News

24 May, 2023
Australia’s jobless rate jumps to 3.7pc, easing fears of further RBA rate hikes
Australia’s jobless rate jumps to 3.7pc, easing fears of further RBA rate hikes

Unemployment has climbed to 3.7 per cent in April from 3.5 per cent, as a surprisingly weak month for the labour market buoyed hopes the Reserve Bank would not hike rates as soon at its next meeting.

The unexpected jump in the jobless rates came as the number of employed people dropped by 4300, according to seasonally adjusted figures from the Australian Bureau of Statistics.

A 22,800 increase in part-time workers in April was more than offset by a 27,100 drop in full-time employment, the data showed.

This compared to the consensus forecast among economists for a 25,000 lift in employment, and for an unchanged jobless rate.

Despite the worse-than-anticipated labour force figures, unemployment remains at around 50-year lows. The latest data will also likely ease pressure on the RBA to deliver a 12th rate hike when it meets next month.

Jim Chalmers said the jobless rate remained “remarkably low”.

“We have expected for some time that the unemployment rate will tick up a bit as a consequence of higher interest rates, combined with some pretty serious global uncertainty, and that’s what we’re seeing in these unemployment numbers,” the Treasurer said in Perth.

“But it is still pretty remarkable that we enter this period of substantial global uncertainty with unemployment with a three in front of it,” he said.

There was worse news for younger workers, with the youth unemployment rate lifting from 7.8 per cent to 8.6 per cent – the highest in almost a year, but still far below the 12 per cent pre-pandemic level.

ABS head of labour statistics Bjorn Jarvis said the “small” drop in the number of people with jobs in April came after the economy created 39,000 jobs over the first three months of the year.

The ABS figures showed the employment-to-population ratio fell 0.2 percentage points to 64.2 per cent, while the labour force participation rate eased by 0.1ppt to 66.7 per cent.

“Even with these falls, both indicators were still well above pre-COVID-19 pandemic levels and close to their historical highs in 2022,” Mr Jarvis said.

The underemployment rate, which measures the proportion of workers unable to find additional hours of work, fell to 6.1 per cent, from 6.2 per cent in April.

Despite fears of a slowing economy and rising financial stress among households, the labour market still remains at its tightest since the 1970s, and well below official estimates of full employment.

Ivan Colhoun, the chief economist in NAB’s institutional division, said the latest figures were “consistent with the view that the Australian labour market is beginning to ease but is a long way from easy”.

This week’s wages figures showed an acceleration in pay rates to a decade-high of 3.7 per cent, but that pay pressures remained within the central bank’s forecasts.

Mr Colhoun said the wages and now the disappointing jobs numbers “together reduce the risk the RBA would opt to raise rates again as soon as June”.

The RBA was still likely to deliver another hike to 4.1 per cent by July or August, he said.

The Reserve Bank’s 11 rate rises since May last year have yet to blunt demand for workers, with nearly 440,000 job vacancies, or nearly twice the pre-Covid number and against the 528,000 unemployed people in the latest ABS jobs numbers.

Close to nine in 10 businesses say they are struggling to find employees, according to NAB.

The RBA forecasts unemployment will lift to 4 per cent by the end of the year, and for it to trend upwards from there.

10 May, 2023
Australia’s pandemic population shuffle revealed
Financial Review

COVID-19 sparked a lasting exodus from Australia’s capital cities, with families moving to cheaper homes in regional and outer-metropolitan areas to take advantage of the historic shift to more flexible work arrangements.

The main recipients of the pandemic-era migration were south-east Queensland and small coastal communities with more spacious homes, according to analysis by The Australian Financial Review of newly released regional population data from the Australian Bureau of Statistics.

Brisbane, the Gold Coast and coastal areas of south-east Queensland, up to Bundaberg, all recorded net population in-flows. Overall, close to a net 87,000 Australians moved to Queensland between June 2020 and June 2022.

The analysis is limited to internal migration, which describes population shifts arising from Australians pulling up stumps and moving to a different area. Overseas migration and natural increases are not considered.

About 86,000 people left Sydney in the first two years of the pandemic, between June 2020 and June 2022, while close to 60,000 Melburnians exited the city.

Parramatta in Sydney’s west, and Brimbank and Dandenong in Melbourne’s outer south-east, all lost more residents to internal migration than any part of the country.

The three areas haemorrhaged more than 10,000 locals each between June 2020 and June 2022, or more than 5 per cent of their estimated resident populations.

The other areas that faced the largest absolute resident outflows were all in Sydney, including Fairfield, which lost 8400 residents (4.3 per cent of its population), Sydney’s inner city (7600 residents, 3 per cent of its population), and Canterbury (7000 residents, 4.8 per cent of its population).

The areas that experienced the largest inward population flows were fast-growing areas on the outskirts of capital cities and lifestyle destinations along the east coast, particularly in the sunshine state.

Thomas and Helene Smeulders moved from Sydney to Brisbane with their 19-month-old daughter Clementine. They had planned to live in NSW indefinitely but re-evaluated things once the pandemic hit.

Ms Smeulders, who works for a disability not-for-profit, said being able to afford a house and being closer to family were factors.

“When we thought about the lifestyle that we would have in NSW, there was just no getting around the fact that we were going to be in a two-bedroom apartment, upwards from an hour out of Sydney.

“That commute was not going to be great for our family, but in Brisbane, we’d be able to have a house that was 15 minutes’ drive from the CBD. That commute was much more family friendly.”

