It’s been a dramatic few years for Australia, and the world, with an unprecedented global impact affecting business locally and internationally. Forced shutdowns, productivity taking a hit, cities deserted and a never before work from home bonanza took place. However, it’s certainly not all doom and gloom. Australia is the resilient country.
We survived the 2008 financial crisis, recovered from COVID and our mining industry has kept us steady. Along with a solid banking industry, Australia is a strong country with a very resilient economy. There’s great talent here, sought after resources and we have proven our worth as industry leaders in many fields. Whatever happens in the next 12 months, Australia’s resilience makes it well positioned to survive and thrive.
So what’s keeping business leaders up at night? What challenges are they expecting to impact them? The top challenges are skills shortages, cyber security, inflation, and supply chain issues. Let’s explore these more.
According to a survey of over 400 Australian business leaders by KPMG, the main challenges facing CEOs this year are:
Talent acquisition, retention and re/upskilling staff to meet a more digitised future (77% of business leaders)
With Australia’s unemployment rate at its lowest level for over half a century, talent acquisition and retention have been the major challenge for business leaders in the last 12 months and this is expected to continue throughout 2023.
Dealing with cyber risks (40% of business leaders)
Not so long ago, dealing with cyber security threats and data breaches was not a top priority for CEOs, but for today’s leadership it’s a major issue. As recently illustrated with the Optus and Medibank hacks, cyber crime impacts the affected organisations, hurts customers, and damages brand loyalty. With class actions against involved organisations, the bottom line can also be severely affected.
With increasing digitisation, the collection, storage and security of sensitive data poses a real and escalating challenge for all businesses.
Increasing revenue by identifying and growing future market segments and opportunities for growth (33% of business leaders)
With inflation rising and higher interest rates, there is a significant focus on increasing revenue growth. However, with signs of supply chains normalising there’s more light at the end of the tunnel than previously seen. Now, Australian business leaders are focused on delivering increased shareholder value.
In 2023 Business Leaders Outlook: Australia by JP Morgan 43% of companies surveyed are raising prices to combat inflationary measures and 35% of companies are prioritising their most profitable products. Businesses will continue to boost their margins by increasing existing market share and entering potential new markets.
The Australian Industry Group (Ai Group) also surveyed Australian business leaders with the majority largely agreeing on the fact that they expect business conditions and performance to improve in 2023.
And not surprisingly, they share the concerns of those in the KPMG survey. The three challenges, which will define their priorities in 2023, are:
- Tight labour markets
Staff shortages, particularly for skilled roles with 90% of CEOs expect to be affected by staff shortages in 2023.
- Continuing inflationary pressures
This is affecting business margins and reducing profitability.
- Supply chain disruptions
Without an effective supply chain, productivity is compromised.
How Australian business leaders are conquering the challenges they face
To address the challenge of staff shortages, business leaders are looking to invest more in staff training and development to grow their in-house skills base. To meet the needs of the digitised future, talent acquisition, retention and re/upskilling are the main challenges facing leaders. Increasing wages and benefits for employees can be a retention strategy, but more and more employees are seeking flexibility and a role that is holistically suitable for them and their work life balance.
Attracting high quality staff with rising wages has been, and will continue to be, a challenge for the majority of businesses this year.
Upping the minimum wage
Another challenge for Australian businesses is the desire to increase the minimum wage by 7% under the Labour government. In response, the AiGroup chief executive, Innes Willox, called on the Fair Work Commission to “exercise restraint and caution”.
“With both the Reserve Bank and the federal government pledging to ‘do what it takes’ to get inflation under control, a wage rise anywhere near the 7% proposed by the ACTU would raise inflationary pressures and inflationary expectations.”
Willox said that households are “already under pressure from increases in mortgage repayments” and failure to curb inflation could lead to “an additional round of interest rate rises”.
If interest rates keep rising, which they have done in the last 10 months, and only this month (April) the RBA announced a pause, what will this mean for Australian business?
Australia and China
Despite some geopolitical tensions, economic and trade cooperation between China and Australia has witnessed continuous growth over the past two years, and will continue to do so.
According to the 2022 survey report published by the Australian Chamber of Commerce, 58% of the Australian business community and organisations still consider China to be their top or one of their three top priorities for global investment plans over the next three years. The survey respondents showed optimism about future market opportunities and growing profitability in China.
This reinforces the fact that Australia is resilient with its main exports being Iron ore, gas and coal.
Boom time for Lithium
With the demand for electric vehicles growing every day and China being the major manufacturer, demand for Australia’s Lithium is stronger than ever. According to Statisa, a leading provider of market and consumer data, in June 2022, China accounted for 97% of Australia’s total lithium exports, importing approximately 1.13 billion Australian dollars worth of lithium. China was the primary importer of Australia’s lithium, accounting for at least 85% of Australia’s lithium exports in each month, and in some months of 2022 even more.
And according to The Resources and Energy quarterly published by the Department of Industry, Science and Resources, Lithium exports are rising rapidly. In 2022–23, Australia’s export earnings are forecast to more than triple to $18.6 billion, up from $5.3 billion in 2021–22.
Due to the high demand for Lithium, huge growth opportunities will continue to exist for the Lithium industry and its suppliers, providing strong stimulus and a workforce that is likely to expand to meet demand.
A positive outlook for 2023
So for the rest of 2023 it’s more of a case of a glass half full rather than half empty. Businesses that are optimistic for the rest of this year are the ones likely to succeed.
More importantly, it’s those businesses with the right people, with diversified thinking, in the right positions. This in turn will create greater shareholder returns, increase staff retention and job satisfaction, and that’s where Occulus comes in.
