Budget holds key for Canberra contractors

Appeared in: iTWire
Author: Beverley Head
Date: Monday, 02 May 2011

While there are early signs of an improvement in the market for ICT contractors in Canberra – many recruiters will be holding their breath as it’s a fragile recovery that could be dashed by next week’s Federal Budget which has already been flagged as a cost cutting affair.

Peoplebank today released its Federal ICT Labour Hire Index, which measures the cost of a unit of labour hire and tracks contractor demand. While the report shows that there is significant strengthening over 2010 – the market is still 8 per cent down on the pre Gershon year of 2006.

Despite the apparent fragility of the recovery the report predicts that demand will rise 25 per cent or more through the next couple of quarters.

“Anecdotal evidence from the Canberra IT market indicates that contract demand is likely to continue strengthening through 2011 underpinned by the commencement of many new projects which had been delayed in 2010 when the Government entered caretaker mode,” according to the report.

The index hit an all-time low in April 2010 as a result of the Gershon reforms which obliged government departments to where possible swap contractors for permanent employees, and also due to the prolonged uncertainty associated with the Federal election. The number and value of contracts through late 2010 was consistently lower than comparative figures in 2009.

However by December 2010 the Index stood at 1263, 5.4 per cent ahead of the December 2009 figure and well above the April all-time low of 773.

Peoplebank CEO Peter Acheson told iTWire that it would only be in October or November this year that the full extent and robustness of the recovery would be made clear, as by that time government departments would have had time to respond to Budget measures. “The signs have been good but we are expecting a tough budget,” he said.
Impact on rates? read on…

Mr Acheson said that most government departments had now achieved the overall financial targets required by the Gershon review and that AGIMO (the Australian Government Information Management Office) had been “quite positive about the outcomes of Gershon in terms of economic benefits.”

Having met the requirement to replace contractors with permanent employees where possible, departments were again “turning to contractors to plug the gaps.” This was putting upward pressure on rates particularly as Canberra had to compete with the active markets along the Eastern seaboard and in WA.

While some Canberra candidates were “drifting back” to the ACT, others had “long memories and will not go rushing back” said Mr Acheson, which may challenge Canberra to keep a lid on contractor rates if skills demand continues to rise post Budget.