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.
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“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, Sydney Restaurant Group, which runs Ripples and Cafe Bondi, has advertised a A$5,000 sign-on bonus for staff who can join “ASAP,” according to a post on recruitment site Indeed.com.au.
The pressures are being felt at a senior level too.
A study released this week found that some executive salaries at Australian firms rose at double the rate of inflation, with remuneration of company secretaries jumping 13% for ASX 200 companies while that of risk managers surged 15%.
“These are significant increases off the back of several years of relatively small rises in fixed pay for executives,” said Megan Motto, chief executive officer of the Governance Institute. “Remuneration is a key factor for candidates, and with roles like company secretary now on the skills shortage list, it’s not surprising we’re seeing some really big jumps in base salaries.”
Higher bonuses are also being offered to make the overall package more attractive, the institute said in its annual report.
Executives at Ramsay and Wesfarmers told an Australian Financial Review summit earlier this year that staff turnover is driving their wage pressures. Gerry Harvey, chairman and executive director of Harvey Norman Holdings Ltd., said earlier this month that his firm’s A$4.2 billion wage bill was the highest as a percentage of sales in the company’s history, the AFR reported.
Wages, staff shortages and rising borrowing costs are taking a toll on business confidence, which slipped into negative territory in May. 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.
(Adds details from Governance Institute report.)