Australian Economy

Westpac, Seek, Lendlease, Costa and Rio Tinto directors warn on job market shake-out

Seek chairman Graham Goldsmith says the advertised salaries of jobs on its website has been solid at 4.5 per cent growth, “but with inflation starting to ease, that is the first time [wage increases] have been a little bit ahead [of inflation]“. Job ads in December last year were also 17.5 per cent down on a year earlier.

‘Intentional resizing’

The Reserve Bank of Australia’s latest quarterly outlook, released on Tuesday, assumes that inflation will fall to 3.3 per cent by June.

The central bank also released its liaison program – which surveys more than 200 large and small businesses – which showed that customer sensitivity was making it hard to increase prices and had made business less willing to hire more staff.

“When we see the job ads going down, we look to that as a sign of business confidence. We would conclude as well that we wouldn’t be surprised to see unemployment tick up over the next few months,” Goldsmith says.

The latest employment data, released last month, showed signs of a cooling jobs market, with economists surprised that employment fell by 65,100 jobs, compared with expectations of a rise of 15,000, although the unemployment rate remained steady at 3.9 per cent.

SBS chairman, IAG and I-MED Radiology director George Savvides says the first stage of the shake-out is likely to be a hiring freeze for companies this year.

“The comment about companies looking more deeply at their cost base is certainly true of all of the boards that I’m on, more so than prior years. The first phase of that is, don’t hire, so a freeze,” he says.

“Following that, there are some more intentional cuts that will follow. Again, all of my boards are quite intentional about resizing, but not in a ridiculously aggressive way.”

Savvides agrees the picture is complicated by continued skill shortages in some areas.

“On the other side is just this annoyance in certain areas of labour skill sets, not having enough labour, and having shortages in construction, healthcare and aged care where we just inflate [wages] through competition,” he says.

“We’ve opened the gates on migration growth, but it’s not manifesting itself in the right areas where these shortages exist, so, there’s a lot of turbulence, it’s not settled at all.”

Chairman of Jumbo Interactive and director of 3#Data and Plenti, Susan Forrester, says while salary demands across the tech sector have “levelled off”, the wage demands ahead of the federal government’s mandatory climate reporting regime have skyrocketed.

“We actually can’t find sustainability experts and expectations on salaries are about 25 per cent higher than we thought – if we can get them,” she says.

Susan Forrester says wage demands have skyrocketed.
 Dan Peled
Artwork by Bob Gibson

Mining sector not immune

Rio Tinto and Woodside director and former West Australian treasurer Ben Wyatt says the mining sector is also looking at its cost base.

“Historically, the mining sector has employed and then shed staff pretty rapidly around the rise and fall of various commodity prices,” he says.

“I’m very keen to understand, as is the board of Rio Tinto … what is the appropriate cost and operating model so, when iron ore comes off its highs, you don’t suddenly have 15,000 people exiting the employment market through all the various mining companies.”

Federal Treasury had expected the iron ore price to drop to an average of $US60 a tonne over the first three months of this year, but it has been holding above $US100 since November.

Director at Vicinity Centres, Costa and Tabcorp, Janette Kendall, says, “all organisations are looking at their operating models and what skills they need in a very different world, with a big presence ofAI”.

“It feels different at the moment. It’s not the old headcount, cost-out, it’s actually reshaping and reskilling an organisation,” she says.

“Tabcorp, for me, is the living, breathing example of it because we’re in a massive transformation journey, but it’s as relevant for other organisations.”

Kendall is also on the board of Australian fruit and vegetable company Costa, whose shareholders have accepted a $1.5 billion bid from US private equity giant Paine Schwartz. On retail spending, Kendall says we are starting to see “some discretionary spending come off, but spending on non-discretionary spending remains strong”, and major events continue to sell.

“We are still seeing record numbers at major events like the Australian Open, ticket sales of Taylor Swift – that’s the hottest ticket in town – I’m not sure if it’s a consumer reaction to saying, ‘the hell with it, we’re feeling miserable, we need some joy in our lives’,” she says.

“I think we’ll see that increase in the value shopper. You’ve got to feed yourself and your family, but we may see a further down-trading in the basket; it will be back to core basics.”

‘Risk compliance tsunami’

The directors also agreed that the government needed to do more to help companies deal with the cumulative wave of regulation – from industrial relations changes to mandatory climate reporting – which they warn is strangling productivity.

“If you’re in a highly regulated industry like banking or insurance, the wave of regulatory change … over the last five years, not just in Australia but globally, is consuming a massive amount of the spend on systems and technology which otherwise would be going into new product innovation,” Ullmer says.

Mark Rigotti, the chief executive of the Australian Institute of Company Directors, says no one in federal Labor is looking across the board on regulation.

“It’s this accumulation effect, it’s not the individual regulation which may have a very good basis, [but] no one is actually looking across the piece, there is not a minister for deregulation [a position and department which previously existed],” he says.

Kendall says that the gaming and waging sector faces a similar level of regulation.

“I would advocate for a minister of harmonisation, that’s the challenge we see,” she says.

“It concerns me that this approaching budget may miss the opportunity on setting that context for transformation, and the regulatory lever is the one that gets pulled on things like climate reporting – it’s actually about how are we transforming, rather than regulating our way to it.”

Savvides says, “a third of our board meetings or more are taken up with managing this risk compliance tsunami coming constantly our way and the rules and penalties around getting it wrong”.

“Why don’t [the government] come and join us in this and have a look at the effect of government policy imposed on corporates and the impact on our customers?” he says.

Bracket creep needs reform

Ullman also urged the government to look at more substantive tax reform, and says the government still needs to find a solution to bracket creep.

“There are a couple of major jurisdictions around the world where the tax brackets are indexed, in one case to 2.5 per cent per year, and that is just locked in,” he says.

“Otherwise, the tax changes which occur are just a sugar hit which get chewed up in bracket creep over the next five to 10 years.”

Savvides also says there is increasing “frustration of more and more tax to a smaller proportion of the total population. The lack of balance is an issue, and I think it’s short-termism.”

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