SLOW ECONOMIC growth forecasts for Australia will have a direct impact on top-tier Australian law firms whose clients will increasingly chase opportunities for growth overseas, predicts Mallesons Stephen Jaques chief executive partner, Robert Milliner.
“In 2005 Ian Macfarlane, the then governor of the Reserve Bank, said that the best predictor of the health of the Australian economy is in fact the world economy. [The Australian economy is] so far behind the world economy that that will predict our future,” Milliner told the Legal Reform Summit held in Sydney last week.
According to the International Monetary Fund’s World Economic Outlook survey for April 2007, the world’s GDP is expected to increase 4.9 per cent in 2008. Australia’s GPD is predicted to increase by only 3.3 per cent. In comparison, countries such as China, India and Russia have growth forecasts well above Australia’s and the global average — 9.5 per cent, 7.8 per cent and 5.9 per cent respectively.
These figures explain the increasing trend for Australian clients to invest more overseas to take advantage of phenomenal growth, especially in Asia — which now accounts for roughly 25 per cent of the world’s GDP.
“It is all about going global and looking for growth. Why? Because [clients] want this growth rate; they want to get into economies where the growth rates are like that. That sort of growth rate is driving interest in those clients and there are significant ramifications for that on the Australia economy and Australian law firms,” Milliner said.
As clients go offshore and become global operators, they will come to expect different levels of service, different rate structures and global capability, Milliner said.
However, Craig Pudig, managing partner at Clayton Utz told the summit this did not necessarily mean that Australian firms had to have a global presence to remain viable.
“We don’t have offices offshore. One of the reasons we’ve done that is it is hard enough getting [lawyers] to come here, let alone sending them offshore.
“At the end of the day it’s not what we want to do it’s what our clients want to do, what services their needs. There is no right or wrong answer;” Pudig said.
Firms will also have to prepare for a shift in the career aspirations of their employees as more and more people want to go out and work in the global marketplace. Milliner estimates around 10 per cent of lawyers at large firms go overseas to work each year.
“My experience is that they are starting to stay longer; many get married over there,” he said.
Peter Butler, managing partner at Freehills agreed.
“I agree with [Milliner], our experience is they tend to stay longer now and one of the reasons is they have career opportunities over there and many of them now become partners,” he said.
Multiple generations within law firms may also lead to a type of social revolution likely to cause significant cultural upheaval that will force firms to reconsider their business structure.
“If you’re not changing as fast internally as the markets change externally you’re falling behind. I would challenge you that no law firm is changing as fast internally as the market is changing externally and, in fact, most of us go kicking and screaming in the general direction but not at the same rate as those external markets.
“So the whole issue about the current partnership model, the structure of the market and the aspirations of our lawyers for the future is going to be quite a significant issue,” Mallesons’ Milliner said.