News

17 Jun, 2022
Minimum wage boost may push some retailers over the edge, says ARA
Source: Bigstock

Today’s 5.2 per cent increase in the minimum wage announced by the Fair Work Commission has been greeted with alarm in the retail sector.

After today’s change, the minimum wage will be $21.38 per hour or $812.60 per week from July 1, however workers in some sectors, such as aviation, tourism and hospitality, will have to wait until October.

Australian Retailers Association’s (ARA) chief Paul Zahra said the boost to the minimum wage is the highest in more than two decades as retailers continue to maneuver economic challenges.

“Whilst the ARA supported a fair and balanced increase to the minimum wage, we fear the scale of this increase could tip some businesses over the edge,” he said.

“Acute supply chain issues, staff shortages and the rising cost of energy, fuel and materials are creating unprecedented financial pressure.”

Dominique Lamb, National Retail Association CEO, also expressed concern describing the increase as “completely out of touch” with the reality of modern businesses.

“The simple fact is that when businesses don’t have enough money to cover their expenses, they need to cut costs. There is no doubt that those cuts will lead to job losses in retail and no doubt in other areas of the economy as well.”

Fair Work Commission president Iain Ross said the most ‘significant change’ since last year has been the sharp rise in the cost of living and the strengthening of the labour market.

“At the aggregate level, labour market performance has been particularly strong. The unemployment rate has fallen to 3.9 per cent, compared to 5.5 per cent in April 2021, at the time of the last review.

“Taking all the relevant considerations into account, we have decided to award an increase of $40 per week to the national minimum wage,” he said.

17 Jun, 2022
One in four people work with a bad apple. Is it you?
Atlassian work futurist Dom Price says calling out bad apples could lead to a stronger workplace culture

Look around the office or work Slack channels and chances are there is at least one bad apple in the barrel.

At least that is what one in four workers thinks, according to research from Atlassian that suggests bad apples can poison high-functioning teams to the core.

More than a quarter (26 per cent) of workers report having a bad apple on their team, and 13.6 per cent said the bad apple was their manager, a survey of more than 2000 workers in Australia and the US found.

For Atlassian’s work futurist Dom Price, the research should be a huge wake-up call for most bosses.

“Whenever I work with companies, I ask them the same question: ‘did you hire idiots or did you create them?’ And I’ve got the same question for organisations with bad apples,” he said.

It was especially problematic when the bad apple was a manager or leader because of the trickle-down effect.

“If you think that a quarter of teams are struggling with someone who brings that team down and reduces their mojo, that’s not good, because if that team is 10 people, that is nine people who are negatively impacted,” Mr Price said.

From the interrupter and the mood killer to the idea thief, most people have worked with a bad apple at some point in their career.

“You’re negative, you cut everyone off, everyone’s ideas get poo-pooed, you ask a stupid question five minutes before the end of the meeting to derail everything,” Mr Price said. “They usually call themselves the devil’s advocate.”

But having a bad apple on the team is not all bad: the research found that teams with bad apples were more likely to be innovative in some areas.

“The weird side effect of having a bad apple in your team is, to some extent, the willingness to engage in conflict, and it creates an environment that forces a team to be more creative,” Mr Price said.

Despite this, it was key that people felt safe to call out bad apple behaviour, which Mr Price said could lead to a stronger workplace culture.

“A quarter of teams having bad apples could be fuelling the great resignation itself, but the problem is that people that leave are the good ones who don’t put up with it, and then you’re left with even more bad apples,” he said.

“The leaders who are thriving and the ones who are building great, sustainable teams are having that open dialogue with their teams, and they’re asking about ways they can do those things better, but bad apples aren’t looking for feedback, are they?”

Leaders need to be asking for constant feedback if they want to avoid the curse of the bad apple.

“Whenever I work with leaders, I regularly ask them: ‘what’s the best bit of feedback you’ve got recently?’ and I usually get met with silence,” he said.

Bosses should begin by asking their teams what is one thing they can do to improve how they work together.

“It costs nothing to ask,” Mr Price said. “It might hurt the ego a tiny bit but what you’re going to get is an absolute golden nugget where you can improve. And if you do it often, then it’s never a giant piece of feedback.”

The research also found that chief executives had an overinflated view about how effective their teams would be in the future.

“Most senior leaders have almost an equal and opposite view of what people on the ground are experiencing,” Mr Price said.

“I think there is a wake-up call for C-suite leaders, whether it be the great resignation or the war for talent or how we engage modern generations in the workforce.

“I think there’s a whole cohort of leaders where there’s a bit of ignorance as to what the reality is of how people are experiencing work right now.”

17 Jun, 2022
ASX appoints first female CEO
Helen Lofthouse, the Group Executive, Markets, will be the new chief executive of the ASX

The ASX board of directors has chosen an internal candidate, Helen Lofthouse, to replace Dominic Stevens as the new chief executive of the $16 billion equities market operator.

The appointment, which is due to be officially announced on Thursday, follows a four-month international search.

