Turbulent times

Smart companies face a very difficult three months that must be factored into business plans, terms of trade and lines of credit if the longer term benefits of cut backs in government spending are to be converted into a summer of expanded opportunity for exports and productive outcomes for the small business sector.

It is interesting to note that Government supporters (those that still support the Gillard Government) expect that times will be tough in the next few years but that they will manage through the next year or so. Abbott supporters are downhearted that he has not been able to convince the independents to go to the polls this year, but expect that their investments will pay off over the next few years.

This week’s landmark equal pay ruling and threats of industrial action from coast to coast pose a very substantial inflation threat for the RBA that will be exacerbated by pressures on State Treasuries to meet the expectations of middle class voters who have switched their allegiances in the expectation of higher professional salaries, housing price appreciation and retention of middle class welfare.

With the switch from Labor to Liberal Governments there is a growing list of complaints as state treasuries take the opportunity to put a cap on public sector salaries. Teachers unions in Victoria had expected to win the highest benefits in the nation after Ted Baillieu’s election offer to them and in New South Wales the police union has slammed Barry O’Farrell’s government crackdown on public sector wage rises as ”a slap in the face for hard-working police officers who put their lives on the line every time they put on the uniform”.

Ian Yates, CEO of the Council of the Ageing and member of the National Aged Care Alliance says there was no one in the Alliance – and therefore the industry – who did not believe that staff should be paid more. Fair Work Australia has signaled probable mechanisms for actually implementing a fair and competitive wage structure. The Australian Nursing Federation is calling for wage comparability or wage parity and the community sector is expecting substantial increases in pay following the equal pay case.

While wage parity may be appropriate when comparing the work of nurses performed across the acute and aged care sector, Yates says it is less useful for determining the wages of other staff, such as personal care workers where there is no equivalent or comparable role. “There, I think a fair and competitive wage is a better measure,”

At the same time as these bottom end of the income scale reviews are underway, thousands of Qantas staff are considering strike action with a pay claim that would raise wages by 28% over the next three years. The ALAEA Federal Secretary Steve Purina’s says the stop-work action is the first step in a series of possible industrial actions by engineers, pilots and all support staff. Steve says that the engineers are sick of the systematic dismantling of the industry by Qantas management.

The main union representing Federal public servants is also flagging industrial action that could affect dozens of government agencies from the middle of the year. Nadine Flood, National Secretary, of the  Community and Public Sector Union says the Australian Public Service Commission (APSC) is attacking workers’ pay and conditions across dozens of government agencies. “Our members are being told that a number of our claims simply won’t be considered or won’t be met.”

The next three months are likely to show a consistent decline in consumer confidence with families waiting to balance out the impacts of demands for capital from electricity generators, calls for compensation from the big polluters and the RBA threat to make most households pay higher interest rates in the interests of the national economy.

Gary Morgan’s post-budget poll shows that the traditional post-budget bounce for the Federal Government is very small this year and the L-NP still has an election winning lead.  

Gary says  “What should concern the Government is the fall in Consumer Confidence following the Federal budget – down 4.0pts to 115.7pts. A clear signal from the public that the budget has not had a positive impact on family finances.”

The first sign of things to come will be requests for increased pay and improved conditions for those companies that have managed to keep down costs and improve their purchasing performance. The next sign will come with an increase in sick leave, absenteeism and customer complaints. The final sign will be rises in staff turnover and costs of recruiting qualified and experienced team members.

According to Michael Duncan, Roy Morgan Research Industry Director, one in four paid employees are considering changing organisations in the next year. Michael says, “Quality staff have always been critical to the success of any organisation and the retention of these key personnel becomes even more important when we are in a period of high employment.”

“With 28% of paid employees considering changing organisations in the next year, companies will need to ensure they provide the flexibility and benefits to retain their best staff.  A major challenge facing employees is that different people value various benefits very differently, according to their life stage, their aspirations, their occupations and skill levels and risk profiles,” according to Duncan.

As central bankers begin the process of winding back stimulus packages, encouraging treasurers to raise taxes to cut back budget deficits and householders to curb their expectations, smart companies should prepare for three months of turbulent times.

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Dr Colin Benjamin is an entrepreneurship and strategic thinking consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up a universe of new possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Colin is also a member of the global Association of Professional Futurists.