Collins Dictionary recently released their ‘Word of the Year’, which they have aptly chosen for 2022 as 'permacrisis' . A portmanteau of “permanent” and “crisis”, the word has been described by Collins as representing, ‘an extended period of instability and insecurity’. Reflecting on the year at large, it seems as though permacrisis perfectly sums up the current state of the world. From feeling the after-effects of the global pandemic, to the ongoing Ukraine crisis, political instability, and the heightening repercussions of climate change, 2022 has certainly been a volatile year. But closer to home in the domestic market, there are a few key issues facing everyday Australians.
Cost of living crisis
After months of consecutive interest rate hikes, the cracks are beginning to show. Ever-increasing interest rates and higher inflation are putting budgetary pressure on many households.
In a recent statement Philip Lowe, the Governor: Monetary Policy Decision at the Reserve Bank of Australia (RBA), declared, “As is the case in most countries, inflation in Australia is too high. Over the year to September, the CPI inflation rate was 7.3 per cent, the highest it has been in more than three decades. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role. Returning inflation to target requires a more sustainable balance between demand and supply.”
The RBA have clearly stated that a further increase in inflation is expected over the months ahead.
Household consumption, spending and consumer confidence
As the lockdowns of the past few years seem to have faded to a distant memory, the zeal of post-pandemic spending seems to have worn off. Leading up to Christmas the negative impacts of the interest rate hikes are coming into effect as growth in household consumption slows due to tighter financial conditions.
The latest Westpac survey data shows that consumer sentiment has dropped to historic lows, falling 6.9% from October to November. Consumer confidence is now below the low point of the GFC, and only slightly higher than when the COVID pandemic first hit in April 2020. The survey results also detailed that leading up to the key holiday shopping period, 40% of consumers expect to spend less on gifts this year – the highest figure recorded by Westpac since 2009.
Australian Property Market
Leading into the back end of the year, there are a number of market factors clearly shaping the Australian property market. The same Westpac survey mentioned above, detailed that consumer sentiment has fallen particularly heavily amongst those with a mortgage, down 15.7%. Whilst buyer attitudes around housing remain near historical lows.
The September quarter CPI release by the Australian Bureau of Statistics (ABS) detailed that, “ongoing shortages of labour and materials continue to drive higher prices for new dwellings.” The increasing costs in new builds directly correlates with our Property Market Update showing the popularity of strata properties for First Home Buyers in NSW. If labour and materials remain in short supply, we may in turn may see a decrease in the construction of new dwellings.
The ABS data also shows that for the third consecutive quarter – the rate of rental price growth has continued for Sydney and Melbourne. The six remaining capital cities also recorded higher increases in rent prices.
What’s in store for 2023?
In their recent live webinar discussing the 2022 Australia State of the Legal Market report, presenters for Thomson Reuters stated that the most dominant word to describe the next 12 months will be ‘uncertainty’. This summation leading into 2023 couldn’t seem truer, given the current state of the Australian market. However, reflecting on the previous twelve months – we should feel optimistic on what the future might hold.
Whilst there will be an element of uncertainty, given all we have experienced over the past few years with the pandemic, as a nation we have been able to build resilience. In our current state, we are better equipped to handle unexpected events that arise and have learnt some valuable lessons over the previous twelve months that will hold us in good stead for the future. To use a phrase that has been in high rotation of late, we have learnt to adapt.
Something that those within the legal and conveyancing industry know all too well. As the previously mentioned Thomson Reuters report states, “there are ample reasons for continued optimism. A renewed focus on the correct technology to better address the challenges firms are facing may help alleviate the strain of more mundane tasks. Creating a culture of innovation can endear law firms to their clients while simultaneously creating an engaging, exciting environment full of opportunity where lawyers want to work, mitigating at least some of the pressures associated with finding and keeping talent.”
It is with this in mind that InfoTrack is excited to see what lies ahead in 2023. Whatever the opportunities and challenges may be, we will meet them head-on and continue to develop solutions that drive firms forward and encourage a culture of innovation.
