Industries connected to the household and building sectors may see a reprieve by the end of the year, although businesses will need to start developing new ways to source staff as baby boomers retire, BIS Shrapnel says in its new forecast.
But a separate report commissioned by Deloitte has found that most chief financial officers aren’t keen on hiring any new workers this year, suggesting the labour market will continue to soften.
The new BIS Shrapnel Long Term Forecast Update suggests the Australian economy will continue to grow by more than 2% this year, with senior economist Tim Hampton saying the household sector and related industries will be among the biggest beneficiaries over the next 12 months.
“One of the things that has emerged over the last few months has been that the household sector will play more of a role in 2012 than we originally thought it would,” he told SmartCompany this morning.
“It looks as though households are spending more money now. The only problem is that they’re not spending a lot of money in Australia.”
Hampton points to positive retail sales data, which shows spending increased in the last few months of 2012. But he says more consumers are eager to spend money overseas and online, and not back home – at least until the housing market picks up later in the year.
“Up until about six months ago we were telling this story about a household sector that was very much not spending money, but we think they are, they’re just being selective.”
“However, the building industry beyond the mining stuff remains pretty subdued. Although the underlying demand is there, particularly for residential investment, we think there is a significant underbuild in New South Wales and Queensland.”
Hampton says the emerging first home owners looking to buy after the price declines over the past two years may pick up in the last half of the year, and subsequently flow through to housing-related retailing.
“As long as there isn’t a big bout of negative news coming out of Europe, we should see an improvement.”
However, that seems unlikely. Greece has just rejected a plan from Germany that would see the EU take over its finances, and analysts believe a new agreement is taking too long to form. But Hampton says consumers get used to these things over time.
“It’s one of those things where gradually people become immune to it. And over time, we think the European crisis won’t be fatal for Australia.”
There’s more good news for the labour market. Hampton points out the trend of baby boomers retiring may not be as bad as originally thought, forecasting the participation rate to remain at 65% through the middle of the decade as more older workers stay in a job.
As a result, Hampton says, income growth should be kept strong and the building and retail sectors should be propped up through the middle of the decade.
“We see a longer trend where people are working later in life, and that trend is stronger than what we had expected.”
“When we have younger workers moving in, older workers are staying in as well. That’s going to keep labour supply and income growth strong.”
However, Hampton says businesses still need to prepare, as lower growth in the actual labour supply means businesses need to start sourcing staff in different ways.
“Businesses too need to start responding now,” he said. “They will have to find more innovative ways to meet their staffing needs, including sourcing more of their staff from offshore and incorporating more part-time staff onto their payroll.”
So far, he noted, only the retail trade and accommodation and food industries have shown a move to more part-time workers, whereas other businesses will need to start learning how to move to such a model.
Meanwhile, the new Deloitte CFO survey found lower prospects for the short-term labour market. Despite BIS explaining the European crisis won’t affect consumer confidence, businesses are more likely to be rattled.
Nearly 84% of CFOs surveyed by the company said they would not hire any more staff over the next 12 months, while one third said the global financial situation is weighing heavily on their forecasts for the year.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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