Published in Retail World Feb 2024

Destination: economic recovery. In September, I wrote about how investing ahead of the curve, especially in retail marketing was going to set aside the growers from the maintainers in the retail space as an expected economic recovery beckoned. In November, I wrote about  how management will need to be even more adept at understanding their staff individually, their new sense of perspective/demands, and designing sometimes bespoke and flexible, but equitable employee value proposition activities by person. These two topics are beginning to collide adversely as our economic recovery may not be here as quickly or as sustainably as we hoped yet employee demands, and labor market challenges continue unabated.

Clearly there are green shoots of economic improvement. Australian unemployment remains low, output is outperforming potential and the housing market is slowly recovering after its 2022 correction (www.imf.org/en/News/Articles/2023/10/31/cs103123). In the December 2023 quarter, inflation was at 4.1% v 5.4% the prior quarter, suggesting a slowing down of inflation driven in the main by the 12 interest rate rises in the last 24 months (www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release). Furthermore, those interest rate rises have now paused.    

However, the underlying causes of the post COVID downturn still remain – geopolitical challenges in Ukraine, now added to in the Middle East; uncertainty in the occupant of the White House by the end of 2024; overall consumer confidence. Furthermore, without getting into the September 2023 PR tangle that undid successful property developer, Tim Gurner, intimating that increased unemployment would be good for productivity and for which he subsequently apologized, for the aforementioned growers, investing to grow ahead of the curve, there is a lack of choice in the labor market given low unemployment. Furthermore, as we know, many quality people withdrew either early, or geographically or withdrew altogether from the labor market unexpectedly as a result of the life perspective challenging COVID episode.

Meanwhile, the weaknesses in the labor market, growing investment in employee value proposition activities, rising labor and input costs per se, not to mention an increased Federal legislative industrial relations program, makes it harder to do business, when it feels like we want to crack on and get ready for the upturn. As we head into an election 12-month period, we will no doubt see a splash of spending and promising. This may make us feel better, but unless it has a level of focus on the private sector’s ability to grow profitably versus growing the size of the public sector, then our feel-good factor might be short lived. That economic turnaround might be more of a slow and long corner and won’t be helped by what’s happening now and in the next 12 months in geopolitics either.

Worse, if a Federal spending/legislative agenda doesn’t adequately support the private sector to grow, and on the contrary, public spending increases exponentially, these factors married to what’s going on overseas, could see us following a short term boost, enter a necessary period of austerity in the medium to longer term of the next 3-5 years. In turn, private businesses will also have to be austere and super frugal with their own overheads, at a time when employees continue to look for more in REM packages and ways of working/benefits- -this level of incongruence is going to provide CEOs and CFOs an even bigger headache to just “do business.”