We are certainly in tumultuous times and the tumult keeps on coming. We are all truly appalled by the Russian war of aggression against Ukraine. That is still likely to play out for some time and its impact is not just rippling, but cascading through the rest of the world. Much of Europe and the rest of the world had already been caught out by a sudden shortness of energy, labour, housing and food, a pull back from capital markets, and a crypto-collapse leading to a 1970s style inflationary environment, whilst demand continues to surge post-covid.
Leaving Ukraine aside, I often wonder how so many expert economists did not see these shortages and impacts of rebounding recovery coming in the first half of 2021. That said and as an aside, the ability of economies to bounce back quickly after a pandemic is not without precedent and, in this context, I highly recommend the insights to be taken from this short article “Coronavirus from the perspective of 17th century plague” by Neil Cummins, Morgan Kelly, Cormac Ó Gráda published on 21 April 2020 and which can be read via this link. Morgan Kelly correctly forecast the global financial crisis previously.
In Australia more specifically, we have seen the first change of government in nine years with the election of the Australian Labor Party and its leader, Anthony Albanese, as our new Prime Minister (I am not even going to mention the ongoing UK political travails!). Already, this new Government has taken to the road to engage with Australia's Pacific and regional partners to counter further Chinese advances and influence amongst the Pacific sovereigns, and to engineer something of a reset with China. This more muscular geopolitics has further to go in our region, however, and will signal further investment in defence and cybersecurity in particular.
A fascinating feature of this Australian election was the return of an increased number of Greens and independent MPs, principally called “teals” who subscribe to a mix of economically liberal but climate change focused policies. However, the Australian Labor Party won a majority in its own right so will not be in a coalition with any of these. Given the huge increase in energy prices here (like everywhere else but in Australia partially for different reasons, the new Government will likely look to accelerate Australia's transition to a net-zero economy. This is obviously very relevant for renewables and businesses focused on decarbonisation, as there will need to be significant investment over the coming decades to achieve new policies of the incoming Government. This will be a key thematic for us over the next decade.
We are keenly interested in this and it is highly relevant for the clients we are already working with via our new ESG practice, McR ESG, headed by Louise Horrocks. Louise rejoined the firm recently from a global specialty climate change investment and advisory firm, and is working closely with clients in the resources, energy and agricultural sectors on how ESG needs to be addressed by corporates and external parties in the Australian context.
For my part, I have taken on a new role too having been appointed as a part-time member of the Australian Clean Energy Regulator which administers Australia's carbon credits regimes and on related methodologies and policies.
As a firm, we still see energy, together with data and infrastructure as being the key drivers for Australian economic growth over the next two decades. Yes, interest rates are now increasing and will continue to rise throughout the rest of the year as the Reserve Bank of Australia (like other central banks) attempts to cool inflation and normalise economic life post-covid and amidst conflict. However, Australia's borders will open up to significant new migration over the next three years, there will be a constant demand for a new and refreshed infrastructure, and digital business will become more prevalent, Australia's battery minerals sector will be more critical for global supply chains and security, decarbonisation activities will accelerate, and the velocity of cross-border capital will increase to invest in what we will all be doing to 2030 (and even in a down-cycle). Yes, we have volatility, but that means that professional life will not be stagnant.
Finally, we are back on the road again as a firm and look forward to seeing many of our friends as we travel through the US, Canada, the UK, Europe, Singapore, Japan and New Zealand. In particular, we will be going to the IBA conference in Miami. Feel free to let us know if you would like to meet up in person as, for me, nothing beats personal face-to-face engagement.
In the way that sometimes a picture can paint a thousand words, a personal meeting can make for a life-long relationship and friendship where our clients are the real winners.
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