Pet spend the big test as economic slowdown looms

Australians’ willingness to put the welfare of their pets ahead of other priorities will, of course, be tested as the slowdown gathers intensity and mortgage stress multiplies. Picture: iStock

The great Australian slowdown in the wake of higher interest rates and bank credit curbs is gathering momentum.

While banks are on the frontline of those being impacted, Australians are putting welfare of their pets before other priorities.

Westpac this week announced a spike in its housing repossession rate, but more significantly in recent weeks there has been a sharp jump in the number of people contacting their banks reporting that they are experiencing mortgage payment stress and requesting help.

In the vast majority of cases the mortgagees are still employed but simply can’t make ends meet because of cost increases and the big fall in their real incomes after adjusting for inflation.

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By historic banking standards the ‘call for help’ level is still not at alarming proportions, but in the pipeline are a vast number of Australians set to move from token fixed term interest rate home mortgages to the much higher current market levels.

The Commonwealth Bank, as Australia’s largest home lender, constantly warned during 2022 that if the Reserve Bank continued to increase interest rates there would be a severe economic downturn in 2023.

But with inflation soaring to an eight per cent level the Reserve Bank had no choice.

But now the CBA-predicted repercussions are unfolding.

The fall in the inflation rate from the peak levels of above eight per cent is another slow down sign, albeit that the inflation rate is still close to seven per cent.

I am not in the business of guessing what Reserve Bank will do next month but the signs in the banking community and employment vacancies will trigger a much more intense debate about interest rate strategies than previous Reserve Bank board meetings.

Global jitters have led to rising interest rates across the globe. Photo: AFP

And the signals from the debt-ridden Victorian government that it is considering retrenching about 5000 public servants has sent a shiver around the labour market because other states may need to follow.

And those Reserve Bank deliberations come as the leading global employment website Indeed reports a remarkable drop in February Australian job vacancy postings in occupations compared to January where you would least expect a severe downturn – insurance, pharmacy, cleaning and sanitation, retail, information design, education, social science, media and communications, and legal.

In each of these sectors the February job posting fall is between 20 and 32 per cent.

Banking and finance rounds off the top ten with a fall of 19.3 per cent.

This represents the heartland of so called “white collar” middle class Australian employment and it is also the areas where large numbers of couples were enticed by the token interest rates and abundant bank credit to enter into a mortgage that would cause payment problems when rates and inflation were much higher.

The employment outlook change adds to the tension.

Bunnings is responding to the pet trend by opening up bigger pet sections in its stores. Picture: iStock

On an overall basis, job postings in 70 per cent of occupations were down 10 per cent or more.

Not surprisingly the ANZ-Roy Morgan Consumer Confidence index has now been below 80 for four straight weeks averaging 77.5.

This is the first time the measure has been below this mark for four consecutive weeks since the early days of the Covid-19 pandemic.

The best performing occupation in Australia is looking after pets.

According to Indeed, job postings the veterinary sector rose a staggering 22 per cent.

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Not only has the pet sector benefited from increased ownership of pets but owners are spending much more on the welfare their animals.

Bunnings is responding to this trend by opening up bigger pet sections in its stores. Australians’ willingness to put the welfare of their pets ahead of other priorities will, of course, be tested as the slowdown gathers intensity and mortgage stress multiplies.

The only other area in the February job posting black was agriculture and forestry.

Among the smaller falls were hospitality, engineering, sports and project management.

Indeed itself has shed staff by 15 per cent on a global basis including Australia, reflecting its view that employment advertising is headed for a considerable decline.

On an overall basis Australian job postings on Indeed fell 5.9 per cent in February compared to a month earlier, leaving postings 1.9 per cent lower than February 2022 and down 17 per cent since the end of last year.

Nevertheless, labour demand remains strong with Australian postings still more than twice as high as they were prior to the pandemic.

Indeed expects posting levels to decline further this year as high inflation and rising interest rates are likely to lower job creation as businesses become more concerned about the outlook for their operations and the broader economy.