The global economic environment indicates that 2023 will be a challenging one for business. However, as with any period of uncertainty, there will be the opportunity for growth as the economy normalises and then starts to recover.
Initially, Australia’s economic growth is expected to fall significantly, as rising inflation curbs household spending and the RBA continues to increase interest rates to try and combat that. This all points to a global recession occurring in early 2023, which will have an impact on Australia as well. As the CBA notes “our base case envisages a global recession in 2023 – the first central bank-induced global recession for a number of decades.”
However, other predictions suggest that Australia might weather the worst of the global economic headwinds. NAB predictions are that the GDP will actually grow – slowly and at less than one per cent, but it will nonetheless be growth.
For businesses, there are some positive signs to look forward to as well. One of the biggest challenges that business owners currently face is the lack of employees, with the unemployment rate being just 3.4%. This is expected to ease in the new year, and depending on the prediction, unemployment will be anything up to one per cent higher than current levels.
A further trend that will start to resolve itself is the current supply chain issues that are making stock such a challenge for so many businesses. These two challenges are significant contributors to inflation, so as they start to ease, the inflation challenge facing Australians will ease in kind.
One final trend that is impacting many Australian businesses is the excessively strong Australian dollar, making imports of any variety more expensive. This is expected to start to ease back and normalise in 2023 as well.
Australia will become the 12th largest economy in 2023 thanks to a stable and resilient business environment and government.
How Businesses Can Prepare For 2023
Ensure strong cash flow
Rising interest rates and inflation can squeeze cash flow, by making inputs more expensive and increasing the interest rate on loans and other debts. It can also mean that banks are willing to lend less money.
It is critical to maintain liquidity through this period, and for that reason having additional sources of immediate cash, such as a charge card, might be a wise idea. Charge cards don’t have interest, don’t have a pre-set spending limit, and earn points with use, which can be used for further business expenses. With terms that allow for up to 55 days to pay for purchases, a charge card can be a useful resource in guaranteeing cash flow.
Prepare your business for the recovery
The huge opportunity after any period of economic uncertainty is the recovery that comes after. Capitalising fully on this opportunity may well mean investment into the business. Additionally, securing your supply chains for the recovery might mean you need to make larger and long-term commitments to your suppliers, which can have substantial up-front costs.
You should check on your business’ credit rating, and then see what options might be available to you. Speaking to your Oracle advisors on what the lending landscape looks like now is a good idea. This will help you to identify where the opportunities to grow will be as you plan for the year ahead.
Look for new opportunities
Many businesses are looking to diversify into new areas of opportunity and find complementary revenue streams as a way of hedging against declining spend in core product areas. For example, small businesses might start selling online for the first time or develop new products and services to offer as a “value add” to their customers.
By investing in data to understand your customers and broader consumer spending behaviour better, you’ll be able to find new opportunities to expand your business in this way. Again, it will cost money and you may want to look at what credit opportunities you must finance that expansion. However, this is something you’ll want to prioritise early in the year. Being flexible and agile in business is more important now than ever.
There are two potentially costly areas of regulatory reform that will affect most Australian businesses in 2023. One is sustainability. Social and economic pressure will push the government into increasingly strict expectations around sustainability, and while there might not be a “carbon tax” implemented, policies will make polluting power more expensive while subsidies and incentives will make renewable power more appealing. You could look at whether there is the opportunity to invest in sustainability, both as a way of reducing ongoing OpEx spending on power, and as a way of boosting your public profile, as consumers start to prefer “green” companies.
Secondly, cyber security is going to be a paramount concern for the government, after the high-profile data breaches that affected so many people this year. With penalties for breaches likely to increase, businesses need to ensure that they’re taking steps to better secure their customers’ data.
Take steps to keep your employees happy
Finally, with the job market being so tight, finding skilled staff is both challenging and expensive. Organisations should focus on job satisfaction to retain existing staff and be sure they’re seen as a good employer to help with recruiting the few job seekers available.
This does not necessarily mean simply increasing wages. One of the underlying reasons for the “Great Resignation” that has occurred in recent years is employee desire for better work/life balance, so bringing in policies that allow employees to feel valued, develop their careers, and have the time they need away from work are all as important to satisfaction and, ultimately, retention, as remuneration.