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According to the National Australia Bank's (NAB) monthly survey for August, the country is heading for a recession. Employers are attempting to defray a wages-fuelled inflation breakout by cutting staff and machinery costs as they prepare for an economic slowdown. Salary sacrifice is just one of a series of indicators that Australia is tightening its belt.
Business conditions are worsening at their fastest rate since the early 1990s. Last month companies in New South Wales were worst hit. NSW was the only state that reported that most employers said their business was in a downturn, rather than an upswing.
Responses on profits, employment and forward orders were at their lowest since 2001. Several companies are calling for Australia's Reserve Bank to make cut interest rates to prevent this year to try to offset the risk of a recession. NAB says that interest rates will be half a percentage point lower by the end of the year.
Spare productive capacity is at low ebb and a shortage of labour could spark a bidding war that would push wages up. Companies reported they had been using 81.6 per cent of their productive capacity this year. The usual rule of thumb for economists is that 75 per cent is the benchmark that indicates a recession.
Given the falls in trading, it is likely that utilisation will fall further in the coming months. Salaries are growing by a strong annual pace of about four per cent. Wages in the mining sector had been growing faster than wages in the rest of the economy, at 8.5 per cent.
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