How we can see where Australia’s job market actually is

When I saw this sign in the window of a local pub, I did a double take. Paid training? When did you last see a hospitality place offering paid training? And taking on staff with no experience! It’s unheard of!

It must be hard indeed for pubs to find staff right now, I thought. And then I followed the QR code on the sign and I was rocked on my heels — a $1000 bonus to staff who stay for three months? The Australian economy must be going rather better than I figured.

The employer in this case is a large hospitality company called the Australian Venue Co, which is hiring for work in its 150+ pubs located from Hobart to Darwin. They’ve actually made the news before for their desperate thirst for staff, after offering to pay to bring Aussies home if they were willing to work for the company:

“We’ll make moving home a breeze! Australian Venue Co will cover the cost of your:

• Flight to Australia;
• Hotel quarantine; and
• Two weeks of accommodation in your destination,”

proclaims their website.

The question of the future of the Australian labour market is vital, and even as we wait for the data to come in, the anecdotal evidence is piling up. And the data is starting to come in. The wage price index bumped up this past week, registering a healthy 0.9% lift in the three month period covering July, August and September. That’s a decent result for a period where half the country went into total lockdown.

And the evidence for the period after that is looking better and better.

The migration angle

Of course, the hospitality industry may be seeing a stronger lift in wages than other industries, as it has long had a reliance on temporary migrants to do a lot of the potato peeling and pint pouring. Now that pubs and cafes are stuck trying to recruit Aussies, they are probably finding the recruitment game a lot tougher. So it is no surprise to see the hospitality industry near the top of the list of recent wage rises. In the next chart, hospitality comes in third, behind only white collar industries and construction.

We should touch on the debate over whether migration can have an economy-wide effect on wages. The evidence tends to show that it does not, over reasonable time frames. The extra demand added to the economy works alongside the added supply of labour such that adding migrants can be good for wages and the economy overall. Feelings, however, run in the opposite direction to evidence.

And, when even the RBA governor has stuck his oar in to muddy the waters, you’d be mad to bet on evidence carrying the day.

Yes, Josh Frydenberg has signalled 200,000 migrants will be allowed to enter the economy, to “accelerate our economic recovery by helping to address shortages in our labour market and allowing businesses to expand and grow with confidence”. But that is probably just testing the water. NSW Premier Dominic Perrottet wants 2 million migrants and I suspect the idea will be far less popular than his plan to end lockdowns.

Inflation and house prices

If wages rise, as they seem to be finally be doing after years in the doldrums, will that flow through to inflation? The RBA says yes, but only slowly. It expects limited wages growth until 2023, and therefore does not anticipate major inflation pressures until after that time. When the RBA does sense inflation is back for real, it expects to raise interest rates from their current record lows of 0.1%.

The idea is that as the economy grows happily, price pressures bubble along but are contained by interest rate rises. The rate rises need to be big enough to clamp down on inflation but not so big they harm that happy growth.

It’s an awfully narrow aperture to sail through. Especially when you consider the amazing leverage the Australian economy has taken on in recent times. Housing credit has risen 6.5% in the last year. Even as owner-occupiers pay off loans with interest rates at record low, new borrowers are adding to the stock of housing debt via enormous mortgages. Any future rise in interest rates will have an extra-large effect, and any wobble in house prices could do harm to homeowner confidence.

All of which is to say — getting some decent wage rises in the next few years might be the easy part. Keeping them flowing in an extremely fraught macroeconomic environment is the big challenge.

This article was first published by Crikey.