Lofthouse, who joined the ASX in 2015, is being promoted to the top job from group executive, markets, a position she has held since July last year.

Her priority is likely to be a review of the status of the $250 million CHESS clearing and settlement replacement project, which was started in 2016 and has been delayed four times.

Replacing the 28-year-old CHESS system with a blockchain-based distributed ledger technology (DLT) is designed to protect the smooth operation of the $2.7 trillion Australian equity capital market and open up growth options for the ASX.

Lofthouse is the first woman to run the ASX since it was founded in 1987 through the merger of all the state based stock exchanges. Also, she is the second woman to run an exchange in the 150 years of stock market trading in Australia after Ann Bowering who ran the National Stock Exchange from 2016 to 2019.

The ASX board’s nomination committee, headed by former KPMG chairman Peter Nash, began the search for a new chief executive in February this year following the sudden retirement of Stevens. The board sought help from consultants Egon Zehnder.

It is believed that ASX chairman Damian Roche, who was on the nomination committee, flew to New York about three weeks ago to interview an international candidate, believed to be NYSE director Stacey Cunningham.

Tough job

It could be argued that Lofthouse, who is now responsible for ASX’s cash and derivatives trading, international business development, and OTC clearing, is taking on one of the toughest CEO jobs in the market.

Although the ASX has some of the highest gross profit margins of any major listed company at about 70 per cent, it faces a number of challenges to its core business.

These include the de-equitisation of the sharemarket caused by a rush of private equity takeovers, a dearth of initial public offerings thanks to the COVID-19 pandemic and no obvious growth opportunities beyond the blockchain-based opportunities from the CHESS replacement.

The ASX’s recent financial performance has improved thanks to increased interest rate futures trading on the back of higher official interest rates.

It is possible the real-time share settlement promised through the CHESS replacement will disrupt a range of established equity market services including registries and custody.

Her appointment fits with the demands made by shareholders in ASX in conversations with Mr Roche.

One shareholder who did not want to be named said the last thing he wanted to see was the appointment of a CEO with a purely IT background.

“We want a CEO who truly understands the operations of the ASX and what this new platform is going to provide to the ASX,” the shareholder said.

“That is very much a business orientation including an understanding of the linkages in the markets and the synergies between various players that can be achieved through the blockchain technology.”

The shareholder said he had conveyed his disappointment to Mr Roche that Mr Stevens had decided to retire and not see through to the go-live date for the CHESS replacement.

The April 2023 go-live date for the CHESS replacement was scrapped in May this year, but the ASX is yet to tell market participants when the project will be operational.

More cost blowouts

Tim Hogben, the executive in charge of the project, told the annual Stockbrokers and Investment Advisers Association annual conference in Sydney last week that the project was on track.

He likened it to being at the equivalent of “the 80-metre mark of a 100-metre sprint”.

He said ASX was awaiting the final drop of code for the system. Also, he said the distributed ledger that sits under this is processing test transactions at speeds not experienced before in Australia.

He provided a possible window for the new go-live date when he said it would be somewhere between June 2023 and April 2024.

The ASX has been spending about $70 million to $100 million a year on technology investments, and it is believed about 70 per cent of that goes into the CHESS replacement.

This suggests the $250 million cost estimate will blow out to more than $300 million.

An ASX spokesman said: “ASX is searching for a new CEO. We will make an announcement to the market at the appropriate time.”

17 Jun, 2022
The four ways to compete in the tightest labour market in 48 years
Employers need to recognise that it is an employees’ market, says David Orsmond.

Businesses should concentrate on pleasing their highest-value “crown jewel” customers rather than chasing market share as inflation hits consumer demand and rivals try to poach their most productive workers.

That is the view of David Orsmond, a professor of economics at Macquarie Business School, who said most executives had never operated in an economy with persistent labour shortages.

He outlines a margin-preserving strategy that major consulting firms, always ahead of the curve on the latest business trends, have already applied to their operations even as they advise their clients to follow suit.

Consulting giant Deloitte, for example, focuses its advisory efforts on its Global Crown Jewel/Global Strategic program made up of the firm’s largest and most important clients, such as miner BHP, carmaker Ford and telecommunications company Telstra.

“We’re no longer in a situation where companies can say, ‘Let’s try to take as much market share as we can, and we’ll just employ the additional people we need to meet that demand,’” Professor Orsmond said of the tightest job market in almost half a century.

3 Jun, 2022
Four ways CEOs can get directors on their side
Steve Pell says it is hard for a CEO to overinvest in the relationship with the chairman

An open, well-functioning, mutually respectful relationship between the chief executive and the board is critical to the long-term success of any organisation.

An obstacle to creating a sound relationship is the tendency of CEOs to grumble about the board’s lack of knowledge of the industry in which the company or organisation operates, says board consultant Steve Pell.

“Almost every CEO thinks that the board doesn’t understand the business or industry enough,” says Pell, managing director of Board Outlook, a board performance platform. “That frustration is there across the market.”

