Why is there a Talent Shortage in Australia? Will Government Intervention Help?

There’s a severe talent shortage in Australia; and unless you’ve been living under a rock, you’ll be acutely aware of this fact.

Australian businesses are desperate for workers as the country languishes in the middle of one of the most significant labour shortages ever. According to the Australian Bureau of Statistics, there are currently more than 423,000 job vacancies in Australia.

And filling talent gaps across most industries is proving incredibly tough for organisations.

Australia’s unemployment rate is at a 48-year low, of 3.5 per cent. Workforce participation rate is at an all-time high of 66.6%.

talent shortage in Australia

Source: ABS

CBA economists have estimated higher interest rates can take as long as three months to have an effect. The RBA’s increase in its cash rate of 2.25 percentage points so far is already the fastest ramp up of borrowing costs since 1994.

Source: The Guardian

How Bad is Our skills shortage?

The low supply of available workers has translated to 31 per cent of businesses struggling to find fitting labour. Most of these businesses attributed their struggles to applicants not having the required skills (59 per cent) and a lack of applicants (79 per cent).

The inability to find workers is also not sector-specific, with the shortage affecting every industry.

Labour as a significant contraint

According to NAB chief economist Alan Oster, the widespread difficulty in finding suitable workers is both a labour shortage issue and a skills issue.

“On these measures, it’s as bad as we’ve had it since the early nineties,” Mr Oster said.

He added that the lack of suitable workers has stifled production, impacting the resilience of supply chains and the ability of companies – and the economy – to grow.

Talent Shortage in Australia: Which Sectors Are Suffering the Most?

There are five sectors that have been hit hardest with staff shortages. These are:

  • Trades
  • Hospitality and tourism
  • Healthcare
  • Manufacturing
  • Technology

The staff shortages for these five sectors can be put into two categories.

The first: hospitality and tourism, manufacturing, and trades. These sectors are experiencing talent shortages primarily because of the pandemic. The regular supply of international travellers and students dried up. And the shortfall remains painfully low.

The second category: healthcare and technology. Finding skilled talent in these industries was already difficult before COVID. Now, it’s far worse. And the reasons are many.

In healthcare, the structural problems have been amplified by COVID. In particular, there’s now a lack of people looking to pursue nursing or careers in mental health, given the demands and conditions during COVID. And there are people leaving the sector in droves thanks to burnout.

There’s a global shortage of technology workers with the right skills. So now, Australia is also competing with international markets, in sourcing tech talent.

talent shortage in Australia

Talent Shortage in Australia: What’s the Solution?

Mr Oster says the most obvious solution to fixing Australia’s skills shortage is increased migration.

But the means to achieve that migration isn’t so simple.

Talent Shortage in Australia

The recent jobs and skills summit hosted by the new Labor Government announced a series of immediate initiatives, which will allow for greater participation in the workforce, and help to ease the talent shortages. These include older Australians being able to work more hours, without their pensions being affected. And, relaxing work restrictions for international students.

But the objectives in the medium term are critical to turning this labour situation around: so far, an additional 180,000 free admissions to vocational training have been announced, as well as a rise in the immigration intake in Australia, from 160,000 to 195,000.

It’s clear the government is taking action via two key strategies: importing skills from overseas AND developing the skills of people here in Australia. Sustaining these strategies for the foreseeable future will be crucial.

What Else is the Government Doing to Help?

The government has also allocated additional funding to speed up the visa processing system in Australia: one that is notoriously slow, cumbersome and expensive. When the Labor party took office back in May, they inherited a backlog of close to one million visa applications (with the obvious caveat being, the applications received during COVID). This system needs to be addressed.

Visas for immigrating to Australia can take years to complete. Even visas like the Temporary Skills Shortage visa can take up to a year to process. It’s a potentially major deterrent for workers looking to move to Australia, as the state of limbo leaves them unable to make important life decisions. These are workers we need in our workforce, right now. So, the process needs urgent attention.

In addition, as birth rates in most wealthy countries like Australia are below the rate of replacement, the global war for talent is hotting up more and more. Look at Canada, a major skills competitor to Australia. They’re currently taking in double the immigration numbers of Australia, and their visa fees are a lot lower than ours.

Our governments need to be mindful of the approaches taken by our global talent competitors and respond accordingly.


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If you are interested in discussing Australia’s labour shortages, please contact us.