by following our model. In recent years in conjunction with Tenfold’s business coaches and mentors, I have honed and refined the model even further. The model centres on:
- Positioning your business in a strong niche market;
- Planning out the big picture growth plan for your business;
- Bullet-proofing your business from internal and external risks; and
- Preparing your business for sale at a significant premium.
Over the coming months I’ll be bringing videos and insights to Tenfold clients help you better understand the theory behind some of the initiatives you’ll be working on with your business coach this year and beyond.
I’m looking forward to seeing your business advance in 2021.
Ashley Thomson B.Eng(Hons), Grad. Dip. Mgmt, MEI
Tenfold Business Coaching