Employment predicted to be on a downward trend

By Paul Stathis
Monday, 21 April, 2008



According to personnel and management consulting firm E L Consult, a fall-out in general employment is inevitable in view of the impact on high-end employment from the Reserve Bank’s continuing rate rises and other global issues.

The Australia-based consultancy issues a monthly human capital index called the E L Index, which has been produced since 1992 as an indicator of economic trends in Australia. The latest index states that executive demand in Australia, a leading indicator of general employment, has fallen a further 10% in March.

While a post-election boom caused a temporary spike in demand in February, falls have since resumed. The combination of rising interest rates and fluctuations in global share markets are tempering growth in Australia.

The index remains at levels seen in July 2006, which coincides with the beginning of the most recent series of interest rate increases.

Grant Montgomery, managing director of E L Consult said: “Businesses who are making borrowing decisions daily react quickly to interest rate rises. They are likely to make immediate budgeting decisions; and cutting their expensive executive payroll is often the first area to be affected.

“The private sector in particular has cut executive employment seven out of the last eight months. This makes the downward trend difficult to deny. It is only a matter of time before the current trend impacts consumer confidence and unemployment generally. It is a global trend and we can expect falls in demand across the economy, including international falls in mineral sales.”

Although there were significant increases in demand for positions in all sectors in February over January, this was only a spike, with widespread falls in demand across every state and territory as well as every industry group in March when compared to February:

  • 10% decrease in executive positions advertised nationwide,
  • 8% decrease in finance positions,
  • 9% decrease in engineering positions,
  • 10% decrease in general management positions,
  • 10% decrease in information technology positions, and
  • 8% decrease in marketing and sales management positions.

Higher Australian dollar not helping to lower inflation

When compared to the US dollar, the Australian dollar is now at its highest point since 1984. This high is boosted by demand for Australian-sourced resources and the high Australian interest rates compared to global averages.

“The Reserve Bank has noted that inflation is currently at the top end of its 2–3% desired band and so is raising interest rates to bring this down,” continued Montgomery. “Normally the appreciation of the Australian dollar would decrease the price of imports, helping to bring down the general rate of inflation and reducing the pressure on the Reserve Bank to raise interest rates unnecessarily.

“The price of imported goods has generally not decreased for consumers. Importers and retailers have used the higher Aussie dollar to boost their own price margins rather than hand on the savings to consumers.

“The federal government must ensure the benefits of the resource boom, the higher interest rates and higher Australian dollar benefit the whole country by lowering import prices.”

The E L Executive Demand Index is a comprehensive monthly analysis of employment trends at executive level, shown by two separate university studies to correlate strongly with general economic and business trends. It is a combined national index of all executive demand made up of five separate indices: finance, IT, management, marketing and engineering.

 

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