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 Thriving in Inflation

by Sean Foster | May 05, 2022 | Newsletter

Are you facing the same cost pressures in your business as the media are reporting?

Last week I held a session on ‘Thriving in an Inflationary Environment’ at our BIG meeting. In preparation for this I had some interesting findings.
graph

First up, and as displayed in the graph above, New Zealand’s inflationary rate is strongly linked with what is happening globally and specifically the USA. You will also note that since the 1990’s we have been operating at very low levels of inflation.

The significance of the above should not be underestimated. Whilst the local Government have introduced some policies that could be termed ‘inflationary’, the nation’s overall strong correlation to what is happening globally appears to be the strongest determinant of our inflation.

So then, the next logical conclusion is: ‘what does the global outlook look like?’.

‘Not great!’ is the simple answer. The following will be fuelling inflation.

  • Global supply chain issues look like they will continue for years, rather than months. These are being exasperated right now by China’s hard-line approach to managing their pandemic.
  • The war in Ukraine is likely to continue for a long time, cost billions more, and have a significant impact on commodity supply and pricing.
  • The modern world has never before experienced a pandemic as we have just had. Governments across the globe, expecting an economic collapse, have been fuelling inflation.


When we look at just New Zealand, there are some big drivers pushing our inflation, specifically house pricing relative to incomes and this is being further exasperated by a shortage of both skilled and unskilled labour. These forces have been building up for decades.

The message for you and your business is that inflation is here for a while.  

 

In business life, one day just rolls into the next, so to ensure that you do not get caught off-guard, it pays to take some dedicated time-out and to pro-actively explore what you could be doing differently to better navigate your business in this ‘new’ environment.

Have you watched the movie: The Big Short’? I loved it, and the correlation with what happened during the GFC, even my own experience back in South Africa operating in an inflationary economy, and where we are today, is all relevant.

Business can be a little hectic, and often we yearn for stable conditions where the variables are predictable and consistent. When we operate in an inflationary economy, few things are stable. There will be casualties, but so too will there be significant opportunities for the focused and brave.

I created a summary handout from our BIG training: ‘Thriving in an Inflationary Environment’ – so rather than me rambling on about the best management practices you should be considering, you can access the summary points outlined in the handout here.
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