Judo Bank report: Plenty of challenges to come in Covid recovery

There’s no relaxing summer ahead for businesses if they want to avoid a number of looming ‘headaches’, warns economist Warren Hogan.

A busy Bourke Street Mall signals Victoria’s recovering economy after a long second wave COVID-19 shutdown. Picture: Getty Images

Businesses will need to spend summer planning ahead for looming “headaches” in the economy, including a shortage of skills and wage pressures, economist Warren Hogan says.

“There won’t be a relaxing summer for SMEs. There is lot of work to do,” Mr Hogan said ahead of the release of a report by Judo Bank on Friday.

“The faster-than-expected recovery of the Australian economy from COVID-19 is going to create fresh challenges for businesses who expected the worst and shed staff at the start of the pandemic.

“Across the 18 different industry sectors, only four have increased their headcount, according to ABS data.

Judo Bank chief economic adviser Warren Hogan.

“For businesses, the story is now changing. They will need to furiously plan ahead to implement initiatives to re-skill staff, hire labour early and think long and hard about the next three or four years.”

Mr Hogan is chief economics adviser of Judo Bank, which commissioned the report to assist its small and medium sized business customers navigate the next 12 months.

He expected the pace of recovery to slow as the economy moved to a different period of adjustment, beyond the end of the “double-edged” JobKeeper program in March.

The end of the JobKeeper program is the biggest threat to employment over the next six months, he said in the report.

“If 10 per cent of the people on the original JobKeeper program lose their jobs … this will amount to approximately 350,000 job losses,” he said.

About 1.5 million employees are currently on the extended JobKeeper wage subsidy program.

“JobKeeper has helped businesses stay afloat, but the other problem is the economy is recovering strongly outside of the distressed areas like arts, hospitality and recreation,” Mr Hogan said.

“Skill-centric demand for ­labour is going to be strong, especially for digital and IT specialists, but JobKeeper may actually be tying people to businesses that may not survive.”

Deteriorating trade relations with China was another “dark cloud”. China’s economic recovery post-pandemic had been “surprisingly strong”, which would ordinarily be good news for Australian businesses.

“But Australia is being targeted by the Chinese government in a trade skirmish,” the report said.

“Those businesses operating in China need to stay close to their local contacts and try to keep the flow of product going.”

They should also “be thinking about alternative markets as this trade skirmish is part of a broader global trade dispute that may not end any time soon”.

Judo Bank co-chief executive Joseph Healy said the report provided a “helicopter view” of the Australian economy in a way that would help business make decisions and plan for the future.