I’ve taken a quick scan of what the experts are saying with regards to the 2023 outlook. I’ve had a look at both the NZ economy and some of the topics I’ve previously covered, like the labour market and supply chain, as well as looking more specifically at the printing and packaging industry. Hopefully, there’s something that gives you a little food for thought as you head into the holidays.
On Wednesday last week (14 December) the government announced that the country would enter a recession in 2023. The economic and fiscal update from the Treasury forecasts a contracting economy in the second, third and fourth quarters of 2023. The Reserve Bank is even more pessimistic on the back of the steep interest rate rises it has imposed to control inflation.
Inflation is expected to ease on the back of falling commodity and house prices and an improving global supply chain. Despite the economic weakness and easy inflationary pressure, it is not expected to return to the government’s target band of 1% to 3% until December 2024, according to the Treasury’s update.
Tight labour market
The tight 2022 labour market and skills shortage, resulting from a lack of migration, looks set to continue in the coming year. Despite low unemployment and the borders opening to overseas workers, New Zealand is dealing with high numbers of workers leaving the country. A slowing of the economy in the context of continued skills shortages could prompt more people to search for higher paying roles overseas to maintain their current lifestyle.
As a result, Jarden has indicated that a slowdown in the growth in wages may take some time to realise. This will likely slow the fall in the inflation rate.
The most in demand roles / skills, according to recruitment company Hays, are Project Manager, Architect, Engineer, Trades / Labourers, Truck Driver, Crane Operator, Facilities Manager, Cyber Security, Data Scientist, Cloud and Sustainability Specialist, Service Desk Analyst, Payroll and Lawyer.
Hays offers some advice to employers on how to tackle these challenging times – Advice for employers.
High interest rates
In the same report mentioned above, Jarden forecasts a continuation of the current high interest rate levels. Whilst these may help reduce the rate of inflation, it is also a key contributor to the slowing economy and likely to increase the unemployment rate.
The recent OCR increases, which lead to the sharp increase in retail borrowing costs, will not take their full effect until 2023 and 2024. Many borrowers who fixed mortgages at record low interest rates for one- and two-year terms will soon roll on to substantially higher interest rates – in many cases double the interest rates they were previously paying. This will materially affect borrowers’ discretionary incomes, particularly those that recently borrowed to buy houses with low deposits.
David Allen, a specialist in resource management, environmental and natural resources law at Buddle Findlay, outlined his belief that 2023 will be a pivotal year for climate change and sustainability in NZ, in an interesting article he wrote for the NZ Herald a few weeks ago.
The view is largely driven by his observations that the majority of the policy and planning work has now been completed and as such it’s time for the ‘real work’ to begin, as he describes it.
The National Adaptation Plan and the Emissions Reduction Plan were both published this year. In 2023, we will see more than 200 NZ businesses publishing their first report as set out in the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act 2021.
David outlines a number of key themes that are likely to continue or emerge for business in 2023.
- The financing of activity that considers environmental considerations will increase across a wide range of industries
- ESG related reporting will increase well beyond those that are initially required to by law and this will in turn drive more progress towards sustainability goals and ambitions
- There will be a greater and more urgent shift to renewable energy as organisations look to lower their emissions and power consumption
- The 2020 RMA amendments will take effect and we will likely see climate change become an issue in the planning and consenting process.
- The RMA will continue to be reformed. The Natural and Built Environment Bill (NBEB) and the associated Spatial Planning Bill were introduced in November. The third of the RMA reform acts, the Climate Change Adaptation Bill (CCAB), is expected to be introduced in 2023. Businesses will have to keep a careful eye on the development of these documents over the next 10 years.
Printing and packaging
So, what does all this mean for the print and packaging industry? Well, according to the latest Drupa Global Trends Report, as an industry we are a little more positive about the future than we were in 2019 prior to the Covid-19 pandemic. The packaging market is the most optimistic but the rest of the industry are seeing the light at the end of the tunnel. I’ve previously shared data and forecasts that indicate the continued growth in the print and packaging industries.
That said, it won’t all be a bed of roses either. It’s clear from the information shared above that finding and holding on to staff will continue to be a challenge. Costs look set to continue to increase and supply chain delays might have decreased but they are a long way away from where they were at the beginning of 2020. Mill closures will continue in 2023 which will obviously impact the availability and price of paper and substrates.
There are a couple of words that we continue to hear in relation to weathering the storm and taking advantage of some of the growth opportunities – diversification and innovation. It is quite clear from the data and forecasts that digital, online and sustainability all present significant growth opportunities.
I’ll leave you to ponder on that over the holidays but I’d welcome the opportunity to discuss them in more detail in the New Year.