John Durie: The banks are chasing SMEs but costs of doing business keep rising

The good news for skilled people is their bargaining power has never been better, with businesses large and small facing a growing shortage of staff.

This means people power is at a peak when it comes to jobs, and, according to Judo Bank’s Joseph Healy, this will increase in the near-term as a greater number of young people head offshore now borders are reopening.

More labour may arrive from elsewhere but staff shortages are the key concern of most small business.  

Healy cites one client who lost a restaurant dishwasher to Queenstown in New Zealand, where the worker was picking up $70,000 per year for another job.

Treasurer Josh Frydenberg underlined the trend earlier this month when he issued a challenge to workers on low incomes to simply change their jobs.

This may be good for the macro economy but for employers, the cost of hiring new staff is as much as 20% more than existing wages.

This is one reason why some economists figure inflation must increase.

Another is the result of the well-covered shortages in supplies.

Next time you renew your car insurance you may be surprised to know your car is worth more today than it was last year.

By way of example, according to one insurance company, a 2019 Subaru wagon was worth $41,000 in 2019 and fell to $33,100 in 2021.

This year the same car was worth $36,600 and the insurance premium was of course increased to compensate.

That’s what happens when two car insurance companies dominate the market: the customer wears the price hike.

Carsales.com this week reported a 32.7% increase in revenues to $242.2 million, with increased used car prices driving up volumes.

Used car prices have increased because of COVID-led demand at a time when parts shortages in the US and elsewhere and shipping issues have curbed supply of new cars into Australia.  

Andrew Irvine, group executive of business and private banking at National Australia Bank, says while confidence is re-emerging, labour shortages are a real problem.

“Inflation is here and while it is too early to tell whether it is transitory or permanent, my fear is it’s the latter,” he says. 

Judo’s Healy says “inflation is increasing at a significantly higher rate than the official figures say”.

This means interest rates will increase.

That, of course, will help bank profit margins only to the extent it doesn’t dampen business spending.

The good news is business credit growth is increasing at 8% per year, says Healy, which is the fastest level since 2015.

Judo Bank, the newcomer to the business market, is ironically enough set to move in November to the old ANZ headquarters building in Melbourne — the now GPT-owned 1880s Gothic building on the corner of Queen and Collins Street.

At the other end of the market, NAB’s Andrew Irvine — the market leader with a 27% market share — has managed something rare in banking: achieving a zero in his net promoter score.

There is obvious room for improvement but Commonwealth Bank this month bizarrely boasted a negative score, which means customers are telling friends to go elsewhere.

Irvine’s QuickBiz loan product, which gives customers access to up to $250,000 digitally, is part of his campaign to move closer to customers. Some 40% of new customers are opening their account digitally.

The banks are chasing business loans, but whichever way business looks, everything they want is costing them more.