Pell has two responses to such agitation. First, it is the CEO’s job to educate directors about the industry and fill in any knowledge gaps they might have. Second, chief executives need to understand that it is healthy to have a level of friction between the CEO and directors.

“Understand that the board is not there to make your life easy,” Pell says. “It’s there to represent shareholders. There should be friction. If you come in understanding that there should be friction, you won’t be disappointed.”

Pell has four other key pieces of advice for incoming CEOs who want to start on the right foot with directors.

1. Prioritise the chairman

The first is cementing a sound relationship with the chairman. As a member of an executive leadership team, who may present to the board regularly, it is easy to underestimate the amount of time it takes to manage the relationship between the CEO and directors and the chairman.

“You almost cannot overinvest in that relationship [with the chairman],” Pell says. “If that relationship doesn’t work, nothing else will. That sounds extreme, but it is true. If you lose trust or communication or transparent information flow, nothing good will happen for the organisation, the board or the management team. And someone will have to go, whether it’s the chair or the CEO.”

Most chairmen and chief executives meet weekly or fortnightly. The conversation might be informal. But there is usually a standing agenda, which includes items such as progress on key strategic initiatives.

“You don’t have to be friends,” Pell says. “But you’ve got to trust each other. And there’s got to be open information flow both ways.”

2. Clarify expectations

Incoming chief executives should work quickly to understand what the board requires of them.

Executives may assume their priorities are obvious because they have been discussed during the interview process, but it might be less clear than they think.

“In interviews, you may set out your vision and what your priorities might be, [but] it may be that three of those resonated strongly with the board and two of them didn’t resonate as strongly and that hasn’t been communicated to you,” notes Pell.

The expectations that need to be clarified might include leadership style, strategy, culture, risk appetite, and other key priorities for the company. They should be agreed by the whole board to ensure everyone is aligned. Pell says the list of expectations should be written down and should fit on a single page. “If you can’t get that on to a page, it’s not going to be powerful.”

3. Work together on strategy

Next, incoming CEOs need to build a partnership with the board around strategy.

“Boards today want to be partners on strategy,” Pell notes. “But I bet most boards would struggle to define what partnership actually means in terms of responsibilities.”

The CEO owns the strategy. But it is developed within boundaries set by directors, and it needs their blessing. As a result, CEOs must take directors along with them as they formalise the strategy. The golden rules are not to spring surprises on the board, and to never go to a board meeting asking directors for a “yes” or “no” answer.

“The reason you don’t want a ‘yes, no’ decision on strategy at the board meeting is that it’s a vote of confidence in the CEO,” Pell says.

“So take the board on the journey through your catch-ups with the chairman. And give [directors] two good options so that they’re not making a decision on ‘yes or no’. They’re making a decision about one of two alternatives.”

4. Slim down board papers

One of the key knock-on effects of board papers is the nature of discussions around the board table. Board packs that are hundreds of pages long and contain huge amounts of detail will enable directors to take board discussions in a plethora of directions. If the CEO thinks directors should be focusing on a more narrow, critical set of issues, the solution is to slim down the breadth of the board papers.

“The effort that’s put into writing shorter papers will translate to better discussions because you have to do the pre thinking about where the discussion is going to go, and how you want to shape it,” Pell says. “That doesn’t mean you have full control over the discussion, but you have a lot more control.”

The consultant suggests CEOs ask chairmen to give them the best couple of board papers they have seen, and to agree to the information that will be included in the board pack with directors.

“Most boards will say they want shorter papers,” Pell says. “But if you unilaterally cut information out, they’ll want it all back. You’ve got to agree what good looks like.”

3 Jun, 2022
Jobless rate’s fall to 48-year low triggers skills warning

Business is demanding urgent steps to access more foreign workers to fix the skills shortage problem that threatens to slow Australia’s post-pandemic recovery, after the jobless rate fell to a 48-year low of 3.9 per cent.

Full-time employment jumped by more than 90,000 in April, offsetting an 88,400 drop in part-time employment. Westpac senior economist Justin Smirk said this could largely be attributed to people taking on more hours.

Economists expect the tight labour market to generate higher wages in the coming months, but the labour paucity because of a soft take-off in skilled migration after the border reopened could dampen the economic rebound.

Overall employment increased by a modest 4000 people who found work in April, well below the market consensus for 30,000 new jobs.

Business Council chief executive Jennifer Westacott said the strong labour market showed the economy was bouncing back strongly, but Australia needed to attract the best global talent to keep the recovery on track.

Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, said the low jobless rate corresponded with a 48-year-high skills shortage, which would hold the economy back.

The number of unemployed is now at 537,000, down from 700,000 just before the COVID-19 crisis, and the latest Australian Bureau of Statistics job ads data suggests businesses are trying to fill more than 400,000 positions.

