AUSTRALIAN TRANSPORT AND LOGISTICS INDUSTRY

Transcription

1 Centre for the Economics of Education and Training Faculty of Education, Monash University AUSTRALIAN TRANSPORT AND LOGISTICS INDUSTRY JUNE 2013

2 CONTENTS Executive summary 1 Tables and figures 79 References 83 1 Introduction Macroeconomic context Measures of education and training Future supply of vocational qualifications The workforce covered by TLISC 19 2 Employment trends Employment trends all sectors Employment trends by industry Employment trends by occupation Employment trends by qualification Employment trends Transport and Logistics industries Employment trends Logistics and Warehousing sector Employment trends Road Transport sector Employment trends Aviation sector Employment trends Rail sector Employment trends Maritime and Ports sector 46 3 Forecasts of employment Forecasts of employment all sectors Forecasts of employment by industry Forecasts of employment by occupation Forecasts of employment by qualification Forecasts of employment Transport and Logistics industries Forecasts of employment Logistics and Warehousing Forecasts of employment Road Transport Forecasts of employment Aviation sector Forecasts of employment Rail sector Forecasts of employment Maritime and Ports sector 59 4 Job openings for new entrants, Job openings for new entrants all sectors Job openings for new entrants Transport and Logistics industries Job openings for new entrants Logistics and Warehousing sector Job openings for new entrants Road Transport sector Job openings for new entrants Aviation sector Job openings for new entrants Rail sector Job openings for new entrants Maritime and Ports sector 65 Report prepared for TLISC by Michael Long & Chandra Shah, CEET TLISC The Transport and Logistics Industry Skills Council Ltd (TLISC) is an independent, government funded, not-forprofit organisation that works on behalf of the Transport and Logistics Industry to promote investment in skills and workforce development. TLISC is chartered with driving the skills and workforce development agenda across the entire Transport and Logistics industry which encompasses activities in road transport, warehousing, rail, aviation, maritime, logistics and ports. CEET CEET is the only centre for the economics of education and training in Australia. CEET focuses on the contribution of education and training to economic and social development, undertaking research training, consultancies and dissemination of the economics and finance of education and training. It has extensive experience and expertise in: the finance and economics of education and training; analysis of large data sets; policy development; supply and demand analysis; and working with government authorities in Australia and overseas.

3 iii 5 Training needs, Concluding remarks Training needs all sectors Training needs Transport and Logistics industries Training needs Logistics and Warehousing Training needs Road Transport Training needs Aviation Training needs Rail Training needs Maritime and Ports 75 Australian transport and logistics industry Forecasts of labour and skill requirements

4 Executive summary There are promising signs for the Transport and Logistics industry, and despite an economy in transition, the future looks bright. During the next five years the industry is expected to grow by 73,000 to 870,000, and one of the distinctive features of the past decade has been the fact that Transport and Logistics workforce growth has exceeded growth for the rest of the economy. Nevertheless, there are challenges ahead. A bigger economy and trade with Asia means that pressures on the industry are only expected to increase and in order to meet these demands quality training and up-skilling of the workforce is vital. The total training needs for the Transport and Logistics Industry over the next five years are for 151,000 persons with qualifications. Training needs vary by sector but also by occupation within each sector. Less than half of all needs will be met by new entrants with qualifications and the rest will be met by continuing workers upskilling. This is a huge task, yet there is the added complication of an ageing Australian workforce. Currently 12 per cent of the Transport and Logistics workforce is 60 years or older looking to retire in the next five years. A further 34 per cent is aged years. Robert Adams Chief Executive Officer In 2002 around one third of the Transport and Logistics workforce held educational qualifications, but by 2012 this had increased to 45 per cent. And despite this surge, the industry still lags behind the Australian workforce as a whole in which 63 per cent hold formal qualifications. The industry s commitment to training and upskilling the Transport and Logistics workforce is evident in the growing number of workers who have educational qualifications. Of course, this also translates to greater productivity across the sectors, higher pay for workers and an overall better standard of living.

