Our CEO Steve McCann's insights for 2019

17 Dec 2018

What does our CEO Steve McCann predict for 2019? And how can business build trust in the wake of increased consumer scrutiny? Read all of Steve’s insights for 2019.

1. How broken is politics and what can be done about it heading into the 2019 federal election?

A significant trust deficit exists between Australia’s elected representatives and the electorate at large. In the lead up to the 2019 election, politicians of all persuasions need to work doubly hard to bridge this divide. This means providing more than just their vision for Australia – they also need to articulate a clear and decisive pathway to achieve this vision. Given political stability and business confidence are inexorably linked, it’s imperative that politicians doggedly pursue a reform agenda that sets the nation up for long-term growth. 

2. What do companies and leaders need to do to repair the public's trust in business?

It’s now well understood that while governments grant permits, communities are the ones that grant permissions. This means if we don’t have a social licence to operate, our projects don’t progress. Given the size and scale of the urban regeneration projects we deliver around the world, it’s imperative we form a genuine partnership with our community stakeholders. This means early and meaningful engagement supported by a genuine focus on trying to find the best solution. 

3. By how much have your energy costs increased in the last 12 months? How has this affected your business?

Lendlease’s business is diversified by both sector and geography. This helps mitigate different market risks including rising energy costs. Further, our Investment Management business has taken ownership of highly sustainable, energy efficient assets to reduce our exposure to the impact of increasing energy prices. Our customers in our Communities business in Australia certainly do feel the impact of higher energy prices and this is another factor in decisions about real estate.   

4. Have you noticed any tightening of credit availability even amid continued low interest rates?

While Lendlease’s ability to access funding has not changed during the past year, the cost of funding has risen marginally. From our customers’ perspective, there has been a noticeable tightening in the availability of credit for Australian households. The revised approach of the major banks in assessing borrowing capacity is having a material impact on the average household’s access to home financing and a resultant impact on demand.

5. Do you expect to see wage growth inside your company and the broader economy?

An infrastructure boom across Australia’s most populous states has undoubtedly pushed labour costs higher in that sector. To lessen the impact on Lendlease, we’ve heightened our focus on workforce planning and resourcing. We also have a strong pipeline of internal talent and prioritise attracting and retaining the best people.

6. Are you using or planning to use artificial intelligence or data analytics? How will it change your business?

Our strategy is based on key themes that we believe will significantly influence our businesses over the medium to longer term. Technology is one of those themes. This means increasingly we use data to inform everything from our approach to safety through to how we operate our precincts and buildings, as well as product development and design. We are doing a lot of work in this area to ensure we keep up with recent innovations.

7. What is your outlook for the US and Chinese economies?

In the US, the economy is growing strongly and seems to be in good shape overall. We do expect conditions will ease through 2019 as the boost from the Trump tax cuts fades, and the Federal Reserve continues its tightening path. Overall, our outlook is for GDP growth to average just over two per cent during the medium term. 

In China, indications are that a fiscal boost is likely from the central government in coming months, which should underpin the economic outlook. Our forecast is for the Chinese economy to grow by about 6 per cent per annum over the medium term. We are hoping the China/US agitation does not escalate as this could damage the global economy.

8. What is the next big disruptive trend you are preparing for?

We see the use of technology as an evolution. There are myriad examples within Lendlease where technological advances are creating enormous opportunities for our company.

For example, our increasing use of cross laminated timber, or CLT, delivers a faster and more environmentally friendly build with less disruption for people in surrounding areas. It’s estimated that using CLT reduces carbon emissions associated with the build process by around a third compared to a traditional concrete build. Most recently, we delivered one of the world’s largest engineered timber office buildings, 25 King, at Brisbane Showgrounds.

Another example is our TRX urban regeneration project in Malaysia, where virtual design technologies and drones are being used to monitor construction progress, safety practices and equipment utilisation. Additionally, the use of biometrics enhances security and safety on site.

9. What makes you optimistic about your sector?

By 2030, it’s estimated that more than 60 per cent of the world’s population will live in urban areas. This means global demand for thoughtfully conceived and well executed urban regeneration projects is only going to increase.

The end development value of our pipeline of work now stands at $71.1 billion. This includes an additional $20 billion of projects in Europe – including the redevelopment of London’s iconic Euston station – added in the past year. In addition, we’re well placed on a number of new urbanisation projects both in Australia and internationally.  

10. What's the best book you've read this year?

Sapiens, a brief history of humankind by Yuval Noah Harari.

11. How long are you taking off over summer and where are you going?

Two weeks at home with the family.

12. What's the most important part of your health regime?

Eating well and time off with my children.
 

To read the published AFR article, click here.