We are in a perfect storm right now, with serious economic uncertainty in the short to medium term. What is not helping is that some governments are splashing more money into the market, think recent Govt announcements:
- Qld additional $15,000 for first homeowners
- the Federal to spend more public money on renewables to meet an increasing unlikely energy target with all the inefficiency an energy grid overloaded with unreliable power generation capacity and driving up power prices (18% in the last 12 months)
Despite the assurance by the Qld Govt that this additional grant will not impact on house prices, my lecturer in economics at UNE taught us that subsidies will drive up prices if they distort the marketplace (I might add that if used to alleviate market failure, subsidies can work well). However, in these cases (energy and housing), these markets are being distorted due to government involvement in the market.
Power generation intervention such as the subsidising the intermittent power generation firmed by batteries etc crowds out alternative generating capacity (I have said it before and will say it again, the push into renewable power generation in the largest transfer of wealth from the less well off to the wealthy we have seen since the industrial revolution in the 1800’s). In the case of housing, increased demand impacts on an already constrained building supply market, thereby increasing the cost of construction. The housing market is also driven by the influx of immigration. On housing, how the government thinks that adding an additional 700,000 migrants into an already limited housing supply will not impact on a range of cost-of-living drivers beggars belief.
From a business perspective, what can we do? Well, we should start at doing a comprehensive review of our business operations to ensure that we are as profitable as possible, now and into the future. Starting with:
- What is our core business
- What are our margins on our main products/services
- Are we using our resources in a productive way (productivity)
- Do we provide our customers value (think price, quality or convenience)
- Can we improve.
These and more are things we need to consider if we are to weather the storm.
If you want assistance to conduct the review, there are a number of capable consultants out there who can support your business development. A good starting point could be https://imc.org.au/. This organisation has a list of professionals who can provide assistance (of which I am a member).
Depending on your needs, I can assist you with your business review, and follow up with additional support if required.
I will be running a webinar on “Managing Economic Uncertainty” Eventbrite 12 December before Christmas Registration link :- https://www.eventbrite.com.au/e/managing-economic-uncertainty-tickets-765965091207?aff=oddtdtcreator if you are interested.
Happy reading and good luck
