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Australia’s economy is in crisis. Or, it’s about to be, writes Jas Singh.
The Reserve Bank of Australia (RBA) has spent the last two years aggressively raising interest rates to bring runaway inflation under control. And while price inflation is forecast to return to the RBA’s target range of 2-3 per cent by early 2025, this victory has come at a steep cost to jobs, growth, and business confidence.
Excluding the pandemic, the Australian economy is currently growing at its slowest pace since the early 1990s recession. The signs of economic stagnation are all around us. One of the most concerning trends is the onset of what many economists call a “white-collar recession”. Highly qualified, senior professionals across industries have been laid off over the last eight to 12 months, a trend that reflects deeper structural challenges within the economy.
According to Deloitte Access Economics, Australia’s private sector job growth has essentially stalled. In the year to March 2024, private sector jobs increased by just 0.1 per cent, amounting to only 6,000 new roles out of a total of 322,000 jobs. This slowdown in hiring comes as Australia braces for a possible recession, with Deloitte estimating that up to 100,000 Australians are expected to find themselves in unemployment queues in the coming months.
While unemployment figures may not fully capture the extent of job losses, particularly among highly qualified white-collar workers, the effects are certainly being felt. Many of those laid off likely might not appear in official unemployment statistics, as they may have received redundancy payouts, opted for early retirement, or are still in the job search process. The private sector has, in large part, implemented external hiring freezes, exacerbating the challenges facing these displaced professionals.
Senior, highly paid professionals are often the first to go during economic downturns. Many companies, driven by cost-cutting measures, have been somewhat hasty in making these redundancies. The logic is simple: reduce headcount at the top end of the pay scale and balance the books. However, the consequences of this approach may be more damaging over the long term than many businesses have accounted for.
While corporates have been increasing their hiring of junior professionals to fill the gaps left behind, the expertise, experience, and institutional knowledge of senior staff are not easily replaced. Sure, careful expense management is critical for long-term business sustainability, but hasty decisions to cut senior staff and reduce hiring may have unintended consequences. Businesses could find themselves lacking the leadership and expertise necessary to navigate a future economic recovery.
Looking ahead, Australia’s economic outlook is unclear. The RBA’s rate hikes may have successfully controlled inflation, but without government intervention and stimulus, the threat of a deeper recession looms large. The next 12 months could see a shift in hiring patterns, particularly if businesses realise the costs of their aggressive downsizing strategies.
It is possible that we may see a mini hiring boom as companies seek to refill critical roles that were hastily made redundant. While this rebound in hiring is unlikely to reach the scale of the COVID-19 hiring boom, it could signal a shift in how businesses approach talent management. However, any kind of recovery will depend largely on the broader economic conditions, including government policies and global market trends.
In the short term, the white-collar recession is likely to continue, with private-sector job growth remaining weak and many professionals struggling to find new roles. But as businesses recalibrate and the economy stabilises, there is hope that some of the more drastic decisions of the last year may be reversed.
For now, Australia finds itself in a delicate balancing act – managing inflation, controlling costs, and trying to avoid a full-blown recession. As we move into 2025, businesses and workers alike must learn to adapt, with a sprinkling of cautious optimism for what lies ahead.
Jas Singh is the founder and managing director of SKL Executive.
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