The Challenge
Australia is emerging from the global recession. We are in a strong position to take decisive action to maximise opportunities for the Australian people.
The Government's focus, as outlined in this statement, is on strategic investment in both human and physical capital to achieve this goal. As a nation moving forward we need to be able to share the benefits of economic growth, manage the economic and fiscal impacts of an ageing population, and successfully adapt to the changing global economy.
The Skills Challenge
The Skills for Sustainable Growth strategy responds to the challenges of skills shortages, poor foundation skills and the changing economic landscape.
Australia faces specific skills shortages with the potential for this to worsen due to demographic shifts resulting in lower workforce participation. At the same time we also have unacceptably high youth unemployment and regions not fully participating in economic recovery. In March 2010, 19 ABS labour force regions out of a total of 80 (or 24 per cent), recorded an unemployment rate of 6.5 per cent or above, compared with the national average of 5.8 per cent (in three-month average original terms).
If the supply of individuals with vocational education and training (VET) qualifications remains at the same level as in 2005, a shortfall of 240,000 can be expected by 2016. To meet the shortfall, net completions will need to increase by more than 1.9 per cent per year.2 The challenge is exacerbated by relatively high exit rates by apprentices both during training, and once they have qualified. Trade apprenticeship commencements fell significantly during most of 2009 as Australia weathered the global recession.
Around 360,000 young Australians have not obtained at least a Year 12 or Certificate II qualification and are not studying for a qualification.3
In March 2010, Skills Australia released Australian Workforce Futures: A National Workforce Development Strategy. The report outlines a strategy for sustaining economic growth, avoiding future skills shortages and deepening the skills of the workforce. The underlying vision of the strategy is compelling—'that Australia has the workforce capability it requires for a productive, sustainable and inclusive future, and that Australian enterprises have the capacity to develop and use the skills of their workforce to maximum advantage for the benefit of industry and the community.'
The global recession
The Rudd Government's economic stimulus plan was underpinned by the $42.1 billion Nation Building and Jobs Plan. It created significant investment in medium and long-term infrastructure projects and ensured skilled workers were kept in employment. These actions resulted in around 200,000 Australians retaining their jobs.
The $145.0 million Securing Australian Apprenticeships initiative, announced in February 2009, helped employers keep 'out of trade' apprentices connected to training and work. In addition, in October 2009, the Government announced a $100.0 million Apprentice Kickstart package, including the $80.0 million Apprentice Kickstart bonus initiative for employers of Australian Apprentices aged 19 years and under in skills shortage trades. This was designed to reverse the decline in traditional trade commencements. It was aimed at young Australians and was in place over the summer months.
Together these measures have helped more than 40,000 businesses in the national skills shortage sectors, enabled more than 48,000 apprentices to remain in work or complete their training, and ensured that close to 24,400 young apprentices started in the trades over the past summer. These initiatives are in addition to the $1.0 billion available each year to employers and apprentices under the Australian Apprenticeships Incentives program.
In 2010 and beyond, as we emerge from the global recession, the challenges are different, but no less pressing. A recovering economy and ongoing structural change bring the risk of a patchwork economy where skill shortages and growing national prosperity co-exist with pockets of entrenched disadvantage and exclusion. This risk has a social dimension—Australians unable to share in, or contribute to, the nation's prosperity. Importantly, there is also a significant economic dimension including unnecessary constraints on growth and fiscal pressures.
Emerging skill shortages in recovery
By keeping Australians in employment, the Government's economic stimulus packages helped prevent the major decline in skills usually associated with a downturn. However, the pace of economic recovery means that we need to improve the supply and use of skills if we are to increase the productive capacity of the economy and continue strong growth.
Skills Australia has noted that, 'employers are already raising concerns about the risk that our economic growth will be constrained once again because of skill shortages.'4
Although labour markets are responsive to skills needs, demand created by rapidly expanding industries may create skills deficits and constrain projects in other sectors. For example many of the skills associated with the resources sector also exist in other sectors, particularly construction.
Rural, regional and remote parts of Australia are likely to experience growth through new investment, such as major resources developments in Western Australia and Queensland. These projects will also require significant operating infrastructure, rail, air and sea ports, as well as basic social and physical infrastructure to support an operational workforce or a resident population. While some of this pressure will be alleviated by projects commencing at different times and construction employees moving between projects, shortages may emerge across occupations as labour is attracted to higher wage occupations. A key task is to ensure that skills and capital move seamlessly through the economy to the projects, industries and regions that need them most.
In the near term, skills vacancies are trending upwards with the greatest demand being felt in metal, construction, automotive and wood trades.
