News items before 2016
By Dr Alan Rai & Annie Jiang
Tuesday, 9 June, 2015Close Article
THE Hunter Research Foundation’s (HRF) economic research shows that to be competitive, Hunter businesses will have to look for globally-connected suppliers, contractors and customers. Currently, Hunter businesses’ customer bases remain largely regionally-focused with only 11per cent selling outside the Hunter.
This was reinforced in HRF’s recently released stage 1 report on the Future of Hunter Professional Services research project, which advises Hunter businesses on opportunities for growth and strategies to achieve it.
There are few global markets that offer more opportunity than China, Australia’s number one trading partner, with its huge population and high economic growth.
China is Australia’s second largest source of foreign direct investment behind the US, as Chinese investors seek to diversify their investments in secure nations that foster the migration of its people. To sustain historical growth rates into the future, China will also need to generate demand outside its domestic market and to import technical know-how to modernise their domestic industries.
As the recent China-Australia Free Trade Agreement sees lower barriers to international trade, there will be opportunities to enter the Chinese market and also benefit from increasing levels of Chinese outbound investment. As technological advances mean that services are increasingly being provided by suppliers outside their customers’ domiciles, global engagement can also help Hunter businesses to overcome the challenge of attracting and retaining high quality staff by off-shoring some aspects of their work. However, lower barriers to trade also bring greater threats from foreign competition.
But where do the opportunities lie with China and how easy is it for Hunter companies to engage with the Chinese market? Global professional services firm PricewaterhouseCoopers (PwC) recently offered some answers at their Engaging in Business with China workshop.
China’s own five-year plan explicitly mentions the sectors which it plans to target for development, which include agriculture, healthcare, education and tourism. The Hunter, with its abundance of arable land, skilled workforce, strong educational institutions, and potential as a top tourist destination, is well-positioned to meet China’s development goals.
Importantly for the Hunter’s services sector, PwC workshop presenter David Thomas from Think Global Consulting, said China’s services sector is under-developed, especially professional and healthcare services. Due to our ageing population, the Hunter’s hospitals and healthcare providers have strengthened their provision of aged-care services. China’s population is also ageing and lacks robust aged-care services. This is a significant opportunity for the Hunter to promote its expertise and attract Chinese investment.
Opportunities also exist in residential housing, with Chinese demand for Australian real estate unlikely to abate. Although the inner-city regions of Sydney and Melbourne have been, to date, the prime locations for Chinese property investment, space is limited. In contrast, the Hunter has an abundance of undeveloped land. The Hunter’s metropolitan area has a large supply of zoned, undeveloped land which can be developed at competitive rates, in direct contrast to Sydney where greenfield sites are in short supply. Also, in recent years, the number of dwellings approved for construction in the Hunter has fallen, and is well short of the 4600 new dwellings required per year to service the projected growth in population over the next one to two decades. All this adds up to significant opportunities for Chinese investors.
For a Hunter SME considering expanding into China, it is tempting for them to think that they need to have a presence in China’s most developed cities: Beijing, Shanghai, and Hong Kong.
However, this is not necessarily the case. Due to China’s enormous size, Hunter SMEs do not have to be ‘‘everywhere’’ in China. Even a ‘‘small’’ city in western China like Chengdu – with a population of 15million – is large enough to allow SMEs to achieve significant economies of scale. In addition, the relatively less well developed nature of China’s western cities means there is the potential for higher profit margins than could be achieved in China’s eastern and southern seaboard.
There are also Chinese-born consultants who can work with your business to build and grow profitable relationships with China. Another proven method for tapping in to opportunities in China is to hire a Chinese international student.
A student or recent graduate can help your business overcome the huge cultural and language barriers that prevent many businesses from engaging successfully with this huge emerging market, while keeping financial overheads low.
Annie Jiang moved to Newcastle in 2012 and completed a Master of Human Resource Management at the University of Newcastle. She founded Danya Export Consultants in 2014. Dr Alan Rai is Principal Economist at HRF and author of the Future of the Hunter’s Professional Services Stage 1 report.
