If Australia follows the US into a tech downturn, these areas will be the most impacted

Nerida Conisbee,
Ray White Chief Economist

We may be in a cost of living crisis but we are certainly not in an employment crisis. Total employment since just before the pandemic has increased by 762,600 people and unemployment is now at its lowest level in 50 years. As interest rates rise and the economy slows, it is unlikely that this will remain the case for long. 

While employment growth has been particularly strong, some jobs are in less demand than before the pandemic. Jobs in manufacturing, agriculture and wholesale trade have continued their long term decline. More surprising however has been the decline in information, media and telecommunications. While this sector grew during the pandemic, employment this year has declined by 19,000 people and is now lower than what it was in February 2020. While this may partly reflect fewer jobs in media, it is likely also reflective of the start of a broader global trend of a tech downturn and fewer jobs in information technology. 

Mass redundancies at US technology firms have been rolling through since last year where more than 70,000 jobs have been made redundant within the biggest firms. Microsoft, Amazon, Meta (Facebook), Alphabet (Google) and Salesforce have made the biggest cuts with all of them having staff in Australia.

Local tech companies have yet to announce large scale redundancies with many seeing now as an opportunity to get some of the best staff. Smaller companies have however started to reduce headcount and this may then flow through to the bigger employers. In addition, the share price of many local firms have plummeted and they would be under pressure to reduce costs. For technology firms, redundancies are the quickest way to do this. 

If we start to see a US style tech downturn in Australia, it will impact Sydney and Melbourne the most. Both cities combined employ 70 per cent of people employed in information, media and telecommunications so are most exposed to tech sector changes. The regions that are most likely to be impacted are the inner suburbs of Melbourne and Sydney, however, Gold Coast also has a particularly high number of tech workers. 

What does it mean for property? While the economic downturn at the start of the pandemic was particularly bad for people with lower incomes, a potential downturn this year in Australia is most likely to impact higher earners particularly if it is a tech downturn similar to the US. This will not only impact property prices but also rents given the younger profile of most tech workers.