Will Labor tackle the labour shortfall in the Federal Budget?

How the labour shortfall is affecting businesses

Recent research by NAB showed that around 40% of small and medium businesses are being very significantly impacted by labour shortfalls. Pandemic disruptions and historically low unemployment rates have created what has been described as a perfect storm of problems, including:

• Scarcity of qualified workers for both entry-level and skilled positions
• Businesses competing for staff by offering higher wages, adding to costs
• Operations scaled back, opening hours reduced, clients turned away
• Fatigued employees working longer hours to fill gaps, more prone to errors
• Dissatisfied and frustrated customers, harming business reputations
• Business owners mentally and physically stressed
• Innovation and growth plans put on hold
• Some businesses closing down

Workforce planning levers available to governments

There are many options for increasing both the size of the Australian employment pool and its skill level, but it’s generally agreed that the main alternatives are:

• Immigration. Lifting the cap on immigration numbers, both temporary and permanent, and focusing on skilled immigration in consultation with industry groups.
• Temporary working visas. Making it easier for international students and backpackers to obtain temporary working visas, and removing restrictions on hours worked for temporary working visa holders.
• Childcare. Increased childcare subsidies to encourage women to return to the workforce.
• Retiree workforce participation. Allowing retirees to earn more before their age pension is reduced or lost.
• Skills and training. Upskilling the workforce via training, especially through apprenticeships and TAFE.

Levers used by the former Coalition government

In January 2022 Prime Minister Scott Morrison announced the removal of the 40-hours-per-fortnight working cap for student visa holders, aiming to encourage international students and backpackers to return to Australia and to ease workforce shortages.

Following this, the March 2022 federal budget provided:

• Workforce participation. $153.5 million to address workforce shortages, support job seekers to find employment, and make it easier for vulnerable Australians to participate in the workforce.
• University research commercialisation. $988.2 million to deliver a research reform package to drive university-industry collaboration.
• Skills development. $1.3 billion to support employers to engage and retain new apprentices, and reform the Australian Apprenticeships system.
• Skills reform to support future growth. $3.7 billion to increase investment in Australia’s skills development and address critical skills needs.

All of this funding was to be spread over the 5-6 years commencing 2021. So although the Coalition government lost office only two months after the March 2022 federal budget, some of these programs had presumably already started, and may be retained to some extent by the Coalition’s Labor successors.

Workforce measures likely to be funded in the October budget

Labor’s 2022 pre-election Economic Plan and Budget Strategy promised these steps:

• Childcare. Boost participation in the workforce with childcare reforms and subsidies for cheaper childcare.
• Training. Adequately fund education and training to address skills shortages.
• TAFE and university. Better train the workforce through fee-free TAFE and more university places to equip Australians with critical skills to address talent shortages.

Later, the new government, industry, unions and other stakeholders came together in the September 2022 Jobs and Skills Summit. Key initiatives agreed to included:

• Immigration. An increase in the permanent Migration Program ceiling to 195,000 in 2022-23.
• Temporary working visas. Extending visas and relaxing work restrictions on international students, and providing additional funding to resolve the visa backlog.
• Retiree workforce participation. A one-off income credit so that aged pensioners who want to work can earn an additional $4,000 over this financial year without losing any of their pension.
• TAFE. An additional $1 billion for fee-free TAFE in 2023 and accelerated delivery of 465,000 fee-free TAFE places.

The Labor government is clearly keenly aware of current workforce shortages, and has addressed them in its election promises, in the Jobs and Skills Summit, and in the commitments already announced about immigration, working visas, retirees and TAFE. Expect to see all of these funded in the October 2022 federal budget, and hopefully the delivery of its increased childcare subsidy plan.

We can help you understand how best to address any labour shortfall challenges you may be experiencing.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.