Happy New Year – and welcome to 2024, which promises to have a number of challenges and opportunities for business.
Across the ACT economy, the busy Christmas period didn’t fire up as much as many businesses expected. The latest Canberra Business Beat survey shows that only half of businesses here in Canberra hit their sales targets for the last quarter.
There are a few reasons for that. First, the weather has been a significant issue, particularly for retail and hospitality. The reality is that Canberrans don’t get out and about as much when the weather is bad, and the run of atrocious weather we’ve had has really dented sales.
The second issue that’s going on is that we are still seeing the impacts of the Federal Government trying to move away from using external consultants. Canberra is particularly impacted by this because of the large number of firms here focused on servicing the Commonwealth as a client. There’s less money coming into those firms at the moment, and therefore less money circulating in the Canberra economy as a result.
The biggest issue, though, is the state of the economy generally, and the impact of inflation. Interest rates remain relatively high, meaning that anyone with a mortgage has to set aside more every week. At the same time, the cost of all goods has continued to increase over the last few months, meaning that many households face a double whammy in terms of increased costs. The bottom line is that consumers are re-prioritising their spending to focus on the basics and pay essential bills.
This has big impacts across the economy. Consumers are less likely to install that new solar electricity system or buy a new fridge right now – they have to save for longer to buy these big-ticket items. We still want to enjoy ourselves, though; there’s still good demand for eating out – although hospitality businesses report that customers are more value-conscious and looking for cheaper options when they do so.
The slight downturn in economic activity does mean, though, that, anecdotally, it’s a bit easier to find tradespeople at the moment, so it is a good time to think about getting some of those household projects underway.
All reports suggest that the Reserve Bank of Australia will start to ease interest rates later this year, around September. While businesses still report upwards pressure on prices, the statistics show that inflation has eased a little, so I hope that we might see the RBA move earlier to start bringing interest rates down. This will ease the pain for households, and perhaps see a bit of an improvement in economic activity.
If you’re interested, you can check out the latest Canberra Business Beat survey at www.canberrabusiness.com
