There has been much talk about the potential fiscal cliff after JobKeeper ends, however we have a more optimistic view. Strong indicators of economic recovery in combination with the commencement of the vaccine roll-out, allows us to see a light at the end of the pandemic tunnel. In fact we have been amazed at the strength of businesses and the economy in general.
There is no doubt some businesses will be adversely impacted long after JobKeeper finishes, and the pain of Covid-19 has not been felt evenly across industries. However, through our work with small and large enterprises across varied industries, we have been impressed by the resilience of businesses, and the rapid reconfiguration which has enabled many to survive, and even thrive in these unprecedented times.
Regional tourism has prospered, with occupancy rates higher than ever before in regional towns like Mudgee and Dubbo. Many online retail businesses have maintained strong trading figures through lock-downs, veterinary practices are experiencing increased demand, and couriers and logistics services are thriving.
The sudden change in our work and life habits has changed demand, certainly, but it is not all bad news. With more people working from home, many are spending less on commuting and CBD lunches, but instead spending on homewares and home delivery. Where we are no longer spending on overseas holidays, we may now be splurging on domestic travel, experiences, hobbies and self-education.
Consider for example, that Australians have one of the highest rates of international travel in the world. In pre-COVID times Aussies spent a massive $58 billion overseas on holidays each year – much more than the $39 billion that we gained from overseas tourists coming here. Whilst our tourism industry takes the hit from a lack of overseas visitors, other areas of our economy are benefitting from our discretionary income that we’re unable to spend on overseas holidays.
The economy has been buoyed by China’s insatiable appetite for iron ore, with record prices and volumes recorded in recent months, benefiting important stocks like Fortescue, Rio Tinto and BHP. Australian equities more broadly serve as a forward barometer of business confidence, and the fact that Australian equities continue to perform very strongly, demonstrates an expectation of a recovery for Australian businesses post-COVID, even if current profits have taken a dip.
Property values in Australia have proved stable, with the benefit of returning expats offsetting the effect of lower migration rates.
With the extraordinary fiscal, monetary and spending stimulus, and record low interest rates, this economic crisis is different to the recessions of the past. Many individuals and businesses have been able to reconfigure their expenses, operations and structures in order to survive a difficult twelve months. With this resilience of people and the economy, we are optimistic for the year ahead.
As always, our team is here to support you and your business. If you have questions, please make contact with us by phone on (02) 9908 9888 or by email.