5 EXECUTIVE SUMMARY 2 Key findings In the five years to 2017, 151,000 job openings for new entrants are forecast in the Transport and Logistics industries. This averages to about 30,000 openings per year. Not surprisingly the highest numbers of openings are expected in the two largest sectors. Almost 90 per cent of all openings are forecast in the Logistics and Road Transport sectors. Employment in the Transport and Logistics industries is forecast to increase by 73,000 persons over the next five years to 870,000 in The average annual rate of growth in these industries is forecast to be higher than in the rest of the economy, which is consistent with the trends over the past decade. The rate of growth is forecast to vary by sector. For instance, growth in Logistics and Rail Transport is forecast to be above the industries average of 1.8 per cent per year. Employment in the two largest sectors logistics and road transport is forecast to increase by 67,000 persons. This is more than 90 per cent of the total growth in Transport and Logistics industries. The Transport and Logistics industries workforce has aged over the past decade, for instance, the proportion of the workforce aged 55 years or older increased from 13 per cent in 2002 to 22 per cent in About 12 per cent of the workforce is 60 years or older and will be approaching retirement during the next five years. The overwhelming majority of people working in the Transport and Logistics industries are male 86 per cent in This proportion has only slightly reduced since Slightly more than half of the rest of the Australian workforce is male 52 per cent in 2012 compared to 53 per cent in A minimum of about 2.4 million people will need to be trained across all Australian Industries from to meet industry demand for skilled workers. This amounts to at least 482,000 completed qualifications per year. The total training needs for the Transport and Logistics Industry over the next five years are for 151,000 persons with qualifications. Training needs vary by sector but also by occupation within each sector. Less than half of all needs will be met by new entrants with qualifications and the rest will be met by continuing workers up-skilling. Australian Australian transport and and logistics industry Forecasts of of labour and skill requirements

6 Context The current broader macroeconomic context is relevant in understanding the demand for labour and skills in the Transport and Logistics industries. Macro conditions have a direct or indirect impact on all industry sectors. The Australian economy, like most other economies around the world, experienced the fallout from the global financial crisis. While the impact of the crisis has been rather severe for many countries, Australia has escaped relatively unscathed from the experience. The Government s stimulus packages together with the continuing demand for Australian resources from China, Japan, South Korea and India cushioned the economy from the worst effects of the crisis. The economy has continued to be resilient despite the winding down of the Australian Government s initial fiscal stimulus. This was mainly because of continuing global demand for Australian resources. However, prices for iron ore and coal, the two commodities that make up a significant proportion of Australia s exports, have declined. This has largely been as a result of a softening of the Chinese economy and increasing supplies of these commodities coming on the market. China has also built up large stockpiles of these commodities. The resources boom has improved Australia s terms of trade. This together with the high interest rates in Australia relative to those in most other developed countries has strengthened the value of the Australian dollar relative to most other major currencies. While the economies and labour markets of the mining states of Western Australia, Queensland and the Northern Territory are expanding rapidly as a result of the resources boom, the traditional manufacturing states of New South Wales, Victoria and South Australia are doing less well, but not as badly as some other parts of the developed world. This patchwork economic progress has become a topic of hot debate more recently because the disparities seem to have increased to well above historic levels. While the average unemployment rate in Australia in the first quarter of 2012 was 5.6 per cent, in some parts of the country it was well above this level. The high Australian dollar has adversely affected the trade-exposed non-resource sectors of the Australian economy (e.g. tourism and manufacturing). Tourism to Australia is not only sensitive to the value of the Australian dollar but it is also affected by the health of economies from which Australia traditionally receives tourists, for example, Europe, Japan and the U.S. Increased numbers of tourists from China and India may offset some of the decline from the traditional sources. The Australian Government has initiated some major economic and social reforms, the pricing of carbon and the construction of the National Broadband Network being the most significant of these. Pricing carbon is however unlikely to have much employment effect, at least in net terms, although additional skill needs may arise from adaptation and mitigation activities. In the Transport and Logistics industries, changing driver behaviour is contributing to mitigation (e.g. improving vehicle fuel efficiency through CleanRun Ecodrive program in Western Australia). Australia s population is projected to grow to 23.5 million by 2015 and then to 26.8 million by The ageing of the population presents a significant long-term risk for the economy and sustainability of government finances. The ageing of the population will also affect future labour supply. Reforms that reduce barriers to participation can lift growth and reduce future pressures on labour supply. Improving educational attainment would be one way to lift aggregate labour force participation because people holding qualifications are more likely to participate than those who do not hold qualifications. Improving the skills base of the workforce is thus emerging as a critical factor if Australia is to meet the economic, environmental and social challenges of the future.

