What’s next for the Australian job market?

It’s the burning question: what’s next for the Australian job market?

Following three waves of the pandemic, numerous lockdowns, and the borders reopening, the job market has changed a lot over the past couple of years. Currently, jobs are aplenty and if you’re in the market for a change, you generally have room to negotiate terms and benefits that suit.

However, if the UK market is anything to go by, the Australian job market is set to change drastically in the next 12 months.

‘Stagflation’

Economists have coined a new term to describe what they predict will soon hit the UK market: stagflation.

It’s the combination of two terms: stagnation and inflation. Both are equally dreaded, signalling low growth and high inflation.

The economy, wage growth and the job market are inextricably linked. (We tackled the topic in a previous blog, Australian wage growth: What can we expect?)

In the UK, a combination of high energy prices, increasing prices of goods, and a falling exchange rate suggest inflation will continue to intensify over the next 12 months. Alongside this, it’s also predicted that an already tight labour market will become even tighter.

We know that when inflation is rife, wages are forced higher (although not quite at par with inflation).

For businesses, that means there are:

• rising supply-chain costs.
• rising costs of goods and amenities.
• increasing wages.

To cover the increasing costs, businesses usually dip into the budget set aside for business luxuries. Think innovation, new tech, or hiring new employees.

When these conditions continue for an extended period, we can expect that the current job-rich and candidate-short market will soon become a job-short and candidate-rich market.

A recession for the Australian job market

In the Australian market, we’ve already seen a decrease in the purchasing power of money. And intensifying inflation is a real cause for concern.

With rising costs and a probable recession, this might affect the Australian job market in a few ways:

• Companies will continue to spend on business-necessary functions, such as those generating revenue. However, they will tighten their purse strings for jobs or responsibilities that are not seen to be business-critical, or whose responsibilities can be absorbed by another person in the business.
• The negotiating power held by people interviewing for job positions will decrease.
• Employees may accept lower wages, prioritising job security over other benefits.
• Alongside a recession, redundancies may also become more common.

Will all industries in the Australian job market be affected equally?

Not all industries will be affected by a recession in the same way.

Where infrastructure is concerned, particularly when it’s tied to Government projects, businesses will be less affected. This means there will likely still be demand in construction or engineering. Tech positions, particularly those that support existing infrastructure, will also be in demand.

Temp or short-term contracts, such as those common in administration or office support, may see a significant reduction in availability.

How can you prepare for a recession?

In a particularly tough market, like the conditions in a recession, budget and job security will become the key talking points.

If you’re a business, pay your employees accordingly but allow some buffer room in your budget. You want to be able to provide discretionary pay increases to your employees when someone performs to ensure you retain your top talent.

If you’re looking for a new position or deciding whether to leave your current job, it’s important to be realistic about market salaries. Don’t undersell or overpitch yourself. If you find a new opportunity and the offered salary leaves you wanting more, talk about possible pay increases once you have proven your success.