Call for ‘ambitious plan’ to resolve shortages

NAB’s first-quarter business survey showed a near-record 84 per cent of companies were reporting difficulties in finding suitable labour. Last week, the bank said the growth in labour costs in April hit its highest since records began in 1997.

More investment in skills development and a temporary two-year increase to 200,000 in the skilled migration intake were needed to fix the situation, Mr McKellar said, calling for an “ambitious plan to resolve” shortages.

Ms Westacott said targeted migration to fill critical shortages at every level was needed “right now.” A skills system that lets workers easily and quickly train for employer needs was required urgently.

“You can’t employ hundreds of Australians on a construction job if you don’t have a surveyor, and you can’t transform our economy to decarbonise, digitise and diversify without access to the best talent in the world,” she said.

CommSec chief economist Craig James said further gains in employment could be soft as some states were arguably already at full employment.

“The assumption is that ‘full employment’ is consistent with a jobless rate near 3.5 per cent to 4 per cent,” he said, which was already the case in NSW, Tasmania and Western Australia, the latter being on 2.9 per cent.

Mr James said more and more businesses were frustrated by the lack of suitably qualified workers, and the party that formed government after Saturday’s election would need to comprehensively deal with the issue.

Vacancies were becoming increasingly harder to fill, JPMorgan economist Jack Stinson said, and the global investment bank expected the jobless rate to show signs of stabilisation in the coming quarters.

“We also see further gains in participation to be increasingly hard-fought as cyclical participation falls and trend growth slows, weighing on the outlook for potential growth ... at the margin,” Mr Stinson said.

Economists are mixed on how low the unemployment rate will go. ANZ is tipping it will fall to the “low 3s” later this year, and the Reserve Bank of Australia think it will fall to 3.6 per cent by the end of 2023 and then stabilise.

Unemployment fell by 11,000 people in April, and with only 4000 finding work, that means about 7000 left the labour force, prompting Australia Institute senior economist Matt Grudnoff to demand closer security of participation, hours worked, security of employment and real wages growth.

Participation rate falls

The participation rate fell over the month, but remained elevated near the record highs achieved in February and March; the underemployment rate fell to 6.1 per cent and the underutilisation rate fell to 10 per cent.

“These were their lowest levels since 2008,” Westpac senior economist Justin Smirk said.

Seasonally adjusted hours worked increased by 1.3 per cent in April, largely reflecting a bounce back from the March falls in flood-affected areas.

The strong labour force result came a day after ABS wages data showed just 2.4 per cent growth in the year to March 31. With CPI inflation running at 5.1 per cent over the same period, real wages went backwards by 2.7 per cent.

But economists believe wages are already beginning to firm.

“The tight labour market evident in the fall in both unemployment to its lowest since 1974 and labour underutilisation to its lowest since 2008 point to an acceleration in wages growth ahead,” AMP Capital’s Shane Oliver said.

The soft wages and employment results this week have economists mostly expecting the RBA to raise the cash rate by 0.25 percentage points in June. That follows a similar increase in May that lifted the record low rate to 0.35 per cent, the first increase since November 2010.

“Added to the disappointing wages data yesterday, this suggests a 25 basis point cash rate hike at the RBA’s June meeting is more likely than a supersized 40-50 basis point hike,” Ms Birch said.

3 Jun, 2022
Want to increase employee engagement levels? Try facilitating a TOMO culture
Employee engagement, Strategic HR

A common mistake employers make is thinking that because their industry isn’t inherently ‘fun’, that there’s no place for play at work. This expert couldn’t disagree more.

Now is the perfect time for organisations to rethink their engagement and motivation strategies, says Lindsay McGregor, co-founder of Vega Factor and employee engagement and motivation expert.

“[We need to ask], what do we stand for? How can we ensure our roles are motivating and that the work is engaging? And then use that information to strengthen our teams,” says McGregor, who is also formerly a consultant with McKinsey & Co.

Organisations have spent a lot of time thinking about purpose over the last decade, she adds.

“That’s important, but when you look at the data, you find that play is about twice as powerful as purpose in driving performance. But it’s something very few of us have learned about.”

A lot of organisations think about play in a social sense, she says. For example, introducing something fun, like a company happy hour. However, McGregor says we need to think about how to infuse play into the work itself.

“That’s the next wave of employee motivation for organisations to think about.”

Embracing experimentation at work

The first step in embracing a culture of play and experimentation is to reconsider how your company approaches culture.

“Most people think building a strong culture is just about people not being a jerk – that the leader just has to be a good person. But it’s often not about that. It’s about the leader designing systems that let their people do their best work. Too many of those systems are built without play in mind and too many of them are built in a way that uses emotional or economic pressure to drive people.”

McGregor admits that a culture that embraces ‘play’ might seem difficult or far-fetched for some employers, especially if you work in an industry that you wouldn’t consider to be inherently ‘fun’. But that’s not what play is about.

It’s about giving people the opportunity to experiment, she says.

McGregor refers to a 2016 experiment she ran with her co-founder, Neel Doshi, with the branches of a retail bank.

