The unemployment rate in Australia, particularly in Western Australia, has been consistently low in recent years. As of January 2023, the unemployment rate in Western Australia is at 3.5%. This low unemployment rate has led to a very tight labour market, where there are more job openings than there are people looking for work.
In this article, we comment on our nation’s low unemployment statistics, and the subsequent effect it has on the labour market. We also comment on the flow-on effect, impacting costs for consumers.
Increased wages for workers
When the labour market is tight, it can have a number of effects on the economy. One of the most significant is that it can lead to increased wages for workers. With more job openings than people looking for work, employers have to compete for employees by offering higher salaries and better benefits. This can be great news for workers, as it means they can earn more money and have more disposable income to spend on goods and services.
In turn, costs are going up for consumers
However, the tight labour market can also lead to increased costs for consumers. When wages go up, businesses have to pay more to their employees, which can lead to higher prices for goods and services. This is because businesses need to make a profit, and if their costs go up, they may need to charge more for their products and services to make up for it. This can lead to inflation, where prices for goods and services are consistently rising.
Another byproduct – skill shortage
Another effect of a tight labour market is that it can be difficult for businesses to find the workers they need. When there are more job openings than people looking for work, businesses may have to increase their recruitment efforts and offer higher salaries to attract new employees. This can be especially difficult for small businesses, which may not have the resources to compete with larger companies for workers.
Having a market with skills shortages can have a negative effect on the economy. When there are not enough people with the skills needed to fill certain jobs, it can slow down economic growth and make it difficult for businesses to expand. This can be especially problematic in industries experiencing rapid growth, such as technology and healthcare.
Competition for goods and services
One of the biggest flow-on effects is that it can lead to increased competition for goods and services. When there are more people with disposable income, they are more likely to buy more products and services, which can lead to higher demand and higher prices. This can be especially true in certain industries, such as housing and transportation, where there may be a limited supply of goods and services.
There are indirect effects as well
A cost of low unemployment is that it can lead to increased consumer debt. When people have more money to spend, they are more likely to take on debt to buy things they want or need. This can lead to more people having credit card debt, personal loans and mortgage debt. This can be problematic in the long-term, as it can lead to a higher overall level of debt in the economy, which can make it more difficult for consumers to save and invest.
Concluding comments
In conclusion, the very low unemployment rate in Perth and broader Australia is causing a very tight labour market which is having a flow-on effect, including costs to consumers. If you are interested to learn more about market trends, the economy and how this might impact your asset values, please get in touch with Griffin Valuation Advisory.