Mr Smeulders, a consultant working in climate with KPMG, said pandemic border closures had forced the couple’s rethink.

“The assumption was we could come back any weekend we wanted, and we did. When that assumption was tested, it actually felt like a long way.

“That is still in the back of our minds. We missed deaths in the family and funerals and births. They’re all those things you would never imagine missing.”

Coastal communities gain

Molonglo on the outskirts of Canberra, Rouse Hill and Blacktown in Sydney’s rapidly expanding north-west, and Jimboomba to Brisbane’s south, experienced net internal migration flows greater than 10 per cent of their populations between June 2020 and June 2022.

Coastal communities were the other major destinations for locals fleeing capital cities.

Victoria’s Surf Coast gained more than 6000 people from internal migration, or 7 per cent of its population. Western Australia’s Margaret River and NSW’s Port Macquarie region both experienced a 3.7 per cent boost in residents, welcoming 2000 and 3200 sea-changers, respectively.

South Australia’s Fleurieu peninsula, home to the McLaren Vale wine region, and parts of Victoria’s Gippsland region also had thousands of arrivals.

Byron Bay mayor Michael Lyon told The Australian Financial Review internal migration during the pandemic had badly exacerbated the area’s housing crisis.

Byron has the highest rate of homelessness in the state outside Sydney, and the council looks set to implement a 60-day cap on some short-term holiday rentals in an effort to generate more long-term rental supply.

“It’s different in the big cities. If there’s pressure in one suburb you can just move further down the road, but in small towns and regional areas, it becomes a nightmare.

“For us right now, it’s almost worse than tourism. Lots of the new residents who have come here are using the region as a base but working from home and not doing much more than buying a coffee from the cafes.

“It’s not a great trend for us. The businesses in the area badly need workers.”

Australian National University demographer Liz Allen is not surprised residents of big cities sought relief after COVID-19.

“Remote learning and working from home enabled a telecommunication-aided migration. Those living in housing that wasn’t quite meeting their lifestyle needs and wants were able to take greater control of their living arrangements,” she said.

“Bigger backyards, more rooms in the home, or a change of pace were made possible for those who could afford it. Once people were no longer tied to their physical place of work, opportunities for housing were vastly broadened. But these opportunities are short-lived, as workers working from home are being recalled to the office.”

Dr Allen said Australia’s international border closure meant there had been no new arrivals into metropolitan areas, resulting in what may look on the surface as an exodus but is instead a lack of inbound migration.

“Australians choose their housing based on location to things like education and employment that meet their lifestyle and affordability requirements. It’s hard to know whether people were moving during COVID for lifestyle, finances, something else, or because of all of this.

“The key here is that people had greater choice because of telecommunication-aided migration. There is much to learn here about movers and their motivations, and what we could then put in place to better support Australians achieve their housing preferences.”

She said a regional renaissance was unlikely after the pandemic.

“In the absence of any real change in the way we do work and where employment is concentrated, Australia’s population distribution will still favour major cities. Jobs and learning are major pull factors for cities. I’m concerned for the people that moved during the height of COVID and are now stuck on the fringe of society without a hope of adequate supports.”

10 May, 2023
Tight employment market puts heat on small business
Financial Review

Small business is set to be included in electricity bill relief measures announced in Tuesday’s federal budget, as new research shows Australia’s tight jobs market has kept up pressure on bosses to retain the best staff.

Figures from a new MYOB survey of more than 1000 small business owners around the country show nearly 40 per cent of small and medium enterprises say they are feeling pressure to retain their workers, while hiring new staff remains a concern for 36 per cent.

Just 9 per cent of business owners are looking to hire full-time workers, the survey completed on Friday found. While 12 per cent of bosses are looking to hire part-time or casual workers, more than a third said they were not planning on offering pay rises to existing staff this year.

MYOB chief employee experience officer Helen Lea said the study showed small business owners were looking to keep their employee numbers steady, while one in five recognised they would need to increase staff pay.

“We know many small businesses are having real trouble hiring for the jobs they need,” she told The Australian Financial Review.

“Offering increased salary is one way to attract talent, though that could be a challenge for businesses facing decreased consumer spend and associated income.

“It’s encouraging to see survey respondents with more than five employees are likely to increase their workforce, suggesting that despite challenging economic conditions, there is some cause for optimism for the year ahead.”

Ahead of the budget, 13 per cent of businesses said they hoped for more federal government support for hiring staff.

“With more than 7.4 million employees, small business is the largest employer in the country and accounts for more than 99 per cent of Australian enterprises,” Ms Lea said.

“Small businesses are the lifeblood of our economy, and supporting them in the upcoming federal budget is key to driving economic recovery.”

Treasurer Jim Chalmers confirmed on Sunday about 1 million small businesses around the country were in line to get extra assistance with electricity bills in the budget.

The money will flow from federal and state government coffers.

“We’ve struck eight different deals with different jurisdictions around the country,” Dr Chalmers said. “But we hope and we expect that it will take some of the sting out of these price rises, which are putting pressure on families and households and small businesses.”

The latest ANZ-Roy Morgan Australian consumer confidence monitor showed an increase of 1.8 points last week. While confidence fell in states including NSW, Victoria and South Australia, it rose in Queensland and Western Australia.

ANZ senior economist Adelaide Timbrell said the rise represented the biggest weekly increase since mid-February.

“This was driven by outright home owners, whose confidence jumped 3.7 points on average, compared with more modest increases among renters (+0.5 points) and those paying off their homes (+0.6 points).

