The Federal Treasurer has got the message.
Expenditures are exceeding income. National debt is high, rapidly increasing and will in early 2026 exceed for the first time $1 trillion.
Budget deficits are forecast for the next ten years.
Government spending, which has been the economic driving force, will be reined in immediately. Outlays on infrastructure, including railway lines, transport tunnels, airports and shipping terminals have underpinned national, state, regional and local economies for the past five years. That trend will lapse in the immediate future.
Noticeably, government contributions to the GDP (Gross Domestic Product) have increased from around 24% to more than 27%, during the current decade. That is disturbingly high. Australia currently has the trappings of socialism, dependent on government fiscal policies, employment, subsidies and financial concessions. Things are about to change, starting in 2026. Therein lies a message for all those in the broader commerce sector.
ON THE OTHER HAND
Private companies have generally been financially prudent during the COVID19 pandemic and beyond. Indications are that private investment will be selectively increased, against a background of record business closures, failures, contractions, acquisitions and mergers.
Global, national, regional and local networks are being recalibrated, resulting in a marginally smaller, more dynamic business landscape. Survival, and ‘Thrival’ of the fittest. (Definition: Thrival: an optimal state of health, vitality, joy and wellbeing).
Much will depend on consumers and their expenditures. Key factors in November’s economic activities were credit card, after-pay, loans and other debt instruments. In short, borrowed money inevitably means borrowed time. The crows, and repayments, will come home to roost early in the year.
The saving grace is that the total saving ratio increased to some 6.8%, which is positive and encouraging. Therefore, some people have the incomes, money, capacity and inclination to spend. They will do so opportunistically, capitalising on sales, discounts, bargains, offers and special events. Seasonal promotions will have the capacity to elicit positive and immediate responses. Hence, one should not hesitate to create opportunities in collaboration with suppliers, associates, market network members and compatible neighbouring businesses. Creating momentum and achieving critical mass typically involves multiple involvements.
A UNIQUE PERSPECTIVE:
Since emerging from the lockdowns of the COVID19 pandemic, Australia’s annual immigration totals have been important and fundamental to Australia’s economic performance since the onset of the pandemic in 2020. They have enabled, if not ensured, the economy has recorded modest growth. Immigration has also contributed and exacerbated housing and rental property shortages, as well as spiralling prices.
For the past two years Australia has experienced, if not endured a per capita recession. Therefore, any decrease in immigration totals will adversely affect the top- and bottom-lines of the national economy. Complex and challenging. No simple or single answer.
INFLATED EXPECTATIONS
Elevated inflation and increased official interest rates by the Reserve Bank of Australia are not beyond the bounds of possibility during 2026. It need not be expected and provisioned in planning.
However, equally, it should not be a surprise if it occurs. There are many moving and contributing parts to the global economy, over which Australia and Australians have little or no control.
Provide for contingency planning and rapid response.
HOUSING REMAINS IMPORTANT
Notwithstanding widespread concerns about housing and rental affordability, it remains a fundamental feature of the economy, social aspirations, lifestyles and senses of wellbeing throughout Australia.
Costs, supplies and skills availability will constrain and contain overall growth in the sectors. However, activities will remain relatively buoyant, which is good news for the broader hardware industry, subcontractors and tradies.
Assertive, creative and innovative initiatives will be rewarded.
One essential trigger for accelerated demand, revenues and profits is the potential for “post-war baby boomers” to downsize. At present they are being encouraged to not do so, because of substantial sales taxes. Sad. Home improvements and maintenance expenditures are the counter-veiling forces.
Part of the agreement for the introduction of GST (Goods & Services Tax) was that all receipts would be paid to the states, which would in turn cease applying sales taxes.
The latter part of that agreement structure was soon overlooked and never invoked.
In this instance, resolution of a fundamental economic issue lies with a political imperative.
Alas, the economic wellbeing of those in business, small to medium sized enterprises in particular are dependent upon the capacity and capabilities of politicians.
STIMULATING INTEREST
The 2026 calendar year will witness winners and losers. Consumers and clients are attuned to and incentivised by discounts, volume offers, sales events and other stimulants.
Overall, they will be well informed, discerning, demanding, price-sensitive and spontaneous.
Impulse and discretion will be secondary factors. 2026 will be a peak year for a national transactional culture.
Be prepared. Prepare team-members. Seek and welcome deals. Go forth and deal with the cards that are on the table.
Barry Urquhart
Business Strategist
Marketing Focus
M: 041 983 5555
E: urquhart@marketingfocus.net.au