Australian Federal Budget 2024-25: Workforce implications 

From a skills and wages perspective, the Budget has a dual focus: addressing immediate cost-of-living pressures through income tax cuts and subsidies, and supporting wage increases in the aged care and childcare sectors. The unwritten message to most workers could be to not seek further hefty pay rises. There is also debt relief for tertiary students and some means-tested support for some students on compulsory placements.

The Budget highlights the skills needed for ambitious defence, construction, and Future Made in Australia commitments. However, it is unclear how Australia will source these workers amid an ageing population, lower immigration, and constrained international student enrolments. The focus on Science, Technology, Engineering and Maths (STEM) skills for future industries might divert resources from critical fields like nursing, aged care, and teaching. 

The Government is actively promoting high-tech jobs, such as nuclear technicians, which could create a workforce dichotomy, favouring high-demand sectors over essential but less ‘glamorous’ roles.

The Future Made in Australia package emphasises investments in renewable energy and defence sectors, focusing on skills development and job creation to future-proof the economy during the energy transition. More than $100 million is allocated to New Energy Apprenticeships and New Energy Skills programs, targeting the growing demand for skilled workers in solar power, renewable hydrogen, and battery energy storage. This initiative aims to bridge the skills gap and prepare the workforce for a green economy. However, there is debate on whether this investment diverts attention from reskilling and upskilling in other productive economic areas.

There is also an ongoing focus in this Budget on building the future workforce to shore up Australia’s defence capabilities. Through a $101.8 million investment over seven years, the Government is focused on building up the workforce to support AUKUS submarines, including apprenticeships and scholarships, specialist welding skills training and $17.2 million to help local defence firms enter the supply chain.

Finally, the Government aims to address housing supply challenges by recruiting thousands of new workers for home construction. Nearly $90 million is allocated to cover education costs for 20,000 young people entering trades, in hopes of boosting a sector in desperate need of more staff.

The Budget addresses issues from the University Accord, highlighting workforce skilling, increasing educational opportunities, and boosting women's workforce participation. It focuses on equity in higher education with funding for enabling courses and pathways to university. However, new regulations requiring universities to increase student accommodation and link it to international student enrolments is likely to put pressure on university revenues.

The Budget made a small step toward addressing the issue of unpaid mandatory placements in university programs announcing the availability of means-tested paid placements for nurses, teachers, and social workers of $319.50 per week. This initiative aims to lessen the financial strain associated with obtaining necessary qualifications, potentially making education more accessible and linked to employment opportunities. No doubt students in other degrees with mandatory placements (such as medicine and psychology) will be disappointed to not have access to this financial support. 

The Government has announced a $3 billion reduction in student debt for more than 3 million individuals. This aims to alleviate the financial burden of Higher Education Loan Program (HELP) and other student loans while maintaining the system's integrity and value. The HELP indexation rate will be capped at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI). This relief will be retroactively applied to all HELP, VET Student Loan, Australian Apprenticeship Support Loan, and other student support loan accounts active as of 1 June 2023.

The Government is facing a complex challenge in future workforce planning, as it must consider various complex and interdependent factors that impact the economy and the labour market, including driving participation of existing workers and building the supply of future workers.

In recent years, the Government has improved workforce participation, especially among women, through enhanced paid parental leave, paid work placements in female-dominated care sectors, and the Building Women’s Careers program. These measures aim to boost productivity and build a modern economy. However, the Budget misses opportunities to reform childcare activity and rebate systems, which would reduce complexity and enhance productivity for existing workers.

While the Government is addressing women's workforce participation, we believe the Budget misses an opportunity for long-term reskilling of the existing workforce. Most initiatives focus on early careers through tertiary education and apprenticeships, supporting future supply. However, our view is that there is a lack of strategic focus on reskilling and retraining the current workforce, especially in areas where productivity is declining, or technology is changing the nature of work.

Comprehensive workforce planning strategies are needed to meet the evolving needs of the Australian workforce sustainably.

The focus on skills and education aligns with the Government’s strategy for sustained growth and competitiveness in a rapidly changing global environment. Investment in tertiary education reform aims to create a more job-ready talent pool for priority industries, reducing skill gaps in sectors like technology and renewable energy. This could lead to more efficient recruitment and lower training costs. However, these benefits will take time to materialise. In the meantime, organisations must invest in reskilling their current workforce and find innovative ways to attract local and overseas skilled workers to fill immediate gaps.

The Stage 3 tax cuts, combined with energy and rental subsidies, suggest the Government does not expect unions to seek significant pay rises in the next 12 months. However, pay pressure will likely continue as organisations strive to attract and retain workers, despite a predicted slight increase in unemployment. As cost-of-living pressures ease, some workers may leave second jobs, increasing vacancies in retail, hospitality, and care sectors. Additionally, employers have been paying higher salaries to new hires, creating a significant pay differential between new and current employees, potentially leading to internal pay equity issues.

The Budget did not directly address the gender pay gap (other than pay increases in childcare and aged care which have a large female workforce, and superannuation paid on parental leave). In our opinion it is disappointing that achieving gender pay equity has been overlooked, as it is a complex issue that requires sustained and long-term intervention. 

Comprehensive and forward-thinking workforce planning is an area that might be seen as critical yet continues to receive insufficient attention in the Budget. Such planning would anticipate future skills and labour market needs more accurately, ensuring that educational and training programs align closely with future job market demands. This could help mitigate the mismatch between the skills being taught and the skills needed in the economy, thereby enhancing both individual career prospects and national economic performance.

The Budget misses an opportunity to enhance business adoption of technology to boost productivity. It mostly focuses on Australia’s regulatory response to ensure safe and responsible development and deployment of AI. However, with productivity remaining at record lows, despite increased working hours, we believe there is a need for strategic investment in areas that boost the efficiency of knowledge work and the overall output of the economy. 

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