Predictions for the Australian and NZ economies in 2014

Predictions for the Australian and New Zealand economies in 2014

By Paul Bunting, MSI Ragg Weir, Accountants, Melbourne
February 19, 2014

Whether you are running a business, are an investor or an employee, 2014 will bring its opportunities and challenges. What better time than now to take stock of your current circumstances and consider your plans for the year or years ahead. If you think you need help you probably do, so seek advice and what better place to start than with your local MSI firm.

1. Inflation or deflation
Where will the Consumer Price Index go and what will the actions be by the Reserve Banks in Australia and New Zealand and the Federal Reserve in the United States? This will be an indication of economic activity. Inflation will usually occur as the economy picks up and if deflation occurs it historically results in an economic downturn. Read the news and be aware of the economy. It will impact on your business, employment and investments.

2. Australian & New Zealand dollar
Will the ‘Aussie’ and the ‘Kiwi’ rise or fall and against which currencies? Exporters want a falling home currency. Importers want a strong home currency. A falling dollar usually results in higher prices for goods and a rising dollar in lower prices. Overseas travellers want their own currency to be strong. Whatever your circumstances – be aware of the volatility and that it can vary from currency to currency. Consider the impact and develop a strategy.

3. Bank finance
It is becoming harder to secure a bank loan both in Australia and New Zealand. Banks have less to lend, security percentages are dropping, bank valuations are conservative, application forms are detailed and the events that disqualify your application are rising. If you need to borrow in 2014, commence the process early and consider having a pre-approval review with your accountant.

4. The rise of the Internet
Nothing new in this one but the pace of change is likely to be faster in 2014. Consider what impact this will have on your business and investments. Look for opportunities and threats. Your opportunities could be wrapped up within the threats.

5. The drive for productivity
The mining boom in Australia has subsided and other industries are being asked to take up the slack. Governments are attempting to foster an environment that results in productivity improvements and business will be looking to join in. Review your processes to ensure that you stay competitive. You may need to consider a long term investment decision.

6. Employment Law
On the Australian side of the Tasman, a change of Government has introduced a change of emphasis. There is plenty of talk about the benefits that SME’s will obtain from the proposed changes. Watch for the rule changes in 2014 and consider how to adapt them to your business.

7. Employment
Unemployment is rising in Australia and this will impact on the strength of the economy particularly in discretionary spending sectors. Business in those sectors must look at their plans and those in employment need to consider their security. On the flip side, New Zealand’s unemployment rate is declining, and with this strength of the labour market, the pressure will be on businesses in finding the right staff.

8. Tax office audit activity
Both ATO and NZ Inland Revenue systems and information gathering systems are improving and the number of audits is rising. Ensure your record keeping is robust and recording of transactions is accurate.

9. Tax Office Debt Recovery
2013 was an election year in Australia and historically the ATO has been lenient during that time. The election is over and the Government needs funds to reduce the national deficit. Expect tougher collection action and for it to become difficult to obtain an agreed plan to pay existing debts over an extended period. Look at your cash flow and allow for the payment of tax liabilities.

10. Economic Growth
Australia’s economic growth is tipped to slow this year so businesses need to adjust and be prepared. However it is forecasted that New Zealand is emerging to be among the world’s fastest growing economies. With positive migration into New Zealand, an upswing in terms of trade and the strength of the labour market have all contributed to increased business and consumer confidence. Businesses will need to focus on being efficient and competitive.

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ENDS

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