This has been a quarter of drama from extreme weather events to devastating wars, from hype around inflation to hype of rising interest rates, from the passing of sporting icons to the commencement of the winter football codes – our thoughts are with everyone that has been affected.
As I write this note, in the early morning hours I see that the sun is rising, so we have the chance to make the world a better place again.
How do we start to summarise what impact all these events will have on our economy now or later in 2022?
The floods in QLD/NSW will impact local communities and economies harder than the national economy, although food inflation will be seen nationally as some of the areas hit were farming and agricultural communities.
The world was coming out of the COVID-19 lockdowns, trying its best to restart the supply chain to get goods moving again, and along comes the unfortunate Ukraine War and the supply chains get hit again. The notion of temporary inflation seems to be disappearing quickly and the chance of inflation becoming a permanent thorn in the global economy’s side is increasing. It is not just commodity (oil, iron ore) prices that are impacted by the Ukraine conflict but also inputs to the food production process, including seeds and fertilisers. Ukraine was a big exporter of many grains including wheat and barley.
The US Federal Reserve last week started their Interest Rate adjustment process by increasing Interest Rates by 25-basis-points., with further commentary suggesting another six rate increases at 25-basis-points per time throughout 2022. Do not be surprised if a 50-basis-point rise is found somewhere amongst these increases. Federal Reserve Chairman Jerome Powell has conceded that the Fed “underestimated” how long demand over supply pressures would last, so being “behind the curve” of inflation may result in a quicker rise in official Interest Rates.
We wait to see what Australia and the rest of the world start to do with Central Bank decisions around Interest Rates. The only direction seems to be up – but when and by how much still has many commentators scratching their heads.
What will this uncertainty do to the decision-making processes of businesses and consumers?
Will inflation stay higher for longer and how will this affect the decision-making process of businesses and consumers?
Throw in a Federal Budget at the end of March and a Federal election in May 2022 and the head spins during the planning process.
With so many different input variables, the need to keep the basics simple and ticking over become paramount.
- Revenue growth (net of inflation) needs to be constant,
- Input costs are rising – so cost containment is important,
- Keeping clients happy and returning is a priority,
- Making sure team members are engaged and productive,
- Keeping debtors under control,
- Making sure cash is coming into the bank account consistently.
We talk about it with our clients all the time, but for 2022, the above will be extra important.
Reviewing financing obligations in a rising Interest Rate environment is another task that is added to this list. Debt has been cheap for a long time; it may not be so cheap in the future.
Our Newsletter theme for March is on the Building & Construction sector and QBCC. Just recently, we are seeing numerous building related businesses being impacted by the “profitless boom” – something we mentioned in our previous newsletter. Businesses from numerous States, various sizes and supplying various materials to the Building & Construction industry are being placed in administration or liquidation.
If you are in this industry or are supplying to the sector, please do not let it go too long before you discuss any cash-flow issues or debtor problems with your business advisor.
In concentrating on the Building & Construction sector this month, our Newsletter contains important tax and advisory pieces designed to help maintain obligations and ensure accurate reporting at deadline time. For QBCC matters specifically, we have noted the commonly asked questions and licencing submission considerations often overlooked when lodging financials. With the current turmoil in the sector, it is certainly prudent planning to review licencing ratios on a regularly basis to ensure ongoing obligations are being met.
With international borders now opening, hopefully our Hospitality and Tourism industries have a chance to get back on their feet. I am sure there will still be some nervousness around travelling overseas in the near future, but for those industries who have been starved of international tourists, it will be great to have them back. With international borders opening, comes the ability for skilled migrants and ex-pats to come home to a safe destination for work and family. With this in mind, we thought it would be timely to discuss the newly proposed returning ex-pat tax residency rules – which can also be found in this month’s Newsletter.
We have not seen strong population growth for a few years in Australia, so people coming to Australia will help bolster growth both in physical numbers and economic numbers. This will in turn stimulate industries like Tourism, Hospitality, Education, and Property. All these industries are large contributors to the Queensland economy. For this reason, I still believe the property market can continue to stay positive even with the headwinds of Interest Rate rises and supply chain issues.
I refuse to believe 2022 will be a full year of doom and gloom. There will be challenges thrown at us throughout the year, but being a glass-half-full person, I hope we all can successfully navigate them.
I look forward to writing a more positive summary for next quarter.
For More Information
For more information or for assistance in matters involving your business or Taxation, Business Advisory, and Superannuation support, please contact the Archer Gowland Redshaw team on (07) 3002 2699 or info@agredshaw.com.au.
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