This article was published in the Newcastle Herald on 9 June 2015
Thursday, 28 May, 2015Close Article
In the face of a rapidly developing global race to innovate, how can Hunter businesses compete and thrive in the Asian century? What are the industries that will grow to create the jobs of tomorrow and to allow the Hunter to maintain the increase in our living standards we experienced as a result of the mining investment boom?
At Hunter Research Foundation (HRF) we are focused on the future for our region, economically and socially. There are a range of global mega-trends, identified by the CSIRO, likely to affect that future including the re-emergence of China and India in the global economy and growing consumer expectations for services, experiences and social interaction.
At our most recent Hunter Economic Breakfast in May, HRF launched our Future of Hunter Professional Services research program, which aims to identify enabling strategies for Hunter companies in this economically-important industry sector to become more globally competitive. Our breakfast speaker May Ngui, a Director of global professional services consultancy GHD, noted that these mega-trends are already playing out on the world stage.
Having had extensive business dealings with Asian businesses, May provided unique insights into the challenges Australian businesses face when accessing Asian markets. These include bridging the cultural, linguistic and legal differences between Australia and its Eastern neighbours.
A transition in employment from industrial to services industries is already occurring in the Hunter due to the end of the mining investment boom. Key global trends indicate that this transition will continue even after mining investment reaches its new trough.
These trends mean that the Hunter’s future economic performance will increasingly be tied to the performance of its services industries. The challenge is to identify ways to improve the value added by service jobs. In the Future of Professional Services research project, HRF will look at the dynamics, opportunities and constraints for boosting the value of professional services in the Hunter.
In April 2015 HRF hosted a roundtable of professional services sector Research Ambassadors (pictured with HRF staff) to identify some of the issues faced by the industry. These issues will be addressed with Research Ambassadors and other professional services businesses during the second stage of project.
Some of the key issues identified include:
- The importance of collaboration
- The impact of advances in information and communications technology
- The challenge in attracting and retaining talent in the Region.
- The importance of strategic planning at Board level
- The potential need for culture change in individual organisations.
The Stage 1 report of HRF Future of Professional Services project also identifies the threats, challenges, and opportunities for the Hunter’s professional services industry. The report was circulated to ambassadors, who were invited to provide feedback and comment.
In Stage 2, HRF researchers will conduct 45‑60 minute in‑depth interviews with 18 local professional services businesses.
Wednesday, 27 May, 2015Close Article
Hunter Research Foundation has been talking the talk about the need for business to actively innovate, particularly in the digital space. Now HRF has stepped up to walk the walk too with a new responsive website, launched at the end of 2014.
The new site arrived only a few months before Google made one of their biggest update announcements; responsive websites, which are optimised to recognise and resize for any device, are now heavily favoured over other websites. The update, dubbed ‘mobilegeddon’, took place in April and those who have not innovated online to be responsive are now somewhat disadvantaged on Google.
It’s little wonder these changes are taking place, with HRF figures from 2014 showing that 64 per cent of Hunter businesses accessed the internet on the go from a smartphone. Meanwhile only 57 per cent of Hunter businesses had a dedicated website at all.
The new HRF website www.hrf.com.au has been custom-designed to offer a new and better experience to our users who can:
- access all our publications free
- sign up for e-news
- register for our popular events
- browse our tailored sponsorship opportunities and
- discover our regional research.
To learn more about the digital economy, register for the next Hunter Economic Breakfast on 17 July. The breakfast will focus on digital technology and innovation as part of the Hunter Innovation Festival, as well as release the latest research into ICT use in the Hunter.
Wednesday, 27 May, 2015Close Article
Data collection will commence shortly for one of HRF’s most sought-after gems. The Hunter Region At A Glance publication provides an annual snapshot of the Hunter including unique data from HRF.
The document is popular with Hunter decision-makers with the publication containing a concise overview covering demographic, economic and social data.
“The information in HRF's Hunter Region At A Glance booklet is very useful to me in preparing my response to a Council debate and assists me to use data to back my argument,” says Singleton Councillor Val Scott. “I have also used the booklet when responding to questions by members of the many committees I sit on."
