THE ACORN PARTNERSHIP

MID YEAR MARKET UPDATE

JULY 2009

 

Based in Sydney, The Acorn Partnership specialises in the recruitment of HR professionals for permanent and contract appointments throughout Australia and Asia. For a confidential discussion about a potential HR vacancy, your HR job search, career management or market information, please call:

Claire McNamara
Director, The Acorn Partnership
+61414 886 438
 clairemcnamara@acornrecruitment.com.au

 

2008/9 Forecast v. Actual

As the 2008/2009 financial year drew to a close, many HR professionals heaved a sigh of relief, hoping to be able to say a jubilant goodbye to what has been a tumultuous and uncertain period for many businesses in most industry sectors. In late 2008, various projections were made about the state of the economy and its potential for recovery. Below is one such projection that was given by a senior economist at a large Australia financial institution in early November 2008:

 

 

Actual figures look like this:

 

 

 

Recovery?

Whilst some of the figures above indicate that a recovery is likely to be slower than some initial forecasts predicted, pundits continue to note their belief that Australia is sheltered from the perfect financial storm somewhat, and should therefore not suffer unduly or for an extended period. Interest rates remain low, the AUD is performing well (if inconsistently) against the greenback, and the stock market appears to be showing if not a return to confidence, then certainly a belief that there are many stocks that are currently greatly undervalued.

 

Figures around retail spending and consumer confidence also paint a relatively positive picture. With retail turnover at 4.8% above the levels attained pre-stimulus, and consumer confidence 22% higher than in October 2008, things are looking up in the mind of the consumer in any case. The question is, to what degree is the 3.85% percentage point fall in variable mortgage rates and Kevin Rudd's $900 stimulus cheques affecting these figures, and therefore, are they sustainable? How will the threat of increased unemployment levels change the view of the consumer in the medium term? And to what degree is consumer confidence affected by the notion that Australia is somehow protected by exports to China?

 

Along with the government stimulus, the demand by China for Australian mineral exports was a primary factor in our unexpectedly positive economic performance in the March quarter. But will it last? With commodity prices down, and future demand somewhat uncertain, it remains to be seen whether China will protect us further from the worst of the global financial crisis and the subsequent economic downturn.

 

Stock market conditions

Stock market conditions in Australia remain complex and somewhat inconsistent, based on a number of factors including the performance of the Dow Jones. Some stock prices reflect a premium for speculation as investors chase returns in the shorter term, whilst others appear to have a premium for liquidity as investors look for the apparent security of cash, which only heightens the feeling of uncertainty in the broader market. Savvy investors are biding their time, and focusing on high quality company stocks that are being priced at a level below that of the late 90s, despite greater earning power, comparatively little debt and clearer competitive advantages.

 

Employment market conditions

Despite the ongoing uncertainty and complexity of the economy, many believe that the Australian employment market has an undercurrent of strength due in part to the comparatively limited pool of talent available locally. Combined with the confirmation in the March quarterly figures that mineral exports to China are still relatively strong and the Federal Government's commitment to new infrastructure spend, there is a pervading feeling that compared to other economies, Australia may feel fewer ongoing negative effects of the global financial crisis when it comes to employment in particular.

 

For the HR profession, the past 12 months have been very trying. Managing redundancy processes, restructuring and downsizing, in the sure knowledge that under the surface, the war for talent still rages, and that succession, development and talent attraction and retention need to remain a focus for organisations hoping to retain competitive advantage through people in the longer term.

 

The negative effects of an economic downturn are most visible to the HR profession, and as a group they are more likely than other professions to feel a degree of "burn out" as a result of months of streamlining and rationalising.

 

Approaches to cost cutting from a people perspective have been many and varied. Organisations with a longer lead time, or more HR-focused business heads have been able to approach the issue with a higher level of creativity, offering flexibility and unpaid leave to travel, or work part-time, or contribute time to charity. The negative press about organisations slashing staff numbers and costs with little thought for their employer brand has been extensive.

 

Anecdotally, there is much evidence to suggest that more significant levels of movement in the HR market will occur sooner rather than later. And that when that movement occurs, it will occur in high volume over a comparatively short period of time, with a higher than normal number of roles being part-time, as a result of still constrained budgets, or replacement positions for individuals already working a 4 day week as a result of enforced leave. Is there a possibility that this period of Australia's history may change the face of our workforce? Workers taking enforced unpaid leave in many cases have chosen to have this structured as a 4 day week, or a 9 day fortnight. There is a good possibility that at least some of these individuals will have a preference for part-time in the future. Some claim to see signs of this already in recent labour force figures, given that over the year to May the rise in part-time employment has more than offset the small fall in full-time employment.

 

Organisations choosing to cut their payroll costs by enforcing unpaid leave or reducing hours rather than making redundancies is reflective of a market in which the desire to retain skilled labour through the downturn is a natural result of our recent experience of full employment, when many firms had trouble finding all the skilled labour they needed. There is a pervading feeling that the return of the skill shortage is not far away.

 

So, the outlook for HR in the APAC region is reasonable, in that there is clearly still a push by businesses for quality HR practice. Many roles currently being advertised are either new positions, or heavily focused on the specialist areas - and OD, Remuneration & Benefits, Industrial and Employee Relations and OH&S. Industries currently performing well include insolvency practices (which comes as no surprise), utilities, pharmaceuticals, transport and engineering consulting, not for profit and government.

 

Overall, the 2009/10 fiscal year should bring more good news than bad. Some degree of growth in the APAC region will likely lead to a slow growth in overall vacancies. Offshore talent is likely to take a backseat for a period of time, given higher than normal levels of competition for positions in the local market, but not for long. Australia will continue to have an overall shortage of HR talent, particularly in the specialist areas, and this shortage will become more evident over time, as it has in the past, leading to a slow but steady increase in the relocation of global talent to the market in the medium to longer term.

 

Salaries

Much research predicts that salaries will remain steady during calendar 2009 across a range of professions, but with negative salary growth broadly being predicted for senior level professionals in a number of disciplines, including HR. Similarly to past market slowdowns, this may continue for some time - possibly into FY10/11.