G'day, everyone. My name's Ray and I'm the founder of electricianXchange, a platform using technology and AI to connect A-Grades and apprentices to employers for work quickly, efficiently, and at a low jobs type cost.

The topic for today's podcast is “Will the Economic Pessimism in 2023 Apply to the Electrical Contracting and the Electrician Industry”?

The podcast is part of electricianXchange's podcast series. Previous podcast episodes are available through electricianXchange's Spotify, Apple and Google Podcasts account or via our website, www.electricianxchange.com.

Now, why do I want to talk about this topic? As founder of electricianXchange, I have several electrical contractors, employers, and even A-Grades, electrical apprentices calling sometimes and asking "How's the market going? Where do you reckon the market's at?" and so on. And that's a fair thing to want to understand, either as the owner of the business or someone that's worried about where the next paycheck comes from. Whether it's in terms of hiring the electricians, investing in inventory, managing cash flows. I mean, it's not unreasonable to have some concern about that. And it can have ramifications on hourly rates for A-Grades and apprentices too from an employment perspective, because if demand falls because of poor economic conditions, then hourly rates could be expected to fall as well.

Now, let's have a look at the conditions affecting the general economy and then let's look at whether these conditions affect those in the electrical industry, either as electrical contractors, A-Grades or apprentices, and A-Grades either on a permanent or subcontract basis. 

So 2022 started with some uncertainty in the marketplace post COVID, with the war between Ukraine and Russia causing this uncertainty, and this translating into higher petrol prices in 2023. Now, some may say, how does this actually affect me? 

You only have to look at petrol prices and see how the cost of petrol has gone up, where for several weeks’ prices have been more around the $2 mark, $2.15 mark, rather than the typical $1.65, $1.70 mark, with diesel prices even higher.

Then there's the impact of interest rate rises. Now, some may say, how does this affect our industry? Well, 50% of businesses aresingle person businesses, and 97.5% are businesses with a staff of less than 20. So most owners of these businesses would own homes and by implication have mortgages they need to manage on the personal front, visa bills they need to pay, and for many small businesses, have credit owing on the credit card or to short term lenders. This is not uncommon. So interest rates have impact on the general economy and, by implication, to electrical contractors and owners in this niche, as well as to A-Grades that might own their own house.

Then there's the issue around Australia-China relations and the supply chain aspects vis-a-vis products purchased from there, if the Chinese are your suppliers. 

On top of that are builders going bankrupt, and the implication this has on monies owing to electrical contractors and employers. 

Then there's the general pessimism regarding job losses among technology companies laying off their staff. But all of this happening, one may assume that the electrical industry is also facing dark clouds, but no, that is not the case and here is why.

Let's look at the issues that I mentioned earlier. Petrol: For any service-oriented business, salaries comprise the largest cost, and while petrol is a cost in the P&L of a business, it's probably 4 to 5% of the total cost of the business. So that by itself is not what's going to break the bank, or that's got a low impact.

With interest rate rises, now that's a personal dynamic, but for those over leveraged either on the personal or business front, yes, this can be an issue, but this has more to do with the management or lack of management of a particular business or a budget rather than on the economy and economic conditions. So if one is highly leveraged, it was only a matter of time. I don't think anyone expected interest rates of less than 1%, which lasted between 2016 to 2022, to remain at the level for long. The glass half empty is yes, interest rates are rising, but the glass half full argument is that if interest rates are rising, it means inflation is high, and inflation is high because demand is high, and there's a feeling of continued optimism within the economy. So you can't have it both ways. A low interest rate is synonymous with subdued conditions; a high interest rate is synonymous of more robust conditions. So conditions is what matters, and I'll talk further about it as it affects this industry, and based on that, I think we're going quite okay.

The next was supply chain issues, but this was more a case during COVID and during the country related lockdowns, and it's as much of an issue now as it was say 20 months back.

The next I spoke about was construction companies folding over, but commercial is only one component within the electrician and electrical contracting industry mix. There is domestic work, data and comms, home and office security, home and device automation and smart homes, battery technology, ESVs that B2B rolled out and charging stations that need to be constructed. Then there's the electrical safety checks on rental properties, which can only be done by licensed electricians. Then there's the rooftop solar, which is still proceeding unabated with commercial solar and the likes of your KFCs, McDonald's, hospitals, prisons, schools, shopping centers, still proceeding quite well. And then we've starting to have offshore solar as well, which is coming about. There is the VEU program of changing LED lights across Australia, and that can be done only by license electricians.