Whether you want to inform your constituents or incorporate the facts and data into your strategic planning, Hunter Region At A Glance is the perfect tool to provide the clarity you need about our Region to make informed and forward-looking decisions. This is particularly important given the current challenging economic climate and HRF has been actively encouraging organisations to plan strategically in order to not only survive, but to thrive into the future.
The next release of Hunter Region At A Glance presents an exciting partnership opportunity with HRF. The information lends itself to digital innovation, with the potential to evolve the once a year publication to include a moreregularly updated app incorporating monthly ABS and HRF data. Have your organisation known as the data experts through collaborating with HRF to develop an At A Glance app.
The At A Glance has been produced each year since 1976 and the 2015 version will be the 39th edition.
By Dr Brent Jenkins
Tuesday, 26 May, 2015Close Article
THE Hunter Research Foundation (HRF) delivered our latest Hunter economic indicators last week, three days after the Federal Budget was handed down.
As HRF reported, we are experiencing the worst economic conditions that the Hunter has faced in a generation, including high unemployment and near-record low levels of business confidence.
To say that we were disappointed in this Budget is an understatement, especially in relation to its impact on regional economies.
The Australian economy has seen fiscal measures drive down interest rates and the Australian dollar, which should have seen a boost in business confidence and investment.
This hasn’t happened due to the continuing effects of the slow-down in mining investment across the national economy and in particular in the Hunter.
Is playing around the reform edges with a modest decrease in SME tax rates and facilitation of child care really going to make a difference?
This is assuming that these measures, and other reform measures left over from the previous budget, can get through the Senate.
The broad aims of the latest Federal Budget are to increase workforce participation and boost employment and investment.
The policies meant to enable that include providing ‘carrots’ for working mums and ‘sticks’ to stay-at-home mums; incentives to hire over-50s and under-25s; and a tax cut and accelerated depreciation for SMEs.
Are these policies a remedy for the current situation? How effective is stimulating the supply of labour by encouraging people to enter the workforce, when there is a shortage of jobs for them to take up?
The economy has excess labour supply, not labour demand.
For Hunter SMEs, lack of sales is the major constraint we are seeing in our indicators, not higher taxes.
The Budget lacked demand-boosting policies.
What will define the economic success of regions like the Hunter is the creation of new jobs and in particular high-value jobs.
The level of job losses in mining and manufacturing are significant and need to be balanced by job creation in new areas such as professional services. Otherwise we will see a significant drop in regional economic value and in our ability to connect to global markets.
It will also be critical to create jobs in this sector to retain the highly-qualified graduates from our TAFE and University to begin addressing what is becoming structural youth unemployment in the Hunter and to stop the brain drain out of the regions and into our capital cities.
What I’d like to see from both Federal and State Governments is a raft of measures to promote job-creation in regional economies.
This package could include creation of special enterprise zones with incentives for new investment and tax concessions. It should recognise that Government spending is a powerful driver of growth for our manufacturing and services sectors and ensure that regional companies can compete effectively for this work. It should not only focus on the sugar-hit of hard infrastructure investment but also provide spaces and support for innovative activities between SMEs and research institutions such as CSIRO and the University. By providing new financing opportunities through regional development banks, Government could bridge the funding gap that a large number of SME’s face in supporting investment growth.
The fiscal card has essentially been played in Australia; how much lower can interest rates go? We will not see a turn-around in the region’s economic situation unless new and targeted initiatives are developed between government and business that focus on the core problems – lack of access to markets, skills and funding that plague SMEs in regional economies. Policies that reduce our dependence on one sector, mining, and that enable Australian companies become more internationally competitive and innovative are necessary for long term economic success.
At our breakfast, HRF launched a new research project to identify opportunities in the Hunter’s services sector and to explore how service companies (both large and small) are tackling the problems that confront them in taking advantage of these opportunities. We all want to see a thriving and prosperous Hunter economy in the future and HRF are working with a group of Research Ambassadors in the region’s professional services industries to try and find ways to stimulate growth in this critically-important sector.
If Budgets and governments won’t lead, let’s get together to enact change at a local level.
