Australia’s economy faces recession risks with stalled private sector jobs: Deloitte
Australia's economy appears to be at a pivotal moment, with recent forecasts indicating a significant slowdown that echoes past recessions. Deloitte’s latest employment forecasts reveal that the Australian economy is facing stagnation, with growth rates dipping to levels not seen since the early 1990s recession. This downturn is now casting a shadow over the labour market, particularly impacting the private sector.
Deloitte’s report underscores a troubling trend: private sector employment has virtually stalled. Despite a healthy overall increase in employment throughout 2024, the gains have been concentrated in the non-market sector. According to Deloitte, while non-market sector employment surged by 7.6% in the year to March 2024, market sector industries saw a mere 0.1% growth.
This divergence highlights a critical shift. The private sector, traditionally a robust driver of job creation, is now struggling to keep pace with its historical performance. The figures suggest that while public and non-market employment sectors continue to expand, the private sector is grappling with a significant hiring freeze, potentially signaling a deeper economic malaise.
Looking ahead, Deloitte projects that Australia’s employment growth will decelerate markedly. For the 2024-25 period, the forecasted growth rate is just 1.0%, translating to an additional 147,400 jobs. This is a stark contrast to the 3.1% growth recorded in 2023-24, which added 423,600 jobs to the economy. The slowdown is attributed to the persistent impact of the Reserve Bank of Australia's (RBA) rate hikes over the past two years, which have contributed to a broader economic stagnation.
The labour force, bolstered by high immigration rates, continues to expand, but this growth is not sufficient to counterbalance the slowdowns in the private sector. As a result, Deloitte anticipates an increase in the unemployment rate, which is projected to rise to 4.5% by the end of 2024-25. This would equate to an additional 101,500 individuals entering the ranks of the unemployed.
White collar employment faces sharp decline
One of the most concerning aspects of this forecast is the predicted decline in white collar employment. Deloitte estimates a 0.4% reduction in white collar jobs, amounting to a loss of approximately 23,500 positions. This decline is indicative of broader challenges within the private sector, where companies are increasingly hesitant to expand their workforce amid economic uncertainty.
In contrast, the non-market sector, particularly in human services, is projected to fare better. Employment in this sector is expected to grow by 1.9% or 96,700 workers in 2024-25, with a steady increase forecasted to 1.3% growth in 2025-26. This growth is attributed to ongoing government spending and support, which is cushioning the impact of the private sector’s contraction.
The private sector's current hiring freeze is a direct response to these economic pressures. Nicole Gorton, Director at Robert Half, highlighted this trend in an interview with ABC News. She noted that companies are prioritizing retention strategies over new hiring, reflecting a cautious approach to workforce expansion in the face of economic uncertainty.
Government spending has played a crucial role in supporting Australia’s economy and labor market, offsetting some of the adverse effects of the private sector slowdown. However, this reliance on public sector support raises concerns about the long-term sustainability of the current economic conditions.
The current economic landscape suggests that Australia may be facing a recessionary environment. The sharp slowdown in private sector employment growth, coupled with the increase in unemployment rates, points to significant challenges ahead. While the non-market sector shows resilience, the broader economic picture remains precarious.
For policymakers and business leaders, the focus must now shift to navigating these turbulent times. Strategies to stimulate private sector growth, enhance economic stability, and support workforce development will be crucial in mitigating the impact of the ongoing slowdown.
The hiring freeze and employment trends observed in recent reports signal a critical juncture for Australia’s economy. As the private sector grapples with these challenges, the broader implications for economic health and labour market dynamics will become increasingly apparent.