Tech sector rebalances after period of unsustainable growth, says index
New data from Employment Hero suggests a 'correction' in the tech sector as the industry seeks to rebalance following an era of soaring valuations and salaries. The latest Employment Hero SME Index, which utilises a comprehensive dataset of over 140,000 small and medium-sized businesses (SMEs) and 1.4 million employees, shows that the Australian technology sector is self-adjusting after experiencing unsustainable growth.
The Science, Information and Communication Technology sector saw a -0.1 percent monthly decline in average employee growth and a drop of -1.8 percent in the median hourly rate. Despite these decreases, the sector retains the highest median hourly rate at $57.08, much higher than that of other sectors. These changes are likely an indication of the tech industry moderating from its previous elevated status entitled to steep valuations and salaries.
Ben Thompson, Co-founder and CEO of Employment Hero, commented, "The SME Index this month shows stagnating growth for the Science, Information and Communication Technology sector. While the growth data is telling, it is not a huge cause for concern. Following a period of unsustainable growth marked by sky-high valuations and salaries, it appears the industry is undergoing a correction."
Looking at current government data, predictions by Victoria University for Jobs and Skills Australia suggest that digital and technology jobs will grow by 21 percent by 2033. The White paper also shows how integral technology has become for Australia's economy. Between 2015 and 2017, SMEs that adopted technology rapidly saw their revenue grow by 3.5 percentage points, and employment rates rise by 5.2 percentage points annually, faster than other small businesses. Thompson suggested that the government should engage in fruitful discussions to stimulate economic growth. He also questioned the need for the government to spend $9m of taxpayer money to evaluate the merits of a skills passport when other private sector equivalents are already available.
He argued, "Why would the Federal Government spend $9m of taxpayer dollars to evaluate if a skills passport is worthwhile when there are already multiple examples of equivalent products working at scale provided by the private sector? For example, Swag by Employment Hero and Certsy by SEEK. This is a great opportunity for the Federal Government to partner with the private sector, which is years ahead, rather than compete with existing solutions."
Generally, the Employment Hero SME Index indicates a growing sense of financial caution among consumers in Australia. The Retail, Hospitality and Tourism sector experienced a -0.02 percent monthly decline in average employee growth, and the median hours worked annually decreased by -1.5 percent. Thompson noted that this decline in discretionary spending is hitting Australia's younger workforce hardest, and it would be interesting to observe the impact on hiring as we approach the holiday season.