Tuesday, July 9, 2013

Planning on a juicy pay rise? Think again

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Confidence see-saws under Rudd

Peter Martin explains that the switch to Kevin Rudd has seen consumer confidence see-saw: family sentiment is down, but long term economic optimism is up.

Australian workers are set to share the burden of a softening economy, with smaller pay rises and shrinking bonuses expected over the next year, says new research.

Workers are expected to received an average 3.5 per cent pay rise this financial year, the slowest growth in wages since the financial crisis, management consulting firm Hay Group said in its annual Australia Salary Movement Index report.

The national report came a day before the monthly labour force data, which economists expect will show a lift in the jobless rate to 5.6 per cent for June, up from 5.5 per cent, and no new positions added to the economy.

The super guarantee is rising - but who's going to pay for it?

As the Australian economy cools, workers should expect smaller pay rises: new research. Photo: Fiona-Lee Quimby

Softening data


Consumer confidence remained steady this month, but was "significantly weaker" than at the start of this year, according to a Westpac-Melbourne Institute report released today.

Business conditions hit a four-month-low in June amid "intense weakness" in the retail, mining and manufacturing sectors, the National Australia Bank's monthly business survey published yesterday found. Business confidence remained subdued.

Job advertisements fell for the fourth-straight month in June and were 19 per cent below their levels a year ago, a monthly survey by ANZ released on Monday found.

"The prevailing weaker business confidence has resulted in a more conservative approach to salary movements," Hay Group senior consultant Steven Paola said.

"Workers expecting increases to be similar or even higher than in recent years may be disappointed."

Some analysts expect the unemployment rate to rise above 6 per cent by the end of the year, in part driven by a lift in population size that is not expected to be matched by the number of jobs created.

Good by comparison

While the salary rises were lower than in recent years, they were still ahead of other developed job markets such as the UK, US and New Zealand, the report noted.

A key driver of slower pay growth was the pull-back in the resources sector as mining investment - which has been well above historic levels - peaks.

"Last year, the moment the resources sector pulled back of some of those projects and investments, it had a really wide-ranging impact," Hay Group senior consultant Trevor Warden said.

"It's that wide-ranging impact that affected the rest of the economy really really quickly, which has in turn affected the forecast for the increases over the next year."

Mr Warden said the winding back on investments and projects saw pay rises in the mining sector for the year fall from an expected 6.25 per cent increase to a more modest 4.8 per cent.


The mining sector is expected to see stronger salary growth compared to the rest of the economy this financial year, with wages growing about 4.3 per cent. Positions in mining operations, exploration and petroleum engineering still command much higher salaries - about 30 per cent above the market average, the report said.

A slower-than-expected transition towards non-mining-led growth has seen economists scale back their growth expectations for the Australian economy.

A slowdown in the Chinese economy and a shift in focus away from resources towards domestic consumption is also expected to weigh on Australia's growth outlook.

The International Monetary Fund lowered its global growth forecast overnight to slightly above 3 per cent for this year, about 0.25 per cent weaker than its previous forecast in April.

The updated forecast was driven by slowing growth in emerging economies as well as further recession in the eurozone, the IMF said.

Non-pay factors

A separate survey of 1800 Australian employers by recruiter Michael Page found that about 30 per cent of staff left their companies for higher salaries. About 28 per cent changed jobs as they were looking for broader learning experiences, and about 13 per cent for more senior positions.

One-tenth of employees' motives for switching to new jobs, according to the employers, were for a better work-life balance.

Hay Group's Mr Warden said the softening wages growth meant employers needed to focus more on other factors beside remuneration retain and motivate their staff.

"Getting the money right is important. It just people in jobs and in some way it provides that base, but the non-financials ... are so vital in engaging employees.

"The world's most admired [companies] we find that pay is not high ... They look at the other issues - the intangibles - and they try and provide challenges and careers. They try and make places culturally better environments."

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