The Canberra Business Podcast
A podcast about all things Canberra Business.
The Canberra Business Podcast
Challenges and Opportunities in Canberra's Economic Landscape
Join us for an enlightening conversation with Andrew Sykes, a seasoned partner at RSM Australia, who brings over four decades of experience to our discussion on Canberra's small to medium-sized business landscape. Discover the intriguing dynamics of how different sectors are navigating economic challenges, with retail and hospitality facing struggles while others find ways to thrive. Andrew shares his wisdom on how businesses can protect their bottom line by identifying and plugging financial leaks. From shifts in consumer behavior to the ripple effects of changes in government employment, we've got a lot to unpack about the local economy's current state and future potential.
Looking ahead, we explore the landscape of growth opportunities that Canberra can seize. Andrew shares practical advice for capitalizing on property development and infrastructure projects like the light rail, as well as boosting tourism with key business infrastructure. We delve into Canberra's aspirations to become a global leader in defense and space technology, emphasizing the critical role of collaboration between higher education and industry. Plus, we touch on the cultural and economic significance of supporting local artists and sports initiatives. With insights into the city's upcoming economic report, this episode offers a comprehensive look at the opportunities and challenges shaping Canberra's economic future.
Hello and welcome to the Canberra Business Podcast brought to you by the Canberra Business Chamber with the support of the University of Canberra. I'm Greg Harford from the Business Chamber and I'm delighted to be kicking the new year off with Andrew Sykes, a partner at RSM Australia who's been operating here in the Canberra market for more than 40 years. Possibly not Andrew personally, but certainly the business Andrew. Welcome to the podcast. A partner at RSM Australia who's been operating here in the Canberra market for more than 40 years. Possibly not Andrew personally, but certainly the business Andrew. Welcome to the podcast. G'day, greg. Happy to be here with you Now. Rsm is a big assurance, tax and consulting firm, but do you want to tell us just a little bit about what you do here in Canberra?
Speaker 2:Yeah, what we do in Canberra is similar to what we do across the country. We're a multi-divisional firm. We are quite often confused with being one of the big players, but we're not. We're a small business firm here in Canberra and across the country. So we really serve small to medium business. Rsm started in 1922 in Western Australia when some accountants about six accountants bought some Model T Fords and thought they'd take accounting out into the bush and since then we've continued to maintain that service ethos serving small business.
Speaker 1:And here you are now in the bush capital. You've been operating here for 40 years. How big is your team here in Canberra?
Speaker 2:We're about 110 people here in Canberra. We've had strong growth over the last two to three years with growth in the Canberra economy.
Speaker 1:So who are your clients? You talked about those a little bit before, but they're mainly in that small to medium space.
Speaker 2:Yeah, canberra. Well, based off some of your own figures, greg, 97% of Canberra business employs 20 people or less, so the Canberra business sector is not a big business, surprisingly thriving though. So we have a range of very long term Canberra businesses that some of them have been my clients. I think one of my clients I'm on the third generation of succession planning, so we have some of the older Canberra businesses and then we have some of the new ones, particularly technology and property sectors, which have really grown in the last few years in Canberra.
Speaker 1:Fantastic. So you're seeing growth in your client base, which is fantastic. But with such a diverse pool of businesses in there, you must get some really good exposure to what's really happening in the Canberra business community. Now all the news or much of the news at the moment is a bit grim. Businesses are finding it a bit tight. Do you think that's a fair assessment?
Speaker 2:I think that is a fair assessment and there is a lot of that. People are being told it's tight around the country, so they're behaving like it's tight. Here in Canberra are being told it's tight around the country, so they're behaving like it's tight. Here in Canberra we're seeing a mix of reactions. With a long-term established business community, a lot of Canberra business people are very good business people and they've done very well, so they're pretty well resourced so they're able to ride out the ups and downs and, of course, canberra's a fairly stable economy. We are seeing some sectors being hurt. Retail is doing it tough and that's a competition factor as well as less money to spend, and I would say that the first quarter of 2024, so January through March was probably the toughest sector we've ever seen in the hospitality industry. So there's a lot of hospitality players doing it very hard there in Canberra.