Recent research conducted by SkillsDMC (an industry skills council for mining and construction) demonstrated national skill shortages in:
- electricians/electrical engineers
- drillers
- infrastructure engineers
- mine managers and deputies
- geologists
- welders.5
Meeting the demand for multiple and higher skills in key sectors of the economy is critical if Australia is to remain globally competitive. We cannot ignore the skills capacity constraints that occurred under the previous Government in the mid 2000s.
Apprenticeships are a vital pathway to engage young people in employment and training and to meet the skills needs of Australian industry. However, trade apprenticeship commencements did not keep pace with economic needs from the mid-1990s to the mid-2000s. Apprenticeship commencements fell sharply in 2009 as a result of the downturn. Youth commencements were down by 22,700 in the year to September 2009 compared to the previous year. The biggest impact was among teenagers (18,800 fewer commencements) and among males in particular (down 14,600).
Investing in critical skills and smarter apprenticeships will ensure more Australians have the opportunity to contribute to national economic recovery and to share the job and income benefits of sustained economic growth, while also meeting our immediate skills needs.
Providing strong foundations in language, literacy and numeracy
A number of factors, including educational attainment, affect proficiency in the foundation skills of English language, broader literacy and numeracy. People who did not complete schooling to Year 12 (or equivalent) or who spoke English as a second language comprise 83 per cent of those with poor prose literacy skills.6
Around 4.5 million working-age Australian adults don't have the high level of core language, literacy and numeracy skills they need to support their success at work or further study. Yet, as Skills Australia observes, 'language, literacy and numeracy skills are fundamental to workforce productivity'7. Better skills are positively associated with higher levels of training, workplace participation and higher incomes. There is a clear economic and social case for making greater investments in this area.
The Productivity Commission estimates that, together with improvements in early childhood education and higher educational attainment, increases in literacy and numeracy could raise aggregate labour productivity by up to 1.2 per cent in 2030.8
A poor level of literacy and numeracy is one of the biggest causes of disengagement from the labour market. Most recent data shows that around 60 per cent of unemployed Australians are unlikely to have the necessary foundation skills to successfully complete a Certificate III qualification—a clear risk to their capacity to gain better jobs and better incomes. The inability to read and comprehend operating instructions, safety precautions, equipment and repair manuals or organisation occupational health and safety policies creates a significant workplace and safety hazard.
The Skills for Sustainable Growth Budget strategy will deliver unprecedented access to high-quality core language, literacy and numeracy programs for those Australians who need them.
Adapting to a changing economy
Skills Australia makes the salient point that '[Australia] will need to deepen [its] skills and lift productivity to enable us to successfully adapt to change and maintain our competitive advantage and a high standard of living, as the emerging economies in our region further advance and industrialise.'9
The link between skills and productivity is multi-dimensional. As well as equipping people to do their jobs more effectively, skills enhance the adaptive capacity of individuals and create the conditions needed for innovation. Higher skill levels may reduce any decline in participation as the population ages, as highly skilled individuals are more likely to engage in paid work, and to work for longer.
Our future workforce will not only need more skilled people, but also people with multiple and higher level skills and qualifications. Deepening skills across all occupations is crucial to achieving long-term productivity growth. Skills Australia modelling estimates that 4.6 million additional qualifications may be required over the next 15 years due to employment growth. To approach the quantitative expansion in qualifications that may be required in the future, Skills Australia has estimated that enrolments in higher education and VET should expand by three per cent per annum.10
Higher levels of participation and increasing skill levels are engines of economic growth. The Organisation for Economic Co-operation and Development (OECD) has noted that:
The 'quality' of the labour force, as seen in education and skills, also has measurable effects on growth. Currently, the working-age populations of most OECD countries have between 10 and 14 years of education per capita, compared with about 7 and 11 years in 1970. This improvement in education is estimated to have increased GDP per capita in the range of 10 to 20 per cent, bringing high returns to individuals but also for society as a whole.11
Vocational education provides many of the technical and professional skills essential for innovation and productivity in the Australian economy. Each year, around 1.7 million Australians learn through vocational education and training, including the technical and professional skills to complement skills associated with university education. It is the major vehicle for up-skilling the Australian workforce.
Australia has a sophisticated and dynamic vocational education system. In 2008 the OECD recognised it as a well understood, flexible national qualification system that actively engages employers and achieves participation from all age groups.12
However, we can and must do better if vocational education is to meet the skills and training needs of a rapidly changing economy. Improved quality, stronger outcomes, agility, transparency and access are the key themes of the vocational education sector reforms of the Rudd Government.
The vision for a modern VET system is one that helps people:
- participate in training
- select the training that will best suit their needs
- convert experience into recognised skills
- complete training in the timeliest way.
It is a system that will also support employers to make the best use of skills.
