Annual Skills Priority Report. Ministerial Industry Commission

Transcription

1 Annual Skills Priority Report Ministerial Industry Commission 31 March 2014

2 Foreword A strong economy is the basis for a strong Queensland. To build a strong economy, industry and government must work together to drive productivity growth and increase workforce participation. After reviewing Queensland s vocational and education training (VET) sector, the Queensland Government developed an action plan Great Skills. Real Opportunities. This plan set out how Queensland s training system would become an enabler for enhanced productivity, participation and consequently, economic growth. Recognising that industry and government must work together to achieve these aims, the first action was the establishment of a Ministerial Industry Commission (the Commission). Established in November 2013 by invitation from the Minister for Education, Training and Employment, the Commission is made up of members with industry, economic, and marketing or communications experience. The Commission is a genuine partnership between government and industry, creating an annual cycle of collaboration to establish industry s needs and use that as a basis for directing government investment. This annual cycle involves evaluating economic and industry trends, asking industry across the state for feedback on this analysis and tailoring government investment to best suit the needs of the economy. This Annual Skills Priority Report (the Report) is the first significant step in delivering on the Queensland Government s commitment to a genuine partnership with industry. The Report identifies the key trends across the Queensland economy and within industries affecting the labour market such as technology change, commodity prices and building approvals. It pinpoints the occupations that are growing and the skills required to fill them. While considerable information is detailed in relation to the demand side of the jobs and skills equation, the Commission acknowledges that over the course of its work, more analysis and modelling is required in relation to supply in order to provide a greater depth of recommendation regarding skills priorities. The timeframes for the Report in its inaugural year have been particularly tight. Despite this short timeframe, the Commission has received significant input and feedback from business and industry. Such input and feedback has directly contributed to the refinement of the Report and the Commission is encouraged by the level of enthusiastic engagement in this process. The Report, now finalised and submitted, will be used by the Minister for Education, Training and Employment to inform decisions on Government investment in VET qualifications for , ensuring that finite government funds are directed towards priority qualifications that will lead to jobs. Liability limited by a scheme approved under Professional Standards Legislation. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms Pty Ltd

3 Throughout the consultation process, a range of issues were canvassed by industry and business. Issues not within the scope of this Report or the Commission s terms of reference included those of student participation, future policy decisions of Government and training quality. In these areas, the Commission will provide this feedback directly to the relevant area of government. On behalf of the Commission I would like to thank all contributors for their input into this Report. I encourage the continued interest and contribution of industry and business in this partnership with government as we build a strong, resilient, four pillar economy. An economy that will be distinguished by its increasing productivity and workforce participation. The work of the Commission is an ongoing process and includes meeting with and hearing from industry and business across the state on a regular basis in order to build upon this Report and inform future Annual Skills Priority Reports. To keep track of the work of the Commission throughout the year and into the future or to access further copies of the Report please visit or contact the Commission Secretariat at mic@dete.qld.gov.au Saxon Rice MP Assistant Minister for Technical and Further Education, and Commission Chair Commission members Saxon Rice MP, Assistant Minister for Technical and Further Education (Commission Chair) Michael Roche, Chief Executive Officer, Queensland Resources Council (Deputy-Chair) Trevor Evans, Chief Executive Officer, National Retail Association Martin Albrecht, Chairman, Exergen Megan Lilly, Director, Education and Training, Australian Industry Group Professor John Mangan, Director, Australian Institute for Business and Economics, The University of Queensland Chris Murphy, Director, Independent Economics

4 Contents Glossary... i Key Findings... ii Executive Summary... i 1 Introduction Presentation of industry chapters Broad directions for the Queensland economy Queensland s future workforce and skill needs Workforce growth Workforce by industry Workforce by occupation Workforce by region Skill needs Industry needs agriculture and forestry Economic trends Skill needs Key VET priorities Industry needs mining (minerals and energy) Economic trends Skill needs Key VET priorities Industry needs manufacturing Economic trends Skill needs Key VET priorities Industry needs utilities and telecommunications Economic trends Skill needs Key VET priorities Industry needs construction and property services Economic trends Skill needs Key VET priorities Industry needs Retail trade Economic trends Skill needs Key VET priorities Industry needs transport and logistics Economic trends... 68

