Industry Research : Aussie Firms Defend Offshoring of Jobs
Business leaders defended on Wednesday the decision of Australian banks and other local companies to offshore jobs. They said the rising labour cost in Australia requires that businesses must have more flexibility in responding to market changes minus political criticism.
Due to the wage difference, it is cheaper to employ workers in London or New York than in Sydney, Macquarie Group Deputy Chief Executive Greg Ward pointed out. Australian banks are set to cut 7,500 jobs in the next two years some of which will be sent offshore to Asian countries where labour cost is lower. Macquarie plans to lay off about 1,000 employees in the next nine months.
"When you think about it, the Australian dollar is very high relative to some overseas jurisdictions and that has been a major factor.... It is more expensive for us to hire a mid-level accountant in Sydney than it is in London or New York. There was a time when the Australian dollar was around 50c, 60c, 70c and the pound was three-to-one. It is making it expensive," Business Spectator quoted Mr Ward.
The statement was issued in response to a criticism by Financial Services Minister Bill Shorten of banks' plan to send jobs offshore to India and other Asian countries while laying off Australian workers.
"Now the banks have done well and they're making great profits, there's an old saying: Don't forget the one who brought you to the dance," ABC Radio quoted Mr Shorten.
"The banks' success is not done on some island separate to the continent of Australia, it's through the support of the taxpayers.... Let us not have corporate amnesia," the minister added.
He said that Australian banks need to have deeper back office functions while improving the skill sets of employees.
"The easiest thing sometimes to do is just move people off your books, whereas I think sometimes if you take a longer investment attitude in people, you tend to get better productivity, better loyalty," Mr Shorten stressed.
Australian MPs are expected to closely monitor bank policies when parliament resumes Wednesday afternoon not only on their planned sending of jobs overseas but also if the lenders would increase interest rates even if the Reserve Bank of Australia announced on Tuesday that it would keep current overnight cash rate at 4.25 per cent.
Sending of jobs overseas has been a practice by many developed nations to cut labour costs, boosted by the telecommunications and Internet expansion since the 1990s. Experts estimated that 2.8 million business-support jobs in many western nations have been eliminated since 2000 and one million more are expected to disappear by 2014.
A report from the Hackett Group estimated that the one million jobs to be sent overseas by 2014 would include finance, human resources and procurement positions, with 450,000 from the IT sector. Due to offshoring of jobs the 4 million back office jobs in IT in 2000 has shrunk to 2.4 million and would even contract further to 2 million in the next two years, warned Hackett Group Chief Research Officer Michael Janssen.
"Commodity programmers, maintenance positions in the data centre and some higher-level application development jobs are at risks," he warned.
After 2.5 million jobs were lost during the 2008 global financial crisis, U.S. President Barack Obama recently offered incentives to U.S. firms that offshore tasks overseas to bring back the jobs to the United States.
However, Mr Janssen pointed out that brands are gearing for global markets.
"Political boundaries are not as important as business boundaries anymore. Money will follow resources and human capital... And most important, when you see these places with your own eyes - India, China, elsewhere - these countries are viable," Mr Janssen said.
It is not just banking jobs that are being shed in Australia. Last week, several large Australian firms such as BHP Billiton, Holden, Manildra, Reckitt Benckiser and Thales announced the axing of hundreds of jobs due to the strong Australian currency.
On Wednesday, Alcoa Australia announced it could sack about 600 workers as the aluminium smelter company in Geelong reviewed the plant's viability amid weak metal prices, soaring costs and the strong Australian dollar.
Alcoa Managing Director Alan Cransberg said the current situation makes it hard for Point Henry to be globally competitive in the foreseeable future.
Posted by Veronica Silva Cusi, news correspondent
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Published: Monday, February 6, 2012