Are we there yet?: 2023 Market Outlook
It’s been quite a long and difficult journey, as we try to navigate the current macroeconomic conditions.
What is happening with interest rates, after 12 rate rises, has felt like a blunt instrument to apply to Australians. But you have to remember that interest rates are being used to try and control inflationary trends. Australia has a slight benefit over the rest of the world in that the majority of loans continue to be variable. So, when the RBA uses interest rates as a way to bring down inflation, by diminishing customers purchasing power in a variable market - it can work.
Borrowers are still going to continue to see high costs. While you cannot assume that interest rates will go back to anything like it was during Covid. Interest rates are going to return back to the long-term average of 300 – 400 bps, which is the old normal.
The road continues to be bumpy
In this environment, it's not surprising that clients are really feeling stressed. Spare cash is dropping for most people. At the peak of Covid people had a 20% saving ratio. It’s now come down to 3.7%, which is below the long-term average of 5% in Australia, showing people are eating into their savings and using it as a bit of a buffer for inflationary pressure and increased interest rates.
Likewise, real wages are not keeping up with inflation, and it continues to be accelerated by spending on services element.
It's not all doom and gloom however, there are positive indicators and the most positive continues to be unemployment. 3.5% unemployment simply means anyone who wants a job, can get a job and if people have income coming in, they continue to be strong.
Where to next?
Brokers have never been as important as they are today, you have stepped in to fill the void of the bank branches closing to fill that void. So as your relevancy and numbers have increased so has your market share. The key question you ask yourself. Are you increasing share, gaining more customers or are you standing still?
Taking the time to break down your value model and what supports your revenues into the business and drives costs will help you understand the lever you have to pull. Understanding your levers will ensure you’re moving forward, capturing opportunities and growing profitably.
Though it’s not just about today
Think about your horizons for growth. What are you doing to improve opportunities with existing customers or existing products and be more efficient?
Where next can you go? Leverage your core. What are you good at? Use this to build out to the next horizon and be more productive.
And then importantly you have to think about the near term. If you want a sustainable business, you have to ask yourself - where’s next best for me to play longer term? How do I start the journey today so I can grow my way there?
By taking a planned approach, you can stay on track and capture the opportunities along the way.