“This may be due to an uptick in housing prices in March and April. Confidence about both finances and the economy rose during the week, with the strongest gain in confidence about ‘future economic conditions’.”

Ms Timbrell said the measure of consumers who say it is time to buy a major household item eased by 0.4 points in the survey, but was still the second-strongest result since late February.

10 May, 2023
What is Gen Z?
McKinsey & Company

Generation Z comprises people born between 1996 and 2010. This generation’s identity has been shaped by the digital age, climate anxiety, a shifting financial landscape, and COVID-19.

Gen Z is currently the second-youngest generation, with millennials before and Generation Alpha after. Like every generation, Gen Z’s behaviors are shaped by how they grew up. Young people today have come of age in the shadow of climate doom, pandemic lockdowns, and fears of economic collapse. The first Gen Zers were born when the internet had just achieved widespread use. They’re called “digital natives”—the first generation to grow up with the internet as a part of daily life. The generation spans a wide range: the oldest Gen Zers have jobs and mortgages, while the youngest are still preteens. Globally, Gen Z is growing fast: Gen Zers will make up a quarter of the population of the Asia–Pacific region by 2025. Read on to understand what makes Gen Z tick.

What is a generation?

No doubt you’re already familiar with the concept of generation within families. Your grandparents, parents, children, and children’s children all make up a distinct generation in relation to you. But each of them also belongs to a diffuse category of their peers, grouped together based on when they were born and what they experience during their lives. Social scientists have studied generations—in theory and more practically—for millennia. More recently, thinkers like August Comte have argued that generational change is the engine behind social change. More specifically, each generation entering into a new life stage at more or less the same time is the pulse that creates the history of a society.

Specific major-scale events can also shape the outlook of a generation and are often reflected in how they’re named. The Lost Generation, for example, is named for the malaise and disillusionment experienced by people who lived through World War I. Later, the Greatest Generation was named for the heroic sacrifice many made during World War II. Their children, born soon after the war ended, are called baby boomers; their outlook, in turn, was colored by the Vietnam War and the social upheavals of the 1960s. More recently, millennials’ worldviews have been shaped by the September 11 attacks and the proliferation of the internet.

Of course, these are generalizations: every so-called generation comprises a multitude of unique individuals with their own opinions, values, behaviors, and plans for the future. Some social scientists even believe that the practice of studying generations can obfuscate what motivates people on an individual level. Generational theory should be understood with this caveat, and used only as a way of thinking about society, rather than the gospel truth.

What is unique about Gen Z?

While there are substantive differences within the cohort known as Gen Z, there are a few commonalities its members share.

As the first real digital natives, Gen Zers—speaking generally—are extremely online. Gen Zers are known for working, shopping, dating, and making friends online; in Asia, Gen Zers spend six or more hours per day on their phones.

Digital natives often turn to the internet when looking for any kind of information, including news and reviews prior to making a purchase. They flit between sites, apps, and social media feeds, each one forming a different part of their online ecosystem. Having grown up with social media, Gen Zers curate their online selves more carefully than those in prior generations have, and they are more likely to turn to trends of anonymity, more personalized feeds, and a smaller online presence, even as they voraciously consume media online.

Video-sharing social media sites have seen a meteoric rise as Gen Z comes of age. TikTok currently rules trends, feelings, and culture for Gen Zers, who make up 60 percent of the app’s one billion-plus users. Gen Zers flock to corners of the internet where they can discuss their passions and interests with those who share them—from gaming to K-pop—bonding with both people they know in real life and ones they’ve only met online.

Gen Z also faces an unprecedented behavioral health crisis: US Gen Zers surveyed by McKinsey report the least positive outlook and the highest prevalence of mental illness of any generation, and European respondents report struggling with self-stigma. This pessimism is fueled by growing global unrest, wars and disruptions, financial crises, and educational interruptions due to the COVID-19 pandemic. Feelings of “climate anxiety” are also widely reported: many Gen Zers report that they think about the fate of the planet on a daily basis.

They are already seeing decreased economic opportunity and don’t assume a social safety net will be there to catch them as pensions shrink, saving for retirement gets more difficult, and the older population grows. Already, 58 percent of Gen Zers in a recent McKinsey survey reported not having a basic social need met—the largest percentage by far of any generation.

But Gen Zers also report a more nuanced perspective around the stigma of mental illness than other generations. European Gen Zers seem less inclined to discriminate against people with mental illness (although they do stigmatize themselves).

However, Gen Z is also generally known for its idealism—they’re part of a new wave of “inclusive consumers” and socially progressive dreamers. Generally speaking, Gen Zers believe in doing their part to help stop the intensification of climate change and to establish greater equity for all. More than any other generation, Gen Z collectively demands purpose and accountability, the creation of more opportunities for people of diverse and underrepresented backgrounds, and rigorous sustainable and green practices.

How are Gen Zers different from millennials?

Those on the cusp of Gen Z and millennial—people who were born shortly before the turn of the millennium—are sometimes referred to as “Zillennials” or “Zennials.” That includes older Gen Zers who’ve been in the workforce for a few years and young millennials who identify more with Gen Z.

However, Gen Z generally has its own formative experiences distinct from those of most millennials. Here are some ways American Gen Zers differ from their older counterparts:

  • They are generally more pragmatic, with both complicated idealism and worries for the future. Gen Zers dream of personal career fulfillment but expect economic struggles.
  • They have less positive life outlooks, with lower levels of emotional and social well-being than older generations.
  • They are more interested in belonging to an inclusive, supportive community.
  • They are more individualistic, with a stronger sense of personal expression.
  • They are more politically and socially active, advocating for what they believe on social media.

