TRANSCRIPT
2023 is a year that a lot of people are looking forward to leaving behind.
It brought with it many changes to their lives, not all for the better.
Australian and global financial markets were impacted by sky-rocketing inflation which was fueled by events such as Russia's invasion of Ukraine and the war between Israel and Hamas.
Dr. George Calhoun, a Teaching Professor at the Stevens Institute of Technology in Hoboken in the United States, says inflation can serve as a distraction from the important issues which shape the course of the world.
“This concern with inflation as a mask for a much broader set of concerns that really spill outside of the economy into the political realm, into the public debates going on over whether the war is, how we should respond to the war in the Middle East, how we should respond to the war in Ukraine, how we should handle the China situation and the political divisions in the country. And a very strange presidential election that seems to be looming.”
Focusing on the Australian market, there were a number of incidents that left their mark within the last 12 months.
Kyle Rodda is a senior financial market analyst for capital.com.
He told the SBS On the Money podcast there was one event that he believes stood out the most.
“I think the thing that rocked corporate Australia the most was probably the drama surrounding Qantas. Obviously a few years of mega profits, but also incredible dissatisfaction amongst customers in the broader community. I think really brought to a head some of the issues that we're seeing more broadly across the globe in terms of stakeholder capitalism and balancing the demands of shareholders and pure profit with the interests of other stakeholders like your consumer, but also the broader community and political environment as well. So the fact that we effectively saw a complete overhaul of the board. Obviously we saw Alan Joyce leave in ignominy effectively. I think that was probably the biggest, for lack of a better word, scandalous development in the business community and one that really shows the signs of the times, I guess you could say in the way business operates within the broader economy.”
But the CEO of Qantas wasn't the only leader in Australia's financial world to step down from his role in 2023.
Philip Lowe also announced his resignation as head of the Reserve Bank of Australia, following a series of inflation rate rises, which is currently sitting at 5.4 per cent.
Optus CEO Kelly Bayer Rosmarin also vacated her role after a massive outage on the company's network in early November that left millions of its customers unable to access its services for several hours.
Mr Rodda says these changes on a leadership level show that people are becoming less tolerant of mistakes.
“I think it's just the incredible scrutiny, especially with sounds a little bit cliche, but I think it is the truth. 24 hour news cycle, the echo chambers that can be created with social media, a very unsympathetic community when it comes to corporate issues, corporate mistakes, greater accountability for boards at a leadership level. And again, I think it's a theme that we've seen overseas and becoming more prevalent here too, is a move away from old fashioned Welch in shareholder capitalism to one that's concerning. That's focusing much more on stakeholder issues, stakeholder capitalism, which doesn't just look at profits, but also looks at businesses, social mandate, that role in economic and social utility and all sort of other issues, political, environmental, and otherwise, which businesses and boards are having to take greater consideration of, but also have greater scrutiny around through just because the nature of media and information technology. So it means that business leaders are now on a real tight rope. Governance is more important than ever.”
2023 was considered by many as a transition period for the world, which was still trying to get back on its feet, in the aftermath of the COVID-19 pandemic.
Companies tried to adjust to the new working conditions for their employers, with some imposing sanctions on those who insisted on working from home.
Many people who had found themselves out of the workforce due to COVID also returned to work.
Dr Calhoun of the Stevens Institute says this trend is set to continue.
“The pandemic took several million people out of the labor force, evidently, who just said, "the heck with it, I'm you know, I'm old enough or I have enough money, I can sit it out for a while." And so there was the great, "the great retirement." But, you know, a lot of those people are probably going to now trickle back into the workforce and that will really re-normalize as well. So, I think the labor market is looking like it's finally re-normalizing after a you know, an amazing and amazingly deep shock that hit it in 2020 and 2021.”
The final months of 2023 have left a tiny glimmer of hope for Australians hard hit by the rising cost of living.
With inflation dropping at a faster-than-expected pace and interest rates remaining relatively solid, there's controlled optimism that cost-of-living prices could soon return to more reasonable levels in the new year.
Mr Rodda says the challenge for 2024 will be to see inflation drop down even further.
“I think the stage that we're in the cycle now is this, what's called the last mile problem, is that you get sort of 90% of the way and things come down pretty quickly, but that last 10% of the journey, so the trip from say 3% inflation to 2% inflation can take some time. And the question is, well, whether that happens, and if it does happen, what's driving it? Is it recession? Which would be an issue in and of itself. But I think it's fair to say that where we sit right now going into the new year, we can say pretty confidently that global interest rates have peaked and that they will come down at some point next year.”
Whether the global markets will be able to finally see some relief from inflation or not will be largely dependent on world affairs.
With two ongoing wars affecting businesses and major trade routes and elections on the way for the U-S Presidency and the European Parliament, not to mention the growing impact of China in world finance, the economy seems to be teetering on a tightrope.
The next year comes with its own challenges.
And you can check out more episodes of the through the SBS listen app or wherever you get your podcasts.