5 10.2 Skill needs Key VET priorities Industry needs tourism and hospitality Economic trends Skill needs Key VET priorities Industry needs public administration Economic trends Skill needs Key VET priorities Industry needs health care and social assistance Economic trends Skill needs Key VET priorities Conclusions References Appendix A : Stakeholder consultation Appendix B : Employment forecast methodology Appendix C : Qualification level forecast methodology Appendix D : Detailed forecast tables Appendix E : Regional definition Limitation of our work Charts Chart 2.1 : Population growth, Queensland and Australia... 4 Chart 2.2 : Components of Queensland s annual population growth... 5 Chart 2.3 : Output growth, Queensland and Australia... 8 Chart 2.4 : Components of investment, Queensland... 9 Chart 3.1 : Employment growth, Queensland and Australia Chart 3.2 : Employment growth by industry (1 digit ANZSIC), % change, to Chart 3.3 : Employment growth by industry (1 digit ANZSIC), 5 year annual average growth to and Chart 3.4 : Employment growth by industry (1 digit ANZSIC), persons, to Chart 3.5 : Employment growth by occupation (1 digit ANZSCO), to Chart 3.6 : Employment growth by Queensland region, to , average % change... 17

6 Chart 3.7 : Employment growth by Queensland region, to , persons Chart 3.8 : Growth in total qualifications held by those employed, to , annual (%) growth Tables Table 2.2 : Components of State final demand, Queensland Table 3.1 : Total qualifications held by those employed, to ( 000) Table 3.2 : Additional VET qualifications required by Queensland workforce, to Table A.1 : Industry structure of reporting Table A.2 : Key industry stakeholders Table D.1 : Queensland industry employment growth Table D.2 : Greater Brisbane industry employment growth Table D.3 : Cairns industry employment growth Table D.4 : Darling Downs industry employment growth Table D.5 : Fitzroy industry employment growth Table D.6 : Gold Coast industry employment growth Table D.7 : Mackay industry employment growth Table D.8 : Queensland Outback industry employment growth Table D.9 : Sunshine Coast industry employment growth Table D.10 : Toowoomba industry employment growth Table D.11 : Townsville industry employment growth Table D.12 : Wide Bay industry employment growth Table D.13 : Industry by occupation employment growth, to Table D.14 : Occupational (4-digit ANZSCO) employment growth, to Figures Figure 2.1 : Deloitte s digital disruption map... 7 Figure E.1 : Queensland Statistical Area level 4 regions Figure E.2 : South-East Queensland Statistical Area level 4 regions Figure E.3 : Brisbane Statistical Area level 4 regions

7 Glossary ABS Australian Bureau of Statistics ANZSCO Australia and New Zealand Standard Classification of Occupations ANZSIC Australia and New Zealand Standard Industrial Classification $A Australian Dollar ATA Australian Trucking Association AWPA Australian Workforce and Productivity Agency CAD Computer Aided Design COAG Council of Australian Governments CEO Chief Executive Officer CSG Coal Seam Gas DAE GDP Gross Domestic Product GFC Global Financial Crisis GSP Gross State Product ISB Industry Skills Body IT Information Technology LNG Liquid Natural Gas LLN Languages, Literacy and Numeracy NBN National Broadband Network RTO Register Training Organisation RSA Rail Skills Australasia SA4 ABS Australian Statistical Geography Standard, Statistical Area Level 4 SME Small to Medium Enterprise VET Vocational Education and Training

8 Key Findings Over the next five years, Queensland s skill development priorities should note the following. A robust rate of employment growth is expected for Queensland over the next five years. expects employment growth over the five years from to average 2.5% per annum (with a similar expectation presented by Queensland Treasury in the Budget). Other things equal, the stronger is employment growth, the stronger will be demand for VET skills. The number of VET qualifications held by those employed is expected to increase by 327,000 over the next five years from million in to million in By type of VET qualification, it is the Certificate III/IV level which is expected to see the strongest rate of increase over time. Certificate III/IV qualifications are expected to account for 59% of additional VET qualifications required over the five years to The stock of VET qualifications held by community and personal services workers is expected to rise by 91,000 over the next five years (to 331,000 by ). That reflects both strong employment growth in health care and social assistance, and the increasing professionalisation of the sector in recent times. A number of industries including mining, construction and utilities all noted a shortage of electrical trades persons and an expectation of additional demand growth in the future. Diesel fitters, mechanical engineers, operators/drivers also appear as skills in demand across many industries in the report. A focus on providing relevant skill sets as well as formal qualifications was identified as a critical need across many industry sectors. A greater need for RTOs to collaborate with employers was a general theme across much industry consultation. A key challenge for RTOs and policy makers alike will be to keep pace with innovation and digital change in order to provide training services that are best suited to the demands of industry.

9 NDIS and other policy changes are affecting demand for skilled workers in the areas of aged care and disability services, and this demand is predicted to continue to grow. There are some notable examples of excellence in the provision of training provided during industry consultations. These examples generally relate to areas where there has been an observed skill need, and often have involved close partnerships between industry and training providers.

