The skills shortage in Australia has dealt what could be the final blow to sustained growth in the economy, according to a leading economic forecaster
THE SKILLS shortage in Australia has dealt what could be the final blow to sustained growth in the economy, according to a leading economic forecaster.
While the Australian economy has grown at an average of 4 per cent over the past 10 years, the chronic shortage of skilled labour will be a permanent drag on growth, with 3 per cent per year looking unlikely, according to BIS Shrapnel. And the Government’s WorkChoices reforms will do little to improve either productivity or increase the pool of labour, the firm said.
While the tight labour market has resulted in a bumper payday for Australian HR professionals, it poses big questions over the future. “Australia has entered a new era of constrained growth,”said BIS Shrapnel senior economist, Matthew Hassan. “Businesses are already grappling with the problems of tight capacity, infrastructure bottlenecks and an acute shortage of skilled labour. And both businesses and government are moving to address these constraints through new investment. But the real, enduring problem is going to be the shortage of skilled labour.”
Indeed, the latest figures released by the Australian Bureau of Statistics late last month showed that job vacancies across the public and private sectors grew by 6.7 per cent between May 2005 and May 2006, with a 5.1 per cent increase in private sector vacancies between February 2006 and May 2006 alone.
New investment is on the up, but, said Hassan, this may in fact cause further damage by creating further demand for skilled employees. “Surging investment will go some way towards relieving the issue of tight capacity and inadequate public infrastructure, but will do little to fix what is set to become a fundamental shortage of skilled labour,” Hassan said.
According to BIS Shrapnel’s analysis, the Australian economy is going through a major shift from growth being driven by demand and expenditure to a scenario where the options for improving productivity have hit a wall. “There has been a major shift in the mode of operation of the Australian economy over the last two years. When Australia first emerged from the early 1990s recession, significant spare capacity and high unemployment meant growth was basically determined by demand and expenditure. The logic for business through much of the 1990s and early 2000s was to hold-off on investment, cut back costs and use existing resources more intensively, with improvements in efficiency flowing directly through to profits,” Hassan said. “But now the rules have changed. The cycle is at a stage where there is less scope to improve productivity through simple cost cutting. Productivity growth has stalled as businesses have run into capacity constraints in terms of both labour and capital resources. For companies facing these problems, the logical thing to do now is invest. Capital improvements add to capacity, boost productivity and, when they are labour-enhancing investment, help to circumvent problems in sourcing additional skilled labour.”
The challenge is on for the Government to improve productivity and increase the pool of skilled labour, Hassan added.
