Looking ahead: How we do business will change after COVID-19

‘May you live in interesting times’ is a phrase in English that is widely reported to be an ironic Chinese curse. While it sounds like a positive statement, we are currently living in “interesting times”. It’s a period that will go down in history, and I would rather that we did not. The original Chinese phrase was probably read, “Better to be a dog in times of tranquillity than a human in times of chaos.” And, as I type this at home, my dog at my feet, I get it now.

I measure the pulse of the power equipment industry regularly. Not from complicated industry statistics as this economist should, but by talking to my local power equipment shop.  So according to Aaron last season was good and, as we start to move into warmer weather, it’s looking even better. Aaron runs a business with quality brands, bordering wealthier suburbs and acreage housing. This is the consumer segment that is probably doing okay and is no longer spending on overseas holidays, or any holidays for that matter. That same buyer is also happy to spend on a new BMW or Mercedes. Luxury brands reported their best month ever in June, despite the instant asset write-off for most vehicles capped at $57,581, but $150,000 for real business assets like machinery, Solar PV etc. All this after the motor vehicle industry reported the worst May sales in 30 years.

So where is this all heading?  Most of my colleague economists will say that they had predicted what we are seeing. Sounds to me a bit like the French radical who said, “There go my people, I must follow them for I am their leader.” Come to think of it, isn’t that what we have seen from our own leaders? They have been taking their advice from experts and from the polls in measured amounts, which means, while they knew we needed tough measures, they were introduced more slowly, to give the population time to accept the inevitable.

Voters like certainly in uncertain times and so does this industry. That is why this column will take the brave step and try to predict the future for you, so you can make your own plans with some degree of confidence. I promise dear reader, to circle back to the power equipment sector, but to do that we need to look at the big picture.

First Scott Morrison said in mid-August, after Victoria had gone into Stage 4 lockdown that the policy was now one of eradication and not containment. Actually, he said it had always been eradication, but I do not recall that. Containment and waiting for a quick and effective vaccine, is no longer the plan. It seems that cures that showed some early promise have not delivered good long term results, and planners increasingly need to assume a world where there is no cure, just indefinite containment.  

We are also learning that while the elderly need to fear that COVID-19 can be fatal, there are some serious and long term health issues faced by the young and foolish who continue to party thinking that the worst they will get is a bad cold. So while the head of Economics at University of New South Wales (UNSW) is right when she says that shutdown is hurting the economy and endangering lives and livelihoods, she is mistaken when she concludes we need to sacrifice many elderly because it is also the healthy youth that will suffer long term
debilitating effects.

What does eradication mean in practice?
My brave forecasts are: 

  1. Victoria will stay in lockdown for much longer than the six weeks announced. It may be not as tough but it is here until Christmas.
  2. NSW is, more likely than not, to also have a lengthy lockdown period.

I am not the only one working on this assumption. Within days of the Victorian lockdown we have seen national distribution centres move their bulk holdings to warehouses in Queensland, which will now be the new point for distribution to retailers.

So, with the new aim of no community transmission by Christmas, expect to see more of the consumer spending on stay-at-home projects – the garden is getting more attention which will be good news for some PE retailers along with Bunnings.

On the international stage, we may see travel to New Zealand and Pacific Islands in the first half of 2021, followed, perhaps, to other island nations like Japan and Taiwan.  So business buyers of PE like hotels and motels won’t be spending.

Australia’s new national goal is self-reliance in manufacturing. So, if ever you had an idea to build something in Australia, then this is the time the governments are keen to help. The reason for self-reliance is the increasing international tensions and the very real likelihood of a war with China. Let us hope this is one of those few occasions when it can be diverted into a Cold War and not a hot war. Interesting times? My dog is now curled up into a ball, which is exactly what I feel like doing too.

ACTION PLAN 

  • Move your distribution centre to a state where staff movement is easier.
  • Look again at how to brutally cut costs.
  • Improve cash flow.
  • Seek government loans and payment delays.
  • Invest in cost cutting like LED lighting and Solar PV. With a subsidized green loan, these are cash flow generators.
  • Be wary of bank offered debt relief as they often come with tight restrictions. 

WORK HEALTH & SAFETY

Gary Fooks is chair of the Blue-Sky Alliance.
Gary has been working on small engine emissions standards since 2005 and was announced as the Environment Minister’s Clean Air Champion in 2015.