By Paul Raftery – CEO, Projects RH. Sydney, November 2021

Hey, Australia: It´s time to adapt to the reactivation!

Out of the desert and having climbed back to the precipice we stand on top of the mountain looking down into the rich valley of growth and opportunity.

Those of us that have survived the 18 months of lock-down across Australia have probably gained a few kilos and lost a few dollars. The vast majority of businesses in Australia will return and the government systems supporting business have broadly proved to be successful. Many of us have had to invest a few more dollars to keep staff and our business is going.

The ques to get the evening bus home are growing longer but many people are only working in the city offices two days a week. We can already see that for many people it is difficult to choose which two days of the week to come back to the office so shortly I expect we will see more and more people returning five days a week.

It is important for us all to understand that technology has been embraced and will continue to be with us and that we must accept its use. We will need to travel but it will be less and more focused. There will be increasing resistance from staff and management for people to travel long distances for one or two brief meetings no matter how important they are to the deal. We have all learned during the pandemic to use the technology and to develop trust. Importantly too, the technology has evolved and has become more accepted, including remote document signing. I doubt anyone again will need to travel to London and return the same day simply to execute a document on behalf of the company.

Clearly, we will need to continue to use the technologies we have been using to maintain and develop our friendships overseas and even across the city. I expect we will continue to work longer hours talking to the Americas in our morning and Asia in Europe in our evenings.

The online financial activation

As we see it, Australia leaping to 90%+ double vaccination, internal borders opening and both students and business and investment visa candidates arriving. Many of those jobs traditionally taken by foreign students will again be available to them.

On the financial front we are seeing interest rates rise, wages rise and inflation all as signs of a buoyant and dynamic economy in 2022 coupled with confidence in the future of Australia.

Australia has come out of Covid 19 relatively unaffected. Whilst the great cities of Australia have been in lockdown most of our export industries, which are highly mechanised, have continued to thrive and enjoy record prices. There are two notable exceptions to this, education and tourism, which are both labour-intensive and both of which have suffered.

Respectfully, whilst the arts have suffered greatly it is not as significant an employer or export learner.

Retail in Australia has adapted and I’m not sure that it will ever go back. We have all learn to click and have delivered or going collect. I, for one, will continue to use online shopping but will also want to periodically go to the shops, however there are some things which will forever be ordered online and delivered such as printer cartridges.

I suspect increasingly we will all have websites which are financially enabled and by that, I mean can accept payment for services and thus we will be always in the global marketplace.

Investors are ringing us looking for good projects

During Covid 19, investors have continued to invest. This investment has not only fueled the stock market and the property market but has gone into new opportunities. In the new projects area, there has been a shift towards more advanced projects with many investors, who previously invested before a minimum viable product was prepared, requiring that to be produced.

Nevertheless, investors are keen to invest and remain interested in putting their money in projects in Australia. There is a clear recognition that there are some very hot sectors in Australia and that these have a potential to be liable. We are seeing the realisation of this in Fintech, agri-tech, retail systems and environmental management but to name a few.

What is important is that international investors recognise Australia remains a wonderful rookery for new projects to develop for they are exported to North America, Europe and/or Asia.

As we work with potential investors, we are receiving ongoing feedback that investors are looking for at least two cofounders with complementary skills. Clearly one of the founders needs to be the visionary with marketing skills and the ability to articulate delivery of the vision. Importantly, either the co-founder or a key member of the team can give the investor the reassurance that the project will be delivered. Investors want experience in delivery.

Whilst the energy and drive of the founder is critical equally important is that the CTO can clearly articulate the deliverability of the vision.

What is needed is a secret sauce – in the case of Afterpay was the ability to connect devoted customers with retailers to drive their sales. In other words, Afterpay developed a deep understanding of their clients based on their data and its analysis.

The founding team understood the secret sauce and were able to articulate it and deliver it. They created the platform for ongoing value generation. They identified it and it is what they sold as their disruptor.

At Projects RH we work with our clients to identify their “secret sauce” and articulate how they will deliver it.

Sustainable Business Models

Investors are not only looking for sustainable business models, but management who understands and embraces ESG principles. Whether they are still investing in mining, energy, transport, food production or processing, they are looking for businesses which can deal with both local and international compliance issues. Increasingly we be asked about “do I need carbon credits or can I create carbon credits”. In fact, one of our business clients is creating a new business model around the generation of carbon credits in recognition from the demand they are seeing both locally and internationally for Australian sourced or endorsed credits. Australia is highly regarded for its technical expertise and its credibility in accreditation processes.

