We are finding across our diverse client base that there are many shortages for staff in the market – regardless of the industry. With the demand for good staff at new highs, and unemployment rates at 3.9% (the lowest since November 2008) the pressure on inflation is at the forefront of discussion.

What does that mean for inflation?

Inflation and unemployment have a longstanding inverse relationship meaning that when one falls the other rises and vice versa. We find in times of low unemployment the demand for workers exceeds the available staff on the market, however when unemployment rises the number of individuals looking for work outweighs demand.

In times of low unemployment, the population has more disposable income to buy goods and services with. This higher demand means higher prices thus causing inflation to have an upward trend. Contrast this to times of high unemployment when people spend less and buy less goods and services – putting a downward pressure on prices and hence reducing inflation.

What is the effect on businesses?

The additional wage costs places pressure on maintaining profit margins, not to mention the endless supply-chain issues and workforce challenges affecting businesses around the country.

This is leaving businesses to turn to increasing their prices and passing on these costs to consumers, while doing what they can to keep our other costs down. I think the public are expecting the price rise, but we need to ensure that they are empathetically and genuinely explained to customers.

It is vital for the government and central bank to ensure that inflation does not spiral out of control by effectively managing Monetary Policy (movement of interest rates) and Fiscal policy (governments tax and spending policies).

We have shown that our country is resilient and can adapt to change over the past 2 years and expect us to do the same again.

If you are wondering how you can plan your business operations to account for increasing inflation, speak with your advisor at Marsh Tincknell. Our role is to sit by your side and help you prepare for what may be around the corner.

Contact us on 07 3422 8000 or mtinfo@mtaccountants.com.au to arrange an appointment.

Adrian Tan,