WHAT LIES AHEAD IN 2019?

With so much going on in the world where is a leader to start? Think climate change, Brexit, trade wars, Middle East conflicts, ageing populations, blockchain, the rise of AI, nationalism rearing its head, despotic regimes and the ugly face of income inequality. With the world feeling as if it’s in a time like no-other, Annie Gray set out to find out what might lie ahead in 2019.

With so much going on in the world, where is a leader to start? Think climate change, Brexit, trade wars, Middle East conflicts, ageing populations, blockchain, the rise of AI, nationalism rearing its head, despotic regimes and the ugly face of income inequality. With the world feeling as if it’s in a time like no other, Annie Gray set out to find out what might lie ahead in 2019.

Quantumrun, an American based research and consulting agency, has succinctly summed up where the world of education is heading. It says “an overwhelming number of tectonic societal, economic and technological trends are all beginning to emerge in unison”. And it seems that neatly sums up the whole global business and geopolitical environment.

New Zealand economist, Shamubeel Eaqub, of Sense Partners says that yes, there’s a lot happening globally, both geopolitically and economically. But his advice to business is to concentrate on one useful lens and that is the things that will have a high impact on your

business and things you have high control over.

He says there are changes taking place that regardless of what you do, you will have no control over.

That said though it’s important New Zealand leaders are prepared for things like a global downturn or a trade war erupting.

“The question is are you prepared to address things you do have control over,” he says. It’s about focusing on your customer experience, on how to reduce costs, increase market share, things you can control regardless of what is going on in the wider global environment.

Eaqub takes the view that whatever happens globally, “it if happens it happens and somewhere there will be business risks and business opportunities”.

From a macro perspective events like Brexit and US politics are more of an annoyance to step through to the bigger things.

Areas he sees likely to escalate in 2019 include the fading of the strong economic run in the US as the impact of the macro fiscal stimulation effect washes out.

He also sees a risk of China’s economy slowing with cracks in its property market appearing, as is happening in Australia.

“With Australia and China being our biggest trading partners... this is a big risk, both for the tourism and export markets as they are reliant on the confidence of the people in those markets... ”

Geopolitically he points to tensions in the Middle East, including the Syrian war which he does not think that will fade away any time soon.

This means the need for business to plan and prepare for oil prices going higher which is likely “in the balance of probability”.

He says too, that the threat of a trade war will not go away and business can’t keep relying on the NZ Government to open up markets. The opening up of new markets in recent years has been good but is not likely to continue at the same rate as the US is no longer in support.

The world has benefitted from open trade post WW11 but in 2019 he expects to see more inward-looking nationalism emerging and nations looking after their own, rather than their trade partners’ interests.

While the more specialised, niche manufacturing sector will find it easy to continue to trade because they have something different, high volume

commodity goods such as dairy, meat and forestry are a different prospect. Dairy is beginning to struggle and he sees the outlook as being tough.

Eaqub puts this down to the dairy expansion being uneconomical with farms expanding when commodity prices were high. But he says the honeymoon period is over. “Look how what was being called white gold before the GFC, is now all about [dirtying] our streams. What that means is the social licence has been lost and social licence is very important, the talk is now around climate change and the ability to navigate,” in that environment.

He has concerns of a downturn in the global market but if the dollar falls that will be positive for exporters. “That is the opportunity and New Zealand business can then make a big push.”

From a domestic perspective, social licence will be a major factor – especially in the financial services sector. They will not escape the effect of the Australian enquiry and that social licence to operate has been lost in Australia.

Australian banks will be looking to do things differently and whatever changes happen in Australia their New Zealand offshoots will also do.

He says there will be more scrutiny on who the banks will lend to and on what terms, which means New Zealand businesses' ability to expand may be made more difficult.

“The tide has turned – it’s a pendulum shift that can’t be stopped.”

Asked about income inequality Eaqub says a trend he is noticing is the Balkanisation of our society. (This is a geopolitical term for the process of fragmentation or division of a region or state into smaller regions or states that are often hostile or uncooperative with one another, according to Wikipedia).

He is seeing a separation of New Zealand society across many divisions, whether that is income, wealth, home ownership, rural versus urban. People’s experience of being a New Zealander is very different depending on which group you belong to.

“There is lot less social cohesion and the social fabric is much looser.”

He says the divisions have become more well defined and when it comes to knowing your customer, businesses don’t know them as well as they used to. The connections are becoming much weaker so now it’s important to work at getting to know your customer even more.

“There are two things to do – add further value for customers and make your business more efficient, but knowing your customers is becoming harder.”

That local knowledge of our customers is becoming a rarer commodity than it has been in the past and while businesses are flooded with data, they are not flooded with insight, he says.

This will be a big opportunity for 2019 – connecting with the hopes and dreams of your customers.

In 2019 he also sees a change in the New Zealand economy and says that while things have softened, it’s not terrible “but the housing market has peaked and is slowing, net migration has peaked and is slowing” and low wages have not generally lifted. This means less disposable income and thus business’ ability to increase prices is limited.

They will need to think hard about what costs to cut but one thing business can do [if things slow] is to grow your market share.

And if other business are cutting back it’s a good time to take on skilled people who are currently in short supply.

2019, he says, will be pivotal for businesses to gain market share and gain talent.

Businesses are also dealing with issues like climate change and pollution which will gain more traction as the new Zero Carbon Bill comes into play. There will be scrutiny on business and the opportunity for business to make the change.

“A lot of businesses have made the shift, but we will see a ramp up on what it means to be socially responsible and environmentally conscious – that is coming through now but will really flourish next year.”

He says the ramping up of zero carbon policy and the Paris Agreement brings a sense of urgency.

“The conversation has shifted from denial, to ‘how we are going to do it?’ But in essence he is hopeful for 2019. “If you take a step back and take off the myopic lense, in the long term the outlook is extraordinarily positive. There are huge opportunities, we are a safe, inclusive society. There are things to improve, but it’s an amazing place to do business and we shouldn’t lose sight of the fact we have something desirable. And there are fewer people living in poverty, the world is becoming a better place.

There are lots of scary things but with the demographics in Asia the growth over the next decades is relentless and we are right there.

And the US and Europe are not suddenly going to become poor.

He says 2019 will be about taking a risk and opportunity strategy, but the long-term outlook is very positive.