In a talk I delivered to the Western Suburbs Business Association last week, I struck a cautiously optimistic tone in regards to the prospects for business in WA in 2017. Most of those attending seemed to agree that things had been picking up of late, and perhaps in 2017 we would all just get on with business, and not worry about post mining-construction doom and gloom.
Here are the slides from the talk.
As always, start with a story, so I began with one of my favourites about the motorcylist in June 1944, having to turn around a convoy of armoured vehicles and trucks on a rainy country road just north of Portsmouth, UK. To find out out he did it, read this post.
The 3 main lessons from this story are:
- If you’re going in the wrong direction, admit it! (most managers can’t)
- Think about what direction you should be heading in (hint: the trend is your friend)
- Make sure you stick to the new direction (no returning to old ways)
While Nokia and Kodak famously did not find a better path, Samsung and Apple most notably did.
There’s no doubt that 2016 was a difficult year (for most, but not all, in businesses in WA). Apart from all the celeb deaths (no more than usual, statistically), we had the Brexit and Trump election shocks, more senate issues for PM Malcolm, a sluggish local economy and the media got smashed (SCOOP went under, and The Sunday Times was bought by The West with barely a whimper).
In fact, 2016 was a relatively good year for WA stocks, as shown by the ‘BN30’ index of 30 representative WA ASX-listed companies. Starting the year at a base of 100, the BN30 ended it 20% higher at 120.
There was some good news around in 2016:
- the US economy grew, and markets hit new records
- US CO2 emissions were the lowest since 1991
- The Giant Panda is off the endangered wildlife list, as are Tigers
- Poverty levels fell, to their lowest levels
- The Colombian government signed a peace deal with FARC
But there’s no doubt, some sectors in WA did it tough in WA:
- Mining services
- Retail
- Property
- Recruitment
- Business Services
Mainly because:
- WA population growth has stalled
- Mining construction boom ended
- Digital disruption
- Uncertainty about the future
…. all fed in to lower business confidence, lower investment, less new jobs created.
Despite all this, unemployment peaked at 6.1%, and GDP grew (for the 25th successive year.)
There were some bright spots in the local economy:
- ICT, tech and digital businesses did well
- Professional services did OK as activity continued
- Annuity (SaaS) businesses were fine
- Agribusiness
- Some miners, especially iron ore, gold and lithium were hot
On that last point, it should be noted that the mining boom is not over, even though the construction boom may have over. Mining, as an industry, is three times the size it was 10 years ago. It’s just that they are not building as many mines as they were during 2004-2012.
FMG’s share price rose 250% in 2016. Atlas Iron, once the darling of the stock market, and then pronounced dead, saw its shares rise from a penny to 4.5c. Long way off its prime, but still alive. For many, this signalled all is not lost. Atlas started paying down debt. FMG could be debt free soon.
What has great potential in WA business?
- Tourism
- Education
- Aqua/agriculture
- Mining/bio/tech startups and software
- Many other industries
So looking to 2017 and beyond, there is much to be thankful for, and positive about in business in WA.
Much of what happens is in the mind anyway. If we think it, it may very well happen. We can create our own future, and we can certainly determine the success of our businesses by the attitude we take.
Plus, we live in paradise, lest we not forget. The sun is shining. The beaches are gorgeous. As is the wine.