Speaker 1:Yeah, but at the same time you go out and about and you see some of those new and quite fashionable restaurants being full of people, is there something that's making some of those firms different to others? Do you think?
Speaker 2:Yeah, well, newness and variety is one thing, but I'm with you. Try and book a restaurant in Canberra. Try and get somewhere to eat. If you don't have a booking on Friday or Saturday night, right, it is busy. But what we're seeing is that when, for example, a couple may have gone out three nights a week, they'll now be going out two nights a week. We'll be seeing that if both of those nights previously were some of you know very high-end restaurants, they'll be doing one high-end and they'll go to a club for another or previously. You know, if you went to the club you may be getting takeaway. We're also seeing that the spend. So when they go out, people just won't spend as much. They'll still go out, but you know they'll buy a $70 bottle of Riesling instead of a $200. You know good for the local Riesling producers, because we do produce some of the best Rieslings in the world. But instead of spending $200 on a bottle of wine, they'll spend $80, you know yeah absolutely so across the board.
Speaker 1:obviously you've got pressure on consumer spending, but what are the other challenges, do you think, that are facing businesses here in the capital?
Speaker 2:Well, canberra has always been a very strong government town and we have seen that certain pressure throughout. You know, we've had the Senate Estimate Committee hearings, we've had pressure on the consulting sector and a lot of the employees or a lot of the people impacted have been at the higher end of the pay demographic. So we are seeing that not only is there interest rate pressure but we're seeing that a lot of highly paid Canberrans have actually had their positions cut or they've been transitioned into APS outside of the professional consulting practices and that's just impacting on the money that's flowing around town practices and that's just impacting on the money that's flowing around town.
Speaker 1:And obviously we often hear about the challenges of finding people to work here in Canberra, finding good, skilled, qualified people to fill a range of jobs, everything from baristas to even retail and into that high-end consulting. Do you think the changes in the employment market at the moment are impacting that? Is it a bit easier to find people? Uh, it's easy hard to say.
Speaker 2:Canberra my experience of canberra, business and and we we would have seen that anybody who's tried to build in canberra you think, okay, well, construction's down, so there'll be excess, uh, trades and labor available so I'll get a cheaper price. That's not the case because we have a very transient workforce here. So if things are quiet in Canberra, historically people have tended to leave and they'll go back to to Sydney or Melbourne or Brisbane. We are now seeing more migration come through into that and supporting that, that sector. I think I read the other day that our Indian population now is up to 3.8% of the community. So we are seeing a lot of very highly skilled workers coming through, migration that is filling the gap and those workers aren't transient, so they'll stay here, they'll do a contract. That contract will finish, they'll stay and do the next one. So I actually think that over my working career I think it's become easier to get people and even particularly in the last 12 to 18 months, we've seen the employment market free up a bit.
Speaker 1:Okay, so, while things are tough, what advice do you have for businesses who might be feeling really pressured at the moment?
Speaker 2:have for businesses who might be feeling really pressured at the moment. Yeah, that's an interesting one. I think it's always easy to focus on top line revenue and growth. Everybody likes to sell more, for example, in December 2024 than we did in December 2023. Much harder to control your top line. It's a lot easier to control the bottom line.
Speaker 2:One of my favourite stats, in particular when I'm talking to individuals about their tax and their financial affairs, is to say focus on the smaller things, the little leakages. The example I use is 27,. If you could save $27 every day of the year, that will get you $10,000 over the course of a year. Over five years, that's 50. Over 10 years, that's 100,000. So, if times are tough, focus on where are you actually leaking. Are there unnecessary subscriptions you're paying? Are you maximising efficiency in your workforce? Is there any area you can cut costs just that little bit? It doesn't have to be, uh, big changes. It can be little changes and, in particular, cumulative little changes. Uh, if you can go into a business and and save two hundred dollars a day, that's you know. It's over $1,000 a week, over $50,000 in a year.
Speaker 1:So then that really adds up. So I guess your advice really is to tighten your belts just a notch, without necessarily getting the knife out.
Speaker 2:Yeah, that's right, and well, it is very true that you have to bait a hook to catch a fish, so you do have to, quite often in business, spend money to make money, but are you wasting that money? In particular, have a look at your taxes. Have a look at some of your indirect taxes, your payroll tax. Have a look at are you structured properly? Are you as efficient as you can be in all of your taxes, those leakages from business that don't really add anything to your bottom line.
