After a couple of grim years, there is finally a growing sense of confidence that the worst of the Australian IT jobs downturn is behind us.
Over the years, the team at Balance have witnessed a number of far more severe downturns (Covid, GFC, Post Y2K/911/.com). However, we’ve never seen a downturn that has lasted quite so long. This was, to use a geological metaphor, a large shallow glacial valley rather than a steep river gorge.
This time we didn’t see the mass layoffs, the wide-spread project cancellations, the big day rate reductions and the sheer desperation in the eyes and voices of those looking for work. Certainly, many job seekers struggled, but it wasn’t as catastrophic as previous cycles.
Looking ahead, the climb out of this downturn appears, for now at least, to be similarly gradual with demand and activity gently rising, as opposed to the catapult effect we experienced out of the Covid downturn.
So, let’s look at the 5 key factors (both positive and negative) that I believe will drive a broad based and gradual improvement in hiring activities over the coming year.
5 Factors that Drives the Recovery of IT Jobs Market
1. Career Debt
I’m coining a new term, ‘Career Debt’. Similar to tech debt, it’s the price workers pay for staying in a less-than-ideal role. Over time, the cost of staying rises, leading to an increased desire to leave and eventually higher levels of attrition. The length of this downturn has created more career debt than other downturns.
Late last year, we saw a steady uptick in demand from customers, with many candidates reporting more job openings, headhunts, and offers. We believe this is partly due to high levels of career debt across the sector. Typically, a job market rebound is driven by new projects or IT initiatives, but we’re seeing only moderate volumes of new projects.
Candidate confidence is rising and workers who previously stayed put are now emerging from hibernation to pay down their career debt by seeking new roles, leaving their old ones behind.
So, the increased role volumes are driven by a much needed but moderate rise in demand and also a higher turnover rate. We expect this trend to continue through the year.
2. AI
AI adoption is now widespread, almost every organisation has implemented solutions that focus on individual productivity, like Copilot. However, it has had minimal impact on the IT job market, as most implementations use existing resources—let’s call this Stage 1.
As AI in Australia and globally matures, we will move into Stage 2 and this will see more of an impact on the jobs market as businesses look to integrate AI solutions into every business system. This process will have some quick wins but we’re starting to see plenty of consulting and IT services firms sourcing AI talent to provide services to their customers aimed at helping them on their AI journey. As more businesses take a holistic approach to AI adoption we’re expecting to see an increase in roles both within enterprises and from their service providers.
Stage 3 is full business transformation, where AI drives innovation and disruption. Start-ups are developing sector-specific offerings, tech companies are building AI solutions, and some businesses are creating in-house applications.
Though still small in the local market, we expect this trend to grow throughout the year. It will be exciting to see well-funded start-ups mature, offering attractive roles, and possibly equity or salaries that will draw job seekers. However, some of these businesses will fail quickly, while others may grow into successful ventures. Job seekers face the challenge of distinguishing between the good and bad, a challenge also faced by investors and customers.
*The 3 stages of AI were devised by Canadian consulting firm Compugen
3. Tech Investment Backlog
After the all-you-can-eat buffet spendathon of post-covid, most IT leaders have been on the weight-watchers budget for the last couple of years.
Whilst many environments have managed to do more with less, a lot of initiatives and serious innovations have been kicked down the road. And at some point, there will need to be a game of catch up. With an uptick in consumer confidence, inflation largely in check and looming rate cuts, we’re predicting that CFO purse strings will continue to loosen over the course of the year.
4. Government
There’s an election coming, and once announced, the wheels of the Government move a lot more slowly during the campaign (caretaker mode) and post-election (machinery of Government). The Federal Government is a major employer in the tech space and 3+ months of reduced activity will certainly be felt.
Regardless of the victor, we can expect the business of digitising government to continue apace. The Coalition are favourites with the bookmakers to form the next government, with current odds at $1.55 or a 65% chance. If successful, we can expect the Coalition to increase spending on consultancies, systems integrators and contract labour. If Labor turn their fortunes around and return, there will be continued effort to employ more permanent IT staff. Despite the quiet market, attracting tech staff to permanent public sector roles has proven challenging, as APS tech salaries sit around 40% below contracting rates. Attempting to do the same in a gently rising market will likely stymie a Labor Government’s efforts.
5. America
Firstly, in positive news, tariffs are levied on goods rather than services. So American organisations who offshore their work across the globe should not be directly affected. The initial reaction to the tariffs and the Trump presidency has been an increase in the USD and a converse softening of the AUD. This certainly continues to make Australia appealing as a tech destination for US businesses.
That’s probably where the good news stops, a global trade war will have very few winners and this single issue could significantly outweigh all the other positive factors in play. Let’s hope the situation resolves in the short term but sadly, I suspect we’re still at the aperitif stage.
In summary, it’s looking far more positive than 12 months ago, however to quote 80’s Aussie super group Boom, Crash, Opera, ‘these here are crazy times’.