Editorial

Facing Recession

How will we fare in 2002?

by Jon Fairall

There is no doubt that these are not the best of times. The world economy was already tumbling towards some kind of slowdown, but given the spate of disasters that have hit the US, the world's largest economy, it now seems that that slowdown will be deeper and longer than one would have hoped.

All the indicators are pointing the wrong way. In Europe, North America and Asia, jobs are disappearing, growth is slowing, or even turning around - and people are starting to hurt.

As at this writing, Australia has been pretty much immune from these troubles. The government has pointed to this as evidence of its fiscal rectitude, but I think we can assume that sometime soon, this tide of international woe is going to wash up on our shores.

Looking at what the effect of that will be in general would take us too far afield; here and now, the question is what effect a world economic slowdown will have on our industry in particular. I think there is considerable reason for optimism.

Much of the income from the surveying industry is tied to the fortunes of the construction industry. There is good evidence now emerging that the home owners' grant, a $14,000 gift from tax- payers to young people buying their first home, has had the desired effect on the construction industry, and will continue to do so. True, construction is not boom- ing, but by and large the worst effects of the recession have passed it by.

Surveyors may be grateful that the rigour of John Howard's views does not prevent him pinching a few good ideas from Keynesian economics on occasion.

The test in the coming months will be to keep the rate of new housing starts from falling. Once upon a time we could have prayed for an interest rate cut, on the assumption that lower interest rates would make mortgages more attractive. But modern governments have given themselves limited ability to move in the interest rate field, and further direct economic stimulus may be the order of the day.

One of the ways in which government could usefully stimulate the economy is by spending on infrastructure. Much of our water and electrical distribution network is in disarray; it's time we spent some money on that. Investment in roads, of course, is a perennial vote winner.

Mining is another economically significant industry that provides a considerable amount of business to surveyors. It too seems to be running better than had been hoped. After years of stagnation, business has been picking up this year, and should continue to do so. Companies that service the mining industry, not only in surveying but also in other areas, report that while business is not miraculous, it is quite healthy.

Even those large companies with significant exposure to the Asian market report that their surveying and spatial industry subsidiaries are doing quite well. In part, that is what one would expect. In those markets, the business is almost all in infrastructure. Asian countries will continue to spend on expanding and improving basic services to their communities all through this depression; not only because of its value in stimulating the economy, but because in most Asian countries the lack of infrastructure is a significant impediment to the development of the country.

Another market where Australian survey companies have significant exposure is Asian forestry. Even there, the market is likely to defy the recession rather than go along with it. As money gets tighter, businesses and governments put a premium on avoiding inefficiency and waste. To the extent that spatial services such as aerial surveying, mapping and monitoring act to improve the efficiency of forestry, there is room for optimism.

Still, much will depend on good economic management. This is the first time since globalisation became a way of life that we have had a simultaneous slowdown in all our major trading partners. Protection is now not an option for them, or for us.

Whichever way you slice it, there will be winners and losers. In an industry that is dominated by small firms, as surveying is, the winners will be either those who can use technology to improve their competitive advantage, or those who are part of such a solution for their clients.

Surveyors need to embrace IT and clever technology as part of a way of winning through. The problem is that such a solution is inherently expensive, and not necessarily one that can be sustained by the cash flow of the typical small business.

Surveying companies need to get bigger, or else they need to manoeuvre themselves into partnership arrangements that will allow them to take advantage of new technology while still retaining their independence.

One thing is for sure: success this decade will depend on being good at what you do, and on having a little imagination.

Top of Page

Table of Contents