Speaker 1:Now Canberra's business sector is much bigger than many people realise. Often people outside look at us and say, oh, it's the public service and government capital of Australia, but actually two thirds of workers are employed in the private sector here. So where do you see the biggest growth opportunities for business? Here in the capital.
Speaker 2:You make a really good point and with one-third of Canberra's workforce working for the government, we quite often assume that Canberra's just a government town and people are surprised when they find out. At RSM I'm in the business advisory division. We have approximately 40 accountants and that's all business. That's no government work at all. Opportunities, though with such a strong employer and spender in town, we do see increasing opportunities supporting and supplying to government. We are seeing, even though there has been pressure on that consulting sector, we're seeing that coming back very strongly, just in the right areas. Property is obviously booming here in town and anybody who lives in Woden you can see the number of units that are being released there. So anything related to the property sector and we are seeing Canberra has been on a growth wave for the last four or five years. I mean growth has really kicked off here since the pandemic. We're seeing increased infrastructure spend. So whether you love or hate things like the light rail, they drive our economy.
Speaker 1:So let's talk about light rail, seeing as you raise it, is it good or bad for the city? Obviously, it's going to drive a lot of investment, as it happens. But beyond that, is there ongoing economic return, do you think?
Speaker 2:There's certainly ongoing economic return while it's being built. Once it's finished, I think. Yeah, it's a very loaded question and yeah, there's been a couple of elections fought over it so far and the Canberra community has indicated that they want a light rail. We are seeing that that infrastructure spend. If you go and stay, try and book a room at some of our lower cost motels I mean a room at some of our our lower cost motels, I mean revenue per available night in across canberra is up. We're seeing workers here. They're staying here long term. There's a lot of money flowing around the community from it and we are also seeing the development of the land along that corridor. Whether it itself will make any money, I I I don't think there's any public transport anywhere that really makes any money, does it?
Speaker 1:Well, no, I think that's right. Certainly not in Australia or this part of the world. Certainly, public transport often loses money and I think all over the world, most public transport will be losing money. But what about other infrastructure, Andrew? What do you think we're missing here in the city? Do we need to get the convention centre done? Are there other things that will really help drive the economy forward?
Speaker 2:Well, that is once again. That's a really good question because if we have a look at and I referenced before that one-third or just over one-third of the Canberra working population is government. If you went back 20 or 30 years ago, that was in excess of 50%. If you went back to the 70s, it was two-thirds or more. We need business infrastructure as we continue to grow. You mentioned the convention centre 100%. We need something that's going to attract and bring people to town. I think Melbourne does that absolutely terrifically. Melbourne is an event city.
Speaker 2:Canberra has some already existing great infrastructure. But yeah, the obvious one is and I'll declare it, I'm a rugby fan, would love to see a square field down by the lake. So some of that spending is going to increase tourism. We have marquee events like Floriade, we have the National Gallery. We already have some great stuff here. But if we could build the shoulders of the tourism spend, that's going to flow through to more local business. I also think we need more spending on technology and technology-based hubs and growth in our innovation sector, driven with assistance from government. We've got a great knowledge worker base here in Canberra that we could really continue to grow and facilitate and develop. But out of all of that I would say Convention Centre's probably the most needed large-scale infrastructure project in the town.
Speaker 1:And certainly the numbers in terms of visitor spend associated with conferences are very substantial and would be a real boon for retail, hospo and other areas of the economy right.
Speaker 2:Yeah, that's right, so it flows through and with our existing. The great thing about a convention centre, or even the oval by the lake, a stadium by the lake, is it's only one part of the spend. So you come to Canberra, you go to a convention. We have other great assets. We have National Gallery, we have the High Court, we have all these other marquee places. So it extends it into, instead of just an overnight, a three, four-day spend. Which is always a challenge here is to get people not only to come but to stay longer.
