Key Takeaways:
- The Australian Labor Party will focus on enhancing the healthcare and tertiary education sectors.
- Downstream industries that can capitalise on this targeted growth will benefit greatly over the new government’s 3-year term.
- Projected wage growth increases, supported by the Albanese Government, will influence the cost structures of many labour-intensive industries such as retail and hospitality.
- The Labor Party’s climate target of cutting emissions by 43% by 2030, compared to the Coalition’s 28% emissions reduction target, will greatly disincentivise heavily polluting industries such as coal mining and other associated industry work.
As it stands, the Australian Labor Party comes into government facing record high net public sector debt, expected to reach almost $780.0 billion by June 2022. In addition, inflation growth and interest rate hikes are heavily projected to place further pressure on many Australian industries moving forward. Anthony Albanese’s platform also emphasised upskilling Australians to fix key industry skill shortage gaps. The Australian Labor Party ran with a focus on enhancing health care and social assistance services, reducing skills shortage gaps and incentivising wage growth.
In contrast, the Coalition, now led by Peter Dutton, left office with an unemployment rate sitting at 3.9%, the lowest it has been since August 1974. The Liberal Party of Australia was unable to re-elect Scott Morrison with a platform centred on industries such as defence, and maintaining a lower emissions reduction target to ensure coal and gas remain critical parts of the nation’s energy mix.
With that in mind, it’s vital to understand how the new government’s agenda and major policies will influence our most important industries. So, how can businesses capitalise on the change of government?
WINNERS
Tertiary Education
Labor’s plan for a Fee Free Technical and Further Education (TAFE) aims to support industries with skills shortage gaps and those hurt the most by the COVID-19 pandemic. The Albanese Government plans to introduce 465,000 Fee Free TAFE places and invest $50 million in a TAFE Technology Fund, focusing on workshops, IT facilities and telehealth simulators.
Labor’s plan would also ensure that at least 70% of Commonwealth vocational education funding is for public TAFE, further strengthening the longevity of the Australian vocational education system. Additionally, they plan to deliver 20,000 extra places and slightly more funding to support Australian universities.
As addressing skills shortages becomes an increasing priority, the introduction of these policies has the potential to enhance the reputation of Australian tertiary qualifications and boost demand among post-academic organisations. TAFE providers always welcome more funding as this enables them to invest more in areas of growth. However, many TAFE providers are still recovering from the COVID-19 pandemic and cuts to international students, with this recovery still needing to play out over the coming period.
Telecommunication Services
Labor has pledged to expand full-fibre access to the NBN as an alternative for regional businesses currently depending on copper wire services. Not only will this likely benefit service providers and demand for telecommunication infrastructure projects, but it will also expand potential markets for countless industries.
While this trend will enable regional firms to be more competitive in the marketplace, it will also lower the importance of proximity for corporations, as regional consumers will be able to access goods and services online much more easily.
With this in mind, small enterprises that target regional or niche communities may have to adapt to online goods and services providers encroaching on regional market share.
Residential Care Services
The Labor Government’s election campaign was highly focused on improving the functionality of aged care. The policies they intend to introduce would mandate having registered nurses on site to attend to residents 24/7, alongside a $2.5 billion commitment to raising nursing home staffing numbers and quality.
Increasing the care time per resident and intensifying industry regulations will require a major boost in federal funding and drive enhanced productivity for this industry. However, some aged-care providers may face difficulty maintaining their profit margins following wage and regulation increases.
The Federal Government’s commitment to funding a real wage rise for aged-care workers is expected to increase care quality and occupancy rates, boosting industry revenue.
Machinery and Equipment Manufacturing
One of the most expensive policy measures in this election relates to Labor’s plan for a National Reconstruction Fund.
The effects of this policy include investing:
- $1.5 billion in extra production and logistics capability for medical manufacturing
- $1 billion into critical technologies by way of equity, loans and guarantees for companies in the business of critical technology creation and advancement
- $1 billion of investment into advanced manufacturing, such as renewables and agricultural processing innovations.
Additionally, health procurement is forecast to be heavily influenced by the Australian Labor Party’s approach to health, aged and child care services, further raising demand for medical equipment.
Nonmetallic Mineral Mining and Quarrying
Demand for lithium is increasing rapidly with the mineral quickly making a case for itself as one of the most sought-after and important minerals of the future. Given the outcome of the 2022 Federal Election, this demand will only increase.
Labor’s commitment to building a national electric vehicle charging network and their introduction of an electric car discount will simultaneously lower the price of electric vehicles and increase their convenience. International demand for electric vehicles is already surging and ripe for increased incentives. For example, sales tripled in Australia from 6,900 in 2020 to 20,665 in 2021. Therefore, the lithium-ion batteries necessary for electric vehicle manufacturing will be in high international demand, encouraging domestic battery mineral mining.
In addition, Labor’s focus on renewable energy investment will continue to incentivise large-scale lithium-ion battery storage production. This trend is a key contributor to smoothing energy supply shocks as the nation phases out coal at a faster pace under Albanese.
