Recovering from the aftermath of the COVID-19 pandemic and the subsequent economic downturn, New Zealand’s economy has been crippled with back-to-back recessions over the past 18 months.
With rising inflation, high interest rates, and the ongoing cost of living crisis, the significant pressure felt by the country’s economy is reflected in the tough labour market conditions – making 2024 one of the most challenging years for Kiwis in their recent memory.
With national economic growth at a standstill and volatile socio-political conditions across the globe, the outlook for the rest of 2024 looks gloomy. Information Technology (IT), much like other major sectors, has taken a significant hit off the back of large-scale redundancies and several strategic initiatives being put on the back burner due to financial constraints. Cost reduction is at the forefront of boardroom agendas, as public and private sector organisations continue to weather storm after storm in a bid to survive the economic downturn.
Mid-way into 2024, here are some of the key talking points emerging from New Zealand’s labour market:
1. Public Sector Job Cuts Could Trigger Record-High Unemployment by the End of 2024
To achieve the annual target of saving $1.5 billion in operating costs as outlined in the 2024 New Zealand Government Budget, over 6,200 public-sector jobs have been slashed as several government programmes have been stalled or postponed indefinitely. Three of the largest government departments have let go over 650 employees each, with several other ministries and agencies also announcing job cuts at scale to expedite their cost reduction efforts. With the total number of public sector redundancies projected to exceed 7,500 in the coming months, the unemployment rate, which is currently at 4.3% (as of the March 2024 quarter), could reach a record-high 5% by the end of the year. According to Stats NZ, the underutilisation rate is currently at 11.2% - up from the 9.1% figure from the same time last year and yet another indication of the challenging labour market conditions.
Workforce ramp-downs in the public sector have created a ripple effect on the private sector, with 700+ documented redundancies already in H1 of 2024. The bulk of these stem from the closure of Newshub by Warner Bros. Discovery and job cuts made by the state-owned broadcaster TVNZ, as well as other businesses within the food and beverage, construction, healthcare, and banking sectors. Unsurprisingly, employee morale is low, with many Kiwis fearing for their jobs or being stuck in their existing ones due to the limited external opportunities available at their disposal.
2. Job Advertisements Plummet but Applications Rise Highlighting the Cut-Throat Competition
The decline in hiring activity due to reduced spending of organisations across New Zealand’s public and private sectors is epitomised by the dwindling number of job advertisements on online platforms. According to Seek New Zealand, the total number of job postings dropped by 5% (m/m) in May 2024 and are down by over 30% (y/y). Marlborough and Wellington recorded the steepest decline with job advertisements falling by a whopping 46% and 42% respectively. Unsurprisingly, there was a greater decline of job openings in regions outside the urban centres when compared to the core cities, indicating a further limitation of opportunities for those based in the remote areas and rural districts of New Zealand.
While job advertisements plummeted, the number of applications per open role has continued to either remain steady or grow over the past few months, with April 2024 recording a whopping 69% in applications when compared to the same time last year. With an excess of candidates seeking employment opportunities and very limited active positions available, the competition for roles, particularly those that are entry-level and less technical or specialised in nature, is more cut-throat than ever. Candidates need to upskill themselves and make their resumes stand out if they are to capture the imagination of recruiters and hiring managers.
3. Trans-Tasman Migration Indicative of Kiwis Looking to Move Abroad for Better Opportunities
Although migrant arrivals into New Zealand have risen by 25% (y/y), the number of departures has gone by up nearly 33% (y/y) - a telling sign of Kiwis looking for greener grass on the other side of the ditch. In the past twelve months leading up to April 2024, 56,600 New Zealand citizens left the country to explore better career prospects overseas, exceeding the previous record of 44,400 in the February 2012 year. Majority of them fall within the age bracket of 25-44 years and have moved to Australia, with the country now intaking 2,000 more Kiwis on average per month. This is already posing a challenge of significant local talent shortage and brain drain within the existing New Zealand workforce which cannot be easily compensated by the incoming immigrant pool. Needless to say, employers face an uphill battle to retain their top local talent amidst the lure of overseas pastures.
4. Employers are Looking for AI Skills but Struggling to Attract and Develop AI Talent
As most organisations look to streamline their operations, optimise costs, and achieve more with less, automation and Artificial Intelligence (AI) have emerged as key focuses. New Zealand-based employers are willing to pay employees 30% more on average if they are equipped with AI skills, with the number rising to 41% in IT. Over 90% of organisations aim to be AI-powered by 2028 – yet this will likely remain a pipe dream if they cannot bring in AI specialists and SMEs. In fact, majority of businesses are struggling to find skilled AI talent locally and 79% of them do not have the expertise and operational bandwidth to run AI-based training and workforce upskilling programmes. Organisations need to recalibrate their hiring and people development strategies as well as form the right strategic partnerships to bridge the talent and skills gaps crippling their workforce. For candidates, this represents a huge opportunity to stand out in a highly competitive labour market by enhancing their skills and competencies in AI and be future-ready by tilting the tide in their favour.
After a slow start to the year with many key economic metrics trending in the wrong direction, there seems to be some stability returning and optimism for how the year will finish. Organisations under pressure to realise efficiencies and reduce costs will continue to explore and invest in technology innovations.
Amidst the ongoing economic volatility, the immediate outlook for New Zealand’s IT labour market looks rather gloomy. However, there is a silver lining amidst the clouds – most economists and labour market analysts believe that things could take a turn for the better in about 15-18 months from now. While overall macro-economic recovery is expected to take time, unemployment levels are likely to go down eventually, easing the pressure on the labour market. By harnessing insights from the latest trends, adopting proactive measures, and unlocking the opportunities embedded within the existing challenges, businesses and professionals can navigate these difficult times with grit and resilience to bounce back stronger.