Economic Outlook 2014
Firstly a very happy new year from all of us at Morgan McKinley. We hope 2014 has started on a positive note for you.
I can’t quite believe it was a year ago that I sat here writing the outlook for 2013 after attending the annual Chief Economist breakfast. It is always interesting to look back at what the economists predicted, what actually happened and what might lie ahead for us in the coming year. With specific regard to Australia, there doesn’t seem to be a huge amount of change for us in the short to medium term but there certainly seems to be a more positive story for some of our key trading partners which can only be a good thing. With regards to understanding the fundamentals of Australia’s economy, we have to put ourselves in the global context and start by considering what external factors we are likely to face this year.
If we look to the US, 2013 was certainly blighted by increased taxes and a period of public sector austerity. However moving into 2014, it is a different story. With a lot of the above measures behind them, fiscal drag is easing and economists are predicting 3% growth, a significant uplift on last year. The early signs are looking positive with improving jobs and productivity measures.
When we look to Europe, the story is probably not quite as rosy with only a sluggish recovery expected and imbalance across the region with Germany likely to perform better at the expense of some of its neighbours France & Italy. Overall the Eurozone could be described as fragile with unemployment still at a record high of 12% and minimal GDP growth of 1.2% forecasted for this year but at least it is going in the right direction.
As we move closer to home, all eyes are on China as our strong economic links have served us very well in previous years. After the current economic dip, Xi Jinping has come out fighting with some major economic and social reforms. Although any reforms of this nature are unlikely to run smoothly with no fall out, the fundamentals are strong and likely to deliver sustainable growth for China over the coming years. The relaxation of the one child policy is an opportunity for China & their plans for significant capital investment in infrastructure will help ignite the economy. Economists are predicting around 7% growth this year, still very desirable in the global context.
Coming back to Australia, GDP growth performed poorly against 2013 predictions coming in closer to 2% rather than the more optimistic 3.5% cited at the start of the year. We all knew that a transition away from the reliance on the mining sector would be challenging but this was a disappointing result. 2014 looks to bring much of the same, the IMF revised their forecast back at the end of last year from 3.3% down to 2.8% growth and expected unemployment to increase to 6% in 2014. Whilst our economy has been transitioning so have those of the most advanced economies. In contrast whilst they have been gradually strengthening, growth in emerging markets has slowed. For Australia the slowdown in China is particularly important as a drop inChina growth from 10% to 7% will have a significant impact on Australian export revenues.
On the bright side, the falling Australian dollar should help to give businesses a boost this year and there will certainly be sectors that prosper as a result. There has been a real conservatism in business & consumer confidence over the last few years which has resulted in a very conservative outlook on spending and investment all detracting from demand in the economy. Towards the end of 2013 and start of 2014, this looks to have bottomed out with confidence returning, the housing market has been a great indicator of this with record clearance rates and prices as we closed out 2013.
So what will this mean for hiring in Australia this year?
Australia more than ever needs to compete on a global playing field and as a nation must invest to keep up and drive a competitive edge. Developing a highly skilled adaptable workforce will also be critical to Australia’s future success.
Productivity will continue to be a key focus for business regardless of sector and there is substantial opportunity for Australian businesses to make significant headway on this front as we move into a far more competitive global marketplace. A lot of work was conducted in 2013 and we expect this to continue into 2014 and beyond.
This may well mean further outsourcing, off-shoring and re-engineering will happen and this undoubtedly will have some impact on unemployment levels with a view that they could increase from 5 to 6%, still very respectable by world standards. Technology and the digital evolution will continue to pose challenges to organisations as they consider how they respond and use these new channels to build customer advocacy. New roles are being created that require a cross disciplinary skill set for delivery. The New “Head of Customer” and “Head of Digital Strategy” are only becoming more common place as organisations grapple with how best to approach these critical business challenges.
As we move into 2014, the other noteworthy trend we have observed is the momentum the diversity challenge has started to gain. Although this is a difficult and sometimes controversial topic, businesses have started to shift from the “we need a business case to prove the benefits”, towards wider acceptance that greater diversity drives better results and a focus on how to exactly deliver this for their organisations.
Hiring for the Australian market which usually doesn’t get under way until mid February, has kicked off with a bang in January and the early signs are looking quite positive for the year ahead.
In summary, the outlook is conservative for the most part for 2014 but the Australian market characterised by its talent shortages will still provide opportunities for capable individuals.
We look forward to working with you in 2014 and we hope this provides you with some useful insight to the year ahead. We wish you all the best for a prosperous 2014!