“At the time, a huge scandal had erupted in the United States after Wells Fargo discovered its sales representatives had opened millions of fake accounts for its customers, because sales pressure was so high.”

Bank representatives would input their own contact details into the system, she says. That way, if someone from the bank’s customer service team called to check in on the ‘customer’, that employee would pretend to be them. 

“You would think this was just a couple of bad apples, but it was massively widespread. When you look into the science of motivation, when people feel under intense stress [they think], ‘If I don’t do this, I’m going to get yelled at in front of my peers, or I’m going to get fired.’ If they see everybody else around them doing it, then it becomes the norm.”

This demonstrated that the levers we often pull to motivate people to work hard, including financial incentives and emotional pressures, can be dangerous. It prompted the retail bank to reconsider its own approach.

“It had to figure out a way to get its people to be highly motivated without sales commissions. That felt impossible to them, but once we explained the science of motivation, they saw that when somebody treats you transactionally, you treat them transactionally,” she says.

When relationships are transactional, people can feel resentful and they stop going above and beyond, she adds.

“If you yell and scream or punish people, they’ll default to tactical work. They’ll follow instructions and execute what’s on their to-do list, but they won’t go beyond that. They won’t bring creativity. They won’t help others.”

“Growth shouldn’t just be about status, rank or your title.” – Lindsay McGregor, co-founder of Vega Factor

Doshi and McGregor helped the bank to think about motivators differently.

“We said, ‘Let’s get rid of the economic and emotional pressures that come from commissions and instead talk about play, purpose and potential.

“To find play, the staff would get together each morning and think about experiments they could run. They’d say things like, ‘There’s usually a long line for our customers, which frustrates them, so how could we help them get what they need without standing in a line? Or make the process of standing in a line a little more fun?’ 

“The next day, people would share what worked and what didn’t. Not only did this make work more fun, it also scaled learning across the organisation.”

Next, they focused on their branch’s purpose, which was to improve the financial health of their community.

“They’d tie what each person was working on to their branch goal. That meant people didn’t feel like they were just showing up to collect a paycheck.”

The combination of these three elements, and the absence of emotional pressures and inertia, is what McGregor and Doshi call a ‘TOMO culture’ – meaning a total motivation culture.

Rethinking growth opportunities for employees

The third element, potential, is about helping individuals to constantly grow.

“When people change jobs, they often say, ‘I needed a new challenge.’ People leave jobs when they’re not growing new skills,” says McGregor.

That’s why it’s so important to facilitate learning and growth opportunities. However, a lot of employers make the mistake of assuming this means simply offering promotions, says McGregor.

“Growth shouldn’t just be about status, rank or your title,” says McGregor. “In the retail bank, we found it was about people saying, ‘I want to learn how to make personal finances easy to understand, so let me build my skills in teaching.’ 

“Another person might choose something like developing their empathy, so people feel comfortable opening up about sensitive financial matters. Those are the kinds of skills that stay with you for your entire career.”

She also suggests thinking about learning opportunities differently. They don’t always need to be formal programs or webinars; it can happen on the job. For example, if you have people who are looking to develop the same skill, they could sit with one of your executives who can teach it to them.

“One leader we worked with was phenomenal. She started her career as an engineer, and then moved into customer service and became the head of customer service for one of the fastest-growing startups of all time.

“She realised she was great at customer service because she could see what was going wrong with the tech and realised that not everyone else knew how to investigate what was causing the bugs. So every Thursday she hosted a 30-minute Zoom call where people could log in and just watch her solving tickets [customer enquiries]. That was something she was going to do anyway and it was a really effective way to upskill people. So ask yourself how you’re offering teaching moments like that.”

Does everyone feel they add value?

While McGregor says employees should try to identify their own play elements at work, she says a lot of that responsibility lies with employers, as they’re designing the work experiences that their people will either flourish or flounder in.

“Think about what demotivates people at work. It’s often things like budgeting or performance review processes. Or the way they try to solve problems might feel horribly slow or full of bureaucracy. Those things can suck the play out of work.”

“To feel truly engaged, people have to feel that if they don’t show up to work tomorrow, something they care about isn’t going to happen.” – Lindsay McGregor, co-founder of Vega Factor

To identify these play-sucking elements of work, she suggests thinking about where people might feel like they’re not adding value. What are the tactical tasks required in your organisation – such as administrative functions – and who is doing the bulk of them? 

If you notice a portion of your people are consistently engaging in tactical work and not getting the opportunity to jump into adaptive work (tasks that require expansive thinking and problem solving), in some instances, that should be treated as a red flag.

“When I think about the Great Resignation, that’s one of the first things I think about: where do people feel replaceable?” 

She refers to an example of an engineering firm that was concerned about losing its talent, so it constantly rotated its engineers onto different projects, so everyone knew how each project worked. While there’s certainly an argument to be made for diversifying knowledge across teams, in this instance it made all the engineers feel replaceable.

“So they switched things up so each engineer could own a unique problem, and that made a big difference.”

