PwC boss on how ag is faring against big economic megatrends

So says the chief executive officer of PwC Australia, whose parent company is the second largest professional services network in the world.

Tom Seymour, who leads a team of 860 partners and 9200 staff across three business arms of assurance, financial advisory and consulting at PwC Australia, spoke at a recent beef industry conference.

His message was that against a backdrop of unprecedented economic volatility, food and fibre production in Australia was comparatively well-placed.

There were, however, risks and he listed over and inefficient regulation as a key one, along with far less elasticity in the skills shortage - two key issues the beef industry has been lobbying hard on.

Mr Seymour told the 800 delegates at the Northern Territory Cattlemen's Association conference in Darwin the world economy was now slowing - but off a breakneck pace.

Australia should outperform the global economy; and northern Australia should outperform the Australian economy, he said.

ALSO FROM THE NTCA CONFERENCE:

PwC works with multinational organisations like Google and Microsoft, has a large business in China and also does a lot of work with governments in most locations across the world.

The insights Mr Seymour shared with farmers came from the ability to correlate many data points thanks to having fingers in a lot of pies.

He said there were massive structural shifts, or mega trends, playing out at the moment on the global economic scene.

"Normally we get one or two occurring at any one point in time, but at the moment with almost every one the dial is turned up to 10 and that's a really unusual situation to be in," he said.

"From what we hear from clients on the street, inflation will be elevated for some time; it is hard to see it coming back into an RBA (Reserve Bank of Australia) target range of sub three per cent in any hurry.

"The demand side has peaked. The interest rate hikes are doing their job but other trends point to supply-side inflation."

Structural supply changes are showing up in inflationary costs.

The economic capital flow disruption as a result of geopolitical tensions in Russia and China is not going to wash out of the system in six months, Mr Seymour said. It will be a five to ten year trend.

Linked to that is the impact of geopolitical shifts on trade. With beef, and many agriculture sectors, largely export-focussed, many of these shifts will present opportunity.

Population regression and the skills and labour shortage it will bring will be felt across every industry.

"We lost three years due to COVID off the back of immigration and we won't get it all back so it's a permanent loss," Mr Seymour said.

Panic is rising in the cattle business due to the lack of labour in abattoirs, with warnings big numbers might not be processed as supply comes back online this year.

Next megatrend: Every country is increasing its budget on defence due to geopolitical instability.

Japan has spent 1pc of its gross domestic product on defence over the past two decades but has now doubled that spend, Mr Seymour reported. That extra 1pc from Japan is almost as big as Australia's entire defence spend. This will put inflationary pressures on certain sectors - heavy engineering, data, cybersecurity.

As the energy transition continues, phenomenal inputs will be needed and the land access equation will be complex, both of which affect agriculture significantly. Steel, copper and critical minerals for batteries will be sought and the world is short on these materials, Mr Seymour said. There will also be the need to find the people to do the work - to rebuild grids and systems for example.

"Eventually, when we get through to a renewable system it will be cheaper but to get from A to B is probably the most complex human endeavour we have ever taken on and that has got to be inflationary in the short term," Mr Seymour said.

"The energy transition will benefit us. We have what the world wants - lots of land, radiant energy from the sun and close proximity to South East Asia. Iron ore and gas will be critical minerals that we have."

Ag will also need to stay on the front foot with mega trends such as the continued acceleration of digitalisation of the world and generative artificial intelligence.

"The name of the game across boardrooms is how do we give customers a better experience using technology and how can it allow business to be done cheaper," Mr Seymour said.

"Meanwhile, the potential for AI to disrupt is very real and governments have to figure out how they regulate this technology. Data sets are uncontrolled, and that can mean we come up with some seriously wrong answers around issues that really matter.

"It could be an AI technology wipes out 20pc of the jobs in an industry in Australia, yet it is overseas-owned with no benefits generated here."

All of these complexities are playing out at time when governments' balance sheets have never been in a worse shape, Mr Seymour said.

And that in itself is another megatrend.

"COVID banged around the budget of every government in the world and set expectations from citizens that they want more from governments," he said.

"Everyone now expects government to bail them out."

Why will Australian ag do better against this backdrop of volatility?

In a nutshell, agriculture is a 'defensive sector' in times of volatility because it meets basic needs like food and shelter, Mr Seymour explained.

The new world energy will be a strength for this part of the world because we have the resources that will be needed, he said.

And our government's balance sheet is bad but better than others.

However, Mr Seymor argued the single biggest reform our governments need to lean into is how to modernise and simplify regulation.

"If they don't, we will miss the opportunities that sit in front of us," he said.

"International clients say we are a hard place to do business."