The release of the June 2022 unemployment rate is a sign to business operators of ongoing issues in the labour market and further justification for more and larger interest rate hikes. The Australian Bureau of Statistics, the ABS, compiles and releases the employment figures and provides detailed data on the breakdown of the statistics.
In the June reporting period
the unemployment rate fell markedly and quite unexpectedly by many, by 0.4% from 3.9% to 3.5%. The June figure represented the lowest Australia unemployment in 50 years. Low rates of unemployment are a major economic goal for governments and something for them to celebrate as confirmation of the success of policy decisions.
But in the midst of the economic conditions being faced in Australia, especially for business operators, these latest figures pose cause for concern for many. It increases the probability of further rate rises and signals continuing shortages in the labour market.
Further rate rises are already expected, the RBA
has stated further steps will need to be taken. But many were expecting the August rise to be similar in size to June and July, at 0.5%. But these latest employment figures are seen as placing pressure on the Board of the RBA to act more aggressively. While the RBA is primarily addressing surging inflation with its current rate hikes, the employment rate is also a key consideration in their decisions.
The RBA Governor Lowe has repeated this in several Board meeting statements over recent months. Noting the tightness of the labour market and how it is restricting many businesses from operating to the full capacity. Workers are simply not available to fill the jobs so the business has to cut back their operations. This may mean in trading hours say in the case of the hospitality or retail sector, or in production for manufacturers and others. For the agricultural sector, it means less harvest.
The labour shortages have been attributed to the lengthy border closures which has restricted many international students and workers from entering the country. In addition, many overseas workers left Australia at the start of the pandemic.
Less output means less supply at a time when demand is high. Thus contributing to inflationary pressures on prices. Another key takeout in the ABS June statement is in regard to the number of hours or days that workers are off work with illness as the current wave of COVID continues to impact many states.
ABS Employment Figures Statement for June
As mentioned above the unemployment for the June reporting period is 3.5%. This is remarkable as the rate had only been dropping by around 0.1% in recent months and actually steady at 3.9% for several reporting periods. The fall of 0.4% appears to have taken the markets by surprise.
Bjorn Jarvis, ABS spokesperson, reported that this is the lowest rate of unemployment seasonally adjusted going back to August of 1974 when it hit the rate of 2.7%. For males the current rate is 3.6% and for females 3.4%.
Mr Jarvis notes this as the eight consecutive monthly fall and does correspond to when the COVID restrictions were eased in the latter part of 2021 especially in NSW and Victoria.
Red Flags for Business Owners
For businesses planning and forecasting operations, the two major points to note is the short supply of labour and the high levels of workers taking leave for illness for both flu and COVID. These issues may need to be factored into operations if they continue.
Shortage of labour and the resultant cutbacks in production may impact short to medium income. If having to compete for labour by offering much higher wages and cash incentives, this can add to costs. Both placing pressure on the business cash flow and productivity.
To support businesses through this challenging period, we may be able to assist with a Business Overdraft
or Secured or Unsecured Business Loan
. If a business is finding their customers are bot in a position to make timely payments due to these same labour issues, considering Debtor Invoice Funding may assist.
Red Flags for Interest Rates
The June figures are already being seen by several economists and financial reporters as putting increased pressure on the RBA to announce a large cash rate rise in August. The figure of possibly 1% has been suggested in the media.
For businesses planning to take on finance for asset acquisitions or for general business support in coming months, this will be of concern. RBA rate hikes flow through the business finance market and that means higher interest rates and repayments.
Those with current fixed interest rate loans should not be impacted by rate rises. For those seeking finance, sourcing the cheapest interest rates will be THE priority. We can assist with that process as we have access and accreditation with many lenders to provide our customers with more choice and hence more chances to achieve the cheapest rated finance.
If you’ve always handled your own finance requirements, possibly primarily through your bank, now may be the time to consider other options such as our services. We are available to all types of businesses and provide specialist loans including Low Docs and No Docs and small business finance.
Contact Business Finance on 1300 000 033 to discuss how our services can assist in securing better interest rate finance.
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