Has the election been perceived as positive or negative for the job market? Let’s take a look.

This week it’s been all about the election so I’ve been gauging whether the results will likely have a positive or negative impact on the New Zealand job market.

I’m pleased to say that the feeling, regardless of political persuasion has been generally in the positive.

There’s a general consensus amongst recruitment leaders that election years put a huge handbreak on activity. It’s perhaps even more evident in Wellington than the rest of the country but it affects us all.

Logic dictates that organisations will wait on big investment to see what changes will be made post election. Central government comes to a standstill of course;  there’s no point starting something new, only for it to be kyboshed if another party comes into power.

Now regardless of your political leanings, there’s less uncertainty now than there was last week. We know it’s a National, Luxon led government. The final part of the MMP jigsaw will only be confirmed once all special votes are counted. They will decide whether Winston Peter’s NZ First becomes a major influence. Regardless, the centre right direction the country will take over the course of the next 3 years is set.

I’ll look forward to the data but the anecdotal evidence from my conversations this week is that business confidence has taken a swing up. I’ll give you some of the reasons for this positivity.

National’s Proactivity

The first is that National built their election campaign partly around Labours perceived lack of delivery. This means that they must be seen to be action oriented. As soon as negotiations with Winston are complete, should they be required, they’ll be keen to get moving. This means 100-day action plans, and mini budgets before Christmas, all gearing up for major budget decisions for the new financial year in April.

National will want to make a statement with key infrastructure projects, the key areas being affordable housing, congestion, and water quality. How they’re funded will be important, remembering they promised innovative ways to do this with investors, ACC, NZ Super Fund and KiwiSaver, along with reducing the consent processing time. Easier said than done, and I think everyone understands it won’t be an easy fix, but National will be looking to gather momentum sooner rather than later.

The Economic Revival

Natiaonal can’t claim any credit for the economic revival just yet but it appears to be swinging favourably just as they take up the reins. Inflation is steadily coming under control. Consumers tend to reduce spending around election time and pick it up again post-election. This year I think this will be tempered somewhat by cost-of-living increases, mainly because of the higher interest rates, and this will in turn start to bring our inflation levels back to an even keel.

A drop to 5.6% inflation was larger than many predicted and has reduced pressure on more interest rate rises. Stats NZ predict that inflation will return to the reserve banks target band of below 3% by September next year.

There’s confidence that 2024 will see further economic stability and GDP growth, removing talk of recessions from around the coffee machine.

Political Ping Pong Balls – Employment Legislation

One political ping pong ball that is firmly now in National’s court is the 90 day trial period for all employers. This law was first introduced by National in 2009 and has been restricted to employers of 20 employees or less by Labour. National will likely overturn this. ACT is also quite keen on limiting minimum wage increases. The likely changes would favour employers, they may be less employee friendly however, and will provide more business confidence to implement hiring decisions.

Net Positive Migration Figures

I don’t know about you, but with the long-wet winter, a gloomy financial outlook and the cost-of-living increasing, migrating to sunnier climes and a more prosperous life have been high on the agenda amongst my circle of friends. Australia and the Brisbane, Gold Coast, Sunshine Coast triangle have been the key destinations. Much to my surprise, the UK has been quite high too,  although I personally don’t quite see the attraction there myself.

Now this brain drain could be a major issue except that net migration figures are very strong. The figures to April 2023 were 170,000 people in, versus 100,000 leaving, a net gain of 70,000.

I certainly don’t like to see our great people depart, at least if they go to the UK I’d expect to see them back pretty quickly. Nothing against my homeland, I love it dearly, but it is very cold and very crowded, so unless you’re in your 20s and going on an OE, in which case you’ll be back in time for your 30s and having kids anyway, don’t do it!

So yes, I don’t like to see great people leave but there is a skilled workforce coming in. High migration does keep a lid on spiralling wage costs. We saw the opposite during Covid when wages rocketed, so more reason for employer confidence going forward.

And finally, a great topic of conversation at this weeks RCSA meetup:

The RCSA October 2023 Job Report

After 3 consecutive quarters of contraction the NZ jobs index rose 3.7% this quarter. I’ve really felt this in the IT sector. There was a massive 28.5% fall in the June quarter, and a real contraction of the contracting market. Permanent recruitment is now back to almost “normal” market levels and contracting will follow through.  I expect a stronger demand again soon.

Contracting may bounce back again before Christmas with employers taking advantage of more competitive rates before it tightens up again in time for the new financial year. The thing about contracting is that new migrants will be most likely looking at permanent roles. There will be a limited number of people available with tried and tested contract project history next year when the demand hits. This will likely push rates closer to Covid levels again.

You can find a copy of the job report here.

The Big Picture

It’s important to note that the effects of a new government’s policies on the job market can be complex and often take time to materialise. There are significant global factors not least wars in the middle east and eastern Europe that will create challenges domestically and a National led government will be facing a big task ahead to fulfil their promises.

Confidence however is just a feeling, and the feeling from this weeks’ round of conversations is that we have good cause to feel hopeful about business opportunities and the job market going into 2024.