Good times ahead for businesses: CommSec chief economist

Gippsland businesses were given an optimistic outlook on the year ahead at Commonwealth Bank’s breakfast presentation at Farm World on Friday

CommSec’s chief economist, Craig James, told those at the breakfast the global economy would be moving up a gear this year.

He said businesses were in a good position to take advantage of the conditions with continued low wage growth of around two per cent and low growth in costs.

Despite a strong Australian jobs market and buoyant business conditions, businesses will have to remain vigilant about costs in an era of strong global competition and their current inability to raise prices.

The exception, according to Mr James, is businesses that can establish a point of difference – “the uncommon offering” – which enables them to charge a premium.

CBA statistics show people are spending more and saving less.

They’re spending more on utilities – the socalled “nasties” – but also spending more on eating out and international travel.

This pattern is being fuelled by the growth in house prices, strong share dividends and low unemployment.

Mr James predicted the Australian dollar would remain between 75-85 US cents and he doesn’t expect much change to historically low interest rates.

While the Australian economy is strong, the West Gippsland economy is booming with strong population growth leading to an increase in home building approvals and strong growth in house prices.

With the rise in population, the jobs mix is also changing rapidly. Construction now accounts for 18.5 per cent of jobs in the Warragul region, ahead of 16.3 per cent for agriculture.

Grant Cairns, the Commonwealth Bank’s executive general manager, regional and agribusiness banking, reinforced the booming conditions in the Gippsland economy, which is now responsible for 23 per cent of the Victorian economy.

Rising energy costs remain a major concern, with 85 per cent of farmers in a recent CBA survey concerned about the cost of energy in Victoria, with most feeling they are outside their control.

However, 57 per cent of those farmers surveyed expressed an interest in solar and battery technologies to regain control over energy costs, while 39 per cent said they planned to modify their farming practices to reduce energy costs.