In sustainability and particularly carbon credits, it is clear Australian industry is ahead of government and government will only capture with the laggards. What we are seeing is that the market first led by the exporters, but increasingly, now those downstream want to understand that the partners they have can continue. Some of our international clients find it amusing that the early movers are the mining and energy companies. At projects RH we think this is not surprising given that these parties are dealing directly with international clients who require to understand and prove to their governments the sourcing of their materials and do they come with or from a country with acceptable CO2 credentials. Australian business does not wish to need to deal with tariffs based on our energy sector not being globally equivalent in their protection of the environment.

The recent promulgation that businesses not only have to report under International Accounting Standards but now also need to report under International Sustainability Standards means that investors and lenders will constantly be faced with companies’ willingness to join environmental sustainability and not waiting for regulatory compliance to catch up with them. In short, Australian companies will be easily benchmarked against international companies based on their compliance on ESG principles.

Compliance with ESG principles will clearly impact on:

• the availability of debt and its pricing
• the willingness of funds managers to hold shares or take new shares because of perceived risk profile based with not being best practice.
• Attracting and retaining good staff
• what we invest in and where we invest
• finding customers and suppliers
• getting insurance and keeping it.

We believe the above factors have been critical in bringing many companies to the table to believe that they need to accept voluntary compliance as failure to do so will cost the company in many ways.

Interestingly, it has been the energy and mining companies which have led the market in announcing their responses and getting their own houses in to reduce their footprint. Whilst many people may think it is ironic to see solar panels at a coal mine is not a sign of future but one of the present.

Our new industry – Decarbonisation

We are seeing decarbonisation with a large investment into it and the creation of new skilled jobs in the maintenance and integration of renewable energy into best business practice. Increasingly it is the large energy companies who are looking for carbon credits to couple with fossil fuels so that they can sell net zero product into the international markets.

Australia is working hard to create a carbon credits generation industry which not only includes not cutting down trees but rather taking positive action such as planting crops which will collect and leave carbon in the ground. It is amazing to see the sale and purchase of fertilisers and supplements which encourage this. The real changes in the mindset, particularly of city people, as our farming community have long known that their soils and water are critical for their long-term future. We are now seeing investors and intellectuals support this and develop long-term projects which have a positive impact on the environment.

You´re Welcome!

Our international boarders have opened so we can come and go and soon other will be able to come, visit and leave.

We see Covid-19 will be relegated to the status of the common flu. It will be seen as something we can and must manage.

As Australia approaches 90% plus vaccination it will be the unvaccinated who will lose out. Most of the economy will continue to move forward and enjoy the rich bounty which Australia offers.

Australia’s Policy Changes

The local media’s unending focus on Covid-19 numbers has led to several policy changes which will change Australia for ever. It also saw policy changes which at other times would have resulted in huge public debate and engaged controversy with the official opposition party treated as a unity ticket item

• Moving to nuclear powered submarines
• Committing to net zero by 2050.

The political opposition parties and the States have said little on either case, Only NZ and Indonesia are worried about an arms race. The only issue to do with nuclear powered submarines has been how quickly will the technology be transferred, and when can start building them; and likewise with the commitment to net zero by 2050, the issue has been why not earlier as most of our states have aggressive programs.

Crypto, Cyber Security and Blockchain

One of the key learning points from so many people working from home during Covid 19 has been our ability to adapt to an increasingly decentralised world which relies totally technology.

• The world of crypto currency less than two years ago was in edge topic and only understood by specialists. Today we have crypto miners listed on our stock exchange, crypto currency tradable on our banking apps and crypto recognised as a class of assets for investment of our pension funds. It is clearly an understood and accepted part of our world.
• Cyber security remains of deep concern and as we all invest in protecting our systems it has now become a major issue at board level. During our lockdown we saw increased cyber-attacks particularly at the consumer level that our banking system and our national security system have protected most of us from the worst implications of cyber security. We did see attempts to break into our banking system and into our government systems, but these have largely been attributed to international espionage seeing as they were directed at our Parliament house computer systems and our Treasury systems.
• Block chain has come of age it is now part of many things we do including our export wines, beef and fish giving an exact story of their origins. More importantly, it is being used broadly in asset tracing and in international money movement. It is providing legitimacy to much of our international trading systems.

