NSW is facing the worst year for its financial sector since the global crisis. Even without an escalation of the problems in Europe thousands of CBD jobs are at risk.
“Sydney’s finance sector businesses grew fat and lazy during many years of double digit credit growth through to 2007,” Deloitte Access Economics says in a report released this morning.
Although banks and finance sector firms rebuilt their workforces after the global financial crisis, many were “now reassessing their cost base — they think they have too many employees.”
“They thought we would return to double digit credit growth,” said report author Chris Richardson. “It couldn’t have gone on forever. Borrowing had been climbing 10 to 12 per cent per year while national income had been climbing 5 to 6 per cent per year. Instead we are saving. The party is over, and the realisation has only really dawned in the last six to nine months"...
Already Westpac is preparing to axe 1000 middle management positions and the ANZ has sacked 130 back office staff.
Mr Richardson said the damage would be felt most keenly in Sydney.
“Sydney is home to half the finance sector businesses in Australia. The sector accounts one in three Sydney CBD jobs,” he said.
“If Europe blows up, the finance sector cutbacks will be even deeper.”
Deloitte Access Economics is forecasting NSW employment growth of just 0.5 per cent this financial year, half the national average. The economy would grow at 2.3 per cent, well down on the national rate of 3.2 per cent.
This morning’s [MON] CommSec State of the States report places NSW in the bottom rung of economic performers along with South Australia, Tasmania, and Queensland. Western Australia is alone on the top rung. Victoria and the Australian Capital Territory share second place.
Mr Richardson said at the same time as the financial sector cut back the public sector would shrink as a result of Commonwealth cutbacks and a state government decision to “tread water”.
Retail was “not doing much,” and the manufacturing sector - vital to Western Sydney - was winding back.
The big plus for NSW was that its residents were heavily mortgaged, and so extremely sensitive to interest rates. “The lower rates will help in NSW more than anywhere else,” Mr Richardson said. “The overall outcome might not be too bad. But the finance sector will go from being a support to being a drag.”
Published in today's SMH
. Banks need to lower their expectations - the rest of us have
. RBA to the banks: Get real - your golden days are over