David Jones has entered administration just a day after Canva announced that more than 1,200 employees worldwide would lose their jobs, putting the spotlight on growing uncertainty across Australia’s retail and technology sectors.
The two companies could hardly be more different in age. Canva is 13 years old, while David Jones has been trading for 188 years. Yet both have become symbols of the pressure facing businesses and their employees.
David Jones’s administrators will assess which stores can continue operating after the retailer failed to pay rent owed to Scentre Group, the owner of Westfield. Scentre said the department store had paid little rent since the end of September.
For now, the company’s shops and online operations remain open. Chief executive Erica Berchtold told staff: “For today, our stores and online operations remain open and trading … You remain employed and should continue your normal duties unless you are directly advised otherwise.”
The administrators will consider whether a smaller version of the retailer can survive. Rival department store Myer may have an opportunity to acquire parts of the business at a substantially reduced price.
David Jones has survived repeated predictions of its demise, including the rise of online shopping. Its department stores remained important to generations of Australians buying wedding presents, their first suits or visiting Christmas displays with their children.
But that longstanding affection could not remove the commercial pressures facing the business. Thousands of employees now face the Christmas trading period uncertain about whether they will still have jobs afterwards.
Canva job cuts add to employment fears
The warning from Canva has come from a very different part of the economy. Co-founder Melanie Perkins told staff that growth had slowed as the company began a restructure involving more than 1,200 jobs.
Canva helped make graphic design accessible to a mass audience, but customers now have other ways to create posters and similar material quickly and cheaply. The company has developed artificial intelligence tools of its own, although running them is costly and they compete with alternatives available to users.
Canva did not blame artificial intelligence directly for the cuts. However, the company is confronting the costs and competition associated with a new phase of technological change.
The employment consequences will be crucial. In a healthy jobs market, a sales assistant losing work at one retailer may be able to find another position nearby. If businesses across the same area are leaving vacancies unfilled, those workers face a far more difficult search.
Unemployment reached 4.7 per cent in September, with part of the increase reflecting more people looking for work, including households under pressure from the cost of living. The Reserve Bank of Australia expects the rate to reach 5.1 per cent by the end of 2028.
Recession risks for the Australian economy
HSBC economist Paul Bloxham has put the chance of an Australian recession at 50-50, while the Reserve Bank still expects the economy to grow.
Even if overall output rises, Australia could experience a per capita recession if economic production per person falls for two consecutive quarters. That can leave people feeling the effects of a recession even while the Government points to a larger economy.
The Reserve Bank raised its cash rate to 4.85 per cent on Tuesday, its fifth increase this year, as annual inflation reached 4.3 per cent. Governor Michele Bullock must balance the need to bring inflation under control with the responsibility of maintaining employment.
Higher interest rates take time to affect mortgage repayments, business revenues and hiring decisions. If companies begin cutting staff faster than expected, the central bank may have reason to pause, although earlier rate rises would continue to work through the economy.
A sharper rise in unemployment could persuade the Reserve Bank that rates have gone far enough for now. But for workers at David Jones or Canva, the prospect of borrowing costs remaining unchanged offers little comfort while they are trying to work out how to meet their repayments at all.