What are Gen Z’s values?

Gen Zers generally have strong values related to racial justice and sustainability. Mobilizations like the Global Climate March, led by Gen Z activist Greta Thunberg, thrive on the activism of young people.

Climate change is one of the issues Gen Zers care about most. They frequently call for reform on personal, public, and global scales to prevent future catastrophe. Many Gen Zers describe themselves as environmentally conscious, and the majority of Gen Z expects to see sustainability commitments from companies and organizations.

Gen Z is also living in a time marked by rapidly rising inflation and financial woes. Rising student loan debt also plagues many members of this generation.

What are Gen Z fashion trends?

Gen Z loves expressive clothes, wants to stand out rather than fit in, and has an ever-changing style—what was in a month ago might already be out today. Their trend-chasing habits are supported by fast-fashion retailers supplying accessible ways to switch it up. One Gen Z staple shop, Chinese fast-fashion giant Shein, adds 6,000 new products to its website per day. This may seem at odds with the generation’s values of sustainability, but the speed at which Gen Z trends change and their desire for unique style can sometimes overcome their eco-scruples.

Gen Zers also love thrifting and vintage styles—which are much more in line with their calls for circular fashion. Both ’90s and y2k-style clothes have seen a major comeback, including fast-fashion dupes and clothes dug out of closets and thrift stores. Fashion resale has experienced massive growth thanks to Gen Z resellers and influencers, and it’s normal for a Gen Z wardrobe to be a mix of cheap fast fashion and treasured vintage pieces.

What do Gen Z shoppers want?

The internet has changed retail forever and shaped the tastes of digital natives. Here’s how:

  • Consumption is about access rather than ownership—Gen Zers subscribe to streaming platforms instead of buying films or music. This trend extends even to services like car shares or luxury-clothing rentals.
  • Gen Zers accept their tastes might change, and they are more likely to spend on experiences that enrich their day-to-day lives than millennials, who are more likely to splurge on luxury.
  • Members of this generation care about ease of use: mobile pay, app-based services, and simple online transactions are important, and brands have found major success by restructuring to suit Gen Z tastes.
  • Gen Zers like brick-and-mortar stores more than millennials do but still want a great online shopping experience. Some brands have even found success through online-first launches, often supported by Gen Z consumers.
  • Ads are everywhere; Gen Zers experience brands “at every moment” as they move through their digital and physical worlds.

And as a generation committed to its values, Gen Z expects the same of its retailers—Gen Zers often choose brands that have a strong story or purpose, as well as those committed to green practices. In one McKinsey study, 73 percent of Gen Z reported trying to purchase from companies they consider ethical, and nine out of ten believe that companies have a responsibility to address environmental and social issues. However, they can tell when a brand is just paying lip service and isn’t backing up diversity or sustainability claims with real change.

Many Gen Zers throughout Asia see the internet as the first place to go when researching new products to purchase; in the United States, 40 percent of Gen Zers admit to being influenced online, often by the brands featured in the videos they watch. Members filter a lot of information, from influencers, family, and friends, to decide where and how they want to spend.

10 May, 2023
Macquarie boss says immigration will shield Australia’s economy
The Sydney Morning Herald

Macquarie Group boss Shemara Wikramanayake says Australia’s rebound in immigration and its natural resource endowments put the nation in a better position than other economies to weather a coming slump caused by rising interest rates and inflation.

Speaking to investors in Sydney on Tuesday before a surprise rise in interest rates, Wikramanayake said the market expected a “material” slowdown in Europe and America as central banks sought to rein in inflation, and Australia was not immune to the trend.

“In Australia as well, the inflation persists, and we are going to have to take action to slow the economy as part of reining that in,” she said at the Macquarie Australia Conference.

Even so, Wikramanayake said Australia’s economy had performed better than many others over the last 25 years, and she argued there were a few key reasons why it would be more resilient this time around as well.

“I think there are a few underlying and structural drivers that impact that, and I think they will also result in our having a milder downturn than big global economies,” Wikramanayake said.

After Wikramanayake’s remarks, the Reserve Bank announced it was raising official interest rates to 3.85 per cent, and said it could increase interest rates further. The change, which was not priced in by financial markets, would increase monthly repayments on an average $500,000 loan by $78, RateCity said.

Some economists worry the RBA is pushing too hard on the brakes, with head of Deloitte Access Economics saying the central bank’s latest hike was unnecessary, and it was playing “recession roulette.” But Wikramanayake said strong immigration and access to natural resources would help to shield the domestic economy.“

As you all know, immigration has really picked up again. So, that is going to drive underlying growth here, which will shield us a bit from the extent of the downturn that global peers are going to have,” she said.

“We also are blessed with things like access to our own commodities in terms of responding to energy issues, and other natural resources in terms of also renewable energy and what we have in terms of advantages in things like wind and solar.”

Household spending is expected to slow this year after interest rates have surged from 0.1 per cent to 3.85 per cent since last May, but Wikramanayake said Australia’s interest rates were still lower than where they were when Macquarie held its first investor conference in 1998, when the cash rate was 5 per cent.

“So you know, yes it’s impacting households, yes, it’s impacting businesses, but it’s at a level - both the inflation and the interest rate environment here - where we should be a bit more resilient than other economies,” she said.

Macquarie says its Australian investor conference is the largest institutional investor gathering in the region, with more than 100 companies presenting and more than 110 global investors attending the event.

