Australia is facing an eight-speed economy as an avalanche of conflicting forces converge to create an unprecedented air of uncertainty for business owners.
When the mining boom was in full swing a decade ago, businesses were grappling with a two-speed economy.
Put simply, this concept explained why many businesses were struggling at a time when national economic data indicated the prevalence of boom conditions. It was a factor that supported high interest rates at a time that the rest of the economy was calling for help.
A lot has changed since then, but the complexity of business conditions hasn’t.
The challenge is clear for businesses. More than ever they need to be aware of these changes and to be prepared to make adjustments if they are to survive and thrive.
This may include expert advice from an independent professional who can help them navigate the rough waters ahead.
The Australian economy currently comprises a number of key drivers that are not in synch, leading to a serious imbalance of conditions from region to region.
The business environment is complicated even further by the friction generated by the new economy of disruption undermining the established hold of traditional industries.
However, businesses need to take all of these drivers into account when making vital decisions related to growth opportunities as they arise.
The eight-speed economy could easily refer to the varied performances of each state, but that would simplify the divide that exists within each state between metropolitan and regional areas, some of which are affected by severe drought.
The sector of Australia’s multi-speed economy most notably out of synch is the property sector. For many years, the strength of the Sydney and Melbourne markets has masked the struggles experienced in other parts of the country.
While there has been a sizeable price correction, the uncertainty created by the property downturn is having a broader impact on consumer and business confidence.
At its core, the property market may have been underpinned by population growth, led by the strength of immigration numbers, but the appeal of the larger capitals has markedly skewed the benefits to the national economy to those centres. It’s been business as usual for everyone else.
So, it may be worth noting that a pullback in international migration announced by the federal government could have implications more broadly for the economy.
Recent data from the Australian Bureau of Statistics shows Australia actually suffered a per capita recession in the September and December quarters of last year. This last occurred in 2006 and indicates that without the growth generated by rapid immigration, the Australian economy would have been tipped into an official recession late last year.
While the population has become more fluid, so have businesses and the one big change is how highly connected they are to global influences these days, much more than they were just a decade ago.
The biggest threat to the Australian economy remains the strength of the Chinese economy, and the global economy more broadly. The waters there are also being muddied by the prospects of an escalation in a global trade war led by the US.
When overlaying these mounting external pressures with the existing forces at play in the Australian economy, the vulnerabilities from the eight-speed economy cannot be understated. Those businesses in the fast lane of the economy will be strong enough to fend off a downturn should it arise, while those already in the slow lane may not make it.
With so much at stake, business owners need to be prepared ahead of time to handle the problems and capitalise on any potential opportunities that a multi-speed economy delivers.