10 Executive Summary The Ministerial Industry Commission (the Commission) is a lead initiative in the reform of the vocational education and training (VET) sector in Queensland. The Commission will provide advice on Queensland s skills and workforce development priorities directly to the Minister for Education, Training and Employment (the Minister). The Commission s advice will be based on comprehensive input from industry, as well as forecasts of employment demand. This advice will be presented to the Minister each year in the Commission s Annual Skills Priority Report. This report first and foremost, provides forecasts of employment demand and skills demand that are intended to inform the Minister s decisions regarding future public funding of VET qualifications, and is intended to underpin the ongoing VET reform agenda in Queensland. is partnering with the Commission to develop this report, including the underpinning data methodology and stakeholder consultation process. detailed economic and labour market forecasts for Queensland are presented in this report. The economic and labour market forecasts will continue to be informed by ongoing industry and employer consultations. In the time between its establishment in November 2013, and delivery of this initial report in March 2014, the Commission will have met with a range of small, medium and large enterprises, as well as industry and employer organisations. Input from these stakeholders will continue to be sought as the Commission prepares its advice through successive Annual Skills Priority Reports. Future workforce Ultimately, future skill needs are dictated by industry employment needs. In , some 2.35 million individuals were employed in Queensland. Total employment in Queensland has increased by 525,000 jobs over the last decade and by more than 1 million jobs over the last two decades. In , Queensland accounted for 20.2% of total Australian employment, which is up from 17.7% in The rate of employment growth in Queensland has been improving through 2013 and looking forward over the next five years there is expected to be a further cyclical improvement through to 2016, before the rate of employment growth moderates once again. That cyclical improvement is in part driven by current low interest rates and the moderation in the $A providing an economic spark to sectors such as housing construction, retail, consumer services, and tourism, with many of these sectors being labour intensive. Overall, employment growth in Queensland over the five years from to is expected to average 2.5% per annum. That compares with expected employment growth for Australia as a whole of 1.7% per annum over the same period. i

11 Queensland s skill development priorities should plan for a robust rate of employment growth over the next five years. expects employment growth over the five years from to average 2.5% per annum (with a similar expectation presented by Queensland Treasury in the Budget). Other things equal, the stronger is employment growth, the stronger will be demand for VET skills. Employment projections by industry (Chart i) show strong gains over the next five years accruing to: sectors benefiting from population growth, such as health care and construction (with residential construction expected to support future growth in the sector); retail trade and education, which also gain some benefit from a lower $A; business services such as professional services, property services and IT; and mining, led by the operational requirements of the oil and gas sector. Chart i: Employment growth by industry (1 digit ANZSIC), to Administrative and Support Services Health Care and Social Assistance Education and Training Retail Trade Mining Professional, Scientific and Technical Services Rental, Hiring and Real Estate Services All industries Information Media and Telecommunications Transport, Postal and Warehousing Public Administration and Safety Wholesale Trade Accommodation and Food Services Financial and Insurance Services Construction Arts and Recreation Services Total manufacturing Electricity, Gas, Water and Waste Services Agriculture, Forestry and Fishing Other Services Queensland Australia Source: -2% 0% 2% 4% 6% Average yearly growth rate In terms of occupational structure, professionals, technicians and trades workers, and clerical and administrative workers are the most common occupation types in the Queensland workforce. Consistent with the expected growth of services sector employment over the next two decades, managers and professionals are expected to lead growth in Queensland employment by occupation. ii

12 Detailed occupations that relate to the health, tourism and education industries are among those expected to show the strongest growth over the next five years. Chart ii: Employment growth by occupation (1 digit ANZSCO), to Managers Professionals Community and Personal Service Workers Sales Workers All occupations Labourers Clerical and Administrative Workers Source: Technicians and Trades Workers Machinery Operators And Drivers Queensland Australia 0% 1% 2% 3% 4% Average yearly growth rate Future skill needs The expected size and industry/occupational composition of the Queensland workforce can be used to estimate future holdings of post-school qualifications (a proxy for skills) over time. Developing projections of the expected supply of additional qualifications (primarily through domestic training and migration) was out of scope for this initial report. Overall, we have seen over time, a lift in the propensity of Australian and Queensland workers to hold post-school VET qualifications, as well as a shift to holding higher level qualifications within that spectrum. These trends are broadly expected to continue. Queensland s skill development priorities should plan for the number of VET qualifications held by those employed to increase by 327,000 over the next five years from million in to million in That amounts to an average growth rate of 4.2% per annum reflecting both the strong employment growth expected on average, replacement of those retiring from the workforce, and a degree of skills deepening by the Queensland workforce over time. 1 1 A detailed explanation of skills deepening is given in Appendix C. iii

