Essential Skills in Short Supply

The Australian

By Jennifer Westacott
Chief Executive, Business Council of Australia

Next week’s federal Budget can underpin a new era of prosperity for Australians in the Asia–Pacific Century by increasing our skilled workforce through effective skills development and migration, and setting out a strategy for well-managed population growth.

The historic transformation in the Asia–Pacific region is creating a positive long-term outlook for investment and growth in Australia. The government’s fiscal strategy is sensibly built around the government pulling back to allow for this anticipated expansion in private sector investment and economic activity.

The success of this strategy will depend on the ability of growing businesses to employ more skilled workers. With the unemployment rate already back under 5 per cent, the existing supply of skilled labour in Australia is almost exhausted. Skills shortages are being reported by firms looking to resource big energy and minerals projects, as well as in construction and information technology.

There are 11.5 million people employed in Australia. New job creation is running at about 30,000 a month and strong growth will continue, according to the budget projection of half a million additional jobs during the next two years.

Longer-term analysis by Skills Australia points to a continuing need for more workers, projecting 9.3 million job openings through the next 15 years – 4.8 million arising from economic growth and 4.4 million needed to replace people who will retire.

Increasing the workforce to fill these jobs should be a top priority for economic policymakers. If businesses cannot employ skilled labour then big projects will be delayed or mothballed.

Productivity growth will be curbed, with the potential for wage inflation to take hold. Challenges in providing education, health and community services will become acute.

Worker shortages are coinciding with a fall in the rate of population growth and the imminent retirement of large sections of the workforce. The rate of growth has fallen to 1.6 per cent, its lowest in four years. Net overseas migration has fallen 36 per cent during the past year to 185,000 people, with a further decline likely based on present policy settings.

The baby-boomer generation, which makes up more than 40 per cent of the workforce, is set to enter retirement age. Deloitte Economics says this is a key reason Australia’s working-age population will increase by only 1 per cent next year.

A three-pronged strategy is needed for a sustained increase in the skilled workforce: investment in education and training, commitment to a sizeable, permanent skilled migration program and greater use of temporary skilled migration visas.

Reforms to skills development in the resources sector, including 18-month apprenticeships for experienced workers and enterprise-led training partnerships, were announced recently and widely welcomed.

The recommendation of Skills Australia this week for a broad-based individual and enterprise demand-led model of public funding is consistent with the Business Council of Australia’s priorities and should be the basis for further policy development in the training sector.

Further improvements to our skills training system should be coupled with measures to address underemployment and long-term unemployment as highlighted recently by Julia Gillard.

Business awaits the details of the government’s approach with interest.

It will require concrete actions that put in place the right mix of incentives and disincentives to lift workforce participation.

Even with the greatest success, lifting participation won’t be enough to fill the jobs of the future and is an unlikely solution for meeting skills requirements for some time.

These measures will complement rather than substitute for the migrant intakes required.

It is imperative that the commitment to a strong permanent skilled migration program continues, with serious consideration given to raising the intake from 113,850 places this year.

A clear signal that the government is committed to robust levels of migration beyond the next 12 months linked to future demand will build business confidence to make long-term investments.

We will need to make greater use of temporary migration visas, including the 457 visa program, and the proposed new enterprise migration program for large investment projects.

Greater flexibility in our migration programs and faster application processing times, building on improvements already announced, will get workers where they are needed faster and support productivity growth.

The community needs to be confident that government policies that increase the population through the migration intake are consistent with a long-term framework for managing the impact of population growth on our cities and regions, infrastructure and environment.

Well-managed population growth will require a commitment to effective long-term planning of our transport, energy and water infrastructure needs, fast-tracking of key infrastructure projects and policy settings that support private investment and efficient delivery of large projects.

Renewed funding for Infrastructure Australia should be confirmed with a refreshed mandate to identify the investments and policy reforms needed to meet these challenges, and with the independence to publish cost–benefit analysis.

A long-term commitment to well-managed population growth is right for the times. It will be good for our society and economy, our international influence and our national security.

And with a stronger economy we will be in a better position to make the investments we need to improve social services, urban amenity and better environmental outcomes.

The government’s intergenerational report shows how important sustained immigration will be for the long-term stability of the Budget with rapidly rising health and services for the aged and pension costs projected to grow to about half of all federal expenditures.

Australia is fortunately positioned to take advantage of opportunities from the Asia–Pacific Century and with the right leadership and workforce and population policies we can become a stronger, better society for future generations.

The job starts with next week’s Budget.