Green shoots in the Australian market – but caution urged

by 21 Jul 2009

Whispers of an economic recovery are creeping into the media but experts are urging caution over premature optimism. Sarah O’Carroll reports

Confidence has risen among consumers, em ployers and employees. Optimism has en tered the markets and hiring expectations have increased – albeit marginally. But caution has been urged by experts who warn against the dangers of premature optimism.

Confidence among Australian employers has risen for the first time since March 2008, reversing five consecutive quarters of falling sentiment, according to the latest Hudson Report: Employment Expectations survey. A total 6.5 per cent of employers reported an in tention to increase their permanent employee levels during the July/September 2009 quarter, which is a sharp rise from the previous quar ter’s record low of 0.8 per cent. According to Frazer Jones HR’s market survey there are very strong expectations for a return to investing in permanent HR staff from the beginning of 2010 onwards, however the survey also forecast a net 12 per cent expected decrease in 2009.

Regional differences

The overall rise in sentiment recorded has been felt throughout the country. All states and ter ritories and the majority of industries recorded a rise in sentiment compared with last quarter. NSW and Victoria, which had dipped into the negative, have now returned to positive senti ment at 4.1 per cent and 5 per cent respectively.

The NSW Business Chamber has recorded a significant increase in business confidence in July compared with April.

“There are reasons to hope that the reces sion might not be as deep or as prolonged in NSW,” said Stephen Cartwright, CEO of the NSW Business Chamber. “It is clear that the federal budget’s economic stimulus package has acted as a circuitbreaker in terms of de clining confidence.”

According to the Hudson report, Western Australia recorded the highest rise in confidence, driven largely by expected oil and gas projects and an upward trend in commodity prices.

Caution urged

Employers have been urged, however, not to view this increased optimism as signs of a con sistent upwards trend.

“Whilst it’s welcome to see this rise in op timism in the business community, Australia remains undoubtedly in the midst of one of the most tumultuous economic periods in modern history,” said Mark Steyn, CEO Hud son A/NZ. “The employment landscape remains mutable and we should view this result as a stabilisation in employer confi dence rather than assuming the start of a consistent upward trend.”

A conservative approach

The Frazer Jones survey which was conduct ed to gauge current thinking among the HR community showed that HR proponents are more conservative in their optimism about the economy – with only 12 per cent seeing an im provement starting in 2009 compared with 27 per cent of CEOs.

However a more conservative outlook may be the wise approach, according to a study by the Boston Consulting Group. The report found that companies that bank on a quick recovery will make the same mistakes as those who failed during the Great Depression.

The report, Green Shoots, False Positives, and What Companies Can Learn from the Great Depression, states that for all the talk of “green shoots” today, most of the popu lar leading economic indicators show that the world economy is still shrinking – albeit at a slower rate than at the beginning of the year – and warns CEOs to guard against the kind of hasty optimism-based decisions or an ex cessive reliance on one or two promising in dicators that undermined some companies during the Great Depression.

For example, nationally in Australia un employment is currently standing at 5.8 per cent, and is predicted by economists and government alike to rise throughout the re mainder of 2009. Other HR experts have also noted that Australia is still suffering a skills shortage in key industries.

According to the SEEK employment index, the market also seems to be stabilising but warns that this should not be viewed as a de finitive upturn.

“Despite recent comments that suggest Australia may avoid a recession and growing consumer confidence, it is still a very compet itive market for those seeking employment,” said managing director of SEEK employment Joe Powell.

“The June results once again suggest that to remain competitive in today’s job market, you really need to look at up-skilling. Those jobseekers that have qualifications and the flexibility to move around should look to those areas where their skills are in most demand.”

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