13 Queensland s skill development priorities should note that by type of VET qualification, it is the Certificate III/IV level which is expected to see the strongest rate of increase over time. Certificate III/IV qualifications are expected to account for 59% of additional VET qualifications required over the five years to Note that not all additional qualifications required need to necessarily be provided by the State s training system. Some may accrue to the State via migration, or drawing on qualified people who are presently not in the labour force. In terms of major occupation groups, it is employed technicians and tradespersons who will account for the largest share of VET qualifications in , with 397,000 qualifications held. However, the most significant growth in VET qualifications is expected to come from community and personal services workers. Queensland s skill development priorities should note that the stock of VET qualifications held by community and personal services workers is expected to rise by 91,000 over the next five years (to 331,000 by ). That reflects both strong employment growth in health care and social assistance, and the increasing professionalisation of the sector in recent times. Industry consultation priorities This report provides a more detailed analysis of key trends and skill needs across ten broad industry sectors. Industry consultations undertaken for this report were centred on key themes of: Cross industry skills and qualifications; Regional variations; Quality; Innovation and new skill demands; Sectoral growth; and Examples of excellence. A notable example of a cross industry skill in demand was for electrical trades workers. Queensland s skill development priorities should note that a number of industries including mining, construction and utilities all identified a shortage of electrical trades persons and an expectation of additional demand growth in the future. Diesel fitters, mechanical engineers, operators/drivers also appear as skills in demand across many industries in the report. Addressing skills shortages in these areas is seen as a priority by several stakeholders. iv

14 Queensland s skill development priorities should note that the need to focus on providing relevant skill sets as well as formal qualifications was identified as a critical need across many industry sectors. All industries noted a more acute challenge in accessing skilled workers in regional areas, with a number also citing that the increase in resource related activity in recent years contributed to challenges in accessing skilled workers. The quality of training provision was discussed by a number of industry stakeholders, with some noting that employers have a lack of trust in the abilities of graduates from some qualifications and institutions. Queensland s skill development priorities should note that a greater need for RTOs to collaborate with employers was a general theme across industry consultations. The integration of digital technologies is placing additional demands on the skills sets of workers in all industries. For retail, tourism and hospitality, new digital methods that allow organisations to communicate and offer products to customers in a wider range of ways, are driving a need for workers to be more ICT literate, while also challenging the demand for bricks and mortar retail space. Conversely, technological advancements in automated technologies and robotics are having a significant impact on the type of skills demanded in industries such as construction, manufacturing, agriculture and mining. Queensland s skill development priorities should note that a key challenge for RTOs and policy makers alike will be to keep pace with innovation and digital change in order to provide training services that are best suited to the demands of industry. Government policy at both the Federal and State government level also has the ability to notably affect the nature of skill demands over time. Queensland s skill development priorities should note that the NDIS and other policy changes are affecting demand for skilled workers in the areas of aged care and disability services, and this demand is predicted to continue to grow. There were some notable examples of excellence in the provision of training provided during industry consultations. These examples generally relate to areas where there has been an observed skill need, and often have involved close partnerships between industry and training providers. These examples are provided through this report. v

15 1 Introduction The Queensland Government s reform action plan for further education and training, Great skills. Real opportunities. is the key response to recommendations of the Queensland Skills and Training Taskforce and the Queensland Commission of Audit. The Government s reforms will modernise vocational education and training (VET) in Queensland to better meet the needs of individuals, communities, industry and employers, and achieve improved outcomes from public investment in training. This will assist more Queenslanders to gain quality qualifications that are needed in the economy, to boost productivity and workforce participation. The Ministerial Industry Commission (the Commission) is a lead initiative in the overarching reform of the VET sector. The Commission is an independent body comprised of business, industry and academic leaders. The Commission will play a vital role in helping to achieve a better return for government investment in training by strengthening the crucial link between industry advice and the training market s response. The Commission will provide advice on skills and workforce development priorities. This advice is to be based on comprehensive input from industry and forecasts of employment demand. This draft Annual Skills Priority Report for is the Commission s key deliverable. has been commissioned by the Commission to assist with the formation of VET skills advice and is the primary author of this report. Deloitte Access Economics detailed economic and labour market forecasts for Queensland are presented in this report. has also consulted with a range of industry bodies and reviewed key industry reports in order to present a range of detailed information on expected skill needs in the future. Given the limited time available for this initial report, initial industry consultations were restricted to Government funded State Industry Skills Bodies (ISBs) and National Industry Skills Councils (ISCs). The key elements of this report are: Chapter 2 provides an overview of the Queensland economy, while chapter 3 provides a range of projections for Queensland s workforce over the next five years. These projections have been developed by. Chapters 4 through to 13 then focus on individual key industry sectors, providing a data summary for the industry sector followed by a discussion of economic trends affecting the sector, skill needs and key VET priorities, with this information informed by industry consultations. Chapter 14 provides conclusions to the report, drawing together the key themes in relation to future skill needs from across industries. A range of appendices then provide more detail on industry consultations, forecast methodology and detailed forecast numbers. 1

