You Can't Control the Economy. You Can Stop It Controlling You.

Digging Deeper

Macroeconomics studies the environment that you are operating in as an Australian business owner. Microeconomics is the art of utilising your systems and strategically responding to macroeconomic forces. The goal isn’t to become an expert forecaster, it’s to place your finger on the macroeconomic pulse to inform your short to medium term business strategies. Then lean on your systems to execute.

Reading the labour market as you grow your team

The definition of ‘unemployed’ is strict. To be genuinely considered unemployed you have to be actively seeking employment by applying to jobs and be available to start work immediately. Workers who have retired, taken a career break, or given up on trying to find a job (discouraged workers) are not included in this statistic (ABS, 2023).

It is important to note that low unemployment is definitely not 0%. A small rate of unemployment includes people changing into higher paying, better matched jobs. Additionally, a labour market running at 100% capacity is running toward burnout. In February 2026, the Reserve Bank of Australia (RBA) noted the unemployment rate of 4.1% as low. They stated the labour market remained strong and resilient despite high inflation (Bullock, 2026).

If you are needing to make a new hire in a tight, competitive labour market, plan for the fact that hiring may take longer than expected. Especially for industries already experiencing shortages such as construction and allied health. When potential candidates have a surplus of options, having a clear communicative recruitment process that supports candidates is a great way to set yourself apart from other employers. A potential employee’s recruitment experience is their first impression of what it’s like to work for you.

When unemployment is higher, more applicants flock to your job listings. It is important to have a distinct, logic based recruitment process to narrow down the right fit. No matter the economic climate, having a reliable team is vital. Every single hire you make has to be able to adapt with the business through economic cycles.

Some analysts assume that low unemployment means more money stimulating the economy. This assumption fails to consider how much of that circulating cash is discretionary. It doesn’t account for a worker’s hesitancy to risk leaving their current role for a higher paying one due to economic uncertainty elsewhere.

Alternatively, workers opting out of the labour market contributes to a reduced unemployment rate. In February 2026, the RBA noted a drop in the unemployment rate for December 2025, potentially due to workers transitioning between roles. Some alternative measures of labour market capacity remained consistent through 2025, contradicting the widely reported unemployment rate for December 2025 (RBA, 2026). This is a key reminder that headlines and indicators don’t always tell the full story.

Understanding budget constraints: both your own and your customer’s

Consumer price index is an aggregated estimate of how much the cost of goods and
services have increased in the previous year. The RBA aims to keep this figure between 2-3%. Any higher than consumer purchasing power starts to rapidly slip away.

Headline CPI is what you pay after penalties (oil crisis in the Middle East) or discounts (Household energy subsidies). Trimmed Mean Inflation aims to measure inflation when all those factors aren’t there. Trimmed Mean is what the RBA considers when making interest rate decisions but headline is what is reported in the news.

The CPI basket is broken down into several categories. Investigating the category your business falls under gives you a slightly closer view of what your customers are experiencing from your industry.

When assessing your prices, ask if they are keeping up with inflation. Is that the strategy you want to embark on in the first place?

Producer Price Index is a useful macroeconomic indicator for business owners. It directly measures the costs of production materials and how they have moved with inflation. The best pricing data is your own data. Have you been getting an influx of price increase emails from your suppliers? What is the average of those increases? Have you noticed reductions in your profit margins? These are indicators drawn from your direct experience as a business owner. For business-facing professional service firms, PPI is a closer reflection of what your customer base is experiencing.

CPI and PPI releases are an opportunity to assess your costs and profit margins, then make critical decisions from there.

Price elasticity of demand refers to the changes in demand for a product that occurs when the price of that product changes. If a product is deemed to be essential/difficult to go without and/or has few suitable alternatives, then the demand for said product is less affected by changes in price. Discretionary products with many alternatives are highly sensitive to price changes. Just take note of which products are on special in your grocery catalogues and which ones are not.

With that in mind, as your production costs increase each year, you can strategically decide how much you want to absorb and how much you want to pass on to the price of your product for your customers. Meticulous pricing strategy decisions rely on accurate book keeping to make a truly informed choice.

When the RBA increases the cash rate, they are hoping households spend less due to budget constraints. On the consumer side this introduces income elasticity of demand. Similar to price elasticity in demand except the shifts in demand occur because of changes to consumer income.

When consumers face budget constraints they turn to cheaper alternatives and essentials. If you are a business with a wide range of services perhaps it is worth shifting your marketing towards the more essential services in your business.

Marketing is a great way to make use of shifts in consumer sentiment. An allied health clinic may choose to promote preventive/essential treatment when consumer budget constraints are tight and then shift toward cosmetic procedures when monetary policy eases again.

Fundamentally, your customers are seeking value in your products and services. The way you communicate that value may shift through economic cycles but serving your clients value through the entire customer journey is key.

The secret is that discretionary vs. non-discretionary spending is at the discretion of each customer. You can read more on this in our article on consumer sentiment.