Challenges Ahead In 2012

Many economists believe that 2012 will bring with it a slow-moving economic environment with the best hopes for business upturn being in 2013.  Obviously, the challenge is surviving through these anticipated sluggish conditions in 2012.  For most business people, this will probably mean the competition will be intense and it highlights the necessity for every business to differentiate their products and services.  Now would be a good time to get rid of products or services which are not performing well. 

Businesses need to look at their marketing and selling strategies to ensure that sales are being made.  Economists are predicting 2012 will see less growth than 2011 but, in the main, most economists are predicting there will not be a recession.  That is the good news.  The dampener is that 2011 was not a good year for too many businesses around Australia.  Overall economic growth is generally expected to be in the range of 1.6% - 2% throughout 2012 and into the beginning of 2013. 

The uncertainty in Europe has affected discretionary spending decisions of many consumers in Australia.  Political instability in Australia, as to whether there is going to be a challenge for the leadership of the government and an early election, also affects consumer thinking.  Economists are forecasting that inflation will be around 3%.  This will be fueled by wage and price pressures expected to occur during 2012.  Most economists believe that interest rates will reduce further, probably two to three cuts made by the Reserve Bank during 2012, however you need to bear in mind that a number of the banks have already announced that they will not automatically respond to a Reserve Bank of Australia adjustment of the official interest rate in determining their own interest rates for borrowers.

For exporters and importers, 2012 is likely to be a challenging year relative to exchange rates.  The Australian Dollar is the fifth highest turnover currency in the world and this means that it is subject to various speculators from time to time.  Most Australian economists are forecasting that the relationship between the US Dollar and Australian Dollar will have reduced to 0.90c from the current $1.06c by the end of 2012.  There can be very significant swings.  What this highlights are the benefits for exporters and importers in hedging the currency by purchasing forward contracts.  Because of the problems in Europe, the share market is expected to be slow-moving during 2012.

You should be taking these matters into consideration in preparing your strategies for 2012.  If you would like to discuss your strategies, please don't hesitate to contact us.