It hits small businesses particularly hard at a time when a series of government support measures implemented during COVID-19 are set to be rolled back.
Alexi Boyd, chief executive of the Council of Small Business Organisations, says labor shortages are putting pressure on small businesses unable to compete for staff.
“Boom Without Profit”
“Economists say things are going badly, but small businesses can’t take advantage of it because they don’t have the workers and [they have] supply chain issues limiting their ability to grow and innovate,” she says.
“It’s a contraction, it’s a real concern. We see it in all industries – they can’t take advantage of it. It’s almost like a profitless boom.
“In many cases, these small businesses are completely overwhelmed and may well, out of sheer exhaustion, walk away from strong, viable businesses because they’re just getting to that tipping point.”
Boyd, who has no connection to Chanticleer, expressed despair that the government was not taking action to address the labor shortage crisis. She also called on banks to recognize the problems facing small businesses.
She said her organization had failed to get the government to focus on the issue of labor migration.
Urgent call to restore migration
Boyd called on banks to “reconnect with their small business customers and understand what they are going through right now, as opposed to what was happening three years ago in the small business economy.”
Anecdotal reports indicate that companies facing a labor shortage are investing their energy and resources in retaining their best employees and not investing in growth.
These strategic moves could have a broader impact on the economy, because if business owners choose to sweat their existing assets rather than expand, it will result in weaker economic growth.
National Australia Bank chief executive Ross McEwan set the tone for the summit with a call for urgent action to attract more migrant workers and a warning of the impact of rising interest rates.
He outlined the following compelling statistics: net migration fell last year by around 90,000 people; there are 500,000 fewer temporary migrants and half as many international students in Australia as in 2019; there are 400,000 vacancies, the highest level on record and almost double the pre-pandemic peak.
“Reviving migration is key to alleviating labor and skills shortages, as well as contributing to economic growth. This is one of the most important and urgent issues that the new government should focus on,” he said.
“And I acknowledge the efforts already underway to do just that.”
The day before the Summit, McEwan hosted a luncheon in Melbourne for 20 NAB corporate clients who provided him with a timely assessment of the economic situation and issues of concern.
The biggest issue they raised was the difficulty of finding people to work in their business.
“Each of them had difficulty finding people to work in their business, and it wasn’t for lack of trying or, in their minds, a matter of money,” he said.
“It’s just that there aren’t enough people around.”
Earlier, McEwan said a survey of 1,040 NAB customers found a third of companies said they couldn’t hire the people they needed and were unable to retain or train staff fairly quickly.
He said NAB has 700 vacancies in its technology division, which is forcing the bank to rethink how it implements technology solutions.
NAB looks to Vietnam and India
It was impossible to find digital, data and technical engineers, forcing NAB to supplement its normal recruitment program with in-house education and training, including training 7,000 people in cloud computing.
In response to the labor shortage, NAB converted an outsourcing center in Vietnam into a regional innovation center to attract more people to join the bank.
NAB also plans to do the same in India, where IT employees are employed by third parties.
Banks challenged over fossil fuel loans
McEwan says he plans to find ways to find IT staff in India and Vietnam by helping them with visa applications.
Other major themes of the Summit were climate change, potential credit issues in the housing market and innovation in payments.
School student Christopher Black caused a stir when he confronted McEwan and Commonwealth Bank of Australia chief executive Matt Comyn over their fossil fuel lending policies.
Black said they needed to stop lending to fossil fuel companies, and he was fed up with the “green laundering” of the two banks.
McEwan said NAB’s loans are shifting from fossil fuels to renewables.
Comyn said: ‘I think the simplest explanation is that we made a commitment not only in Paris but also to limit temperature increases to 1½ degrees.
“In terms of exposure to fossil fuels, they represent less than 2% of our balance sheet. We have a balance sheet of $1 trillion, [so] our actual exposure to fossil fuels is very low.
“We must act in the general interest of the country, which also means that we must ensure that there is a secure energy platform. This year we will release glide paths to meet this 1½ degree energy transition, this will show that we are below the glide paths that we are required to meet.
“So to give you a simple explanation, thermal coal would be down more than 15% with less than $100 million in loan exposure.
“There is a big difference, however, in terms of the potential role that gas is going to play versus thermal coal, and I know, naturally, that you are looking for a very simple answer.
“But the broader answer is that we are doing a lot to make sure that we are going to meet the energy transition, as well as the deadlines and more particularly the objectives.
Falling behind on emissions rating
But Wayne Byres, chairman of the Australian Prudential Regulation Authoritysaid a survey of 64 medium and large companies regulated by APRA, including 21 of the largest banks, found a lack of uniformity in carbon emissions valuation.
About half of the banks surveyed rated the issuances of their lending exposures.
Byres said the absence of these measures created two challenges.
“First, it is difficult for banks to fully understand how borrowers [or will not] be impacted by the transition to a low-carbon world.
“And second, it is difficult for banks to meet the growing demands from investors, standard setters and peer regulators for greater climate risk disclosure.”
“Very different environment”
On the subject of credit quality, McEwan said the NAB was watching its lending to the construction sector closely due to rising costs and fixed-price contracts that were signed before inflation took off.
Byres warned of the potential impact of higher interest rates on home loan borrowers who had entered the market in recent years.
“We are now entering a very different environment than that which has existed for much of the past decade,” he said.
“The faster-than-expected emergence of inflation and higher interest rates will have a significant impact on many mortgage borrowers, with pockets of stress likely, particularly if interest rates rise rapidly and, as expected, house prices fall.
“Of particular note are residential mortgage borrowers who have taken advantage of very low fixed rates over the past couple of years and could face significant ‘repayment shock’. [possibly compounded by negative equity] when they will need to refinance in a year or two. »
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