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Tuesday, 09 June 2015 14:39

IT sector takes a big hit as exec demand dives in consecutive months Featured

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The outlook is bleak for the IT sector, with demand for executives falling two months in a row as the national economy struggles to gain traction.

The latest executive demand index from EL Consult paints a depressing picture of the job market across many business and industry sectors, with the IT industry one of the hardest hit sectors with  demand dropping 17% n May compared to April.

Despite the drop in demand in IT and a negative result overall, there were some bright spots in the sector, with the A.C.T. (Canberra), Western Australia, South Australia and Tasmania holding their own to record positive results.

The losses, however, were in the major IT markets and larger states of Victoria, New South Wales and Queensland – putting the IT sector back to the middle of its recent trading range.

The bleak outlook in IT is reflected in EL’s national figures across all sectors, with executive jobs falling for the first time in five months. Engineering is the only positive as infrastructure spending gathers pace.

And, according to EL managing director Grant Montgomery, the economy is struggling and is unlikely to be boosted for some months by the federal government’s recent budget.

This latest report from EL shows that demand for Australian executives fell 10% in May– the first time there has been a fall in executive job opportunities recorded by the EL this year.

Montgomery cautions that the fall was the first sign this year that full economic recovery in Australia is tentative, and still has some way to go.

“It is important to note that demand for executives is a lead indicator and is predictive of future trends in the economy so it is not surprising given the full five months of rises that the National Accounts released this week were positive and better than expected.

“But by the same token the E.L Index’s fall this month is an early warning that the economy will still show weakness over the coming months.”

Montgomery stresses that the general trend is for the E.L Index to run three months ahead of the general economy.

“The National Accounts showed gross domestic product (GDP) grew a seasonally adjusted 0.9% in the three months to the end of March which was ahead of general expectations but behind the long term growth trend of 3.35% and slower than even the last quarter of 2.5%.

“In this climate it is not surprising that the Reserve Bank is taking a 'wait and see' position on further interest rate adjustments.

“Coupled with this, interest rates changes are taking longer and becoming less effective in fine tuning the economy and their main focus right now is managing the exchange rate.

“The one stimulus the government is hoping for is the small business depreciation allowances offered in the recent budget and these will no doubt help retailers particularly in the technology sector.

“But as Australia mostly imports it computers and office equipment the overall effect on general employment outside retail and logistics is likely to be negligible. Real stimulus is needed in the way businesses large and small get capital.”

As Montgomery remarks, not surprisingly Australian businesses pay some of the highest rates of borrowed capital in the developed world and, he says, banks in particular do not have the skills to lend small business capital unless it is some form of “quasi property loan and this not only distorts capital investment in Australia but acts as a break on business innovation”.

“However despite the falling level of investment in both the mining and non-mining sectors, demand for engineering executives continues to slowly rise, particularly in New South Wales.

“Infrastructure projects are coming on line throughout the country, assisted by government spending and the housing acceleration in New South Wales. This is very important as it is one of the bright spots in the economy.”

On executive demand nationally, Montgomery says Tasmania recorded the only improvement off a small base, while New South Wales’s 1% loss gave the overall index some stability.

And, the engineering sector was the only one to finish the month in positive territory, followed by the marketing and management sectors.


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Peter Dinham

Peter Dinham - retired in 2020. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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