16 1.1 Presentation of industry chapters The following industry chapters in this report all commence with a key industry data dashboard over their first two pages. An explanation of those data dashboards follows. Sector profile, Shows current employment levels in the industry, split into its major components and the industry s current share of overall Queensland employment. The table also reports the proportion of the industry s workforce that hold post-school qualifications by highest qualification (higher education and VET), and the proportion without post-school qualifications. Projected employment growth by component Shows the projected change in employment levels for major industry components between and (the end of the forecast period). Employment by region, The heat map shows the current regional profile of industry employment. The map displays how important the industry in question is to each region. Green coloured regions signify those with high industry employment intensity in the region, while blue coloured regions represent lower industry employment intensity in the region. Projected employment growth by region The chart shows the expected change in employment levels for the industry in each region. For this report, regions have been based on ABS Statistical Area Level 4 classifications. Greater Brisbane represents the sum of the five Brisbane SA4s as well as Logan, Ipswich, Moreton Bay North and South SA4 regions. Given its size, the Greater Brisbane region dominates the expected level of employment gains for Queensland as a whole, though this is not necessarily the case for each industry sector. Employment by occupation, Presents the current level of employment for the industry by the eight major occupational categories reported by the ABS. Projected employment growth for key detailed occupations The expected change in employment levels from to for each of the top ten detailed occupations (using the ABS detailed occupational classification) recorded within the industry as at the 2011 Census 2. Note that this list of occupations does not necessarily match those that are expected to experience the greatest level of additional employment demand it is reporting on prospects for occupations which are currently common across the industry. Furthermore, this chart represents the expected change in occupational employment across the entire Queensland labour market, not just for the given industry. Combined, the data dashboard charts and tables provide a snapshot of the current employment profile within each industry in Queensland and expectations for employment growth by industry major component, region and occupations over the next five years. 2 The occupation General Clerks has been omitted from the charts given the size of this group and the non-specific nature of associated skill demands. 2

17 2 Broad directions for the Queensland economy This report provides information on labour demand for Queensland across several dimensions, including industry, occupation and region of employment. These projections are not prepared in isolation from the broader economy. Expected developments in the broader Queensland and Australian economies form important drivers for the more detailed projections which follow. This chapter sets out some of the key trends expected for the Queensland economy over time. Unless otherwise specified, the projections in this chapter are drawn from Deloitte Access Economics demographic and macroeconomic forecasting. Population growth set to lift (though with ageing composition) Historically, Queensland has accounted for a growing share of Australia s population over time. At times, the rate of Queensland s population growth has been double that seen for Australia more broadly (as seen in Chart 2.1). At other points in time, such as the immediate aftermath of the GFC, the margin has been much tighter, though still in Queensland s favour. In , Queensland s population growth dipped to a rate of just 1.6% per year, the lowest recorded since The decline in the rate of population growth was driven by falls in the net number of migrants from both interstate and overseas, with the Queensland economy going through a relatively slower patch at that time. It has since bounced back to an annual growth rate of 2.0% with an improvement in broader economic conditions for Queensland, led by significant resources and infrastructure investment. Queensland s population growth is expected to see a further modest improvement over the next two years (to 2.2% per annum), with a lower $A driving improved competitiveness for many of Queensland s sectors. Overall, Queensland s population is forecast to reach five million people in 2016 and six million people ten years later in

18 Chart 2.1: Population growth, Queensland and Australia Year-to growth 3% Forecast 2% 1% Queensland Australia 0% Source: ABS , Note that population projections for Queensland are a little higher than ABS Series B population projections, primarily because the projections assume Queensland s share of net overseas migration to Australia returns to historic norms. Despite the common perception that Queensland s population growth is driven by large numbers of southerners who head north in search of warmer weather, Queensland s population growth over recent years has predominately been driven by natural increase (births minus deaths) and net overseas migration (overseas immigrants minus overseas emigrants). As Chart 2.2 shows, net interstate migration to Queensland has dropped over recent years. In part, this reflects a decline in the overall rates of interstate movement by Australians in recent years. However a number of specific problems have deterred movement into Queensland. Prior to the GFC rapid rises in Brisbane and Gold Coast house prices stemmed the flow of young families to the State (who moved to Melbourne instead), while the aftermath of the global economic turmoil saw a collapse in the level of financing available to Queensland builders. The loss of momentum in the housing construction sector saw a further slide in migration into the State, although total growth was sustained by a surge in international migration. The forecasts in this report anticipate some unwinding in these recent trends over coming years. Current economic conditions suggest the blockages in housing construction are loosening and employment growth should pick up in the medium term. Both will be conducive to a higher level of net interstate migration, while the projections for international migration suggest that it will also provide a solid increase in population (with Queensland s share of net overseas migration to Australia moving back up from recent lows). 4

