November 2022
Michael Courtney
Managing Director
Adapting to life post COVID-19
As we get back to ‘normal’, Councils are adapting to life after COVID as are we at CT Management.
The economic environment is unique with record:
- low unemployment
- increasing interest rates
- significant labour and skill shortages
- growth in property markets
We are now seeing increases in inflation being managed by Reserve Bank increases in interest rates.
Where this cycle will finish will be interesting to observe over the next few months.
It seems this solution is regressive and impacts lower income people disproportionately.
The Federal Treasurer predicted a 56% increase in energy costs and 41% increase in gas in the coming 24 months – tough times ahead for some.
These issues coupled with increasing energy costs will affect the community’s capacity to pay as the cost of living increases become the new normal.
Some pundits are suggesting energy costs will increase by 35% in the coming 3 years as we unwind from our dependency on fossil fuels.
The timing of the unwinding will be critical, as it will directly impact the rate of energy cost increase.
Sadly, for a country full of natural resources and sunlight we still don’t have a clear implementation plan to achieve our 43% emissions reduction target.
How will this changing environment impact Local Government demand for services from CT Management Group?
We are adapting our business to provide lead services and products in this environment that we believe will increase demand for Associates.
In our view Local Government requires a period of consolidation and focus on assessing its long-term financial sustainability and its priorities for investment in services and capital into the future.
After 6 years Councils are also feeling the impact of rate capping – on average loss of 3.8% revenue (compounding) over this period!
A time for review and adaptation is required to ensure a financial and environmentally sustainable direction into the future.
Councils that can evolve their business models to capitalise on this paradigm shift (lower costs, lower energy emissions, greater community participation and less revenue) will be rewarded.
As Councils revenue decreases in real terms, the underlying cost structure will need to lower to ensure Councils maintains a sustainable financial position.
Adaptation may involve introducing a streamlined variable cost model – will this be inevitable given the impact of rate capping.
A variable cost model would mean Council would call on temporary specialised resources as required as opposed to employing full time staff.
With the expertise across the CT Management Associate group, we can fill this void – to a large extent an extension of our current service offering.
A recent increase demand for Placements is the start of this trend, though we anticipate this will extend over the next 3 years into formalised “virtual service” arrangements.
In response to this forecasted trend, we are developing responses in our key service areas, commencing with Asset Management.
Our current Service Planning offering deals with the issues of levels of service, future demand and prioritisation of future service offerings.
This approach assists Councils re set service priorities, resource allocation and capital investment as the community needs and revenue sources diminish.
To date many of our Council clients outlook has been unsustainable, but with a prioritised Service Review program and revised capital program, Councils can plan and shape a different but sustainable future.
We are also developing our response to the decarbonisation of Councils to net zero in two areas.
Firstly, strategically we are an event partner for the Local Government NetZero Roundtable to be held in Canberra on 21-22 March 2023.
The Roundtable is aimed at local government sustainability practitioners, policy makers and executives tasked with designing and implementing council initiatives to achieve NetZero.
The Roundtable will see councils share their:
- success stories and achievements.
- learnings and next steps; and
- challenges, policy gaps and advocacy agenda.
The NetZero Roundtable will share sustainability insights and practical experiences that will encourage replicability of successful initiatives to move Australia closer towards its emission reduction targets.
The following themes will be discussed:
- Power Purchasing Agreements
- Electric Vehicles and Charging Infrastructure
- Community Batteries, Microgrids and VPP
- Electrifying Council Operations
- Waste and Circular Economy
- Mobilising the Community – Electrifying Everything
The Roundtable themes have been designed to inspire and equip the local government sector to lead their communities towards NetZero.
We believe Councils will need to play an active role in assisting the Federal Government achieve its 43% emission reduction target by 2030.
Secondly, we have partnered with Uniqco in providing services to assist Councils towards a Net Zero Plant & Fleet.
Our services include:
- carbon emissions calculations
- proper fleet and vehicle changeover plans supported by real data economic modelling
- recommend a pathway towards electric vehicles,
- assist with design and implementation of charging grids
- fully cost a Net Zero Plant & Fleet transition plan.
The leading Councils will manage these transitions and not be reactive to the impact of change and follow in its wake.
Finally, I would like to wish all our valuable clients a Merry Christmas and a Prosperous New Year 2023.
Michael Courtney
Managing Director
CT Management Group