Budget falls short in tackling skills shortage

UQ Business School Head Professor Tim Brailsford believes last night’s Federal Budget does not go far enough in addressing the critical workforce issues facing Australia.

He said the growth forecast in excess of the magical three percent barrier over the next fiscal year could be expected to result in ongoing budget surpluses.

“Treasurer Costello can rest comfortably in the knowledge that continued budget surpluses will finance the largess handed out in this year’s budget in the form of personal income tax cuts,” Professor Brailsford said.

“Moreover, the success story of the Australian economy which continues to roll along off the back of a prices-led resources boom and resurgent global conditions, will allow the Treasurer to have a kit-bag of goodies in reserve for the next election.

“However, we need to ask the question about how sustainable Australian growth really is.

“Just like business profits, which are dependent on prices, volume and costs of production, the overall economy works in a similar fashion. Our economic prices are high, which is being led by our commodities and a strong Aussie dollar."

Professor Brailsford said that feedback from the business community revealed capacity constraints that were putting a cap on production and a shortage of inputs that was pushing costs higher.

“Nowhere is this more prevalent than the mining sector where talented labour is in acute shortage. We face the prospect of having created a dangerous circle of reliance wherein prices are being inflated because of supply shortages,” he said.

“The key question is whether prices will plummet once the supply tap is turned on.

“The mining sector is symbolic of a fragility in the Australian economy. We face an increasing shortage of skilled labour, be it manufacturing or services based.

“This year’s Budget seeks to address this problem by creating incentives for increased workforce participation. The tax cuts and particularly the superannuation changes are designed to keep people working more frequently and for longer.

“However, these changes avoid the central issue which is about increasing our supply of skilled labour to hungry industry, which is demanding that people work at the smarter end of the food chain.

“This problem will not disappear and our demographic indicators suggest it will get worse. Nothing short of an integrated set of policies that involves direct investment in skilled migration, education and training will alleviate what is major impediment for long-term aggressive growth and hence sustainable long-term tax cuts.”

For more information contact Cathy Stacey at UQ Business School on 0434 074 372 or 3365 6179.