19 Chart 2.2: Components of Queensland s annual population growth Number of persons Natural increase International Interstate Source: ABS , While the economic cycle is favourable towards a stronger rate of population growth in the short term, the longer term trend of an increasing average age for the Queensland population also continues. The average age of Queensland s population in was 37.2 years a notable lift from the 33.9 years average seen 20 years ago, but well shy of the 38.9 years average expected in 20 years time. The challenges of that ageing population can be summed up in the State s aged dependency ratio (the ratio of population over 65 to working age population aged years), which is estimated to be 20.3% now, rising to 27.7% over the next twenty years. While the tide is very much in the direction of an ageing population (and slowing working-age population growth) over time, the rate of net overseas migration to Australia and to Queensland will influence the speed of that development. These projections are based on the view that net overseas migration to Australia will continue to rise in the short term before levelling out at around 240,000 per annum. Yet migration policy is contentious and there can be swings in the rate of net migration over time. It is worth keeping in mind that the bulk of skilled migrants to Australia and Queensland are aged between 20 and 40, and thus act as a counter-balance to the ageing trend. If the rate of net international migration were to be substantially lower going forward, the demographic tide noted above would be a far more significant one. How might this changing age profile affect the structure of the Queensland economy? People of different ages demand different types of goods and services, which will then have notable implications for skills demand. In particular, the economic impact of the demographic shift underway is expected to show up in: 5

20 Increased demand for health and aged care - a larger proportion of older people will place pressures on the hospital, residential aged care and community services systems, which will need to respond accordingly. Changes in consumer spending patterns - older people tend to spend proportionately more on food and non-alcoholic beverages, medical care and health expenses, and domestic fuel and power than other demographic cohorts. Also, many older couples (households) enjoy relatively high discretionary spending on recreation. Opportunities for financial services - the management of retirement incomes will escalate in importance, particularly as the first of the baby boomers were able to access the pension in This generation saw superannuation become widely available to most workers in the 1980s (becoming compulsory during the 1990s) and have benefited from recent reforms and contribution schemes which have allowed them to supplement this retirement income stream. Productivity remains paramount for living standards Productivity isn t everything, but in the long run it is almost everything. These are the words of well-known US economist Paul Krugman. The size of our economy can grow as we add more people to it, and as we work for longer, but the holy grail of economic growth is productivity growth doing more with less. Productivity growth is the key driver of per capita living standards over time. Queensland s productivity performance over the last decade has left a lot to be desired. Queensland labour productivity growth averaged 1.7% during the 1990s, but only averaged 1.1% during the first decade of the 2000s. At present, Queensland is starting to see a cyclical improvement in productivity growth as the recent significant tranche of resources investment starts to pay dividends in the form of higher production and exports. These projections include a view that Queensland labour productivity growth will lift to average 1.8% per annum over the next five years. An improved rate of productivity growth often goes hand in hand with skills development. Having the skills to harness new technologies and techniques will be an important enabler of productivity for governments and businesses, with digital disruption (digital change) a key challenge for many sectors. Deloitte has recently mapped the expected impact of digital trends on different parts of the economy (Figure 2.1 below). Sectors were mapped according to the expected size of the impact upon the sector from digital disruption to the imminence of the change. Those sectors in the top left quadrant (short fuse, big bang) potentially face the biggest change in the short term, creating some difficult challenges but also opportunities for significant productivity improvement. 6

21 Figure 2.1: Deloitte s digital disruption map Source: Deloitte, Digital disruption; short fuse, big bang?, Building the Lucky Country #2 (2012) Those industries facing the greatest disruption or change in the short term are likely to include: Retail trade, which is coming to terms with the rapid rise of online shopping, putting traditional bricks and mortar retailing under sustained pressure. Information and communications (including media), where increased competition from online media and the emergence of new mobile technologies is rapidly revolutionising the sector. Professional services, real estate and finance, where access to information and services online is already growing rapidly, and is likely to continue to experience rapid change in the future. Major changes can also be expected in other industries, though over a longer time horizon. Such industries include: Agriculture, where producers are increasingly making use of mobile technology to improve productivity and increase yields. Transport and postal and courier services, where increased integration and improved tracking and logistics are the key drivers of change. Government services, health and education, where the administration and sharing of information will be made easier, and new services will continue to be delivered online. Queensland s broader economic growth to lift in coming years, with a gear switch Queensland s economy has seen its fair share of ups and downs in recent years. The State was particularly hard hit, relative to the rest of Australia, in the aftermath of the global 7

