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Tough trading conditions forecast for 2020

Adam Zuchetti
Adam Zuchetti
27 December 2019 2 minute readShare
Pitt Street Mall

While it may be the festive season, most business leaders feel there will be little to celebrate in the new year, amid expectations of falling sales and tougher competition.

Several recent polls have painted a disappointing picture for business conditions in 2020.

A poll on the My Business website over the month to 20 December found that only one in four (26.7 per cent) respondents believes their business will be better off in 2020 compared with 2019.

The highest proportion (41.7 per cent) see their business outlook getting worse, while a further 24.4 per cent believe that things will simply stagnate.

The remaining 7.2 per cent of the 180 respondents admitted they were unsure how the year would turn out for them.

Meanwhile, figures compiled by McGrathNicol — from the Westpac-Melbourne Institute Consumer Sentiment Index, the ABS and the NAB Online Retail Sales Index — show that retail sales volumes were flat in the month of October despite the lead-up to Christmas, although they did manage to beat inflation over the year to climb by a modest 2.2 per cent.

Perhaps most surprising was that online sales actually fell in the month, down by 1.4 per cent, although they were up by a healthier 6.6 per cent over the past year.
But the headline figure was a stubbornly downward trend in consumer sentiment.

In December 2019, McGrathNicol said that consumer sentiment was down by 2.0 per cent for the month, continuing a 3.2 per cent fall over the past quarter. These losses saw consumer sentiment slump by 8.9 per cent over the past year.

“We expect consumers to remain conservative in 2020, continuing the low growth environment where retail sales growth tracks closer to GDP growth, with potential downside risks,” the firm’s Ciaran Mannion and Damien Pasfield wrote in a post dated 19 December.

“Retail sales have outpaced GDP and wage growth in recent years; however, the gap has narrowed. This means that consumers have spent at a greater rate than the relative growth of their disposable income, resulting in a steady reduction in household savings over the past 10 years from over 10 per cent in 2009 to only 3 per cent in 2019.”

The duo said that despite interest rate reductions and tax cuts this year, “there are a number of reports from various financial institutions and agencies which report individuals are channeling the surplus disposable income into reducing credit card debt and their mortgage, rather than consumption”.

Corporates more upbeat, and Aussies lead the charge

Despite these findings and commentary from the Reserve Bank around its decision to cut interest rates three times since June, a separate poll suggested that Australian corporate leaders are more upbeat, and particularly so compared with their international counterparts.

International recruitment firm Robert Half polled 5,165 business leaders from around the globe, including 501 here in Australia, and found considerably higher level of confidence down under.

According to the agency, 69 per cent of respondents said they feel “very confident” in their company’s growth prospects in the first half of 2020. Only 28 per cent said they are “somewhat confident”, and just 3 per cent confessed to being “not at all confident”.

That was much higher than the 56 per cent of respondents in all countries who said they feel “very confident”. Only a slightly higher number (4 per cent) globally said they are “not at all confident”, with the remainder stating they are “somewhat confident”.

“C-suite sentiment is positive, driven largely by public infrastructure investment, the recovery of the mining sector, as well as ongoing digitisation efforts and robust trade relations,” Robert Half Australia’s director, Andrew Morris, said.

“Our research shows that companies are capitalising on the opportunities this presents by investing in their permanent headcount to support their forward growth strategies, from expanded business operations to the implementation of new initiatives or investments.”

He continued: “Rapid advances in technology are changing the way companies do business, and in order to remain competitive in a global market, leaders should continue to employ a flexible staffing strategy that combines permanent and contract employees in order to gain access to niche, low-supply skills while upskilling the existing workforce at the same time.”

Tough trading conditions forecast for 2020
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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