Wikramanayake also highlighted long-term trends that will be discussed at the event, including the rise of artificial intelligence (AI) and machine learning, the surge in investment caused by decarbonisation, and growth in capital invested outside public markets.

Wikramanayake said despite the challenges posed by AI applications such as ChatGPT, such technology also presented big opportunities for investors.

Macquarie will report its full-year results this Friday, and analysts are expecting a result of about $5 billion.

12 Apr, 2023
Australia will experience biggest two-year population surge in its history, with an extra 650,000 migrants this financial year and next
The Australian

Australia will experience the biggest two-year population surge in its history, with an extra 650,000 migrants across this financial year and next driving a 900,000 jump in the number of residents.

As the nation emerges from Covid-19 lockdowns and skills shortages persist in the services sector, the return of international students and working holiday-makers has produced a sharper rise in migrants than the “Big Australia” era of 2008-09.

With the Albanese government’s second budget six weeks away, Treasury officials are adjusting the fiscal statement’s economic forecasts to reflect the surprise population boom.

The influx of tourists, foreign workers and students is boosting spending, the tax take and demand for services, particularly housing, where the government’s concerns are greatest given extremely tight rental markets.

In the first three months of this financial year, there was a net inflow of 106,000 migrants, which Treasury’s Centre for Population said was the largest quarterly addition in the history of the data series compiled by the Australian Bureau of Statistics since 1979.

In the year to September, the ABS said net overseas migration was 304,000, the highest annual rise since March 2009, with NSW and Victoria accounting for two-thirds of the increase. With ­migration responsible for more than 80 per cent of elevated ­population growth in the ­September quarter, economists expect continued strong inflow to prop up consumer spending and to ease chronic labour shortages in a full-employment economy.

Jim Chalmers has revealed net overseas migration this financial year is likely to be 350,000, perhaps more, a 50 per cent rise on what was expected in the October budget and January’s annual population statement. The Treasurer said the migration surge was a key underlying factor in the May 9 fiscal package, which would focus on cost-of-living relief, productive investment, and funding the care economy, defence and essential services.

Prior to the pandemic, net overseas migration was expected to add 1.2 million people to our population in the five years to June 2024. Now, according to Dr Chalmers, the revised figure is likely to be 950,000 or about 250,000 less than was expected by Treasury in its mid-year economic and fiscal outlook in late 2019. With a net contribution from migration over the past three years of just under 300,000, that implies net overseas migration of 650,000 over this year and next.

The previous two-year high was 577,000 in the 2008 and 2009 financial years, when then prime minister Kevin Rudd urged the nation to embrace rapid population growth. “I actually believe in a big ­Australia, I make no ­apology for that,” Mr Rudd said in October 2009, after projections showed the nation was on track to reach 35 million people by 2050.

“I actually think it’s good news that our population is growing.”

The annual natural increase in population – that is, births minus deaths – is currently 123,000. On these trends, Australia’s population will be almost 27 million by June next year.

The latest Treasury projections show our population at just under 30 million in mid-2033.

“Bigger is not better, it’s just bigger,” independent economist Chris Richardson said of the ­reverse in the pandemic’s ­population shock.

“It’s good for the construction industry. We haven’t been building enough homes.

“Covid pushed us into smaller households but we definitely need more supply.”

In the first year of the pandemic there was a net outflow of 85,000 migrants, as students and workers on temporary visas ­returned to their home countries, and near zero growth in the population. According to the Department of Home Affairs, there were 110,000 more student visa holders in Australia in the 12 months to the end of February, bringing the total here to 583,000.

Home Affairs Minister Clare O’Neil said the return of students was “a promising increase” but still below 2019 levels. “This data is a welcome indicator of the ongoing recovery from the pandemic and a reminder of the critical role migration plays in our economy, but also shows that we still have a long way to go to fill the gap in our workforce left by the pandemic,” Ms O’Neil said.

“There are obvious changes that we have made to the migration system to undo some of the damage done by the years of neglect under the previous government, and the department has already reduced the massive visa backlog by 40 per cent, but we want to go further.”

In September, Ms O’Neil announced a wide-ranging review of Australia’s migration system

An interim report from its three reviewers was due at the end of last month and is expected to contain key priority recommendations for the 2023-24 budget.

Ms O’Neil said the review would provide “comprehensive analysis of what we can do to ensure that we are getting the people we need, providing opportunities and ending the churn and exploitation which … has become a feature of our migration system”.

In response to calls from employers to ramp up the migration program, the Albanese government increased the cap on permanent migration from 160,000 to 195,000 for this financial year, with 70 per cent of places allocated for the skilled stream.

The five-yearly review of productivity by the Productivity Commission, released this month, said skilled migration needed to be improved to produce a greater economic dividend. The report also noted high levels of migration could lead to road congestion and pressure on services, as well as reduced wages for some workers.

After 10 straight rises in official interest rates, National Australia Bank economists said a key support in the housing market was the rapid recovery in population growth. “This has contributed to a sharp tightening in the rental market where vacancy rates have fallen to around or below 1 per cent in most cities,” NAB said.

Growth in rents is now tracking at about an annual 11 per cent in aggregate across the capitals.

“The strong rental market, strong population growth and a healthy labour market are all likely offsetting some of the pressure from reduced borrowing capacity,” NAB said.

A senior government source said the population rebound was driven by one-off factors after the border reopening, rather than a marked shift in policy.

Annual net migration inflows would return to the pre-pandemic 10-year average of around 230,000.

