Australian employers are offering signing bonuses to entice workers, with companies like Wesfarmers Ltd. and Ramsay Health Care Ltd. reporting up to 8% in wage growth, highlighting a tight labor market and complicating the Reserve Bank’s inflation fight.
(Bloomberg) — Australian employers are offering signing bonuses to entice workers, with companies like Wesfarmers Ltd. and Ramsay Health Care Ltd. reporting up to 8% in wage growth, highlighting a tight labor market and complicating the Reserve Bank’s inflation fight.
A popular bakery in the southeastern state of Victoria is prepared to give bonuses of up to A$700 ($477) to attract staff while public hospitals in the same state are offering A$5,000 to fresh nursing and midwifery graduates in addition to their salary.
“In the current market, job seekers are still spoiled for choice,” Callam Pickering, an economist at global jobs site Indeed Inc., said after Thursday’s data showed a surprise fall in unemployment. “Australia’s job vacancy rate is 2.8%, which is still around twice as high as was considered normal before the pandemic.”
Labor demand persists even after 12 interest-rate increases in the past year. That helps explain financial market pricing for at least two more hikes to take the cash rate to 4.6% from 4.1% now.
In New South Wales, restaurants such as Ripples and Cafe Bondi, has advertised a A$5,000 sign-on bonus for staff who can join “ASAP.”
Yet it isn’t all one-way, with a survey this week showing business confidence slipped into negative territory. Rebekah Mirium, director of events at Grove Bar in Sydney, said her firm has frozen hiring.
“We don’t have the ability to give any jobs,” Mirium said, referring to the soaring cost of doing business. “We’re making less revenue every day than before. We’re seeing a slump in foot traffic, in bums on seats, in patrons coming out and spending money.”
The RBA has raised rates by 4 percentage points since May 2022, its most aggressive tightening campaign in more than 30 years. Yet the jobless rate has remained in a 3.4%-3.7% range over the period and wage expectations have accelerated.
The rising pay demands are a key worry for RBA Governor Philip Lowe, who wants to avoid the type of price-wage spiral that policymakers in the US and UK are grappling with.
Inflation in Australia is hovering around 7% and the RBA only forecasts it to return to the top of its 2-3% target in two years’ time. Lowe recently highlighted upside risks to prices from services such as dining and healthcare.
“We have been prepared to be patient in getting inflation back to target,” the governor said last week. “But our patience has a limit and the risks are testing that limit.”
–With assistance from Amy Bainbridge.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.