Feb 2, 2016

Predictions for 2016

Another year has passed and this year has already begun with a lot of volatility in the share markets, interest rates are at an all-time low. Here are three of our predictions for 2016:

Businesses will invest in technology not people

In the last 20 years the internet has started from the humble dial up to the NBN. Technological advances have made huge leaps in the past decades and you software can be developed to improve efficiencies and achieve a reasonable return on investment. The R&D tax offset provides a great incentive for businesses to invest in technology for their business. Look for businesses to invest more in technology to improve their efficiencies and reduce less manual handling of processes.

The winners will be businesses looking to develop new technologies and software to improve business processes. Employees who are able to embrace and utilise new technologies to improve efficiencies in business processes.  New technology and start up businesses who are able to solve industry problems. Current examples include Atlassian and Xero.

The losers will be those business and employees who continue doing business the same way. Increased competition and price pressure on inputs will erode existing margins and businesses will find it harder to compete with businesses who are improving their efficiencies.

Tourism, Food, Education and Healthcare sectors to shine

We believe tourism, food, education and healthcare sectors will outperform other markets.

Tourism will be buoyed by a lower Australian dollar and emerging middle class of China to contribute to the tourism dollar. Many tourists have put off travelling to Australia in the past few years due to the high Australian dollar. We expect a significant increase in Europeans, Americans and Chinese tourists to take advantage of the lower Australian dollar a missed opportunity to travel to Australia in past years.

Food sector will outperform as people will always need to eat. Bellamy’s, A2 milk, Bega Cheese and the Australian wine industry in general continue to see increased demand for their products from the middle class in China. With an increasing global population and scarcity in primary production land, the food sector will outperform in 2016.

Education in Australia has always been seen as high quality. Australian education is Asia is highly sought after with its close proximity and Australia being an English speaking nation. Along with the lower Australian dollar, education will be a sector that outperforms in 2016.

The healthcare sector will continue to benefit from a growing ageing population. As baby boomer’s retire the cohort or older wealthier Australian’s continue to grow along with demand for higher quality care.

Commodity prices will remain weak

Commodity prices in general will continue to remain weak with companies increasing supply to offset lower prices. We expect some consolidation in this area where higher cost producers either merge with larger companies or simply close. We would expect commodity prices to only improve after some consolidation takes place in the commodity space.

How is your business placed to take advantage of these trends and limit and potential downside to your business? Make an appointment to speak to one of our accountants in North Sydney to see how you can take advantage of any business opportunities.

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