10 factors every business should consider when making plans for 2016

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It’s time to make plans and goals for the year ahead. But before concentrating on internal factors, you need to take into account everything else that’s beyond your control.

From a slowing China to consumer sentiment and a possible election, there are a multitude of factors that will influence your business in the coming year.

Here are 10 to get you started.

1. China is slowing.

China, the elephant in the room, doesn’t appear to be doing too well. GDP growth, which was hovering around 14% just a few years ago, has come in under 7%. This won’t be the end of it, as the country is set to slow further to 6% this year. And this is if we can trust Chinese data at all.

China’s slowdown has numerous flow-on effects for Australian companies, especially considering its prominence as a trade partner. Historically, this has a lot to do with trade in resources and other primary goods, but Australia recently completed a free-trade agreement with China. When fully implemented, the agreement will see 96% of Australian exports to China arrive without duty, and had promised to see many more sectors benefit from China’s development.

2. Major commodities have crashed.

Partially a consequence of China’s slowdown, but also thanks to a global slowdown and developments in Saudi Arabia and the United States, several major commodities have crashed and it looks like it will stay that way for a while.

The slump in commodities is important for more than investors and mining companies, as these materials are inputs in many businesses. This is especially true of oil, which has again fallen below $US 30 a barrel, and whose influence can be felt from groceries to plane tickets.

3. The Australian dollar is softening.

With mining exports tapering off, interest rates rising around the world and Glenn Stevens talking it down, the Australian dollar is hovering around 70 cents. This after spending a few years hovering around parity with the US dollar.

A lower Australian dollar makes foreign goods more expensive and Australian exports more affordable overseas. This is good news for trade-exposed sectors, whose goods are more competitive at home and abroad. A dollar around the 70 cent mark can stimulate both the mining and non-mining economy, says ANZ currency strategist Daniel Been.

4. The zero interest world is going away.

The US Federal Reserve finally raised its base funds rate in December. This was the first raise in nine years, and saw the end of nearly seven years of a zero funds rate. The Bank of England looks set to follow sometime this year, and there is some consensus that both institutions will raise rates multiple times over the next two years.

The Reserve Bank of Australia’s cash rate was never as low as other countries, and there is a likelihood of another cut sometime this year. Regardless, financial markets will be impacted as the mad scramble for yield starts to ease.

5. The economy is re-balancing.

All of this adds up to an economy that is re-balancing, away from the mining industry and into other sectors. Numbers from the government’s MYEFO budget update forecast a 25.5% drop in mining investment this year, after a 17.3% decline last year, with an uptick in investment in other sectors.

New housing construction, for example, grew faster than projected last year and is expected to speed up even more this year. And with new free trade agreements between China and Japan, there are potentially opportunities available in industries like agriculture.

6. Consumer confidence is slowly recovering.

As the economy transitions away from mining, Australian consumers are only slightly more optimistic than they were a year ago.

The ANZ-Roy Morgan consumer confidence surveys have recovered to a two-year high since Malcolm Turnbull replaced Tony Abbott. However, burned by the global financial crisis, consumer sentiment is nowhere close to levels seen in 2009.

Whether the upward trend will translate to increased spending remains to be seen, meanwhile, weak wage growth and higher unemployment could still pose as obstacles to full recovery.

7. We’re going to have an election.

The last possible date for the next federal election is the 14th of January 2017, and the earliest is the 6th of August, meaning we are likely to have a federal election towards the end of the year. The government has hinted at an election “around” September or October.

No-matter when it takes place or who wins, a looming election will impact everything political from the upcoming budget to policy announcements. As was shown with carbon pricing, election outcomes can have dramatic impacts on the rules governing business.

8. House price growth is slowing.

Even as the economy is transitioning away from the mining industry, something that has been helped along by a jump in new construction, house prices are starting to soften.

In fact, Australian house prices recently recorded their biggest quarterly fall since 2011. In large part due to the huge amount of wealth Australians have locked up in property, this will rebound through the economy. Impacting consumer confidence and spending, and of course the myriad businesses connected to housing.

9. There are more tourists than ever.

Linked to many of the points above, the Australian tourism sector is booming as China transitions and the dollar slides. Last year saw a record for short-term arrivals in Australia. A large part of this was a boom in tourists from China, who accounted for close to a million arrivals for the year to September.

The increase in tourists from China is especially notable, as the amount spent by Chinese tourist almost doubled between 2010 and 2015, to $7 billion. This is great news for luxury outlets, who have disproportionately gained from Chinese tourists in other countries.

10. New technologies are giving us ever more data on our businesses.

From Xero, Square through to the many new payments networks, more and more data is being produced through everyday business operations. And through cloud platforms, all of this can be connected and analysed.

As Business Insider previously noted, the connections between different services on cloud platforms are unlocking more value and are even optimising existing businesses.

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