22 financial crisis (GFC) tight lending conditions hit the Queensland residential and commercial sectors harder than elsewhere. In addition, a series of natural disasters including heavy rainfall, flooding and cyclones damaged and destroyed crops, and severely limited coal production, transportation and exports. Chart 2.3: Output growth, Queensland and Australia Year-to growth 10% 8% Queensland Australia Forecast 6% 4% 2% 0% -2% Source: ABS, That period of Queensland underperforming the broader Australian economy did not last, with Queensland s economic growth bouncing back to 4.4% during , outpacing Australia (3.6%) once again. Queensland s outperformance in terms of broader economic growth continued in (3.6% State growth compared with 2.7% for Australia), and is expected to hold as well during (3.6% growth from Queensland compared with 2.5% nationally). Part of the economic recovery came from a return to normal production for the State s agriculture and mining sectors. But a substantial portion came from new investment in large scale resources projects, particularly the development of three new liquefied natural gas (LNG) facilities, with all three slated for completion by This lift in engineering construction activity as a share of the State s economy from 2011 is seen clearly in Chart 2.4 below. But at present, during , the Queensland economy is changing gears once again. Weaker commodity prices have begun to take effect on the mining industry, and so the expansion of construction activity has slowed. The Queensland government s fiscal repair agenda has also cut spending out of some parts of the Queensland economy. The slowdown in construction activity in the mining sector is a sign of a shift to the third phase of the mining boom the lift in mining output which follows on from the boom in prices and in major project construction. 8

23 Chart 2.4: Components of investment, Queensland Share of Queensland GSP 16% Housing investment 14% Commercial construction investment 12% Forecast 10% 8% 6% 4% 2% 0% Source: ABS , Within the construction sector, the decline in engineering construction activity is expected to be partially offset by a rise in housing construction. Housing construction is expected to be an important component of Queensland economic growth over the next two to three years, as a period of low interest rates sparks investor interest, house prices are rising, and population growth has lifted over recent years. Building approvals rose notably in 2013 suggesting housing construction activity will start to do likewise in The shift downwards in the $A over 2013 will also deliver benefits to Queensland sectors such as tourism, international education and agriculture, while lingering low interest rates will also further assist some consumers and businesses in the short term. Table 2.2 provides forecasts for key components of final demand in Queensland over the coming years. Over the next few years the economic cycle is expected to produce very strong growth in housing construction, which is expected to help smooth the path from declining engineering construction, as major project investment steps down. 9

24 Table 2.2: Components of State final demand, Queensland State final demand ($m, real) Gross State product 305, , , , , ,983 % change 3.6% 3.6% 5.0% 4.6% 4.1% 3.6% Share of GDP 19.5% 19.7% 20.1% 20.3% 20.5% 20.7% Real final demand 312, , , , , ,444 % change 0.8% 1.6% 2.7% 3.6% 3.4% 3.2% Private consumption 163, , , , , ,767 % change 2.6% 3.9% 3.8% 3.8% 4.0% 4.1% Private housing investment 14,574 17,118 19,079 20,841 21,661 21,913 % change 6.5% 17.5% 11.5% 9.2% 3.9% 1.2% Private construction inv 37,390 31,205 29,623 29,499 29,685 29,737 % change -6.5% -16.5% -5.1% -0.4% 0.6% 0.2% Private equipment inv 18,287 18,254 18,225 19,145 19,913 20,603 % change -6.1% -0.2% -0.2% 5.0% 4.0% 3.5% International exports 61,120 65,426 70,528 75,763 81,525 86,654 % change 6.1% 7.0% 7.8% 7.4% 7.6% 6.3% International imports 43,547 45,511 46,928 50,293 53,090 55,319 % change 1.5% 4.5% 3.1% 7.2% 5.6% 4.2% Source: 10

