Businesses held back as jobs go unfilled

A shop worker and customer in Sydney.
The retail sector is one of the hardest hit by worker shortages, with 40,300 jobs up for grabs. -AAP Image

The tightest labour market in decades sounds good on paper with an unemployment rate of 3.9 per cent, but businesses are up in arms over their inability to fill job positions.

New figures showed there were almost half a million job vacancies in May, more than double the number recorded in February 2020 before the onset of the COVID-19 pandemic.

The Australian Bureau of Statistics said job vacancies grew by 13.8 per cent over the three months to May to 480,100, compared to February.

"This reflected increasing demand for workers, particularly in customer-facing roles, with businesses continuing to face disruptions to their operations, as well as ongoing labour shortages," ABS head of labour statistics Bjorn Jarvis said.

The percentage of businesses reporting at least one vacancy also increased.

"A quarter of businesses reported having at least one vacancy in May. This rate was more than double the pre-pandemic level in February 2020, which highlights the extent to which businesses are finding it more difficult to find staff," Mr Jarvis said.

KPMG chief economist Brendan Rynne said Australia's labour market efficiency is falling.

"There is a mismatch between the skills people have who are currently available to work and the skills employers are seeking to hire - which is resulting in jobs being left unfilled," Dr Rynne said.

Business Council of Australia chief executive Jennifer Westacott said the ABS data underscores the critical worker shortages that are holding back the economic recovery.

"A shortage of workers puts a handbrake on businesses who want to expand and innovate, boost their productivity and pay sustained higher wages," Ms Westacott said.

The retail sector is one of the hardest hit, with 40,300 jobs up for grabs.

Australian Retailers Association CEO Paul Zahra said his industry simply cannot get enough staff, be it in frontline roles or specialist positions in data and technology.

"Exacerbated by overseas and student workers missing from our economy, staff shortages along with rising business costs related to leasing, fuel, energy and supply chains, is pushing many small businesses to the brink," Mr Zahra said.

"We need to see some immediate practical solutions from government, otherwise this situation will only deteriorate."

Still, while businesses are struggling to find staff, data released by the Reserve Bank of Australia indicated they were still confident enough to take on new loans, even in the face of the first rate rise in more than a decade.

Outstanding loans among businesses grew by 1.3 per cent in May, to be 12.9 per cent higher annually, the strongest pace in 13-and-a-half years.

Total credit grew by 0.8 per cent in May, just below the 0.9 pace seen in April and enough to lift the annual rate to nine per cent - also its highest since October 2008.

However, it was still well below the pre-global financial crisis peak of 16.5 per cent in December 2007.

Housing credit grew by a further 0.6 per cent in the month, to hold steady at 7.9 per cent over the year.

The central bank followed up its May hike with a 50 basis point rise in June, the largest increase since February 2000. 

Economists expect a further 50 basis point increase at next week's July board meeting.

"The lift in borrowing costs as the Reserve Bank continues to hike the cash rate will take some of the steam out of credit growth," St George chief economist Besa Deda said.

"But we expect credit growth will continue to find support from generous government incentives and an ongoing economic expansion."