Treasury secretary Steven Kennedy told a Senate hearing last month temporary migration had recovered faster than expected. “Net overseas migration numbers are being artificially boosted this year by the resumption of inward flows of international students and working holiday-makers,” Dr Kennedy said.

“This effect will diminish in subsequent years, when the usual inward and outward patterns of international student flows re-establish themselves.

“Coupled with broad softening in hiring demand, increases in net overseas migration should help to ease skill and labour ­shortages, particularly for the hospitality and retail sectors.”

During the Senate estimates hearing, Dr Kennedy rejected a suggestion Treasury was running a “big Australia policy” just as the Reserve Bank was trying to cool demand and reduce a 30-year high in inflation with aggressive interest rate hikes.

“We don’t have a big Australia policy,” he said in response to a question from LNP senator Gerard Rennick.

On the issue of a doubling in new student visas, the Treasury chief said: “There is an artificial dynamic at the moment. We are seeing some students return who weren’t here to finish degrees.”

Dr Kennedy said that “as to whether it puts pressure on rental markets and accommodation, more people clearly put pressure on rental markets and accommodation”.

Dr Chalmers told a Business Council gathering last Thursday the government was expecting a higher net migration inflow, due to more tourists, a faster return of international students, and as more Australians stay at home.

“Even with this big bounce in net overseas migration, we still haven’t caught up with what we lost in Covid and that’s why it will still take time to fill the gaps and the skills shortages that you’re all familiar with and we’ve talked about on multiple occasions,” the Treasurer said.

12 Apr, 2023
Inflation drops to 6.8pc in February, from 7.4pc in January
The Australian

A pause in the punishing series of back-to-back Reserve Bank rate rises could come as soon as next week, after inflation decelerated sharply to 6.8 per cent in February, from 7.4 per cent the month before.

Economists are confident the worst of the inflationary shock is behind us, although cost-of-living pressures remain intense and a decision to hold the cash rate steady at 3.6 per cent at Tuesday’s RBA board meeting after 10 straight increases was no foregone conclusion, they said.

With Australian Bureau of Statistics figures showing electricity prices increased by more than 17 per cent in the year to February, Jim Chalmers welcomed the ongoing “moderation” in consumer price pressures but said addressing the still “unacceptably high” rate of inflation remained at the centre of the government’s economic strategy ahead of the May 9 budget.

“We do understand Australians are under the pump from cost-of-living pressures,” the Treasurer said in question time.

There may be some good news for mortgage holders, who have suffered a steep increase in interest payments since May when the RBA began the most aggressive rate hike cycle since the 1980s.

Capital Economics head of Asia-Pacific Marcel Thieliant said “the further sharp fall in inflation coupled with the softness of consumption will probably prompt the Reserve Bank of Australia to pause its tightening cycle next week, though we still expect one final rate hike at its May meeting”.

By category, the biggest price rise in the year to February was a 9.9 per cent jump in housing costs, ABS figures showed.

While asking rents are reportedly rising at double-digit rates, rent inflation in CPI figures was steady at 4.8 per cent, if remaining on an upwards trend.

Similarly, electricity prices accelerated to 17.2 per cent from 16.8 per cent, although building cost growth eased to 13 per cent from 14.7 per cent in the year to January, the ABS data revealed.

The data showed food prices were 8 per cent up on a year earlier, relatively unchanged from 8.2 per cent in January, but recreation and culture inflation fell sharply to 6.4 per cent in February, from 10.2 per cent, as the end of a bumper holiday season saw travel and accommodation price rises fall from 17.8 per cent to a still-high 14.9 per cent.

Fuel prices climbed by 5.6 per cent in the year to February, after rising at annual pace of 7.5 per cent the month before.

In the wake of the Russian invasion of Ukraine, petrol prices were climbing year on year by more than 40 per cent.

Minutes from the March meeting showed the board had considered holding rates steady, before ultimately deciding to hike.

RBA governor Philip Lowe has made it clear he will be guided by the data – including Wednesday’s inflation report.

Monthly annual inflation reached a high of 8.4 per cent in December before dropping to 7.4 per cent in January and 6.8 per cent in the most recent figures

While ABS figures underlined a disinflationary trend taking hold in early 2023, ANZ senior economist Catherine Birch said there was still too much momentum in consumer price growth, and the RBA would hike again on Tuesday.She pointed to three key pieces of data since the last central bank board meeting – including February’s strong employment report, ongoing cost pressures in NAB’s business survey, and ongoing strength in services spending – pointing towards ongoing economic resilience.

“Moreover, the banking sector issues over the past few weeks seem (at this stage) to have been ring-fenced by quick action from central banks,” Ms Birch said. “The US Fed, the ECB (European Central Bank), the BoE (Bank of England) and the SNB (Swiss Nat­ional Bank) have all raised rates over the past few weeks, signalling that financial stability concerns, while under close watch, are not outweighing ongoing inflationary concerns.”

The relatively new monthly CPI data do not include the full basket of consumer goods in each month, with the quarterly report offering the most complete picture. Despite those drawbacks, the RBA has made it clear the more frequent inflation number provides a useful and more up-to-date guide on price pressures.

Inflation based on the quarterly figures reached 7.8 per cent in December, and the March quarter report is due on April 26.

Westpac senior economist Justin Smirk predicted quarterly inflation in the year to the March would drop to 7.2 per cent, but Wednesday’s soft CPI figures suggested the figure could come in meaningfully lower.

12 Apr, 2023
Surging immigration exacerbates housing shortfall
Financial Review

Surging population growth and a squeeze on new supply triggered by the fastest rate-rising cycle in three decades are expected to exacerbate the predicted shortfall of homes over the next five years.

