External Analysis: Economic

In early 2016, arts organisations around Victoria will be working on their submissions to the 2016 Creative Victoria Organisation Investment Program. This is the next in a series of posts in which Regional Arts Victoria will be sharing some of the work we’ve done to prepare us for our own submission, published in the hope that it will of use to others in the sector. 

Arts organisations don’t exist in isolation, and neither should your Strategic Plan. A useful exercise in scanning your environment is to brainstorm with your team on what Political, Economic, Social and Technical developments or trends might impact on you in the life of your Strategic Plan.

These terms don’t need to be organised too rigidly; they can be used simply to guide your thinking when considering the big wide world outside. At Regional Arts Victoria, we wrote a short post under each heading for our team to read through before our Strategic Planning brainstorm sessions. Below is the second of these, under the heading ‘Economic.’

 

RAF 2015_High Yield-in the deep freeze_In Debt Saving Seed_Photo by Dave Jones

High Yield in the Deep Freeze by Dave Jones

 

Economic

You can only tighten your belt so much before you’re punching eyelets in the buckle just to keep your pants up. So it is in our sector, such that the question is not whether artists and organisations will run out of belt space in 2016-17, but just how many of them do.

Charities are facing increased competition for donations. In 2015, 2,400 new charities were registered, despite donations falling to their lowest levels in 30 years. These charities joined 53,000 existing groups, adding to the 600,000 not-for-profit groups in Australia.

Corporate and philanthropic supporters of the arts alike are reluctant to step in to fill roles filled by government, creating significant economic flow-on impacts from changes outlined in the Political post. In Regional Arts Victoria’s case, a number of philanthropic organisations who have supported our program over a number of years have made it clear this support is not open-ended; indeed, some project funding was not renewed in 2016.

Charities and not-for-profits across the country might also learn from the recent experiences of the Shane Warne Foundation. Not-for-profits like Regional Arts Victoria should be transparent about their finances, and aim to ensure money contributed to the company is directed towards the mission it serves in the most efficient manner.

The economic health of these trusts and funds is also impacted by the overall health of the economy, with many philanthropic organisations relying on returns from financial investments to support their grant giving. Unfortunately for these funds, the All Ordinaries and S&P/ASX 200 price indexes fell over 2015, with 2016 also off to a shaky start.

On the upside, unemployment fell in 2015 from 6.2% to 5.8%, with full-time employment growth stronger than that for part-time over the year. Average weekly earnings increased by 2% over the year to May 2015 which is important, as the percentage of total household income spent on recreational goods such as the arts is unsurprisingly higher for those with higher incomes and many consider the arts to be a luxury good.

Stepping back into the political realm, a focus on reducing the size of the federal budget deficit by reducing spending means governments are unlikely to commit to large new expenditure outlays without corresponding reductions in other areas.

From 2016-17, local councils in Victoria will be subject to new rate-capping rules which restrict the amount by which these councils can increase rates to the consumer price index (CPI). The resulting limits on revenue will impact on the arts: 20% of total government expenditure on the arts and culture comes from local government sources (including performing arts venues).

Many artists and organisations have now developed more sophisticated approaches to resourcing their work outside of these traditional funding mechanisms. Perhaps the best known crowdfunding platform in Australia Pozible reports a 56% project success rate with over 10,000 projects successfully supported, and a handbook for assisting people to get their own project off the ground.

For small-to-medium organisations and independent artists in particular, this method of going directly to supporters to finance new work is better understood than ever. The potential to make a positive impact for organisations like Regional Arts Victoria cannot be ignored.

 

Further Reading:

Accounting for Good, 2016, ‘What’s Coming in 2016?’, Accounting for Good.

Heath, M., 2016, ‘Reserve Bank of Australia Sees Faster Growth, Scope for Easier Policy’, Bloomberg Business.

Heber, A., 2015, ‘A crowdfunding revolution is coming to Australia: Here’s what you need to know’, Business Insider.

Philanthropy Australia, date unknown, Fast facts and stats, Philanthropy Australia.

 

We don’t pretend to be the sole authorities on arts organisation governance. This post should help start discussions, not end them. Disagree with what we’ve said? Want to add some wisdom of your own? Great! Please post your contributions in the comments section below.