Speaker 1:You talk about the need for infrastructure and I think the Chamber certainly agrees with you. We need to see a lot more investment in infrastructure. But how affordable is that? The Territory's got limited budgets. The Commonwealth seems not willing to come to the party in the way that it might have done in the years before self-government. How do we prioritise and how do we bridge the gap between what's affordable and what's desirable?
Speaker 2:Well, we do suffer from not? I don't think if you read what the government says in the budget, we don't get our fair share of GST, but I think every government says that. And the funding? I think it's down to priorities and I think it's down to being able to take a long-term vision of what the city looks like. Certainly, in my view, the, the governments tend to focus on very short term and funding in the short term, but you, you really are looking at multi-generational type spends and and not, you know, generational in terms of working careers, not not lifespan. So if we spread the cost and the spend over a long enough time, that gives the government the ability to fund it. But it's also involving business in there and bringing in big business partners along for the ride.
Speaker 1:Sorry.
Speaker 2:public-private partnership Public-private yep, yep, and I don't know if that's really explored very well in this town.
Speaker 1:So opportunities to innovate and do more, perhaps. Now I just want to come back to the subject of innovation, which we touched on a little bit earlier. And obviously you know, canberra's future, I think, hinges on its ability to innovate and lead in key industries. But where do you see the focus of that innovation happening?
Speaker 2:Generally, as I said before, we've got a large knowledge worker base. Our very good public service employers have spent years and years training up and we also have quite a significant university sector here, so we have the ability to produce those knowledge workers. Obviously, that technology sector really jumps out. We have some existing good. You know Sebrin does a good job at harnessing innovation but some more funding in that area technology, ai and that sort of growing sector.
Speaker 1:So, on the subject of higher education institutions, obviously there's a lot of pressure on our universities at the moment. How do you think the city or the territory, and indeed business, can foster better, greater collaboration between those institutions and industry?
Speaker 2:I think overall we seem to do a pretty good job of that anyway. I think the ANU has certainly developed as one great example, as has the University of Canberra, with the city fringe type infrastructure built around it. A lot of that comes down to planning. Some of our repurposing any land here in Canberra is a pretty difficult experience. With our planning laws the change of use charges can be very prohibitive. Your 75% betterment tax on your lease purpose clause changes can really be prohibitive. So some of that streamlining, as for example and we have emerging universities coming in here as they grow the ability to repurpose and rezone the land around them without so much significant cost.
Speaker 1:Canberra businesses have quite a strong heritage in terms of defence and space technology, which often is not something that's particularly well known, but how do you think Canberra can position itself as a global leader in those sectors?
Speaker 2:Yeah, that's a good one. We do have a business RSM in Canberra is actually working with a company that's looking to develop a rocket launching facility, but that's in Northern Australia. So really our role should probably be on that, the pivot point between government and those far-flung organisations. We're too far away from the equator to launch anything, but we could support the manufacturing sector, the liaison with government, and be that, as I said, that pivot between international and private organisations and the government.
Speaker 1:It's a bit of a shame really, isn't it? It would be quite majestic to see some rockets lifting off from down the bottom of Lake Burley Griffin there.
Speaker 2:Yeah, it'd be nice, wouldn't it? But unfortunately I think the cost of it I don't think it's been looked at, but the cost of it you've got to be. There's only there's actually very few points in the world you can launch a rocket from and do it commercially well. But that's just an example of one of those growth industries that Canberra has. If you're a smart, if you're an innovative technology-based company and you're looking for a smart workforce, canberra has a smart workforce. So you know how can the government try and attract and offer incentives for those organisations. You know how could we attract a large international technology company to come in, for example, and set up and hire our local workers?
Speaker 1:And that's a really good point, and one of the things that the business chamber has often talked about is the need to be trying to attract more businesses here. What do you think are the things that will help bring business to Canberra?
Speaker 2:I think you need the basics. You need access to housing, you need a good healthcare system and you need a good education system. The government has to continue to invest and spend on those things to make it worthwhile. As a larger employer, you want to look at your ability to be able to house your existing staff that you're going to bring into town and for their kids to go to school and receive health care and education, et cetera. But you're also going to ask yourself well, who am I going to employ for my future and where are they going to come from?
Speaker 1:Now, we've talked a lot about physical infrastructure, we've talked about some workforce issues, but what about cultural initiatives? Do you think that they enhance the city's livability and appeal?