The National Housing Finance and Investment Corporation predicts a faster-than-expected rise in borrowing costs will reduce the net supply of new houses to 138,100 homes annually over the three years to 2025, down from the 180,000 it predicted a year earlier.

At the same time, the NHFIC predicts 268,000 more people will migrate to Australia between 2022 and 2024 than it anticipated in its State of the Nation’s Housing report last February.

The downturn in supply at a time when population growth is surging has widened the predicted housing shortfall from 62,900 to 106,300 by 2027.

“The rapid return of overseas migration together with a supply pipeline constrained by decade-high construction costs and significant increases in interest rates is exacerbating an already tight rental market,” NHFIC chief executive Nathan Dal Bon said.

The expert housing advisory body’s diagnosis of a further deterioration in the country’s chronic housing shortage comes as the federal government’s ability to respond to the crisis weakens.

Last week the Albanese government was forced to shelve legislation to create a $10 billion Housing Australia Future Fund that would fund the development of 30,000 new social and affordable homes over five years – with an additional 10,000 affordable homes – in the face of opposition from the Greens and independent Senator David Pocock because it did not go far enough.

The Housing Australia Fund Bill 2023 the federal government had hoped to pass in the final sitting week before the May budget would also have expanded the role of NHFIC – rebranding it as Housing Australia – while also creating a new advisory body, the National Housing Supply and Affordability Council, to be led by former Mirvac CEO Susan Lloyd-Hurwitz.

Federal housing minister Julie Collins said the report was another reminder that too many Australians were struggling to secure safe and affordable housing.

“The findings highlight the need to pass legislation currently before the parliament,” Ms Collins said.

Australia’s housing sector has been hit by a raft of detached home builder collapses. High-rise developers are unable to sell new developments even with vacancy rates at record lows and rents soaring.

The Reserve Bank of Australia has lifted the benchmark lending rate from 0.1 per cent in May last year to 3.6 per cent in 10 consecutive moves. The odds of a further increase at Tuesday’s April meeting are evenly balanced.

Higher borrowing and construction costs halved sales of greenfield lots for detached homes last year, a report by developer group UDIA found, while a separate report by commercial agency JLL showed apartment completions in mainland state capitals slumped 45 per cent last year and that there would be no material increase in large-scale projects until 2025 at the earliest.

Holistic approach

“Housing affordability and supply are likely to remain challenging for some time, underscoring the need for a holistic approach to mitigate the housing pressures Australians are facing,” Mr Dal Bon said.

It will hurt vulnerable people the most.

NHFIC estimated that 377,600 households were already in situations of housing need, 331,000 households were in rental stress – typically spending more than 30 per cent of their household income on rent – and 46,500 households were experiencing homelessness.

Migrants aside, Australians account for a large slice of the growing demand for housing, with the pandemic-era growth of single-person households likely to keep influencing demands on housing supply beyond the immediate five-year horizon.

In its report last year, NHFIC predicted the number of single-person households would rise from 25 per cent of the national total to about 27.5 per cent in 2032.

Australia’s ageing population is a key driver of growth in single-person households. The rising median age of Australians accelerated during the pandemic as fewer migrants – typically younger people – entered the country.

Older households, particularly females, are more likely to live in smaller, lone-person households than other age groups, the report says.

Single-person households make up the third-largest group at 2.7-million households, after couples without children (2.72 million) and couples with children (3.1 million).

This will create more demand for apartments, with a shortfall that will be more severe over the next five years, before the market responds to rising prices created by tight demand to develop greater numbers of homes.

Over the five years to 2027, NHFIC forecasts a national shortfall of 62,300 apartments and medium-density dwellings, and a shortfall of 44,000 detached homes.

Over the decade from 2023 to 2032, NHFIC forecasts a shortfall of 77,600 apartments and medium-density dwellings, while the equivalent 10-year forecast for detached houses is a deficit of 10,900.

12 Apr, 2023
Future workforce needs new approach to skills and training
Financial Review

When we talk about preparing people for the workforce, it is often framed as being a choice between vocational education, going to university, or on-the-job training.

The problem with that paradigm is that the speed of technological advances means future workers will probably need to do all three, and not just once. They will need to constantly move in and out of education throughout their careers to update their knowledge and skills.

The sensible first response is to make it easier for students to move between the three settings, and to ensure they receive recognition for their previous learning – no matter where it occurred. But a new experiment in Sydney’s north-west goes a step further by looking at how a fully integrated approach could work.

Earlier this year, the Institute for Applied Technology (Digital) opened its doors on a site at Meadowbank TAFE. It brings together the University of Technology Sydney, Macquarie University, TAFE NSW and Microsoft.

It aims to take the best of each type of training, giving learners a rigorous yet practical and industry-relevant education in digital technologies such as big data, cybersecurity, software development and artificial intelligence. Employers are crying out for graduates in these areas, and that demand is only expected to increase.

This is a significant moment for those of us who have been trying to offer integrated educational offerings in Australia.

IATs were originally recommended by Professor Peter Shergold and David Gonski in their 2020 review of the NSW vocational education and training sector. The report’s findings were clear: the future of education must involve a more seamless, connected approach that puts the learner at the centre of the system. The IATs are one model to achieve this.

Progressive pathways

IATs are a distinctive, and new, form of tertiary education – blending VET and higher education with a focus on preparing students with industry-based employability skills to meet emerging workforce needs.

