E.L I n d e x J u n e 2023
Employment Index for Middle Australia
Executive demand defies economic tremors.
Mortgage cliff likely to have a major effect on spending.
Increased productivity the key to growth.
The E.L. Executive Demand Index shows that demand for Australia’s executives is increasing despite the hikes in official interest rates.
The E.L. Executive Demand Index rose 10 per cent in May compared with the prior month, the first rise in three months.
Mr Grant Montgomery, Managing Director of E.L Consult, the executive search firm that researches and publishes the E.L. Executive Demand Index, said: “Executive demand is now lifting as we close in on the end of the financial year.
“It seems that the market that ‘middle Australia’ is having a renewed upturn,” Mr Montgomery said.
“This is despite thousands still unproductively working for home, rising interest rates and continuing international pressures.
“The recent inflation rate figures suggest that the economy is still driving hard and the Reserve Bank has a big task to try and cool continuing and relentless inflation.
“With all sectors rising just before the end of the financial year this is not as good news as it may seem.
“Despite the best efforts of the Reserve Bank the economy is clearly overheated which means more interest rate rises and potentially either a real estate fallout or continuing interest rate hikes.
“The big and mounting issue is the "cliff" when many fixed interest rates come off fixed rate and suddenly face the massive hike in monthly repayments.
“There are nearly 900,000 fixed rate mortgage holders that will come off their fixed rates in the near future. Most will be paying $1,000 more a month in repayments.
“In May 2021, the average new fixed rate loan for a term of three years or less was 1.95 per cent. Now, the variable rate comparable loan rate for an average mortgage starts at of 6.5 per cent.
“That is a major build-up of pressure in the market.
“Many people will arrive at a position that they cannot afford to keep the monthly payments up and may be forced to sell.
“This will not happen overnight as lenders will be enthusiastic to try and keep owners in their home and avoid foreclosure.
“Also, interest in the Australian property market internationally and from wealthier Australians who don’t need a mortgage will continue to boost the more expensive end of the market.
“The pain is going to be felt in middle Australia on middle Australian properties. It is the silent Australian – many of which are hard-working executives who have families and have taken on significant financial responsibilities – that will hurt in 2023 and into 2024.
“If you take out the top end of town, people are already hurting as these costs take hold on spending as can been seen by falls of over 20 percent in big end retailers like David Jones.
“If executive demand backs off over the long term and unemployment in executive and general ranks increases, I foresee a difficult 2024.
“It is a very careful balancing act to avoid a local recession.
“The biggest short-term saviours are high employment and salary and wage inflation, but the latter two are driven by and driving inflation are false Gods..
“It is only higher productivity across the country that can recession-proof the economy.”
In May most of the regions were higher, with only the ACT lower. Western Australia and Tasmania were the strongest states, rising significantly. New South Wales and Victoria both rose, followed by South Australia and Queensland.
Amid the industry sectors there were widespread gains. The Management sector recorded the largest increase at 13 per cent, followed by Finance and Engineering. Information Technology, which has defied the falls in other sectors over recent months, rose another 9 per cent.
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