Australia’s Smaller Businesses Plan to Cut Back in 2015

Australia’s employment outlook for 2015 continues to look uncomfortable with small businesses – which account for 50% of private sector employment – set to significantly reduce headcounts and cut their wage bills, reports East & Partners.

Research from the business banking analysts found that micro businesses, with A$1m-5m in annual turnover, and small and medium-sized enterprises (SME) businesses turning over A$5m-20m are planning to cut their headcounts, while larger businesses are set to add staff.

According to the Australian Bureau of Statistics (ABS), the national unemployment rate in November was at 6.2%, and moved through the 6% level in May.

East’s forecasts are partly based on a direct interviewing programme with a structured, national sample of 984 businesses interviewed around Australia carried out last month. This found that micro businesses planned headcount reductions averaging 6.6% in the first half of 2015, while SMEs planned a 2.9% cut.

Both business segments also forecast lower wages expenses, with micros expecting a fall of 5.5% and SMEs a 4.0% decrease.

Emphasising the two-geared nature of the economy, however, corporate businesses turning over A$20m-725m project a 4.0% headcount increase, while the largest Institutional businesses project a 3.3% increase. Both the corporate and institutional segments expect their wages expenses will rise, by 1.8% and 1.3% respectively.

Lachlan Colquhoun, East’s head of markets analysis, said the results further reinforced suggestions for a very uncertain period ahead for the economy in 2015.

“Small businesses are major drivers of employment, accounting for around half of all private sector employment and around 46 percent of gross domestic product [GDP], and these results point to further rises in unemployment next year,” said Colquhoun.

“Larger businesses might be adding headcount but if businesses are not hiring at a grassroots level the two-geared economy will continue, and the wider economy will struggle to achieve significant momentum.”

“Particularly concerning are comparisons with historical ABS employment data which, based on these forecast employer hiring/retrenchment plans, may well be seriously under-stated. This is worrying news indeed from the economy’s largest employment growth engines.”


Related reading