The Skills for Sustainable Growth strategy initiates much needed structural reform of vocational education. It will invest directly in more places, with a strong focus on quality and transparency.
The Infrastructure Challenge
The Rudd Government is investing $37.0 billion in the period 2008—09 to 2013—14 in road, rail and port infrastructure that will serve Australia for the future. This investment is supporting jobs today while investing in the infrastructure the nation needs for the future.
Infrastructure investment is now firmly recognised as a key driver in strengthening the national economy and enhancing Australia's productivity. The combined contribution of higher productivity and employment means an improved standard of living for Australians.
Over the past decade capacity constraints have capped our productivity and the infrastructure deficit has held us back. The Australian Government is putting unprecedented resources into addressing the bottlenecks. If we are to resume the high productivity levels Australia enjoyed during the mid-1980s through to the 1990s as a result of microeconomic reforms, then infrastructure and regulatory reform must play a major role in meeting the challenges of capacity constraints.
Infrastructure investment also sits as a key arm of economic policy—to stabilise demand in the recovery from the global recession, to take pressure off demand in the long run, reduce costs through regulatory reform and further boost the supply capacity of the Australian economy to alleviate inflationary pressures.
The Rudd Government took decisive and immediate action to address major short-term challenges of the global recession. This investment has ensured Australia's economic strength. In 2009, Australia had the fastest growth among the world's advanced economies. Australia has far lower debt and deficit compared with major advanced economies. Australia's resilience during the global recession is the envy of the world. As we move forward, addressing the challenges of the infrastructure deficit is a high priority for the Government.
The Nation Building and Jobs Plan was not just about the short term. This investment has provided a boost to our economy in the short term, but in the long term, it will result in sustained benefits by enhancing the productive capacity of the economy. We are supporting jobs today by building the infrastructure we need for tomorrow.
Modernising the regulatory and planning framework
An ambitious nation building agenda must be matched by a robust policy framework and the removal of outdated and inefficient regulations. The Council of Australian Governments (COAG) Reform Council is working to reduce these differences and build better national approaches. COAG's involvement in the Seamless National Economy National Partnership initiative, which includes a set of 27 deregulation priorities and eight major competition reforms, will help ensure Australia's future prosperity and competitiveness. The Rudd Government understands the boost to productivity that comes with moving towards a seamless, national economy.
The Government is providing national leadership on urban policy. The Major Cities Unit is developing Australia's first national urban policy statement that will help guide activities and infrastructure investment in the years ahead. The Government is working cooperatively with states and territories through COAG to support strategic planning and investment in our capital cities for a more productive, liveable and sustainable future.
Australians are a resilient, innovative and hard working people. Investing in our productive capacity must include strengthening our education infrastructure. The Government's education revolution will continue creating a world-class education system for Australia. The Rudd Government's commitment to building school infrastructure, modernising digital education resources and providing national consistency in education, is delivering long-term benefits for our national and international competitiveness.
The nation is set to reap the benefits of the Government's significant investment in communication technology. Developments in information and communication technologies have already helped reduce the tyranny of distance that separates Australia from major global markets. The National Broadband Network will bring fast and affordable broadband to Australian businesses, regardless of where they are located. The new network will dramatically improve broadband, connecting 90 per cent of all homes, schools and workplaces with optical fibre, fibre-to-the-premises or 'FTTP', providing broadband services to Australians with speeds of up to 100 megabits per second (50 times faster than most people experience today).
In an increasingly complex global environment, the challenges facing the Australian economy are immense—but with each challenge comes enormous opportunities. In just two years the Australian Government has overhauled past approaches to infrastructure investment rolling out the most significant range of infrastructure activities in our nation's history, supporting jobs, productivity and sustainability right across the country. To ensure the long-term prosperity of the nation, the Government is committed to ensuring that future investments are similarly planned and targeted.
2 Shah C. and Burke G. (2006) 'Qualifications and the future labour market in Australia' Report prepared for the National Training Reform Taskforce, Monash University, Centre for the Economics of Education and Training.
3 ABS Survey of Education and Work, May 2009.
4 Skills Australia (2010) Australian Workforce Futures, p. 1
5 SkillsDMC 2009, Building for the Future, Preparing today: A systematic approach to Workforce Development, Environmental scan, Skills DMC National Industry Skills Council.
6 ABS (2008) Social Trends 2008 Adult Literacy, p. 2
7 Skills Australia op. cit. pp. 35—36
8 Productivity Commission, Australia's Productivity Performance, submission to the House of Representatives Standing Committee on Economics, September 2009
9 Skills Australia, op. cit. p. 1
10 Skills Australia, op cit. p. 2
11 OECD (2003) The Policy Agenda for Growth.
12 OECD op. cit.
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