Staff shortages will ease in 2023, but business growth will slow: Macquarie Bank

In its latest report, Macquarie Bank said while recessions look likely in advanced economies overseas in 2023, Australia is likely to fare better, but it will still be impacted by events on the global stage.

With the unemployment figure hovering around 3.5 per cent, the bank said over the next quarter and into 2023, growth-focused businesses will be rewriting their playbook to attract and retain new staff including hybrid working, better salary packages, and looking closely at their culture and employee development strategies.

But in 2023, the economy will start to face economic constraints.

“In a forward-looking sense there’s a couple of things that will determine how easy it is to get labour,” said senior Australian economist at Macquarie Group, Justin Fabo.

“The first one is the borders reopening, and a pickup in population growth, that will help in terms of the availability of labour.

“The second one is probably less favourable. We are expecting a decline in demand growth in the economy, and an increase in unemployment. That’ll make it easier to get staff, but the bigger issue for businesses will be slower growth in demand.”

In regard to the residential property market, the report said that with national property prices falling, businesses that use their residential property to support business loans could be impacted by the risk to valuations.

“At the national level we are expecting a peak-to-trough fall of around 15 per cent, a bit larger in Sydney and Melbourne as usual, and a bit less in the other capital cities,” said Mr Fabo.

“In this environment, it’s important to remember short-term thinking can be to the detriment of long-term goals. The key to managing through a market dip is ensuring you’re making decisions that ladder up to a big-picture strategy.”

Commercial property prices will also see decline according to Laurence Hart, national head of property lending at Macquarie Business Banking.

“Business leaders have reasons to be cautious in the current environment, however, the market isn’t showing signs of a major, irrecoverable downswing. Like with the residential property market, as risks to the downside continue, making decisions based on your long-term goals remains important,” Mr Hart said.

The cash rate will also start to slow into 2023 according to the bank.

“We do think interest rates continue to go up from here, but most of the heavy lifting in terms of the increase in interest rates we think has already happened in Australia, and the rate of increase has slowed,” said Mr Fabo.

“Still, the rising costs of finance is a core consideration for cash management. Many business leaders are being cautious in their planning until they are confident the cash rate is stabilising. Proactive cash management is important as always, such as ensuring your business is taking advantage of the opportunities a rising interest rate environment presents for cash deposits.”