This article was published in the Newcastle Herald on 25 May 2015
By Dr Alan Rai
Saturday, 16 May, 2015Close Article
The Hunter Research Foundation’s (HRF) latest Hunter economic indicators show a Region that remains strongly impacted by the end of the mining investment boom, with rising unemployment and low business expectations.
There were around 285,600 people employed in the Hunter at the end of March 2015, 5 per cent lower (16,200 people) than the September 2013 peak of 301,600. Over the same period, in contrast, 48,000 extra people had gained employment across NSW, a rise of 1 per cent.
The decline in employment has been greatest for full-time, male workers – who are more likely than females to be employed in mining and related industries. Of the 16,200 people who have lost their jobs since September 2013, more than four-fifths (13,200) have been males.
As employment has declined, the unemployment rate has increased over the past quarter, with around one-in-10 Hunter people unable to find work in March 2015. In contrast, the unemployment rate across NSW was 6.8 per cent at end-March 2015. More worryingly for the Hunter, the estimated unemployment rate amongst its young people (15-24 year-olds) continues to rise, reaching 18.5 per cent at the end of March.
The divergence between the State’s and the Hunter’s unemployment rates indicates the Hunter has been much less successful in reducing its reliance on the mining sector and in growing its non-mining industries. Hunter employment is only likely to increase in the future if businesses see opportunities to grow and invest. Increasing their exposure to Asia – becoming more export-oriented and globally competitive – is a significant opportunity for all types of Hunter businesses, from services-based industries to agriculture and manufacturing.
To some extent the regional economy mirrors the national, with Australia’s economic growth remaining subdued and unemployment expected to continue rising in 2015. However, over the medium term, Australia’s economic growth is expected to rise, whereas our research has shown some worrying signs in the preparedness of Hunter businesses to capitalise on some of the factors that are expected to drive that growth.
Australia’s projected growth is partly due to the boost in international competitiveness provided by a low Australian dollar (A$). The 10 per cent fall in the value of the A$ promises a windfall for Australian companies who export and is expected to help the national economy to re-balance from mining to non-mining growth.
In the Hunter, however, HRF’s surveys have revealed that only about one-in-10 businesses are exporting. This has fallen slightly over the past five years, from around one-in-six in 2010. In a more encouraging development, over the past six months the share of Hunter businesses that expect to begin exporting over the next 12 months has risen, from around 1 per cent in June 2014 to around 16 per cent today. To take advantage of opportunities offshore, collaboration and networking will be important, especially as most Hunter businesses do not currently export.
Given the weak state of the Hunter’s economy, all businesses need to look outside the Region for customers in order to remain profitable. By broadening and diversifying customer bases across different regions and nations, Hunter businesses can mitigate some of the impact of the Region’s weak economy on their performance. Despite the benefits of customer and market diversification, only half of Hunter businesses surveyed in March 2015 said they export to Australian customers outside the Hunter.
The professional services sector – which includes financial, legal, technical and real-estate services – currently employs around one-in-11 Hunter workers, compared to one-in-six for the State and one-in-seven for the nation. While this employment share has fallen across the Hunter since 2011, it has risen slightly across NSW and Australia.
HRF today launched its Future of Hunter Professional Servicesresearch project, which will examine the opportunities for the sector to grow and add value; constraints faced in attempting to capture these opportunities; and strategies that can be developed and implemented at the regional level to enable the Hunter to boost its share of the value created by the professional services sector.
To remain globally competitive, the Hunter professional services sector will need to increasingly look towards new markets. The opportunities to export have risen over time, reflecting ongoing technological advances and falling trade barriers, which have also raised the threat of foreign competition.
These opportunities have been boosted by the free trade agreements (FTAs) recently signed with our major trading partners – China, Japan and Korea. These are likely to have a higher impact on less trade-exposed industries – such as professional services – where trade barriers remain relatively high. For example, the mining and manufacturing sectors across Australia are each around seven times more internationally tradeable than professional services.
HRF have recruited a group of Professional Services Sector Research Ambassadors from leading Hunter firms to help inform our research and develop real solutions to improve the sector’s contribution to the Hunter’s future economic growth.
This article was published in the Newcastle Herald on 16 May 2015.