The unemployment rate in Australia has dropped towards an historical low, currently sitting at 5 per cent, defying cooling economic conditions and supporting weakness in other areas of the economy. Tony Sacre, CEO of the Bentleys Network, considers the likely impact on small to medium sized enterprises (SMEs) and shares some tips on how to manage the associated risks.
An economic snapshot
We expect the Reserve Bank of Australia (RBA) is quite pleased with the latest drop in unemployment. Our market is already grappling with a weakening housing market, reduced business lending, and a reduction in capital expenditure by businesses (typical behaviour before a federal election), so another negative impact would have been cause for concern. However, higher employment means that people have jobs to fund debt and there is still liquidity in the market.
The RBA has time to consider what to do with interest rates as we approach the next election. We do not expect any change to interest rates before the election, as it would be seen to be too political.
We spare a thought for the many Australians (8.3 per cent) who are under-employed and working part-time. Under-employment has a real impact on the economic and social welfare of Australians. We expect the RBA would want to this rate drop, so more Aussies can put more money aside for their superannuation to secure their financial futures. Lack of full-time employment opportunities and stagnant wages has been described by the Labor party as a ‘wage crisis’.
Risk management tips for SMEs
In this climate, the challenge for SMEs is to consider how they can weather low unemployment to continue to attract and retain high quality staff.
Suitable strategies can include:
Having high quality training programs in place to support career progression
Employee recognition programs to celebrate good performance
Employee benefits that are valued, such as flexible work arrangements
Establishing clear lines of communication to foster trust and collaboration
Keeping track of industry remuneration benchmarks to offer competitive rates
Providing meaningful work opportunities to increase job satisfaction
Introducing staff mentoring programs
Establishing staff secondment opportunities with partner firms in other locations
Ensuring staff are not over worked and their well being is supported.
For more insights, watch Tony Sacre on Your Money, or contact your local Bentleys advisor.