It’s an exciting, yet uncertain time for the Australian economy. On one hand, we have a strong jobs market with record-low unemployment and pressure on wages to keep pace with inflation.
But on the other hand, there’s the threat of a recession and high-interest rates trying to curb inflation. It’s a delicate balancing act, and one that requires smart decision-making from business leaders.
In this article, we take a deep dive into the key issues facing Australian businesses in 2023. From the pressure to increase wages and the impact of high inflation, to the challenges of managing cashflow and improving profitability. We’ll also explore how technology and innovation are going to shape success in the year ahead.
Whether you’re a business leader looking to stay ahead of the curve, or an entrepreneur looking to start a new venture, this article will outline some of the opportunities for business success in 2023.
Key trends to watch out for in 2023
Stubborn inflation and further interest rate rises anticipated
The early part of 2023 has shown us that we must continue to brace for stubborn inflation and more interest rate increases. The December quarter saw annual inflation jump to a near 33-year high of 7.8 percent, below the Reserve Bank’s forecast of 8 percent. Economists are predicting that this will make interest rate hikes in coming months almost inevitable. However, due to the lag nature of interest rates’ impact on the economy, it may not be until the second half of 2023 that we see meaningful drops in inflation.
The energy crisis that was feared to occur in Europe due to war in Ukraine has now abated, thanks to a warmer winter and additional gas production from the USA. Despite this reprieve, the high-inflation and high-interest rate environment is expected to continue to challenge businesses in Australia. As always, it will be important for companies to keep a close eye on the economy and adapt their strategies accordingly.
Significant pressure for wage increases
As the Australian economy continues to navigate the challenging landscape of record high inflation and a higher interest rate environment, business leaders across the country will face increased pressure to lift wages for their employees. With real wages being significantly eroded by inflation, many are calling for salary increases to keep pace with the rising cost of living.
The current state of Australia’s economy, with unemployment at a 50-year low and inflation on the rise, is creating a perfect storm for wage pressures. Governments and unions are facing increasing pressure to match wage increases with changes in the Consumer Price Index (CPI), a trend that is expected to impact the entire commercial sector.
This pressure on wages is likely to have a ripple effect throughout the economy, as businesses struggle to keep up with the rising cost of labour. Some experts predict that companies may be forced to cut costs and shed workers in order to stay competitive, creating opportunities for innovative and well-run firms.
As the year progresses, business leaders will need to keep a close eye on the inflation and interest rate environment in order to stay ahead of the curve. With the potential for further interest rate hikes and continued inflation pressures, the need for salary increases to keep pace with the cost of living will only become more pressing.
WFH is here to stay – and now we want to only work 4 days too
Not only will we want higher wages in 2023, but we’ll want to work less hours for it too. One of the most significant and lasting legacies of the pandemic is the massive surge in flexible working. With employees reluctant to return to the office when pandemic restrictions were lifted, many have found that working from home has its benefits, such as no time wasted on lengthy commutes, as well as easier school runs and fewer distractions.
In light of this trend, many employers have had to do more to win over prospective job seekers, including offering alternative working arrangements such as generous leave entitlements and shorter working hours. A small but growing number of companies have even begun to experiment with a four-day workweek, with emerging evidence from a UK trial suggesting that this could make staff more productive.
In Australia, the momentum for a shorter working week is also building, with our largest health insurer, Medibank, confirming that a four-day workweek will be part of its experiments to simplify how the company operates, and Telstra CEO championing more flexible working environments and structures with Australia’s largest employer. This is shaping up to be the biggest workplace trend of the year, and it’s likely that more and more employers will come under pressure to shift to a four-day working week.
However, the pandemic-induced switch to remote working has not been without its challenges. Employers have raised concerns about the perceived negative effects on workplace culture, collaboration, and mentorship, and many have expressed a lack of trust in their staff. In a Microsoft study published last September, 85% of leaders said the shift to hybrid working meant they had little confidence that employees were being productive at home.
During 2023 it’s likely that employers will be faced with the challenge of finding a balance between remote and in-person working. Some may look to invest more in technology that allows them to track employee activity, while others may work to sell the benefits of the office to employees who are content working from home. Whether or not this trend will continue to gain momentum remains to be seen, but one thing is for certain – the way we work has changed forever.
Cyber security fears go mainstream
Cybersecurity concerns are set to go mainstream in 2023, as more and more small to mid-sized businesses realize the severity of the threat they face.
While in 2022 Australia had some high-profile cybersecurity hacks such as Optus and Medibank, the challenges are only just beginning, and many small to mid-sized businesses are very exposed. Cybercriminals don’t discriminate by business size, and the consequences of a cyber-attack can be devastating for small businesses.
The rapid digitalisation of business operations and the increasing use of digital platforms to manage and process sensitive information has resulted in many small businesses becoming vulnerable to cyber-attacks. This makes it imperative for small businesses to take cybersecurity more seriously and take the necessary steps to protect themselves. This could include hiring a cybersecurity expert, investing in security software and training employees on best practices for cybersecurity.
With the increasing number of cyber-attacks, it is more important than ever for businesses to have a cyber security strategy and action plan in place. Regardless of the size of your business, the hackers want your data. Whether that’s your customer data, health records or credit card information. Small businesses need to be aware of the risks and take steps to protect themselves, their employees and their customers.
Strategies to take advantage of these trends in 2023
With 50-year record-low unemployment and a decrease in global immigration, the talent shortage in Australia is more pronounced than ever before.
One of the key strategies for attracting and retaining top talent is developing an Employer Value Proposition (EVP) that differentiates your company from competitors and encourages your team to stay. This can include offering competitive compensation and benefits, promoting a positive company culture, and providing opportunities for career development and growth. Additionally, companies can also look to target specific talent pools, such as recent graduates or experienced professionals in specific industries.
It’s also important to note that companies should also shift their mindset from being buyers of talent to sellers of opportunities. This means that companies should market their company as a great place to work and show how working for them can benefit the employee.
By developing an EVP, targeting specific talent pools, and offering remote work options, Australian business owners can navigate the ongoing trend of talent acquisition and retention, and position their companies for success in the long term.