A positive economic outlook from Finlease

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“I’m going to paint a positive picture for the industry. All the data we are catching from the banks indicates that 2025 and 2026 are going to be positive years. We’ve just been though a tough year as an industry, and I think most people would nod in agreement when they read this article, this year has been tough,” said Chris.

There are number of identifiable reasons for the recent slowdown, says Chris.

“Over the last 12 months there has been a significant reduction in investment for infrastructure. The cost of labour has increased, the cost of cranes has increased and the cost of borrowing exploded. It takes time for businesses to adjust to these conditions.

“Also, the last quarter of 2024 was the slowest economic quarter Australia has seen since the Global Financial Crisis. We grew at 0.1%, which means we are teetering on the thought of a recession. We are very close, but I don’t think we will experience a recession. By definition a recession is back-to- back quarters of negative growth. Expectations are that growth numbers will return to somewhere near normal by the middle of next year, which will be coupled with interest rate cuts at the start of next year,” said Chris.

“I am having conversations all the time with customers wanting to understand ‘the lay of the land’ asking me for direction on what is likely to happen. Businesses want to make decisions and continue to grow but to do this they want to know what
the ‘runway’ is going to look like. Hopefully the team at Finlease have the right answers,” said Chris. “Working out borrowing costs is straightforward. You know the cost of your crane is $5 million, and the interest rate is 5 per cent. You can work out the financial package because they’re all fixed costs.

“What’s been difficult is the volatility in this economic environment. Businesses don’t know where the work is, they don’t know where to find staff including experienced operators, Riggers and Dogmen. It is difficult to make investment decisions with volatility in the market “I’m seeing that the ‘runway’ is starting to stabilise, and we are entering into a period of slow but modest economic growth. There has been a sharp upturn of skilled labour coming into the country, meaning labour costs will soften and the cost of borrowing is starting to come down. When we see reductions in the cost of borrowing, we will see the ‘runway’ level out and that’s what businesses need,” said Chris.

Having worked at NAB prior to Finlease, Chris always pays particular attention to the NAB Business Confidence Survey.

“It’s an interesting survey. Rather than using tangible economic data, NAB would sample 1,000 business customers and ask them questions that they would rank one to 10. Questions would include, ‘What is the likelihood of you bringing on extra staff in the next quarter?’ What is the likelihood of you purchasing a new piece of equipment in the next quarter?’ The answers are compiled and indexed to provide a score.

“The NAB Business Confidence Survey for the last quarter was the first one in 12 months that demonstrated a little a spike of confidence which couples with what we are seeing. The ‘runway’ into next year is starting to look more positive than where we currently sit. I think it is fair to say we’ve hit the bottom of the curve and we’re now heading back up into more positive times,” said Chris.

The Energy Sector will provide significant growth opportunities in the years to come says Chris.

“During my conversations with customers, I make reference to the ongoing investment in energy. We are seeing significant investment in the energy sector, in wind, solar, hydrogen, gas, and potentially in the future, nuclear, if that gets off the ground.

“I recently attended a summit in Gladstone and there was a presentation by a group called the Gladstone Engineering Alliance (GEA). They were presenting about how they’ve essentially had to redesign the whole town because they are forecasting 7,000 wind farm turbines will be erected there between now and 2050. The presentation referenced close to 25 years worth of work,” he said.

“In August the Federal Government approved the first stage of the $30bn SunCable project, which environment minister Tanya Plibersek described as the ‘biggest renewable energy project ever’ saying the project will be ‘transformational’ for Northern Territory.

“We are going to see a shift from traditional infrastructure spends, like bridges, rail, roads and tunnels, although there will obviously be ongoing projects, but the investment will not be at the levels we have seen in recent years. The investment is going to be in the Energy Sector,” said Chris.

The 2032 Brisbane Olympics will also see a significant building program, says Chris.

“The ‘Olympic Build’ is going to be huge for the Brisbane construction sector, we’re even hearing it from the banks. It’s interesting, as states like Victoria slow down as projects are completed, Queensland comes on the boil. There is a lot of work coming in the construction and energy sectors in Queensland,” he said.

Chris is seeing a change in purchasing and he has advice for crane businesses when it comes to the borrowing process.

“We have noticed a move from crane companies towards the purchase of quality used cranes. The cranes are still usually relatively ‘new’ and I think this trend supports a broader cost saving exercise for businesses. Given everything has inflated so much over the last 12 months, crane businesses are being more rigorous with their budgeting and purchasing.

“The advice we are providing customers is to plan the investment. Obviously, we still need all the fundamental financial details but we are advising customers to plan their purchases up to 18 months in advance. Regardless of whether it’s a second hand or a brand new model, there needs to be strategy around the purchase. Not so long ago, customers would come to me saying ‘Chris, I’ve bought a crane, here’s the invoice, please sort the finance’.

“There’s far more to it now, especially for your larger machines. When I was at NAB, we could turn around a 60 tonne Liebherr in 24 hours, no problem. That’s not the case anymore, customers must be strategic and really plan the financing. Even for motor vehicles and smaller assets, it’s very much a thought out, planned process,” he said.

“A customer contacted us recently having noticed an upcoming auction. They wanted to secure a pre-approval so they could potentially successfully bid on some cranes. This is a safer and smarter way to transact. Pre-approvals unfortunately take time in the current lending environment, emphasising the importance of planning your purchases. It can put strain on a relationship when a supplier is requesting payment, but this is delayed because you haven’t been preemptive and taken the necessary steps for preapproval,” said Chris.

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