If you Google electrification of the world, there are a great number of articles including a book by Saul Griffith, about the increased demand for electricians generally as the electrification of the world takes place. So energy efficiency and the way everyone uses electricity is in focus. So there is so much demand in this particular segment that it's a supply of A-Grades and apprentices available to meet this which is the more pressing issue, not the pessimism but the lack of optimism in this industry, specifically.

Even job losses that I spoke about, it's happening within technology companies. And it makes sense that technology companies, as they become more efficient, shed staff. That's not rocket science, but will this apply to electricians and electrical contractors? Does anyone really think robots and automation will take over the jobs of electricians, especially given the safety aspects related to electricity? So job losses are not a fear for this industry. Sure, for some companies affected by the commercial sector, as I've said earlier, that is a factor, but that's among so many other positive things that this industry is facing. Demand has never been higher for this industry.

Now, the way economics works, if demand is high, as I've outlined it is, then it depends on supply, for a determination regarding price being charged to customers and hence optimism or pessimism in this industry. This is irrespective of whether it's for rates per hour for those employed on a permanent or contract basis, or prices to customers for those in business. If supply was in abundance, yeah, there could be some indication of pessimism. High demand and even higher supply could cause issues, yeah. But supply of staff is at its lowest. For every 10 employers broadly that I see in managing electricianXchange, at least three to four business owners will just not find the staff that they need. There just isn't enough.

So it's not the optimism or the pessimism in this industry, which needs to be a topic of discussion. It's a supply and how to increase this which is the greater issue. Based on the last Bureau of Statistics data, 30% of A-Grades are above the age of 50. So there's an aging demographic. And with electrical work being of a physical nature, it's not like A-Grades can work beyond 60 or 67 as those that work in the finance or banking industries can do. So one third of the supply is limited.

Then there's the new supply of apprentices. 17 to 25% of apprentices do not finish their apprenticeship. So the new supply is not even enough to meet yesterday's demand, leave alone today's demand or tomorrow's demand with the increased electrification of everything that's coming about, and the different demand pockets that I've actually just spoken about. And supply can't be enriched with overseas migrants because one needs to be locally qualified to work independently as a licensed electrician, and it takes 18 months to train overseas electricians. And it's not like overseas countries aren't facing the same issues as we are with low numbers of qualified electricians in their own workforce.

So my assertion is this, let's not worry about demand. There is a lot of it. Let's start to talk seriously about supply, and that's something electricianXchange focuses on, and this will be the topic of another discussion and podcast, so keep listening. Till then, take advantage of the work around. Work smarter to pivot. So if commercial work is reducing, move to something else by collaborating, by bringing in new skills catered to the new demand. Take advantage of the demand still there. Use the mix between permanent and contract as well to manage margins better. Permanents not fully utilized are a drain on the P & L of a business, which I've spoken about in an earlier podcast. Find your best permanent/subcontract mix to enhance profits, and use a technology like electricianXchange to rocket fuel your business. Call me and I can show you how. Till then, keep listening to the podcast. Do call if you've got any thoughts, ideas, suggestions, and until next podcast, I wish you all the very best.

Hope you've enjoyed today's podcast. My aim out here has been to try and get everyone to come on the same page. Whether it's in terms of looking for work where those looking for staff and those looking for work come together, whether it's in terms of sharing ideas and aspects through which we as an industry can benefit from, here are ways through which I'm going to bring other interviewees, individuals that are expert in the topics that I choose. And there are some really great topics that are relevant both for those looking for work and those that are hiring. So listen in. If you have any suggestions, if you'd like to contribute, if you disagree with what I say, that's also okay, let me know. I think at the end of the day, if we can all contribute, then as an industry, we will benefit. That, I guarantee.

So here's my number. It's 1300 353 364. It'll come through. You can ask for me. My name's Ray. I am the founder and I am more than happy to listen, help, guide, contribute to anything I can, and let's make these podcasts something that can be of benefit to all of us. Cheers.