Lessons from Australia and New Zealand
Lessons from Australia:
By most accounts, the Australian economy was protected from the GFC, thanks to the mining boom. But as with all seasons, all booms must end. After two tough years in the mining sector, it’s good to see a solid recovery since. Two lessons jump out from this industry cycle:
- Firstly, when your industry is next in boom time, without being defeatist, accept that it will come to an end eventually. So be sure to make hay when the sun shines (to stack up cash to see through the decline that may follow).
- Try to limit your exposure to a single industry. If your industry has experienced any booms or downturns in the last 30 years, statistically speaking it is likely to happen again. Try to target two different industries that are unrelated. Ideally do this outside of boom times (when you’re making hay!)
Lessons from New Zealand: (aka Eastern Australia!!!)
The general election in 2017 led to a significant drop in business investment in the 6 months that followed. What shocked me most was that most businesses were surprised by the stagnation, when it seems to happen each political cycle. If New Zealand business confidence is impacted for 6 months every 5-year election cycle, that’s 6 months in a 60-month period, or 10% of the time. It’s the responsibility of directors to plan for these delays, given their regularity, AND given 10% of the time is a long period to ignore.
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