Strap in, we’re in for a bumpy economic ride

The manager network last year helped guide readers on what was happening in the real economy. Now we turn to 2024 and the outlook will not please those looking for big interest rate falls in the near future.

State and federal governments and some in the private sector are embarking on projects where there is simply not the labour and material capacity to undertake those tasks. That’s exploding the costs to uneconomic levels.

And we remain a society where around 70 per cent of the population are managing well but the remaining 30 per cent, led by those under mortgage and rent stress, are having a terrible time.

Most enterprises that recognise this situation are adapting their business and are doing well. Others are not.

In mid-2023, we saw the prosperous 70 per cent cut back their spending, almost as national duty to curb interest rates, but around September, the managers could see signs of significant spending upswing.

Most prepared themselves for strong trading in the final six weeks of the year, covering Black Friday, Christmas and Boxing Day.

In Paul Keating’s famous line, the prosperous consumers “brought home the bacon”, although rain in many east coast areas during the Boxing Day period curbed sales and therefore clipped back what otherwise would have been a perfect trading six weeks.

January is also being impacted by rain, but the underlying forces that drove sales in the last three months of 2023 are still there.

Sydney’s flagship David Jones store during Christmas shopping trading hours. Picture: Dylan Robinson/NCA NewsWire

Not everyone wins. For example, the boom in cruises is hitting the caravan industry and will divert some of the spending by the prosperous.

Supermarkets are being impacted by the lower spending of the suffering 30 per cent and liquor sales are down.

But the higher cost pressures are relentless.

The infrastructure projects have contributed greatly to the prosperity in the 70 per cent, but the costs of these projects, including the badly-planned renewable energy projects, is exploding in part because there is simply not the skills to undertake them.

The situation is being made worse by retiring baby boomers who had irreplaceable skills. Power costs will continue to rise, although those rises may be interrupted by subsidies.

As I explained on Wednesday, it is possible supermarkets may be forced to reduce vegetable and meat prices and China is going through a period of deflation, which means that our imports costs will be contained and that in turn will help retailers.

Nevertheless, this is not an environment where it is going to be easy to quickly reduce interest rates.

The US and Europe are encountering similar experiences, which is why global stock markets are currently weak.

At the moment, sharemarkets are besotted by interest rate levels rather than the very different trading patterns that will be experienced.

If politicians continue to seek votes by announcing infrastructure projects where there is simply not the capacity to build, then in a few years time the consequent cost explosion will impact us very severely.

Meanwhile, the looming interim reporting season will give us a good guide to which companies can handle current conditions.

A challenge for David Pocock

Senator Pocock has emailed me stating that enterprises employing less than 15 people will not need to pay redundancy.

I used a legal opinion that made a different interpretation of the act.

So, as you would expect, I immediately sought a second legal opinion.

I was told that while the act states that all enterprises regardless of size must pay redundancy, a series of complex qualifications eliminate a large number of smaller enterprises from paying redundancy.

I therefore accept Pocock’s statement, and thank him for the email.

But this is a further illustration of the incredible complexity of the act, which family enterprises and their lawyers must navigate.

Most don’t have the funds to fight in the courts.

Pocock points out that he has had smaller business experience in Zimbabwe and lists a series of his small business achievements in Australia.

That’s good but sadly for Pocock, for the rest of his life he will be remembered by family businesses as the man that badly damaged family business culture and operations in Australia by supporting the Albanese anti-family business campaign by delivering union delegates to small and large family enterprises with wide powers.

For example, an enterprise with just ten employees could end up with two delegates who can spend vast amounts of time paid for by the enterprise and in the process totally change the family operation.

But Pocock says he wants to be recognised for his small business achievements.

I believe he can achieve redemption, but it won’t be easy.

First, he must admit a mistake in passing legislation that gives union delegates so much power. It is not easy for a politician to admit error, but if I can do it, so can he.

Second, he needs to devote the rest of his parliamentary career to rectify that mistake and to block in the Senate the remainder of the Albanese anti-family business measures, including the effective abolition of casual labour, the damage to the gig economy, the complexity of sole trading as the High Court is challenged and a plan to create a union/big transport company cartel by restricting ACCC powers.

We all make mistakes.

I challenge Pocock to back the sentiments he expressed in his email with the above actions. And if he does, I will be his great supporter and so will the community.