The latest insights from Employment Hero’s SME Index seemingly indicate a probable economic downturn in Australia, as evidenced by slowing employment growth and declining hours worked by employees across the country.
The Index recorded its first drop in six months, declining 0.5 points month-on-month (MoM) to 129.7. Despite a year-on-year (YoY) increase in average employee growth of 6.1 per cent, there was a notable 0.2 per cent MoM decrease in December. The SME Index also revealed a decline in median hours worked by SMEs at -1.3 per cent MoM and -3.6 per cent quarterly.
The construction and trade services and manufacturing, transport and logistics sectors saw the most significant monthly drops of -0.3 per cent, while science, information and technology experienced the smallest growth YoY of 3.9 per cent. On the plus side, healthcare and community services saw a significant rise of nine per cent annually.
Wage trends offered a slightly more positive outlook, with a one per cent MoM increase in the median hourly rate to $38.14 in December, a 7.8 per cent YoY increase from the dip recorded in November.
The science, information and technology sector led the way on this metric with the greatest MoM jump of 3.8 per cent, recording the highest hourly rate of $59.68. However, the sector’s YoY growth was modest at one per cent. Retail, hospitality and tourism experienced the smallest MoM jump of 0.4 per cent, while healthcare and community services services saw the biggest annual jump of 7.4 per cent. Both recorded the smallest quarterly jump of 1.1 per cent.
Australian employees aged 65+ saw the biggest pay bump at two per cent MoM, the greatest quarterly jump at 2.1 per cent, and the most significant YoY rise of 8.4 per cent. Under 18s saw the largest drop MoM of -7.5 per cent and quarterly at -4.4 per cent and experienced the smallest YoY increase alongside 18-24 year-olds of 6.4 per cent.
Ben Thompson, Co-founder and CEO of Employment Hero, commented, “The latest SME Index results reflect the shifting economic landscape we’re navigating,” Ben Thompson, Co-founder and CEO of Employment Hero, commented. “While we’ve seen some positive signs this month, specifically in wages, the slight downturn in the Index and the nuanced variations in employment growth across different states, territories, and industries point to a challenging period ahead.
“This overall downward trajectory indicates a small recession will likely occur later this year as SMEs pump the brakes on hiring and growth plans,” Thompson added. “As Australia faces these complex challenges, this data underscores the need for strategic planning and support for the SME sector, which is instrumental in driving the nation’s economic health.
Thompson pointed out that wages declined for the first time in six months, prompting him to join the call for the RBA to halt further cash rate increases for at least the near term.
“This inflation game is undoubtedly a delicate balancing act, which is why the real-time granularity of our data is so critical to ongoing discussions concerning Australia’s employment landscape,” Thompson concluded.
