Austerity was a word thrown around during the GFC but was ultimately disregarded in favour of governments borrowing and spending their way out of trouble. With inflation now a global problem, those measures are not the economic lifeline they once were. As economic conditions worsen next year and countries find the debt to fund their budget deficits increasingly more expensive, I think we are going to see a wave of momentum changes in 2024. People and Governments can be fickle and if the experience over the past few years has taught us anything it’s that self-interest and the wellbeing of those closest to us, be it financial or health, overrides all else. When faced with decisions tied to immediate challenges that impact them directly, people tend to prioritize addressing those issues over what might have been their earlier preference for the sake of long-term causes and the greater good. So, when push comes to shove financially, here’s where I see the tide turning in the next year or so.
Taxes going up. This is obvious when we are talking about austerity measures but look for governments across the world to start increasing taxes wherever they can. This will be especially true for smaller countries who are less easily able to borrow to fund their deficits going forward. Here in Australia, the rich are an easy target, but I wouldn’t rule out an increase in the GST. When it was introduced, there were a range of assurances that 10% was the figure, primarily that all state governments and the federal governments would have to agree – and that was very unlikely. However, we are in a position where almost all governments are politically aligned, with all being Labor except Tasmania. While in the past I was of the view that voters would not stand for it, with limited ways to meaningfully increase the tax base it would not surprise me to see proposals to increase the GST to 12.5% or 15%.
The war in Ukraine. One part of this comes from the general public experiencing ‘war fatigue’. The media put this in front of us 24/7 and eventually, it just wears people down psychologically and they switch off. Another part comes from people questioning spending money on a war that they are not directly involved in. Rightly or wrongly, when people start seeing their standard of living go down and they start experiencing financial hardship, they question where money is going. In 2024, I think that tide will likely turn. The risk being that the West loses the people’s support and subsequently the political will to fund Ukraine defence efforts. Reduced funding likely ends in a Russian victory.
Climate change funding. Similarly, to war fatigue, funding climate change initiatives has been challenging in the best of economic times. When governments and corporations around the world are faced with a more immediate, or at least a more tangible issue, I expect they will defer targets and reduce spending. This is not a statement on what should happen, but how I see this playing out. It won’t just be due to government neglect or corporate greed. As individual people are faced with more immediate financial problems, whether unemployment or defaulting loans, the support for important long-term movements may well evaporate.
Working from home. This one will take time to play out. A significant flow on effect from austerity at the business and consumer level will be higher unemployment. As unemployment increases and job security reduces then employees will become more inclined to go wherever the work is. While many workplaces are happy to offer WFH, there are many that only do so because it’s the only way they can retain staff. But that tide will turn, and the catalyst will be higher unemployment. All things being equal, the employee who works in the office will get the promotion and get the new job. Workplaces and employees will rediscover the serendipitous benefits of being together in the same place. It will also lead to the reinvigoration of CBDs and eventually a recovery in office rents and valuations.
In the shifting currents of global economics, 2024 is set for change. As the burdens of budget deficits grow heavier, governments will find themselves turning to the once-dismissed concept of austerity, marked by an inevitable rise in taxes and reduced spending. While the global landscape hangs in the balance with conflicts such as the war in Ukraine, there is an increasing risk of weariness among the public—a war fatigue, that may sway support across the world. The allocation of resources, including funds for climate change initiatives, may face redirection as immediate concerns eclipse long-term priorities amid economic challenges. Additionally, the move to remote work may gradually subside as higher unemployment prompts a return to traditional workspaces. The intricate dance of economic tides in 2024 seems set to redefine not only fiscal policies but also societal priorities, as the world navigates the complex currents of change.
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