This isn’t to say tactical performance is a bad thing. It certainly has its time and place.

“Tactical performance will reduce people’s stress and emotional pressure. It’s really important to have good tactical performance for your team to feel organised [and] they don’t have to waste time reinventing the wheel.

“If you’re working on invoicing, for example, the tactical work would be about having a process that you follow, but the adaptive work might be asking: ‘What are the three big opportunities for us to improve how we do invoicing? What’s a creative way we can fix our problems?’

“When a culture is high in total motivation, people feel a lot of play, purpose and potential for the actual work that they’re doing. So that’s not saying, “I work for a great non-profit, but I hate my job as an accountant,’ but being able to say, ‘The day-to-day work I’m doing as an accountant gives me play, purpose and potential.’ When you’ve done this, you’re able to motivate people to do both the tactical and the adaptive work.”

It’s about employers taking the time to ask: “Does everybody have an interesting, meaningful problem to solve?” she says. 

“[That means a problem] where they can come up with ideas and experiment with those ideas. So many organisations have big, grand mission statements, and those are important, but to feel truly engaged, people have to feel that if they don’t show up to work tomorrow, something they care about isn’t going to happen.”

3 Jun, 2022
Australian workers lead return to office, but hybrid here to stay
Mirvac is encouraging staff to return to the office, trialling initiatives such as no dedicated desks at its Sydney HQ

Australian, Asia-Pacific and European workplaces are slowly returning to normal as more staff work from their company office, but the situation is very different in the United States, where most white-collar employees are staying home.

A new employer survey from CBRE has revealed more than a third of Australian businesses are encouraging staff to attend the office at least a few days a week – and their employees are responding.

This trend starkly contrasts to the US, where Henry Chin, global head of investment thought leadership at CBRE, said office occupancy rates were at 30 per cent, with no sign of them rebounding.

He said many businesses were struggling to get workers back and that key office precincts such as Union Square in San Francisco – the gateway to Silicon Valley – were deserted, with office occupancy running at 10 per cent.

A big part of the issue was outdated offices, Dr Chin said.

Most tenant demand was for premium buildings in cities such as New York, where 70 per cent of new leases were being signed in the top 40 per cent of buildings.

“I think the journey for America’s return to the office will be a lot, lot longer,” Dr Chin said.

“Europe is very different, similar to here. Monday and Friday, we cannot get any client meetings, they only work Tuesday, Wednesday, Thursday.”

The survey revealed the number of days Australian employers expect their staff to work remotely has contracted to 1.7 days, down from 1.9 days when it was last conducted during October 2020.

The return to work is being accompanied by significant changes in office strategies.

These include an increase in unassigned seating, the prioritisation of collaboration space, and greater tenant appetite for building with robust environmental, social and governance credentials.

Tom Broderick, head of office and capital market research for CBRE in Australia, said employers were now much clearer on hybrid work, with more than 90 per cent expecting a mix of remote and office working, well up on last year’s expectations.

“In a positive shift, occupiers are also re-examining their office footprints and are moving from contraction to expansion mode,” he said.

“One-third of Asia-Pacific respondents with at least one office in Australia and New Zealand now expect to expand.

“For companies solely based in this region, there is even more of a leaning towards expansion (40 per cent) versus contraction (36 per cent).”

Of those that are moving, about 80 per cent want to shift into ESG-credentialled buildings, a significant market shift.

The research also showed unassigned seating was on the rise, with 58 per cent of those surveyed saying they have already implemented this approach, or expect to within the next two years.

More collaboration and social were a high priority, increasing the need for more individual quiet rooms combined with further investment in workplace technology.

3 Jun, 2022
Skills shortage threatens economic recovery, government warned
NAB chief executive Ross McEwan talks to Chanticleer columnist Tony Boyd.

The Albanese government must prioritise attracting skilled and unskilled workers to Australia or risk acute labour shortages further curtailing the economic recovery, banking leaders say.

Australia is well-placed to weather an inflationary outbreak and sharp rise in interest rates, but a lack of workers across almost all sectors is forcing labour costs higher, resulting in a “profitless boom” for some.

Speaking at The Australian Financial Review Banking Summit on Tuesday,  NAB chief executive Ross McEwan pointed to pressures created by negative migration last year and 400,000 job vacancies, the highest level on record.

“Restoring migration is critical to easing labour and skills shortages as well as contributing to economic growth,” Mr McEwan told attendees, highlighting that NAB had 700 technology vacancies alone.

“In my mind, this is one of the most urgent issues that the new government should focus on. We acknowledge efforts under way to do exactly that.”

Prudential regulator chief Wayne Byres told the Summit in Sydney he was watching emerging risks, especially in housing markets.

Mr Byres said the Australian Prudential Regulation Authority had cracked down on lending to highly indebted borrowers by tightening some banks’ debt-to-income ratios. The big banks’ share prices fell shortly after the speech.