In the Short Term

The headlines for the economy raise uncertainty. Like the rest the world we are suffering from container shortages and longer lead times for shipping to come to Australia.  Consumption patterns again will change though I believe online sales will dramatically eat into the retail dollar for ever more. Discretionary spending will see the return of gymnasiums and health food at the expense of convenience foods which grew during lock-down. There are clear inflationary pressures in the wager sector and the rise in house prices will require an increase in interest rates.

Australia does need that return of immigration to put the economy back into balance.

Australia The Next Chapter

We are seeing several clear signs that the Australian economy is heating and there is an expectation that things will change

• interest rates in the forward market have picked-up
• junior and middle professional salaries have risen 10-15%
• Australian urban real estate has risen significantly based on cheap money. Sadly, for most, when the price of money rises those who have borrowed will be hurt.
• Consumer credit in the form of buy now pay later is almost universally available encouraging people to spend money they don’t have.
• Lower-level wages such as those in the hospitality industry have risen significantly, but this is expected to be a short-term thing until foreign students arrive and their presence will press labour markets.
• Skilled workers and professionals are seeking to come to Australia from offshore this coupled with the return of foreign students will place additional demands on the economy. The only downside being the outflow of skilled professionals on working holidays to North America and Europe. This has been a long-term feature of the Australian economy that what we will see is probably three years exits in one year.

Reactivation and what we do

This reactivation of the Australian economy asks to continue to act prudently but willingly embrace the change which we are seeing.

• With our clients we need to adapt to a greater online presence and dealing with them using videoconferencing. We need recognise not only is it convenient and time effective for us before them to. We also need to understand it is time to get out and meet with our clients face-to-face, this may mean some travel but we need to recognise there is a human factor in doing business.
• Our staff need to be thanked for their persistence during the period of lock-down, but we need understand that they have found a new freedom and probably now work harder and more effectively but more flexibly. If we wish to keep them, I doubt that we can force them to come to the office five days a week. They respect the time found in abandoning travel to and from work and are enjoying flexibility of working and being with their families too.
• We need to be ready for a bout of inflation which will see prices and wages rise.

Our International Community

Our day-to-day exposure to the international community will return. From six December international students will start arriving and shortly thereafter we can expect to see normal patterns of immigration resume.

This will see new businesses founded and new opportunities emerging. We do expect to see a number of offshore individuals seeking to migrate to Australia and to bring with them their business acumen and technology to create a new business so that they and their family can grow in Australia. This will require their employment of good local people to ensure that the business can grow. We expect to see many of these businesses with an export focus which will be good for the national interest.

What I expect we will see is also continuing internationalisation of our business. In the case of Projects RH we bring project management skills to a number of projects not just in Australia but offshore working with Australian and overseas partners. I expect to see this area of our business continue to grow, particularly when we and our overseas partners are able to travel. We are seeing many business activities across the world adopt international standards whether they be accounting, engineering or environmental. In each of these, Australians have the opportunity to work with the best par entities in the world to deliver projects. We are already being invited to work with parties in Vietnam, Chile, Hong Kong, India, Sri Lanka and Colombia.

Australians have a good reputation for working internationally and I expect that this will see new doors open for us. We must thank our team who have worked the last 18 months to maintain and expand these links and opportunities.

Conclusion

In adapting to the reactivation of the Australian economy we need to be both flexible and planned.

We do need to have after date business plans and financial models which take account for things as we know them, but we also need to be willing to amend those plans as opportunities emerge.

We need to be sharing these plans with our advisors, investors and lenders most importantly those who can lead us to additional clients. We need to have important strategic relationships both reinforced and understood. I for one am expecting we will be very busy in the weeks before Christmas and again in the few weeks before Chinese New Year as we deal with the reopening of Australia and the coming to Australia of people. I also expect that we need to be willing to travel to renew our friendships and business contacts which we probably have not seen other than on a video-conference for more than 18 months. It is important to remember that business is done by people and in many parts of the world this requires trust to be built up by meeting people. We need to have reinforced our friendships and this will take some time, but it is worth the effort.

I expect will also see a number of people who have been talking to us over the last 18 months about coming in investing in Australia deciding to do so. Australia will not be the first nation to open but what has happened in Australia has meant that we are relatively under-scarred by Covid 19, which makes us very attractive to many international people for who would like to call Australia home. I suspect we will see many businesses wanting to establish and grow in Australia and they will be welcome as they will create jobs and bring with them technologies.

As we prepare to finish 2021 with a gallop, we need to be ready to jump out of the box in 2022 and now we have a marathon on ahead of us.

We will need to continue to work hard but be flexible so that we are ready to take opportunities that present to us with both hands.