Businesses have been slashing employees’ work hours to trim their expenses and stay afloat as high interest rates and inflation dampen consumer spending.
Discretionary sectors, where demand has declined most due to the cost-of-living pressures on household budgets, saw some of the biggest reductions in labour costs, but most industries cut their expenses in the last quarter, Westpac’s latest bank transactions data shows.
“Things are definitely slowing down, with turnover down 3 per cent in the last quarter,” said Westpac’s head of business and wealth, Anthony Miller. “But business expenses were down 4 per cent, so they’re in an okay position cashflow wise. For certain sectors in particular, there’s just been a little less labour required.”
The bank’s findings underline data from the Australian Bureau of Statistics, which showed hours worked declined by 0.4 per cent in the December quarter and that underemployment – a measure of people who are in work but want more work – ticked up 0.4 percentage points in the past year.
Despite expectations from the Reserve Bank that the rates of unemployment and underemployment will increase further, Miller said it wasn’t something to be too concerned about.
“People are still busy, we have a very high level of employment, and there’s a lot of people therefore with the capacity to spend, so the overall macro position is still positive,” he said.
Miller said business expenses were also easing as the costs for non-labour inputs continued to cool on the back of improved supply chains and lower costs for producing and shipping goods.
In the December quarter, business expenses declined to their lowest level since the March quarter of 2022, according to Westpac, with cost increases expected to slow further as inflation eases.
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