ACETA Newsletter - September/October 2020
Dear Colleagues,
Throughout its course, the Covid-19 pandemic has attracted regular opinion on its economic and employment fallout, which in general terms are not as dire as most commentators predicted. However, it helps to consider this pragmatically, first of all we have never in our lifetime had a pandemic precedent such as Covid-19 to guide a metric, without which, we can only speculate. Secondly, we need to assess the pandemic’s impact industry by industry. We know that some industries have prospered, however we can group together a loose confederation of sectors that have not, and these include hospitality, tourism, travel, entertainment and its associated technology and service streams.
So, whilst we don’t have a pandemic precedent to help make informed judgements, we do a recession. Therefore, we juxtapose our current experience with that of 1990, and before we do, let’s confirm what constitutes a recession. Technically, a recession occurs when we see two consecutive quarters of negative GDP growth. The cause, experience and outcome of recessions will vary; however, we will endure reduced business activity leading to increased unemployment. As unemployment rises, the community spends less and overall economic output declines. Given our bushfire trauma followed by the pandemic, it isn’t surprising that we are now in a technical recession.
The last recession commencing in 1990, followed a period of excess, speculation and overspending. It occurred as central banks pushed interest rates to a record 17% to curb inflation. Today our official cash rate has dropped to 0.25% in March, driving interest rates to record lows and a vastly different landscape than 1990. Our current GDP experience saw a 0.03% decline from January to March and a massive 7% from April to June. Household consumption fell by 12.1%
Unemployment reached almost 11% in 1992, and it took almost a decade to return to 6%. Currently the official unemployment rate is 7.5%, with underemployment at 11.2% and a participation level of 64.7%. In the 1990 recession house prices crashed as very high interest rates, combined with job losses, produced higher numbers of distressed property sales. Despite doom and gloom predications, there has been no property crash in 2020, whilst there has been some decline in some regions, values have been relatively stable, thanks to extremely low interest rates and government income support.
The 2020 recession is quite different and we shouldn’t expect it to play out the same as that which we encountered in 1990. Our current experience was preceded by low inflation, low interest rates, low wages growth, low productivity and low economic growth. It is in fact a downturn instigated by government restrictions designed to protect as many Australians as possible from Covid-19.
Unlike the 1990s, the RBA expects GDP and unemployment will return to previous levels within one to three years. While unemployment may still rise to 10% as JobKeeper is wound back, economists are forecasting GDP will start to expand from the third quarter of 2020. House prices are not expected to crash, by virtue of lower interest rates, more supportive banks and government stimulus measures not experienced in 1990. Typically, a recession ends when interest rates and operating costs fall so low that businesses and investors start borrowing and spending again, and employers start hiring. The RBA has signalled it will keep the cash rate at the record low levels for several years, which bodes well for investment and opportunity.
The pandemic has provided a multitude of excuses and masked underlying flaws. As we recover and learn to manage and live with Covid-19, a ‘business as usual’ attitude will undermine our future and deny opportunity that will be available, if we are capable and willing to change. Before proceeding, I would suggest core contemporary business practices have not really served us well including;
-business growth at any cost
-short term thinking, quick fixes and convenience
-the race to the bottom in both cost and quality
-placating the shareholder at the expense of the customer
-the growing emphasis on virtual as opposed to real engagement
Ordinariness should not be an option, evolve and realize your potential.
Opportunities you may like to consider moving forward:
For the MANUFACTURER/CREATOR, there has never been a better time than now to realize your potential. Many international competitors have been weakened or aren’t there, some are not producing/supplying. The reputations of some traditional supply nations are not what they were, it will be a different landscape moving forward, of that you can be certain. The playing field has levelled and we are viewed as a high-quality producer; we are both respected, neutral, and an ideal supply partner, but we need to get our act together. We also have ACETA to provide cohesion and move us forward in a dynamic and unified manner.
To the DISTRIBUTOR, the time is right to consider local technology producers instead of placing all your emphasis on imports. A new initiative may be considered to specialise in local producer representation?
Most multi-nationals are confronting significant challenges and some will reduce cost and exposure by closing regional offices, reverting to a local distribution model. You now have justification to consider who and what you are, specialist, all things to all people, bigger or better, diversify? We also should ensure local commercial activity retention and ACETA will provide solutions in this regard.
The SERVICE PROVIDER sector represents the largest number of businesses, that combined, employ the highest number of individuals across a variety of trades and professions, without which the show (in all its forms) doesn’t go on. In certain area’s the sectors destiny is dictated by the activity or inactivity of others. Diversification will deliver opportunity both within, and outside the industry, and some feel improved standards, including compliance and skill recognition will improve sustainability. Some paths to increased opportunity require a unified approach, which is being actioned by ACETA.
The 2021 ACETA convention will focus on development and the transformation required to prevail in a new industry landscape. Dates for the 2021 convention will be confirmed shortly, and to reiterate, due the exceptional circumstances, and as a once only gesture, it will be free to qualifying members and associate members, but subject to necessary capping. Now is not the time to remain disconnected, if you have questions and/or wish to join your industries peak body, contact julie@aceta.org.au.
