2020 Economic Predictions

2020 Economic Predictions

The holiday season often gives us time to reflect on the year that has been, and to ponder the year ahead. This is the ideal time to review your business plan in the context of a fast changing environment, and to make any necessary adjustments to strategy. So as we all start to settle back into our work routines, it’s a good time to think about the challenges ahead, and what we can do to prepare for 2020. As food for thought, I offer my top three predictions for the year ahead, which may impact your business.

Modest global growth

Whilst the global economy will continue to show ‘moderate’ growth in 2020, we will probably have the weakest growth seen since the global financial crisis in 2008/09. This lethargy will be due to the continuation of trade wars between the US and China (and other country, most recently Brazil, which President Trump chooses to take issue with) which will stifle economic activity in both the US and globally. This impacts both global economic output and consumer sentiment, with an obvious trickle down impact to broader economic investment.

On one level it has been good news for Britain recently and their political uncertainly is now resolved, however economic uncertainty remains as all signs suggest there will be a reduction of around eight per cent of gross domestic product (GDP) for Britain post Brexit. Smart firms will have already started preparing for this. Other foreign powers will position themselves to work on Britain specific trade agreements, however, offering good opportunities for Australia to negotiate good terms with ‘old Blighty’.

Growth out of Asia should remain solid, effectively supporting global growth. Hong Kong remains a concern, as political turmoil continues to weigh heavily on their economic performance. Any further escalation on this front from China may cause other global powers to at least ‘be seen’ to be doing the right thing, thus potentially applying further pressure on growth.

Interest Rates Remain Low

Domestically, official interest rates can’t go much lower (although they will). We will hear from the Reserve Bank of Australia (RBA) that we need to see greater changes to fiscal policy to stimulate growth (as the RBA can’t do much more, and negative interest rates are a slippery slope we do not want to be on).

The lower rates have helped the domestic property market rebound (most notably in Sydney and Melbourne), and employment remains reasonably strong (which is helping the economy). On balance, the lower Australian dollar (a by-product of falling interest rates in this instance) will help support the economy by assisting our exporters.

Change is afoot

Domestically and globally, change is coming! Enhanced regulation in most sectors, a far greater (and needed) focus on the environment and sustainability will be seen.

Many traditional economies are ‘peering over the fence’ to see the success of socialist economies like Finland and Norway, for example, as their ‘happiness’ indexes, their free education and health systems, their greater balance on fairness, stronger gender balance in the workforce etc, seem to be gaining greater traction as a means to move an economy forward. I feel that these economies, and their means of running their companies and their countries, will attract more attention and become more influential as Millennials rise to positions of leadership in the workforce, with many taking their ‘lead’ from the economic, environmental and sociological policies followed within these countries.