Six future trends for Australian business
In a time of rampant change we highlight the major trends for Australian business over the next five years.
1. Low interest rates
During the writing of this story the Reserve Bank of Australia slashed the cash rate to a record low of 1.5%. The RBA also stated that the subdued growth and weak inflationary pressures influencing the rate cut were expected to remain that way for some time.
In other words, expect cash rates to stay low for the foreseeable future. This is good and bad for an economy, but for business it is mainly positive.
The cost of borrowing is less, meaning business loans for expansions or new projects become more attractive, encouraging growth and employment. While businesses are less likely during low-interest periods to invest their earnings in interest-bearing accounts, they are more likely to invest back into their own business, once again encouraging growth. Lower interest also typically means greater ability for customers to make purchases.
So the long-term, low-interest period we’ve found ourselves in should generally be good for Australian business.
2. Tax reductions
The Federal Budget announced in May 2016 contained gifts for all Australian businesses in the form of tax cuts; some immediate and some rolling in gradually over 10 years. The intention of these reductions was to encourage businesses of all sizes to invest and employ. Wage subsidies for employers will also be available in certain situations.
As the lessening of the tax burden begins to be felt, salaries should rise. Living standards which have remained relatively unchanged over the last few years should also receive a boost.
Another result of the business tax cuts should be greater interest and investment from other territories. Australia’s relatively high taxes did local businesses no favours in competitive international markets. Some foreign entities have likely been turned off the idea of trading or investing in Australia as a result.
3. Sensors and data
Experts at SAP Digital Futures say that by 2030 the world will contain over 200 billion internet-connected things with sensors, and over 100 trillion sensors. They will be in the items we carry, in clothing we wear, in places we go and in offices in which we work. During the next five years alone, the number of sensors will grow from 14.8 billion to 50 billion.
What does it mean for business? The ubiquity of sensors, and of the data they provide, will drive massive convergence in digital engineering information.
Consider the way scientists can analyse an individual’s DNA in order to make accurate predictions about personality, health and physical attributes. Businesses at the forefront of data analysis from the internet of things will be able to predict, maintain and manage their performance in a similar way.
Many organisations are doing so already. As sensors become more widespread, these businesses will leapfrog others.
4. Brexit fallout
Nobody truly knows how Brexit will alter business, or whether it will even happen at all. But assuming Article 50 is triggered, many of the 1500 Australian companies that are active in the UK are likely to begin to look towards Europe for office space.
While the UK is a massive and attractive market which is culturally very similar to Australia, our businesses usually look to Europe for greater growth opportunities. Where the UK was once the perfect base or stepping stone as part of the EU, that may no longer be the case if Brexit becomes a reality.
Australian businesses in the financial services and insurance space may be particularly interested in a move as they have traditionally used their UK business licences to conduct operations throughout Europe.
5. Drones will be everywhere
They have already taken over in the real estate world, as predicted long ago. No online real estate advertisement is complete without an image or video from an eye in the sky.
But countless other businesses are also experimenting with drone technology for an endless series of roles, including delivery, emergency services, internet services, farming, fire management, engineering, security and, believe it or not, playground maintenance.
Playground maintenance? What does that have to do with drones? Imagine a pair of council workers whose job is to drive around to playgrounds once a week in order to check for vandalism, damage to equipment, dumping of rubbish etc.
Then imagine a drone that automatically flies to each park once a week, taking photos then returning to base and uploading those images to a central database, where they are compared to last week’s shots. The system figures out whether a team needs to be sent out to do repairs. Amazingly, the entire process requires no human intervention.
SAP Digital Futures says the global market for commercial drones will rise from its current value of $15-$20 million to $1.27 billion in 2020.
6. Commoditisation of services
Call it the ‘Xero effect’: businesses will increasingly discover opportunities to reduce traditional costs by automating certain functions or by making use of new offerings that use technology to remove cost and effort from a previously expensive operation.
Consider Australian businesses that have switched to car-sharing services such as GoGet rather than using company cars, hire cars or taxis. Others utilise offerings such as Stripe for payments processing, rather than more expensive bank-related services. And Airbnb is winning plenty of love from business since revamping its processes and systems to suit a corporate audience. Certain industries will be well and truly disrupted, but as that occurs, other opportunities will arise in their place.
One thing we can say for sure is that five years from now the business landscape will look very different to the one we see today.