All the best
Frank Hinton
President
ACETA
Throughout its course, the Covid-19 pandemic has attracted regular opinion on its economic and employment fallout, which in general terms are not as dire as most commentators predicted. However, it helps to consider this pragmatically, first of all we have never in our lifetime had a pandemic precedent such as Covid-19 to guide a metric, without which, we can only speculate. Secondly, we need to assess the pandemic’s impact industry by industry. We know that some industries have prospered, however we can group together a loose confederation of sectors that have not, and these include hospitality, tourism, travel, entertainment and its associated technology and service streams.
So, whilst we don’t have a pandemic precedent to help make informed judgements, we do a recession. Therefore, we juxtapose our current experience with that of 1990, and before we do, let’s confirm what constitutes a recession. Technically, a recession occurs when we see two consecutive quarters of negative GDP growth. The cause, experience and outcome of recessions will vary; however, we will endure reduced business activity leading to increased unemployment. As unemployment rises, the community spends less and overall economic output declines. Given our bushfire trauma followed by the pandemic, it isn’t surprising that we are now in a technical recession.
The last recession commencing in 1990, followed a period of excess, speculation and overspending. It occurred as central banks pushed interest rates to a record 17% to curb inflation. Today our official cash rate has dropped to 0.25% in March, driving interest rates to record lows and a vastly different landscape than 1990. Our current GDP experience saw a 0.03% decline from January to March and a massive 7% from April to June. Household consumption fell by 12.1%
Unemployment reached almost 11% in 1992, and it took almost a decade to return to 6%. Currently the official unemployment rate is 7.5%, with underemployment at 11.2% and a participation level of 64.7%. In the 1990 recession house prices crashed as very high interest rates, combined with job losses, produced higher numbers of distressed property sales. Despite doom and gloom predications, there has been no property crash in 2020, whilst there has been some decline in some regions, values have been relatively stable, thanks to extremely low interest rates and government income support.
The 2020 recession is quite different and we shouldn’t expect it to play out the same as that which we encountered in 1990. Our current experience was preceded by low inflation, low interest rates, low wages growth, low productivity and low economic growth. It is in fact a downturn instigated by government restrictions designed to protect as many Australians as possible from Covid-19.
Unlike the 1990s, the RBA expects GDP and unemployment will return to previous levels within one to three years. While unemployment may still rise to 10% as JobKeeper is wound back, economists are forecasting GDP will start to expand from the third quarter of 2020. House prices are not expected to crash, by virtue of lower interest rates, more supportive banks and government stimulus measures not experienced in 1990. Typically, a recession ends when interest rates and operating costs fall so low that businesses and investors start borrowing and spending again, and employers start hiring. The RBA has signalled it will keep the cash rate at the record low levels for several years, which bodes well for investment and opportunity.
The pandemic has provided a multitude of excuses and masked underlying flaws. As we recover and learn to manage and live with Covid-19, a ‘business as usual’ attitude will undermine our future and deny opportunity that will be available, if we are capable and willing to change. Before proceeding, I would suggest core contemporary business practices have not really served us well including;
-business growth at any cost
-short term thinking, quick fixes and convenience
-the race to the bottom in both cost and quality
-placating the shareholder at the expense of the customer
-the growing emphasis on virtual as opposed to real engagement
Ordinariness should not be an option, evolve and realize your potential.
Opportunities you may like to consider moving forward:
For the MANUFACTURER/CREATOR, there has never been a better time than now to realize your potential. Many international competitors have been weakened or aren’t there, some are not producing/supplying. The reputations of some traditional supply nations are not what they were, it will be a different landscape moving forward, of that you can be certain. The playing field has levelled and we are viewed as a high-quality producer; we are both respected, neutral, and an ideal supply partner, but we need to get our act together. We also have ACETA to provide cohesion and move us forward in a dynamic and unified manner.
To the DISTRIBUTOR, the time is right to consider local technology producers instead of placing all your emphasis on imports. A new initiative may be considered to specialise in local producer representation?
Most multi-nationals are confronting significant challenges and some will reduce cost and exposure by closing regional offices, reverting to a local distribution model. You now have justification to consider who and what you are, specialist, all things to all people, bigger or better, diversify? We also should ensure local commercial activity retention and ACETA will provide solutions in this regard.
The SERVICE PROVIDER sector represents the largest number of businesses, that combined, employ the highest number of individuals across a variety of trades and professions, without which the show (in all its forms) doesn’t go on. In certain area’s the sectors destiny is dictated by the activity or inactivity of others. Diversification will deliver opportunity both within, and outside the industry, and some feel improved standards, including compliance and skill recognition will improve sustainability. Some paths to increased opportunity require a unified approach, which is being actioned by ACETA.
The 2021 ACETA convention will focus on development and the transformation required to prevail in a new industry landscape. Dates for the 2021 convention will be confirmed shortly, and to reiterate, due the exceptional circumstances, and as a once only gesture, it will be free to qualifying members and associate members, but subject to necessary capping. Now is not the time to remain disconnected, if you have questions and/or wish to join your industries peak body, contact julie@aceta.org.au.
All the best
Frank Hinton
President
ACETA