25 3 Queensland s future workforce and skill needs What is the expected size and composition of Queensland s workforce over the coming years? Ultimately, future skill needs are dictated by industry needs. This chapter examines how Queensland s workforce is expected to evolve over the next five years. 3.1 Workforce growth In , some 2.35 million individuals were employed in Queensland. Total employment in Queensland has increased by 525,000 jobs over the last decade and by more than 1 million jobs over the last two decades. In Queensland accounted for 20.2% of total Australian employment, which is up from 17.7% in While Queensland s share of employment has been rising, Queensland s share of Australian unemployment has also been rising over time. In , Queensland accounted for less than 17% of total unemployment in Australia. By that share had risen to 22.6%. In , Queensland also recorded a higher unemployment rate than the national average 5.9% compared to 5.3% nationally a trend which has been consistent since the second half of The rate of employment growth in Queensland has been improving through 2013 and looking forward over the next five years there is expected to be a further cyclical improvement through to 2016, before the rate of employment growth moderates once again. That cyclical improvement is in part driven by current low interest rates and the moderation in the $A providing an economic spark to sectors such as housing construction, retail, consumer services, and tourism, with many of these sectors being labour intensive. Overall, employment growth in Queensland over the five years from to is expected to average 2.5% per annum. That compares with expected employment growth for Australia as a whole of 1.7% per annum over the same period. As a benchmark, the latest projection from Queensland Treasury for employment growth between and is expected to average 2.5% per annum. 3 3 Queensland Budget , Budget Paper 2, page 27 11

26 Chart 3.1: Employment growth, Queensland and Australia Year-to growth 7% 6% 5% 4% 3% Queensland Forecast average Australia Forecast average Forecast 2% 1% 0% -1% Source: ABS , Beyond a short term cyclical peak, employment growth in Queensland is expected to moderate over time. That moderation will in part be driven by expected further declines in the State s labour force participation rate over time. The increase in the average age of the population discussed in chapter 2 means that as more people move into older age cohorts, the overall rate of labour force participation will likely decline over time. Policies from both government and business which provide flexibility to encourage people to remain in the workforce for longer are likely to continue to be vigorously pursued. With a cyclical upswing in employment growth expected, and an underlying trend of gradual weakening of supply into the labour force over time, it is also likely that Queensland s unemployment rate will move lower over time. The Queensland government has set the aspirational target of reducing the State s unemployment rate to 4% in six years. 3.2 Workforce by industry The industry dimension of expected workforce growth will be key to driving overall skill needs. Although Queensland has benefited significantly from a lift in resource-related investment over the last decade, which has increased the level of employment in the mining and construction industries, the Queensland economy remains broadly based, with considerable employment in the services sector. Of the 525,000 jobs created in Queensland over the past decade, significant gains by industry sector were seen in: Health care and social assistance (112,000); Construction (75,000); 12

27 Professional, scientific and technical services (66,000); Mining (55,000); Education and training (44,000); and Retail trade (37,000). Compared to Australia as a whole, Queensland s industry structure has a higher share of activity devoted to mining, construction, and tourism related sectors such as accommodation, as well as public administration and health care. It has less exposure to manufacturing, as well as to financial services and professional services. The employment projections show strong gains over the next five years accruing to: sectors benefiting from population growth, such as health care and administrative services (largely representing services to households); retail trade and education, which also gain some benefit from a lower $A; business services such as professional services, property services and IT; and mining, led by the operational requirements of the oil and gas sector. Chart 3.2: Employment growth by industry (1 digit ANZSIC), % change, to Administrative and Support Services Health Care and Social Assistance Education and Training Retail Trade Mining Professional, Scientific and Technical Services Rental, Hiring and Real Estate Services All industries Information Media and Telecommunications Transport, Postal and Warehousing Public Administration and Safety Wholesale Trade Accommodation and Food Services Financial and Insurance Services Construction Arts and Recreation Services Total manufacturing Electricity, Gas, Water and Waste Services Agriculture, Forestry and Fishing Other Services Queensland Australia Source: -2% 0% 2% 4% 6% Average yearly growth rate Chart 3.3 compares these projections with employment growth seen in Queensland over the past five years. Health care and consumer driven administrative services are expected to continue strong job gains, with their links to solid population growth and ageing demographics. Meanwhile, the education, recreation and manufacturing industries are likely to see stronger growth going forward as the $A becomes less of a negative over time. 13

28 On the other hand, mining employment growth is forecast to ease considerably, along with employment in the utilities industry. Chart 3.3: Employment growth by industry (1 digit ANZSIC), 5 year annual average growth to and Administrative and Support Services Health Care and Social Assistance Education and Training Retail Trade Mining Professional, Scientific and Technical Services Rental, Hiring and Real Estate Services All industries Information Media and Telecommunications Transport, Postal and Warehousing Public Administration and Safety Wholesale Trade Accommodation and Food Services Financial and Insurance Services Construction Arts and Recreation Services Total manufacturing Electricity, Gas, Water and Waste Services Agriculture, Forestry and Fishing Other Services Source: ABS , -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Average yearly growth rate In total, Queensland employment is projected to increase by 308,000 persons over the five years to Significant gains by industry sectors are expected for: Health care and social assistance (55,000); Retail trade (45,000); Education and training (33,000); Professional and scientific and technical services (27,000); Construction (20,000); and, Administrative and support services (18,000). Expected employment growth in terms of persons across all major industry sectors is shown in Chart