Great Resignation workers’ exodus could raise wages in Australia

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A phenomenon known as the Great Depression is about to hit Australia, and despite the scary name, it could actually force wages to rise.

Australia may be on the verge of a phenomenon called The Great Resignation, and one expert believes that the mass exodus of staff could push wages higher and even force an interest rate hike.

A record number of people have changed jobs in the United States and the post-pandemic trend looks set to hit Australia next time.

An increasing number of Aussies are at least considering quitting their jobs.

The latest results from a Digital Finance Analytics survey of 52,000 households covering September show that about a quarter of people have considered moving on.

“The intention to at least consider it is up by at least 10 percent (compared to the same time last year),” principal Martin North told news.com.au.

Interestingly, the reasons people give for wanting to quit have changed considerably, with most now motivated by wanting a pay rise.

In September last year, about two-thirds of those who wanted to quit were driven by lifestyle factors, such as not wanting to commute or wanting a better work-life balance, North said. Only about a third were motivated by money.

This has now changed, with about two-thirds now wanting a pay rise and only one-third wanting a better lifestyle.

“More people are now thinking more seriously about changing jobs if they can increase their income,” North said.

“I think it’s a reflection of the rising cost of living and larger mortgages, and some of the other uncertainties that have been experienced in recent times.”

Mr North said people’s attitudes changed about three months ago.

“It was in practice around June / July that we started to see this fluctuation – I do not know if it is correlated with tighter lockings during that period,” he said.

Some analysts believe that many Australians will try to move on in March next year, when people have received their Christmas bonuses and recruitment is starting to pick up again.

Mr North said there were differences in sentiment depending on industry, age and location, but if the trend took place and a large number of Aussies left their jobs for better paid positions, this could have broader consequences for wage increases and interest rates.

Mr North said wages could start to rise if employers began to be more proactive in developing strategies to stop their best staff from leaving by offering pay rises or other incentives, rather than waiting until someone threatens to leave.

“It usually costs a lot to replace staff, there is the cost of re-hiring but there are also disruptions because it is especially difficult now to get staff, so this puts pressure on a company,” he said.

Widespread wage increases can then drive up inflation.

While the Reserve Bank has said that it does not expect to raise interest rates until 2024, if inflation becomes too high, it may have to act earlier.

“This round of people and higher wage negotiations could very well be the trigger for higher interest rates in the future,” North said.

“In fact, many people have not had a real wage increase other than increased living costs since 2011,” he said.

“Wage growth in Australia has been disgusting – other than in industries such as high-tech industries.

“Financial stress is very high at the moment, the cost of living is rising and mortgages are rising, but we have had very little income growth.”

But Mr North said his observation of employers in Australia was that they generally did not provide preventative pay although this was generally better for their companies, so it is unclear if this scenario will play out.

He also noted that temporary workers and others without the security of full-time employment would be in a much weaker position to negotiate wage increases.

Mr North said that if people wanted higher wages, they would probably need to be proactive and go elsewhere or negotiate with their existing employer.

“What I think is amazing is that the average mortgage has grown by about $ 80,000 over the last year,” he said.

“People are much more engaged (financially) than before and it obviously has a destabilizing effect on people’s household finances in my opinion.”

Back in the early 2000s, people had good income growth to help pay off their mortgages, but Mr North said this was not happening now.

“Once interest rates rise, as they are likely to do, this could be a very significant burden on the economy as well as on individual households.”

Read related topics:Cost of livingEmployment

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