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Is the Australian economy headed for a recession?

The latest Employment Hero SME Index, which uses an accumulative dataset of over 140,000 small and medium-sized businesses (SMEs) and 1.4 million employees, indicates Australia’s technology sector is correcting itself after a period of unsustainable growth.

The average employee growth for the Science, Information and Communication Technology sector saw a -0.1 monthly decline, while the median hourly rate dropped by -1.8 per cent (despite all other key industries seeing a slight monthly increase in the median hourly rate). Science, Information and Technology also experienced the smallest annual change to the median hourly rate (2.5 per cent) compared to all sectors.

However, the industry still holds the highest median hourly rate of $57.08, far above other sectors, which signals these slowing growth rates are likely a rebalancing of the tech industry as valuations and salaries return to earth.

Ben Thompson, Co-founder and CEO of Employment Hero, said: “The SME Index this month shows stagnating growth for the Science, Information and Communication Technology sector. While the growth data is telling, it is not a huge cause for concern. Following a period of unsustainable growth marked by sky-high valuations and salaries, it appears the industry is undergoing a correction.”

According to the Government’s Employment White Paper on Jobs and Opportunities, projections produced by Victoria University for Jobs and Skills Australia show that digital and technology jobs will grow by 21 per cent by 2033. Moreover, the proof is in the pudding regarding the value of technology for Australia’s economy: According to the White paper, ‘between 2015 and 2017, small businesses that accelerated technology adoption grew revenue by 3.5 percentage points and employment by 5.2 percentage points per year faster than other small businesses.’

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While the employment white paper outlines a shared vision for a labour market that is well-prepared for the future, Mr. Thompson argues that Australia does not have to start from scratch to move in the right direction.

“If the Government is genuinely committed to digital transformation and fostering collaboration across industries to stimulate economic growth, then it’s time for us to engage in a meaningful discussion. The National Skills Passport, which the government is exploring, has the potential to simplify how employees present their skills and qualifications to prospective employers. This includes utilising micro-credentials, digital badges, portfolios, resumes, and references, ultimately streamlining the hiring process for employers.

“Why would the Federal Government spend $9m of taxpayer dollars to evaluate if a skills passport is worthwhile when there are already multiple examples of equivalent products working at scale provided by the private sector? For example Swag by Employment Hero and Certsy by SEEK. This is a great opportunity for the Federal Government to partner with the private sector, which is years ahead, rather than compete with existing solutions. There’s no need for the Government to reinvent the wheel,” Mr Thompson continued.

More widely, the Employment Hero SME Index signals consumer mood in Australia is becoming more austere. The average employee growth in the Retail, Hospitality and Tourism sector saw a -0.02 per cent monthly decline while median hours worked declined annually by -1.5 per cent. Under 18s and 18-24-year-olds had the least median hours worked (29.2 and 85.6, respectively) across all age groups, as both demographics also saw an annual decrease in median hours worked (-5.1 per cent and -0.3 per cent, respectively).

Mr Thompson commented: “Discretionary spending is going down in the industries that bring us the most joy as Australians. The jump in the cost of living means everyday workers and families are spending less, and the SME Index indicates this is hitting our younger workforce the hardest. As we enter the Christmas and Holiday season, it will be telling to see if there is an uptick in seasonality hiring or if the current declines continue through this period as businesses seek to recoup losses.”

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