People’s lives ‘about to be hell’

Deloitte partner and economist Chris Richardson said financial market pricing for a cash rate above 3 per cent in the coming years was effectively investors betting that people’s lives were “about to be hell”

“If that happens, most models would suggest you’d lose 15 per cent to 20 per cent out of housing prices in Australia – there goes $2 trillion,” he said, though such an outcome would be a “mistake” by policymakers.

Mr Byres said the banking industry was “well-placed to weather a more difficult environment, and we do not expect a deterioration in housing loan portfolios to cause system stability issues”.

Furthermore, he said an expected decline in house prices was “on balance, a positive development from a system stability perspective, reducing the need for borrowers to borrow very high multiples of their incomes”.

Other leading bankers were upbeat about Australia’s relative position in the global economy.

“You really wouldn’t switch places economically or socially at the moment,” said Commonwealth Bank chief executive Matt Comyn, who is just back from a trip to the United States, which is experiencing a wage-price spiral.

“The US is a classic overheat,” Mr Comyn said. “Australia is very different.”

He said he struggled to understand why the money market was pricing in the RBA cash rate going north of 3 per cent, similar to the projected US Federal Reserve funds rate.

CBA economists tip a peak RBA cash rate of 1.6 per cent.

NAB’s head of business banking, Andrew Irvine, said business lending would outperform highly leveraged retail banking consumers, who would be more susceptible to interest rate rises and falling house prices.

He said that although the housing construction sector was challenged, agriculture, minerals and energy were strongly positioned to take advantage of high commodity prices exacerbated by the Ukraine-Russia war.

Storm clouds growing over US

“The other area where you’re going to see Australian business do well I think is onshoring of supply chains because it’s so hard to get stuff from anywhere else,” Mr Irvine said.

He agreed that “storm clouds” were growing over the United States, Europe and China, where stresses in global supply chains and inflationary pressures are more pronounced than in Australia.

“We believe Australia, on a relative basis, is going to do very, very well,” he said. “And if you’re going to be investing anywhere in the world, you’re going to be hard-pressed to see an economy do better than Australia.”

Despite the upbeat assessment from business bankers, Council of Small Business Organisations chief executive Alexi Boyd said labour and skills shortages meant some small firms were experiencing a “profitless boom”.

“Economists are saying things are going gangbusters, but small businesses can’t take advantage because they don’t have the workers and issues with supply chain constraining their ability to grow and to innovate,” she said.

“It’s a contraction. That’s a real concern. Worker shortages, worker shortages, worker shortages ... we can’t seem to get the government to take action in the short term.

“In a lot of cases, those small businesses are completely overwhelmed and may very well, through sheer exhaustion, walk away from strong, viable businesses because they’re just getting to that tipping point.”

The summit examined opportunities for banks from the valuation pressures on the technology sector, and Mr Comyn suggested that they would seek to form more partnerships as they raced to innovate faster than start-ups could acquire new customers.

The new environment of rising rates was also creating pressures for banks, said Australian Banking Association chief executive Anna Bligh.

“It’s always a clear and present danger for banks that they could end up [in the political crosshairs] because they are so central to people’s lives,” she said.

After falling into a hole after the Hayne banking royal commission, Ms Bligh – a former Queensland premier – said banks had worked hard to climb out and foster a “fragile” positive attitude in the community.

“I think their ability to hang on to that is going to very much depend on how they deal with those individuals, those families and those businesses who will find the next 12 to 18 months very, very stressful,” she said.

3 Jun, 2022
‘Big challenges ahead’: Jim Chalmers talks down the economy
Treasurer Jim Chalmers focused on inflation, falling real wages, rising interest rates and the cost of living at his first national accounts press conference

Treasurer Jim Chalmers has reset the economic narrative, labelling a solid quarterly economic growth figure and booming national income as “weaker than expected”⁣ and warning of “big challenges”⁣ ahead for the economy.

Gross domestic product rose a respectable 0.8 per cent in the March quarter as the economy increased production of goods and services 3.3 per cent over the year.

Economists variously labelled the result “very strong”, “strong”, “solid” and “firm”, but Dr Chalmers used his first national accounts press conference to describe the result as “weaker” than the budget forecasts and “a snapshot of the really serious constraints and challenges that we have in our economy”.

Although he acknowledged that parts of the economy were “robust”⁣ and “resilient”⁣, including the unemployment rate at a 48-year low of 3.9 per cent, the treasurer sought to focus attention on the “big challenges”⁣ of inflation, falling real wages, rising interest rates and worsening cost of living.

He cited petrol prices – up 12 per cent since the end of April; wholesale electricity prices – up 237 per cent, and household power bills set to rocket; and gas prices – up more than 300 per cent over recent years.

He also referenced the handbrake on economic growth caused by acute skills shortages, which NAB chief executive Ross McEwan, speaking at The Australian Financial Review Banking Summit on Tuesday, described as “one of the most urgent issues that the new government should focus on”⁣.

