Australia has been a huge beneficiary of the commodity bull market but, as we have discussed in articles such as Storm warning, a dark cloud is looming in the shape of a significant increase in the supply of many resources. Further evidence of a downturn in the country’s economy has now come with new figures released by two recruitment companies.
The performance of staffing businesses tends to be a good indicator of what is going on in an economy and investors and other market watchers have certainly been known to attach significant weight to these sorts of figures.
In Australia, the weakness of the eastern states has for some time now been offset by the strong employment, tax revenues and so forth enjoyed by resources-rich Western Australia. That all started to turn down in the second half of last year, however, and indications of this decline continue to appear in data such as the latest numbers from large recruitment consultant Hays.
While the net fees the business generated from the eastern states in the first three months of this year were down 13% on the same period in 2012 and those from its overall Australia/New Zealand division were down 18%, net fees from Western Australia were 28% lower. Results were far worse in permanent as opposed to temporary recruitment as that is where companies tend to stop hiring first.
Hays has been reporting sluggish numbers from Australia’s east coast for a while but this is the first sign of a decline on the other side of the country. A similarly negative picture emerged from another recruitment giant when Michal Page announced its combined Australia/New Zealand revenues for the first three months of this year had fallen 16% compared with the first quarter of 2012.
By no means are all the affected jobs directly exposed to mining – for example, numbers from the companies’ legal and finance divisions have also fallen – but that only serves to underline the extent of the influence of Western Australia’s resources industries. This huge driver of the economy has its tentacles everywhere and, now it is starting to slow, everything is being affected.