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The strengthening labour market could result in further rate rises from the RBA, says economist.
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Jobless rate returns to record low 3.4%
18 November 2022
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The unemployment rate fell back to a near five-decade low of 3.4 per cent in October just one day after wage growth picked up pace to an annual rate of 3.1 per cent and together the ABS figures mean bad news for the economy, commentators say.
“The labour market remains extremely tight, reflecting the very high levels of capacity utilisation that businesses continue to report,” said Anneke Thompson, CreditorWatch chief economist.
“The continued strength of the labour market presents a conundrum for the RBA who are looking for heat coming out of the labour market as one of the most tell-tale indicators that their monetary policy tightening will start to work against inflation.”
“In all likelihood, the unemployment rate will probably remain around the current rate until around January 2022, so that businesses — particularly retail, hospitality, etc — can capitalise on the busy Christmas period.”
CPA Australia chief executive Andrew Hunter said the result exacerbated the skills shortage faced by businesses across multiple industries.
“Filling vacancies, attracting the right talent and retaining staff is incredibly difficult in this tight jobs market,” said Mr Hunter. “Our members are telling us that businesses continue to be battered by a perfect storm of skills shortages, rising costs and higher interest rates.”
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“Businesses have been battening down the hatches to weather through this period but they need to know when they will see conditions improve.”
“Businesses need certainty about the future, especially in terms of workforce planning. Our members are telling us that some business clients are delaying expansion opportunities or considering offshoring to fill their employment gaps.”
Accountants had also felt the influence of the tight labour market, particularly in regional Australia, said Ainslie van Onselen, CEO of CA ANZ.
“Accountants and auditors are trusted advisers, but these trusted advisers are concerned that they are approaching a break point due to the current workforce constraints,” she said.
“The tertiary education funding changes in 2021 exacerbated a decline in the students commencing higher education in accounting since 2016. The result is that we today have a national shortage of auditors, accounting, and finance professionals at a time we need them most.”
Ms Thompson said the September quarter wage growth figure was good news for workers but still trailed inflation.
“While the increase is positive, and certainly higher than has been recorded recently, it is still well below inflation, meaning real wages are going backwards,” she said.
“Wages in the September quarter usually show a bit of a bump when compared to other quarters, as many private sector salary reviews begin following the end of the financial year.”
However, business associations said the wage growth figure was a clear sign that employees did not need the government’s industrial relations reforms.
“We all agree that Australians should get paid more, but the workplace relations legislation currently before the Senate isn’t a solution and it risks sending workers backwards,” said BCA chief executive Jennifer Westacott.
“This is a reminder that the parliament, the government and the key stakeholders must focus their efforts on the sectors and workers who need help, not the businesses that already pay their workers more and deliver better conditions.”
AI Group chief executive Innes Willox agreed and said it showed the IR bill before the senate was not required.
“The pick-up in wages growth is occurring organically and is particularly evident in the 4.3 per cent increase in private sector wages that were renegotiated over the course of the September quarter,” said Mr Willox.
“It provides still further evidence of the ill-considered and unnecessary changes proposed in the IR bill the government is trying to rush through the parliament.”
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