“I’ve tried to say there are elements of strong demand, tight labour market, there are some pleasing elements of the national accounts, but there are far more troubling aspects in our economy,”⁣ Dr Chalmers said. “The situation we’ve inherited is serious. In some instances, it is dire.”⁣

Economists’ rosy view

But the view among economists was rosier. The result was ahead of market expectations for growth of 0.7 per cent over the quarter and 3 per cent over the year, according to the Australian Bureau of Statistics.

“The Australian economy began the year with a very bright start,”⁣ said Commonwealth Bank head of Australian economics Gareth Aird, noting that the result came amid COVID-19’s omicron wave and widespread flooding.

Domestic final demand contributed 1.6 percentage points to GDP growth, driven largely by household consumption (0.8 percentage points). Government spending – largely on healthcare – added 0.6 percentage points.

The army clean-up in response to the floods in NSW and Queensland also contributed to the rise, according to the ABS. Spending on the defence force was up 7.8 per cent in those states compared with 3 per cent in others.

The ABS said the estimated insured losses from the floods were $3.3 billion, making it the costliest flood event and fifth-costliest disaster on record, and the rebuilding effort would contribute to GDP growth in future quarters.

Surging commodity prices drove export values higher, ensuring a stellar outcome for national income despite a drop in export volumes. Nominal GDP rose 3.7 per cent over the quarter and 10.2 per cent over the year.

Exports of mining commodities increased 10.5 per cent in current price terms, which also led to a 14.7 per cent rise in mining profits. That will have a positive effect on the federal budget bottom line through higher tax revenue.

Rising global prices pushed Australia’s terms of trade to a record high during the quarter, climbing 5.9 per cent. The share of national income going to profits also set a record at 31.1 per cent.

The news is good,⁣ Mr Aird said, but he cautioned that the data pre-dated the Reserve Bank’s decision last month to raise the record low 0.1 per cent cash rate to 0.35 per cent and signal that more rises were coming.

“There are already signs that rising rates and the expectation of further hikes will act to cool the economy,” he said, citing recent data showing Sydney national house prices fell 1 per cent in May, and would probably fall further.

NAB group chief economist Alan Oster said the big four banks expected “solid growth”⁣ to continue in the near-term, in part supported by strong household consumption and a forecast pick-up in business investment. However, he said higher energy and petrol costs would act as a headwind.

RBA rate rise of 40bp tipped

The national accounts also showed that a key measure of inflation reached its highest level since 1988 and would add pressure to on the RBA to increase interest rates.

When combined with growth in average earnings of about 5.4 per cent, “there is a very strong argument”⁣ for a 40 basis point rate rise next week, ANZ senior economist Felicity Emmett said. Average earnings were closely watched by the RBA and were on track to easily hit the central bank’s June forecast of 6 per cent, she said.

Nomura economist Andrew Ticehurst backed that assessment.

“We continue to forecast a 40bp RBA rate hike next week, with the cash rate rising steadily to around 2 per cent by end-2022 and to a moderately restrictive level of 2.75 per cent by mid-2023,”⁣ Mr Ticehurst said. He expected that to be the consensus view before the June RBA meeting.

He also labelled Wednesday’s data as “noisy”⁣ and suggested that it needed to be interpreted carefully, but “the outlook remains positive”⁣.

Stockpiling, spending boost growth

Although not echoing Dr Chalmers’ downbeat tone, Deloitte partner Stephen Smith said Wednesday’s economic data suggested that the economy was “finely balanced”⁣ rather than reflecting underlying strength.

“In our view, some caution is required in terms of thinking about the outlook over the next 12 months,”⁣ Mr Smith said. “If we look at the domestic side, it’s very much propped up by government spending. Household consumption was a touch stronger than expected but only just above pre-COVID levels.

“The outlook from here is clouded by a rapidly darkening international environment and, in that context, business investment domestically will be crucial in needing to underpin the outlook.“

Businesses building up inventories closer to pre-pandemic levels as supply constraints eased in the quarter contributed 1 percentage point to GDP, partly offsetting the 1.7 percentage point drag caused by net exports.

The household savings ratio – the portion of people’s take-home pay they stash away – continued to fall – from 13.4 per cent to 11.4 per cent – but it is still well above the long-run average of about 5 per cent, as households continue to increase their cash buffers. The latest deposit data shows households have stashed away almost $270 billion since January 2020.

”⁣The 11.4 per cent household saving ratio was the lowest since the start of the COVID-19 pandemic, but remains above pre-pandemic levels,“ ABS acting head of national accounts Sean Crick said.

Economists said this was likely to act as a buffer against rising prices and rates.

Household spending on discretionary goods and services rose 4.3 per cent, exceeding pre-pandemic levels for the first time, and the reopening of the international border resulted in a 60 per cent boost to transport services.

Spending was strongest in the eastern states most affected by the delta wave restrictions in the second half of last year. The ACT recorded 3 per cent growth, followed by Victoria on 2.7 per cent and NSW on 1.9 per cent.

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