Rates decision: ‘People want to remain confident, but every bit of news does erode that slightly going into next year’
All signs are pointing towards the Reserve Bank of Australia raising the cash rate another 25 basis points later today – an eighth successive month of hikes.
The RBA is convening for its final meeting of the year at 2.30pm (AEDT), and data from the Australian Bureau of Statistics yesterday reported an unexpected drop in private sector profits, with company gross operating profits falling 12.4% (seasonally adjusted) across the September quarter.
Mediabrand’s Coad
“I think people want to remain confident,” said Mediabrands CEO Mark Coad. “But it’s like every tiny little bit of news does erode that slightly going into next year. But I still think the needle is on the confident side of the ledger at the moment, but not as much as it was three months ago.”
Coad said in 2023 we’ll need to wait until around the March-May mark, when many households come off fixed interest rate periods, and “from that point on it will determine what kind of year we’re going to have”.
But consumers are still spending as the year comes to a close, according to chief strategy officer of Howatson + Company, Dom Hickey.
Hickey told Mumbrella that research has shown “spending hasn’t slowed down as much as we thought” after two years of lockdown, heading into our first Christmas completely out and about.
Hickey says consumers have their heads in the sand until the festive season is over
“I think everyone’s going into this Christmas hard, and almost trying to put that aside. But I think when we come into next year, we’re going to see people leaning into the behaviour they probably should have picked up a couple of months ago.”
After the end of this year, and the start of next that they needed, buying presents and had a great holiday season, Hickey said then “people will start to go ‘okay, now its time to buckle down’, so I wouldn’t be surprised if the top of everyone’s new year’s resolution is budgeting, pull it back and spend less”.
What is the cause of this?
Hickey said there is “definitely a little bit of the ‘ostrich effect’. People have their heads in the sand a little bit, and they know that they shouldn’t, but I think the temptation to have a break and not stress about something else is that bit too great”.
An eight rate rise of the year is on the cards today
“The research is showing that retail hasn’t really slowed, but I think next year it probably will, and everything will soften a little bit.”
The ABS also reported that wages rose 2.9% during the same quarter period, and are up 11% year-on-year.
Talent wise, pressure has eased – but ever so slightly, said Coad.
“Internationals are starting to turn up. Maybe post-Christmas after many have spent time with their families those moves back to Australia will accelerate.”
Coad continued: “Some of the digital platforms have reduced their workforces and that does release some good talent into the marketplace. But I haven’t seen any agencies with major contractions like that to this point in time.”
But this does result in more available talent he said. “Combined with that fact that many have worked hard to fill many vacancies does mean the pressure here is hoped to ease somewhat into next year.”
While there have been cuts across several agencies already towards the end of this year, Hickey said Howatson + Company as a ‘growth agency’ is “doing really well”.
“Speaking for the agencies strategic hires, the energy this year has made it an great company to join.
“I think the momentum the agency has had this year makes it something that people want to be part of, particularly in a market where it feels like everyone’s tightening their belts. To see an agency pushing forward with a sense of optimism and positivity, that’s attractive.”
“Bigger agencies reporting to networks will be under more pressure to tighten the purse strings a bit, whereas smaller indies can play a different game.”
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Calum Jaspan was news editor at Mumbrella, based in Melbourne. He was also the producer and host of the Mumbrellacast. He left Mumbrella in May 2023.
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‘Research is showing” – why not speak to the researchers?
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