LOSERS
Consumer Goods Retailing
Rising minimum wages will increase industry costs and prices of key upstream inputs. Global supply shocks are forecast to continue ravaging this sector in the medium term. In the meantime, Labor’s backing of a rise in the minimum wage could spell trouble for businesses of all sizes. An increase to the minimum wage would hit retailers the hardest, as wages already encompass a large proportion of their cost structure.
Wage growth is expected to have mixed effects on this industry. Disposable incomes across Australia will rise, giving low-income consumers more money to spend on industry goods. However, cost pressures will require organisations to raise their prices and fire workers to remain viable. Consequently, consumer purchases are forecast to shift to either prioritise expenditure on lower cost alternatives or spend less often.
Overall, surging inflation, coupled with a rise in the minimum wage, won’t be kind to store-based retailers.
Food and Beverage Services
Many industries will struggle to cope with Albanese’s backing of rising minimum wages, with food and beverage services being one of the hardest hit. It is important to note that around 25-30% of the labour force has its pay linked with minimum wage increases through industry awards or enterprise bargaining agreements.
This industry will also need to brace for severe cost increases following shocks to global supply chains, as input goods are forecast to join labour in becoming more expensive. Firms that provide goods or equipment to industry players will also need to adapt, as their downstream customers will need to cut costs, including from inputs that are not a priority.
Due to the competitive nature of the industry, it is likely that average industry profit margins will suffer from these supply-side issues. Prices will continue to rise in the medium term, highlighting a threat to the demand for industry goods and adjacent businesses.
Defence
As part of their federal election platform, the Australian Labor Party championed the Defence Force Posture Review. This review will holistically look into the assets and staff of the Australian Defence Force, and redirect funding based on its findings.
Under a Coalition government, Defence industry spending was expected to be much higher.
Such spending included:
- $8 billion pledged toward building new tactical helicopters and upgrades
- $58 million towards defence manufacturing expansion
- $24 million to upgrade the Navy’s Marine Precinct in Cairns
- $180 million to enable pathways into the Defence industry
Historically, the Australian Labor Party cut defence spending twice during its last time in government, with many anticipating the future funding redirection to include cuts to a variety of currently active services. These cuts may affect consultants and adjacent industry players who rely on the Defence industry as a major downstream customer for goods or services.
Coal Mining
The Coalition Government was much more likely to have supported new gas and coal projects. Their carbon emissions targets of a 28% reduction by 2030 was much less strict compared with Labor’s 43%. Additionally, the Liberal Party had focused on a technology- and gas-led recovery from the COVID-19 pandemic to transition to cleaner energy over a sustainable period.
Despite reaching a majority government in the House of Representatives, the Labor Party will need to work with the Greens, led nationally by Adam Bandt, and other senators to pass legislation in the Senate.
Therefore, although Anthony Albanese’s government supports the many imminent major oil and gas projects, it is possible that they will need to compromise their support of these projects to pass other legislation.
As a result, the coal mining industry is a direct loser and other adjacent fossil fuel-mining industries and downstream energy providers are also on shaky ground. Energy companies relying on upcoming fossil fuel projects for incoming revenue will face relatively more risk over Albanese’s term.
Major companies are all paying close attention to this space. Any manufacturer who had plans to implement renewable energy will now have to bring forward their timelines to meet industry standards.
Professional Services
Scott Morrison’s Coalition placed a public staffing cap on public services. This cap ensured that departments would limit wasteful internal spending. However, this cap also increased the need for external consultants or contractors for any project work of massive scope.
The incoming Federal Government is committed to cutting $3 billion in spending on consultants and labour-hire companies over the next four years. These funds will instead be directed to internal staffing and other platform focuses, as the Albanese government plans to scrap the public staffing cap.
However, despite external staffing cuts, the Federal Government is still likely to rely on professional services for some aspects of public operations. In addition, operators in the other listed industries may need support in adjusting their business strategies and cost structures, and in seeking new markets to pursue.
As government projects are generally not the primary source of income for professional services, despite their lucrative contracts, there will still be some demand for professional services in the near term.
Conclusion
Overall, an Albanese Labor Government will attempt to navigate Australia’s economic future through increased funding for renewable energy processes and government services.
Change creates an opportunity for competition. Organisations should invest in best practices, upskill and maintain their workforce, and enhance the quality of their products and services to see these challenges through.
It will be critical to monitor the downstream effects of the new government’s policies, as many related and semi-related industry players will have to make strategic decisions that rely on an accurate understanding of the new economic outlook.
Alfabank-Adres reports used to develop this release:
- Aged Care Residential Services in Australia
- Real Household Disposable Income
- Inflation Wreaks Havoc As Prices Balloon
- What is Strategic Planning?
For more information, to obtain industry reports, or to arrange an interview with an analyst, please contact: mediarelations@alfabank-adres.ru