Speaker 2:Yes, I think they do. I think you know I mentioned before you know 3.8% of our population is now Indian. I think the increasing diversity and access to that provides not only entertainment but just better understanding of people getting on.
Speaker 1:Yeah, and in terms of the arts, do you think they play an important role in attracting and keeping people here in the city as well? Is there a good benefit-cost analysis for that?
Speaker 2:Well, yeah, you do know I'm an accountant, don't you?
Speaker 1:Absolutely.
Speaker 2:Look, I'm sure these are topical conversations around your summer barbecues.
Speaker 2:Yeah, that's right. So not a strong view on the arts. But look, an arts and cultural sector is important. I certainly know my wife is far more interested in the arts than I am, but, that having been said, we make regular trips up to the Sydney Opera House, so those cultural institutions do bring people to Canberra and do help business. It might not look like it. General spend on artwork around is a very heated debate. There's some of the artwork in Canberra that really does divide people and whether the government should be spending on it. I would certainly think, if we're going to spend, maybe we should spend on the local artist rather than international.
Speaker 1:And there'll certainly be some people who might be listening to this and who might say well, rugby and the need for a new stadium, or indeed sports generally, is just the other side of that cultural lens. So some people really appreciate opera and will travel to that. Some really appreciate rugby and will come for that too.
Speaker 2:Yeah, but I think the money tends to flow with the sport, at least in the short term. I've said to be quite clear, I'm a big supporter of rugby and a stadium near the city. I think it brings an enormous amount to Canberra.
Speaker 1:Now I understand you're producing, or will be producing this year, a report on Canberra's economic future. When's that coming out and what can we expect to see?
Speaker 2:That'll come out in the first quarter of next year and RSM nationally has done our leading cities reports and the next city that we're going to look at is Canberra. Rsm. We have our own full-time economist, Devika, and she's going to be looking at the economics and we're going to answer some of those questions, or look at some of those questions that we've touched on briefly. What is the role of infrastructure spend? What do we need to spend on? What is the place of Canberra within the Australian broader business community?
Speaker 1:Excellent. Well, we'll look forward to seeing that report when it comes available sometime in the next two or three months, I guess. Andrew, just to sort of finish off this chat, today you know it's still summer, we're all out and about at the Barbies and what have you? What are you hoping to see this year for Canberra?
Speaker 2:This year for Canberra. I would like to see there is a lot of talk about interest rates dropping again, economies starting to get more vibrant. I think Canberra's built a fantastic base. I've been in Canberra since 1981. I've been an accountant here since the early 90s and the maturity and growth and continued growth. So I'd like to see a renewal in confidence. You mentioned new restaurants and yeah, we are seeing that new venues continue to open up, that new infrastructure is being built. Our developers you know land sales have probably dropped off a bit in this region. Hopefully see land sales picking up and just a general sense of confidence coming back into Canberra again.
Speaker 1:Yeah, it would be really good to see a bit more confidence coming back into the market, and I guess one of the challenges there, of course, is the federal election. Are you expecting to see a bit of a slowdown here in the local economy as a result of the election campaign in the caretaker period?
Speaker 2:Yeah, we always suffer a bit in the caretaker period. Federal spending is so important, particularly in the professional services sector, which has been problematic over the last 12 to 18 months, as we've seen. Hopefully that starts to resolve itself and the government as a customer comes to a better understanding of what value proposition that they are after and we can get a little more certainty. So, yeah, a bit of certainty will drive that confidence.
Speaker 1:Excellent. Well, we'll keep our fingers crossed for certainty, confidence and, indeed, a bit of a bounce back as the year goes on. Andrew Sykes, thank you so much for joining us here on the Canberra Business Podcast today. It's been great having a chat to you. You're welcome, thanks, greg. So, thank you, andrew. I'm Greg Harford from the Canberra Business Chamber and I've been talking today to Andrew Sykes, the managing partner of RSM Canberra. This has been the Canberra for its support. Don't forget that your business can benefit from fresh ideas and perspectives by using student interns, and if you want to know more, just reach out to careers at canberraeduau. This is the Canberra Business Podcast. Catch you next time.