A Message of Season's Greetings - 2022

Welcome to the last AGR Insights newsletter for 2022.

The year has passed quickly and along the way there has been many interesting twists and turns for the economy, for Australia as a nation, and at a global level.

Australia is sometimes seen as this island to the south but it is still well connected to the global world and the interconnection still impacts our nation. Consequently 2023 will be a difficult year for Australia as well as the rest of the world.

The year has seen the commencement and continuation of the war in the Ukraine, the rise and rise of inflation, the demise of cryptocurrency, the fall in the fabled FAANG stocks and high growth enterprise software cohort. Australia voted in a new Federal Government during the year and re-elected some State Governments.

The skills shortage and general lack of labour across many industries continues, impacting businesses and regions. Some businesses have been forced to close due to the shortage of staff. The construction industry has been plagued by administration and liquidation of businesses - big, medium, and small - as shortages in product and labour impacted margins and cashflow.

Inflation was a common discussion point throughout 2022. Central Banks around the world started raising Interest Rates to thwart the rise of inflation and keep the cost-of-living impacts to a minimum. Someone forgot to tell the Governments that to support the fight of inflation - stop spending aimlessly in the community. The dreaded wage spiral may still be happening and the longer the timeframe in slowing or reducing inflation numbers, the more embedded inflation will become in the economy.

With Interest Rates rising and consumers and investors getting nervous, businesses pivoted towards profitability instead of growth orientated strategies for growth's sake.

2023 - What Will Happen?

Certainly, Interest Rates will keep rising. In Australia, many commentators suggest another 75bps to 100bps rise over the first six-months of the year and then the RBA will wait and review the data.

The Federal Reserve is on much of the same trajectory as their Australian counterparts. Just recently the commentary in the USA has been around peak inflation - that maybe the case with used car prices and crude oil prices falling, but even if 6% is not as high as 7% - it is still way too high for the Central Bankers. Whether the Fed can tame inflation without dropping the country into a recession will be closely watched. Some pundits even believe a recession and the corresponding increase in unemployment is what is needed to combat the inflation beast.

Businesses (and households for that matter) need to understand the impact of rising Interest Rates and a potential recession on their business/household. Can their business control cost inputs and pass on any additional rises in input costs to consumers? Will consumers reach a point where they stop purchasing products/services due to the increase in the sticker price? These scenarios need to be brainstormed and analysed with team members and advisors to ensure cashflow is still coming through the door quicker than it is going out. Managing inventory levels will also be crucial in these situations for businesses.

Energy, Healthcare, Food & Water will still be growth industries during 2023. Businesses need to take climate change seriously into the decision-making process and how to better utilise renewables as part of the business strategy. Consumers and clients are looking towards how businesses are preparing themselves for future decades to come. Those businesses that are neglecting this area will do so at their own peril.

The equity markets will be solid across the year. The first-half will be volatile and may even have a negative direction, but the second-half may be more positive. This prediction hinges on the fight against inflation and where Central Banks finish their Interest Rate rise and how long before the Interest Rate cuts start.

It might be wishful thinking to believe that Interest Rate cuts will happen during 2023.

Archer Gowland Redshaw

As a merged entity we are a little over two years old and I would just like to take this opportunity to thank all the team members at Archer Gowland Redshaw for their efforts throughout 2022. 

From the new team members that have come into the AGR tribe this year, to the team members that have been with us for decades - thank you. Without the support of everyone, we don't have a business.

To our clients, on behalf of the entire team, thank you for allowing our firm to be part of your business and life journey.

To all, a safe and Merry Christmas and prosperous New Year. We look forward to 2023 with excitement and vigour.

Best Wishes and Merry Christmas,

The team at Archer Gowland Redshaw

In celebrating the festive season, our office will be closed from close of business Thursday, 22nd December and will reopen on Monday, 9th January 2023.