Market Outlook
With a recession currently in play, and the credit squeeze still in effect, new project developments are far and few between. Whether it’s mining, civil or building, it seems most private project developments are either being canned, reviewed or placed in indefinite hold…or are they.
At the begining of this year, most businesses (small and big) got nervous, and decided to cut costs, pull on the brakes, cancel expansion plans, sit tight, ready to wait out the downturn..in turn this worsened the downturn. In our opinion (based on anecdotal evidence only) business is starting to realise that although we may not have seen the worst of this downturn, our reaction was maybe an “over-reaction”.
For instance, Clients we work for, stripped down to a leaner business operating model, which mostly meant reducion in “non-core” project staff. That meant a lot of planners/engineers lost there jobs. 18 months ago our clients came to us because they could not find staff to carry out these roles, now it seems they are starting to come back to us because they no longer have these people, but still have the work to be done (but maybe not at the same quantity).
As there are now some signs of improvement in the U.S. economy, and subsequently improvements in credit availability globally, feasible developments are likely to go ahead again (albeit some maybe not as grande).
In Western Australia, with the likely go ahead of some existing planned Major projects (eg Pluto, Gorgon, RPG6, Perth Arena, Fiona Hospital), we wonder whether by the end of this year we may experience a mini boom..will we be ready for it, or will we have stripped down business models too much.
Of course there are many other factors governing how our local economy recovers from this downturn. eg government fiscal policy. Although not responsible for the global fiscal meltdown, the federal government by dishing out cash to the punters in order to manipulate quarterly growth figures, attempting to temporarily fend off a technical recession (which did not work in anycase), will not help return real growth in business, investment and jobs. Most ecomomists (I expect also Rudd/Swan’s own ecomomic advisors) seem to agree the best way forward is to use this money (and any further stimulus funds) on infrastructure spending.
In summary, although things are slowed (and may get slower) there seems to be a small silver lining in W.A. (although not necessarily for the local housing values), and maybe if the Federal and state goverments get there fiscal acts together, we may bounce back from this U.S. created mess sooner than later.
