Businesses are often not only affected by their own management decisions, but the wider trends of the economy, and conditions in their industry segment.

Predicting the impacts of these broader economic factors is by no means an exact science, so here’s a summary of economic forecasting provided by Australia’s leading bodies including the Reserve Bank, the Big Four Banks, and IBISWorld Data Analytics to assist your business planning for the year ahead.

Overall Economic Growth and Other Key Economic Indicators

Many economists share the view that overall growth in the economy will be subdued compared to the average of the past five years. However, there is anticipated to be a slight recovery compared with the tougher conditions experienced in 2023.

The RBA forecasts a GDP growth rate of 1.3% through to June, picking up to 1.8% through December, for an annualised 3.1%. NAB projects a slightly lower growth rate of 2.7%, a drop on their prior projections published in November. NAB does however provide a strong outlook for manufacturing, resources, and primary production industries, forecasting a 5% growth rate due to an increasing export market to China.

Inflation has been the focus topic for 2023, and is expected to finally ease through 2024.  With the ABS announcement of December 2023 quarter inflation of 0.6%, the annualised figure fell to 4.1% from the high of 7.8% in December 2022. The Reserve Bank forecasts annual inflation to drop across the year to 3.1% by December 2024, returning to the target range. The Commonwealth Bank has a slightly more positive outlook on inflation, projecting 2.95% across the financial year.

Consequent to slowing rates of inflation, the RBA cash rate is predicted to fall to 3.3% by Q1 2025, easing from the current rate of 4.35%. This is a downward revision on prior projections, which forecast a drop to 3.85% across the year.

For any businesses operating in international markets, the RBA advises that little change is forecast for any of Australia’s major overseas currency pairings or USD, CNY, JPY, EUR and UKP.

The overall unemployment rate is expected to increase slightly, from 3.8% at January 2024 to 4.5% by December. This may ease some of the pressures of the current competitive employment market.

Industry-Specific Analysis

Below are summaries of forecasts and analysis for some of the major industry segments our clients operate in as conducted by IBISworld Australia. This is a guide for the high level trends expected to influence the operating markets throughout the year.

Professional Services

• Revenue growth is forecast at an average annualised rate of 3.4% across the coming three years. This represents a slowing in revenue growth compared to the prior five years.
• This industry segment includes Engineering Consultancy, which is anticipated to experience revenue growth of up to 5.2% per year. This is forecast in association with $120bn of committed Federal Government infrastructure and energy project spending.
• The total net profits achieved across the industry are forecast to fall by 1.3% across the year, due to increased employment costs in an under-resourced labour market.

Mining Services

• The industry is projected to experience only moderate growth in revenues over the coming year of 0.6%, continuing a trend in which support service companies are not experiencing growth at the rates of the broader commodities market.
• There is a mixed forecast of profitability for industry firms, with IBISworld expecting larger firms to benefit from an increasing number of Coal Seam Gas projects, while smaller firms may experience difficulties associated with declining raw commodity prices.
• Changes to legislation such as the ‘Same Job Same Pay’ provisions are anticipated to increase average labour costs for the industry.

Health Services

• IBISworld forecasts no growth in overall industry revenues for 2024, however revenues are forecast to grow 3.6% annually in the 4 years following.
• Wage costs industry wide are expected to grow from an average of 50.6% of revenues, to 52.8% of revenues due to regulatory changes. It is noteworthy that wages as a percentage of revenue have grown industry wide by 5.1% across the past 5 years.

Construction

• Residential construction revenues are forecast to be slightly subdued in comparison to the prior 5 years. This is driven primarily by tighter bank financing regulation, and fewer construction subsidies.
• Multi-dwelling constructions are expected to see increased revenues towards the end of the year, being underpinned by the Housing Australia Future Fund.
• Construction Material pricing is forecast to further increase across the year, tightening profit margins, though profits are expected to return to pre-covid levels within the coming 5 years.
• Due to a number of federal and state government backed major civil projects coming to completion, industry employment is set to contract by 4.2% during the year.

How We Can Help Your Business

While these forecasts are useful in assisting businesses and owners in making informed decisions regarding their strategic direction, they provide only general guidance. We believe it is important that businesses assess the potential impacts of changes in the economy. Even a 1% change in costs can have a much greater impact on your net cashflow. At Lambourne Partners Consulting, we have developed tools and models to assist business owners in gaining a greater understanding of the impact of these changes on their businesses, and the impacts of any management decisions they make in response to change.

If you are unsure how any of these predicted trends in the economy may effect your business, please contact us below for an obligation free meeting with Ben Wilson to discuss modelling and strategies.