Future Told: Our predictions for 2018

Illustrations by Conxita Herrero 

FUTURE TOLD: OUR PREDICTIONS FOR 2018

Aussie gin, cheap wearable tech and maybe even a wage rise are on the cards for 2018 as our experts share their predictions.

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GOING

Restaurants will seek suburban or remote locations to escape crowded, expensive cities. Already, some of the country’s best restaurants are going regional and destination dining is hot. Vegetables will be the stars of the show, with an influx of restaurants offering plant-based menus. At the other extreme, our obsession for flame-grilling and smoking everything from meat to cheese won’t wane. Fine dining foams and gels are out. Diners will demand authentic, affordable food with personality. New restaurants will be high-volume, serving substantial shared dishes that satisfy.

Food provenance will be topical, with diners yearning for more information on the story behind the produce. And lifting Australian spirits will be locally produced gin, vermouth and whiskey, taking over bars across the country.

Travellers will continue shifting towards authentic experiences, unique locations, bespoke activities and the chance to live like a local. Chile will be the hot destination and Europe closer from March, when Qantas launches its 17-hour Perth to London Dreamliner route. The staycation is also gaining popularity. Expect more creative skill-sharing makerspaces. Get your hands dirty making furniture, stitching leather or potting succulents. If that’s not your thing, the first virtual reality concert hits Australia in 2018.

Stephanie Anderson
Events Manager,
PwC Australia
 

WEARING

In 2018, we move to digital identity 3.0 and wearable tech and the Internet of Things will combine in interesting ways, contributing to people’s experience but also increasing the risk of identity theft.

Tech will become more embedded in personal accessories and clothing, and this will increase the envy of the have nots. Fortunately, the prices will come down and supply will increase. More of us will go about our lives with visible and invisible wearable tech, providing feedback on our physical wellbeing – and there will also be a benefit by removing friction from service interactions and commerce.

Innovation in wearable tech is leading to new transducers and sensors becoming available for user interactions. Businesses will evolve use cases and leverage biometrics and behavioural data to authenticate and streamline customer interactions (for example, iPhoneX facial recognition opens up a new gesture set that will become the new “swipe”).

With the increase of wearables capturing consumer data, we will see higher demand for trust and security from consumers. Services that leverage this data will need to manage richer behavioural information and, in turn, will be required to invest in emerging security models such as behavioral driven authentication and behavioral biometrics analysis.

Joe Brasacchio
Experience Centre Technology Team Director,
PwC Australia

 

WAGES

Good news here. As annual wage growth has roughly halved from a peak of close to four per cent a year from 2011 to 2017, we have hopefully hit rock bottom and it is reasonable to suggest that annual wages growth will average around two per cent next year, with modest growth in subsequent years.

Wage growth remains relatively low, but there are some points of distinction. Public sector wages continue to grow faster than in the private sector, but the gap will narrow under increased pressure by state governments to push new enterprise bargaining agreements (EBAs) with lower wages growth.

A reduction in penalty rates in a range of industries (for example, hospitality, restaurant, fast food, retail and pharmacy) will keep downward pressure on wages in these industries.

Reflecting the end to the mining boom, wages growth has been and will continue to be particularly soft in mining exposed business-service industries (for example, professional, scientific and technical, and rental, hiring and real estate) and in mining itself. This is hitting wages growth in WA hardest.

Finally, the industries that will experience higher wage growth will be some IT and construction-related engineering jobs, where there are shortages of available workers in these business-

service industries.

Jeremy Thorpe
National Economics and Policy Partner,
PwC Australia

 

INVESTING

Be aware of the heightened euphoria that continues to drive developed market valuation as we awake to the next set of highs across many assets. We are seeing narrowing credit spreads and the chase for yield, without necessarily aligning return with the underlying risk.

Sound familiar? I often say the litmus test of our own market resides in the strength of our home-grown retailers. If retail is not seeing the results at the register because of decreases in disposable income, then storms are brewing.

There will be increased pressure on local retailers as global monoliths enter this market. Consider the impact on household disposable income, resulting from the recent lift in interest-only loan mortgage rates over the past nine months.

The size of this loan market is at the lofty heights of $581 billion versus total residential loans outstanding of $1.54 trillion. If the average lift in interest rates for interest-only loans was 0.65 per cent (we are seeing 0.20 per cent to 0.75 per cent) then this equates to a staggering $3.8 billion of additional loan servicing costs per year coming from money once available to spend elsewhere or save.

This is a relatively significant hit to savings and near-term spending power but also suggests no change in the official RBA cash rate in FY2018.

Stuart Morley
Private Wealth Lead Partner,
PwC Australia

 

TECH

Think of 2017 as a foundation year, with the arrival of many platforms and technologies such as voice, blockchain and artificial intelligence, which are now ready to scale.

In 2018, we’ll see mass adoption of these platforms and tech to create a step change in experience – brands, organisations and relationships that are easy to deal with will shine.

“All you can eat” products and subscription services will affect traditional revenue for usage-based providers, and they’ll have to respond or customers will vote with their feet.

Digital banks are coming. In 2018, we will see three serious digital players in financial services, right here in Australia. Refinancing your mortgage may happen in 24 hours, not 24 days.

Bitcoin and virtual currency will continue to broaden distribution and gain acceptance, but regulation will come as mass adoption requires greater oversight of inflows and outflows from traditional currencies. Expect one major e-commerce marketplace to accept Bitcoin soon.

With talent shortages in key technology and digital roles, organisations will leverage speedy connectivity and collaboration tools to tap the best talent globally.

Agile ways of working will boom and redefine “offshoring”.

Monty Hamilton
Digital Transformation Partner,
PwC Australia

 

BUYING

A good year for consumers coming up – but far more challenging for the retailers themselves. Consumer confidence will increase off the back of job growth and rising business confidence, which should see an upturn in overall retail spend. However, given the arrival of Amazon and other international competition, especially in the online channel, the expectation is continued price discounting from our domestic retailers.

Improved “last mile” solutions, resulting in cheaper or free home delivery alongside the continued growth in collection points in stores and lockers, should result in an upturn in overall e-commerce spending across a number of categories, increasing pressure on domestic retailers lacking a strong online proposition.

We should also see substantial changes in the retail landscape, with some brands, even those that are quite established, driven out of business.

This may not change what we are buying, but will certainly change where we buy it. Electricals, clothing, toys and homewares were examples of early casualties of this change in European and US markets, and we might expect the same in Australia. Pure players in these categories, alongside department stores, will need to innovate quickly to maintain a competitive edge.

Paul von Kesmark
Retail & Consumer Director,
PwC Australia

 

WORKING

Expect the significant disruption in the world of work to continue, hitting employers and job applicants across all industries. Specifically, there is a growing demand for enterprise skills – skills that are transferable and enable people to navigate complex careers across a range of industries and professions.

They include problem solving, financial and digital literacy, teamwork and communication, and are different from technical skills which are specific to a particular task, role or industry.

This shift is consistent with the findings of the recent PwC 2030 report on the future of work, in which 60 per cent of respondents believe few people will have stable, long-term employment in the future.

The concept of a job for life is redundant. As computing power continues to increase, more tasks are automated, so employees to do tasks that are less routine, impacting business models and fuelling demand for different and greater skills portability.

The one skill I believe is critical to shoring up prospects for employment success is the ability to problem solve – this is likely to remain a key critical skill for decades to come as artificial intelligence and machine learning work alongside humans. Emotional intelligence and the ability to reason are still innately human skills.

Dorothy Hisgrove
Chief Human Resources Officer Partner,
PwC Australia

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