IATs are not super-TAFEs, nor dual-sector institutions. Nor do IATs replace university-based programs that already deliver foundational or bridging courses to higher education students.

IATs integrate curriculum with progressive pathways, through which students will be able to stack meaningful qualifications that are valued and recognised by industry.

It is the education delivered that is distinctive: IATs integrate practical and theoretical components of education by bringing the best of academia and industry together. They address shortcomings in the tertiary system, such as responsiveness to changing industry training needs. Students gain skills and microcredentials that are recognised by education partners.

The national universities accord process has this in its sights, as does the new Jobs and Skills Australia.

The Productivity Commission recently recommended other states and territories follow the example set by NSW’s IAT model. The point has been made repeatedly that the current system does not work for students. It would seem the political appetite to find solutions is finally here. So, what are the possible solutions?

Changes to current funding settings must better incentivise collaboration, co-design and innovation across industry and providers.

For the IATs in NSW to succeed, we need to spend the next four years expanding the program and evaluating what works, with continuing state government support and, ideally, additional federal support.

Other individual universities and TAFEs are collaborating in parts of the country, but this activity is ad hoc and, by all accounts, many of the same pain points are being felt. We need a determined push by state and federal governments to evaluate the various pilot programs, catalogue the barriers and commit to breaking them down.

In the longer term, governments need to work together. Changes to current funding settings must better incentivise collaboration, co-design and innovation across industry and providers, and provide students with a smoother transition across different loan and fee settings.

This work is complex and won’t be done in a year. One of the outcomes of the universities accord process should be the initiation of a formal co-ordinating council to address issues at the intersection of VET and higher education, including qualifications, reciprocal recognition of prior learning, collaborative courses, provider funding models and student funding, preferably with a commitment to Commonwealth Supported Places for joint courses like those on offer at the IATs.

This would go a long way to creating a future nation that has the individual students and their future employability at its heart.

Professor Bruce Dowton is vice chancellor of Macquarie University and Professor Andrew Parfitt is vice chancellor of University of Technology Sydney.

12 Apr, 2023
Retailers back ‘inflation based’ minimum wage increase of 3.8pc
Financial Review

The retailer group representing Coles and Woolworths has called for a 3.8 per cent increase in minimum and award wages, the highest of all the employer groups.

A submission by the Australian Retailers’ Association (ARA) to the annual wage review argues a 3.8 per cent increase would account for a forecast drop in inflation by June 2024, as well as the 0.5 per cent rise in superannuation.

The wage increase would flow on to 2.6 million award workers as well as hundreds of thousands under retail and fast-food agreements, which tie their annual wage rises to the minimum wage decision.

But the Shop Distributive and Allied Employees Association is supporting the ACTU’s call for 7 per cent, arguing its members are experiencing hardship that has surpassed the global financial crisis, and retail profits mean they can afford a real wage rise.

The ARA submission, spearheaded by chief executive Paul Zahra based on membership consultation, said it supported a “sustainable increase” that helped retail workers keep pace with rising cost of living and that it should be “based on the underlying inflation rate”.

“The ARA therefore recommends an increase of 3.8 per cent in the minimum wage to take effect from July 1, 2023 based on the current rate of trimmed mean inflation at 6.9 per cent less the 0.5 per cent increase in superannuation and less the projected 3.1 per cent decline in inflation through 2023-24,” it said.

“We believe an increase of this magnitude strikes the balance between an employer’s ability to keep pace with the rising costs of doing business, against an employee’s expectation that wages grow in line with prices.”

It follows Australian Chamber of Commerce and Industry calling for a 3.5 per cent increase – its highest in decades – and the Australian Council of Trade Union pushing for a record 7 per cent increase.

The Consumer Price Index as of the December quarter was 7.8 per cent, with underlying inflation at 6.9 per cent. But monthly CPI indicators suggest headline inflation fell to 6.8 per cent in February.

The ARA said it would update its claim when the March figures are released but it argues the Fair Work Commission should not base its decision just on past inflation rates but also the year ahead.

It cited Reserve Bank forecasts that underlying inflation will fall to 4.3 per cent by the end of the year and 3.3 per cent by June 2024.

Worker ‘despair’ worse than GFC

However, the SDA said that a study by University of Wollongong Associate Professor Martin O’Brien found the proportion of retail employee households assessing themselves as “just getting along” and “poor” had increased from 26 per cent to 30 per cent in 2022.

“The SDA has not seen in any recent past decades, this level of hardship among its members,” the union’s submission said.

“Not even the GFC caused such significant distress or despair from members.”

A female assistant department manager described herself to the union as “working poor” and said mortgage, car and phone bills took up her entire pay.

Another 55-year-old female retail worker quoted in the submission said she was now paying bills in instalments and her situation was “desperate”.

The SDA points out that the top 10 retailers’ earnings before interest and taxes grew by 51 per cent since 2019 and sales grew for eight of them last year.

However, the ARA warns anything higher than 3.8 per cent should be offset by productivity gains to reduce inflation risks and avoid “over-stretching smaller retailers who have limited reserves to incur higher labour costs, in addition to higher costs of doing business”.

The ARA said there were early indications that economic growth was slowing, with retail reporting the first month-on-month declines in trade for more than a year in December 2022.

“Analysts report that retail sales volumes are flat and that growth in retail trade is being driven by increases in prices, not volumes,” it said.

According to an ARA survey of 141 members, nearly 75 per cent had passed on higher costs to consumers as higher prices but more than 50 per cent said they had suffered higher prices by reducing margins.

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