Australians will need to continue being careful with their budgets, as company bosses look likely to hold back pay raises amid inflationary pressures.
A salary survey conducted by Robert Walters—a Sydney-based recruitment agency—of 1,500 employers revealed that 58 percent would not be offering any pay rises above the current inflation rate, at around 5 percent.
The company’s analysis of 2023 wage movements showed that business development managers reported a 2 percent pay increase on average. Project managers in natural resources and engineering reported a 3.7 percent increase.
Conversely, financial accountants in wealth management received a 35.71 percent bump, hiking their average salaries to $220,000 from $160,000.
Tech workers were also some of the more prosperous, with test analysts reporting a 16.82 percent pay rise, and supply chain managers reporting a 15.15 percent jump.
Andrew Hanson, managing director of Robert Walters, said the growth in tech salaries was unsustainable, warning it would “hit the ceiling.”
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He said the initial boost was due to strong demand for certain skillsets, forcing employers to pay above grade.
Mr. Walters also touched on the current economic downturn being conducive to stagnant wage growth in sales jobs.
“We sometimes see those sales roles slip when the market is just not there to sell into.”
Stagflation Fears Start to Bite
Although stable for a while, unemployment is starting to rise in line with inflation in a predicament known as stagflation, with many employers feeling the pain of both increases, especially highly leveraged businesses.Professional services giant Ernst & Young (EY) recently made 232 employees redundant, following a cut of 338 jobs by rival firm PricewaterhouseCoopers (PwC).
KPMG has followed suit with its contemporaries, letting go of 100 staff in late October.
Similarly, Commonwealth Bank has axed over 1,000 staff in the past 12 months as it looks to continue cutting costs. In September, National Australia Bank also fired 222 employees whilst Westpac has let go of more than 750 since May.
People Discouraged From Saving
The pace of wage growth is not the only index inflation is consistently overtaking.According to the Australian Bureau of Statistics (ABS), the current rate of inflation in Australia sits just under 5 percent.
This exceeds both the current 4.35 percent cash rate set by the Reserve Bank of Australia (RBA), and the rate offered for deposits by major commercial banks—real interest rates remain negative, the cost of borrowing money against inflation.
In practical terms, because the inflation rate has exceeded savings rates in banks, people are disincentivised to save as the real value erodes sitting dormant in a bank account. Therefore, they are more inclined to spend in the short term before prices increase further.
Former RBA Governor Phillip Lowe warned of such dangers on Nov. 28, saying interest rates had not risen high enough.
“I hope that most central banks have done enough, but I’m worried that they haven’t, and it’s doubly important that we pass this first inflation test,” Mr. Lowe said at a central banking conference in Hong Kong.
“Many countries now are saying that inflation won’t get back to target until the end of 2025. That’ll be four years with inflation above target … and if central banks allow that timeline to be pushed out even further into 2026, the community will rightly say, ‘Are they serious?’”
Mr. Lowe warned of further inflationary risks deriving from wages that are too stable relative to low productivity.
“The wage system has to adjust to weaker productivity growth. If it doesn’t, that means more inflation.”
