It has been said that the only constant is change. This has certainly been the case since the global financial crisis where we have seen significant change, both here in Australia and globally.
There is no disagreement to the belief that businesses are great generators of activity and employment and are critical to the success of Australia’s economy.
As we look to the future, it is therefore essential that business see the opportunity in change, rather than the challenge.
However after a period of boom – strong GDP and business credit growth, strong business and consumer confidence domestically and internationally – it is clear that Australian businesses have largely found the uncertainty of change difficult to navigate.
A quick recap on what we’ve seen over the past few years: significant structural changes in many global economies and markets; China continuing to rise in significance; a weakening of the US economy; numerous European economies tittered on the brink of collapse.
This has all had an impact closer to home. While the Australian economy recorded its 22nd year of growth with historically low unemployment rates and low inflation, numerous surveys revealed business confidence and conditions were at an all-time low, credit growth was subdued and discussions intensified on the end of the resources boom and the future of the Australian economy. The phrase 'the gloomy boom' resonates with many businesses and the reality of the so-called 'Dutch Disease' impacts many sectors sensitive to the high Australian dollar (How the fight against deflation is killing us, November 11).
We’ve seen new business models emerge and old ones decline. Established institutions have gone out of business and new leaders have emerged – often through radically altering their business models or even Government intervention.
The fact is, however, looking historically this sense of change is nothing new – for centuries industries, economies and even geographies have been ebbing and flowing.
In many ways we have moved to a phase of change that is less evolutionary and more revolutionary or transformational in nature.
How you respond to this transformation is critical. While it is natural that businesses focus internally to ensure they are equipped to address the changing external landscape, the risk they run is that with all the attention focussed internally, the external view gets lost. Businesses can lose sight of what is actually most important and what keeps a business successful. Businesses can lose sight of their customer and how they are changing.
An inward philosophy not only misses the reason why businesses exist, but it weakens performance and motivation.
Such businesses fail to recognise that internally there are only costs – externally is where revenue lies. Externally is where the opportunity lies.
Extremely successful businesses have the ability to see potential when others see problems. The apocryphal story of two shoe salesmen sent to Africa perfectly captures this. One salesman came back in despair after discovering that Africans don't wear shoes; there simply wasn't a market. The other salesman sent a telegram back exclaiming the huge potential and opportunity to start supplying shoes immediately.
As we head into 2014, acting on the opportunities should be a key focus for the business community, investing to ensure continued innovation and growth (Australia's 2023 boom has begun, November 18).
We are starting to see some early positive signs. The National Australia Bank's most recent business confidence survey showed that whilst business confidence has lost some of the gains seen post the election, overall confidence still remains relatively higher than the below-average levels over the past three years, and history shows that stronger conditions follow stronger confidence.
NAB’s quarterly front-line business banker survey, which taps into the insight of our leading banker network and what they are seeing with customers, is an invaluable way to understand the conditions and thoughts of the business community straight from our bankers.
The most recent survey showed a strong recovery in demand for business credit, where we saw the strongest reading since early 2011, particularly from businesses on the east coast.
Notably our bankers are more optimistic for growth next quarter with significant improvement in bankers’ short-term expectations on conditions, the strongest we’ve seen in many months.
This is encouraging. We want businesses to see the opportunities and act on them. As I look ahead, one of the most evident opportunities for Australian businesses is Asia. With a rapidly expanding population, continuing urbanisation and an insatiable appetite for reliably safe food, the opportunities are vast. Australian businesses are perfectly positioned to respond to these growing demands – the agricultural and resource sectors in particular have a unique opportunity.
Australian businesses are beginning to see the advantage of our adjacency to Asia and the economic benefits that flow from that; however we have only scratched the surface and there is more reward to be had.
As we move into 2014, I believe the economic fundamentals provide more reasons to feel positive.
It is likely we will see the Australian dollar reduce to more sustainable levels, after finishing this year higher than many originally predicted. National GDP is expected to rise to 2.5 per cent in 2014 and I’m optimistic about growth in demand for credit. We won’t see pre-global financial crisis levels of circa 15 per cent, although arguably we don’t want to head back into that type of lending environment.
Globally, at the start of 2013 we started to see a slight upturn in the growth of the advanced economies and I believe moderate growth will continue in 2014, with global growth at around 3.5 per cent.
We’ll start to see the re-emergence of the US economy in the years ahead, where evidence of a recovery is already clear and momentum is gaining. And the years ahead will be stronger for the UK and across Western Europe.
The China story will continue to captivate next year and whilst growth rates will stabilise, there will continue to be high levels of growth.
Undeniably though, even with fundamentals looking strong, conditions currently continue to remain challenging for many.
In this environment of transformational change, more than ever banks have a responsibility to work with business to help them look past headlines and identify where the opportunities lie. And to ultimately take advantage.
We need Australian businesses to be preparing for, and looking optimistically to, the future. To positively embrace change, and to transform.
Joseph Healy is Group Executive, Business Banking at National Australia Bank.