7 EXECUTIVE SUMMARY 4 What part of the workforce is covered by TLISC? TLISC holds responsibility for the training and workforce development needs at the sub-professional level in the following Transport and Logistics sectors: Road Transport, Logistics and Warehousing Aviation Rail Maritime and Ports. These sectors are defined by a set of occupations, training for which is predominantly delivered using one of the three training packages that TLISC has responsibility for. Workforce profile and trends in employment, All sectors Employment in Australia reached 11.4 million persons in Since 2002 it has increased by a quarter, or 2.3 per cent per year. While employment in Agriculture, Forestry and Fishing has continued to decline, in Mining it has trebled, albeit from a low base. The Transport, Postal and Warehousing sector, which overlaps with the TLISC workforce as defined in this report, employed 566,000 persons in The qualifications profile of the Australian workforce has been changing with a trend toward more people holding qualifications and at higher levels. In 2001, 54.2 per cent of the working population aged years held qualifications and 52.6 per cent of these qualifications were at a diploma or higher level. By 2011, 62.7 per cent held qualifications and 59.6 per cent of the qualifications were at the Diploma or higher levels. The number of people with qualifications in the workforce has been increasing at a much higher rate than overall employment 3.7 per cent compared to 2.2 per cent per year. These trends indicate substantial skills deepening in the workforce. 28% employment growth in Transport and Logistics since Australian Australian transport and and logistics industry Forecasts of of labour and skill requirements

8 Table E1 Transport and Logistics industries workforce, 2002 Sector Employment ( 000s) % male % aged 45 years or older % working 35 hours or more per week TLISC sectors Logistics Road Transport Aviation Rail Maritime & Ports Non-TLISC sectors 8, All sectors 9, % with qualifications Source: Australian Bureau of Statistics (ABS) (2012b). Scope: persons aged 15 years or older. Small numbers have relatively large associated standard errors and should be used with caution. Table E2 Transport and Logistics industries workforce, 2012 Sector Employment ( 000s) % male % aged 45 years or older % working 35 hours or more per week TLISC sectors Logistics Road Transport Aviation Rail Maritime & Ports Non-TLISC sectors 10, All sectors 11, % with qualifications Source: Australian Bureau of Statistics (ABS) (2012b). Scope: persons aged 15 years or older. Small numbers have relatively large associated standard errors and should be used with caution. Transport and Logistics industries Employment in the Transport and Logistics industries increased at a faster rate than in the rest of the workforce between 2002 and compared to 2.2 per cent per year. In 2012, employment in the industries was about 800,000, having increased by 28 per cent since Tables E1 and E2 provides a summary of the Transport and Logistics industries workforce in 2002 and Most of the workforce is employed in the Logistics and Road Transport sectors. The workforce is predominantly male, especially in the Maritime and Ports sector. The workforce has a higher percentage of workers aged 45 year or older than the rest of the workforce. There was a 10 percentage point increase in the number in this age group over the last decade. In the Road Transport sector, 56 per cent of all workers were in this age range in Partly as a result of a mainly male workforce, three out of every four workers in the workforce worked 35 hours or more per week. Only about a third of the workforce held educational qualifications in The percentage had increased to 45 per cent by A number of occupations in the Transport and Logistics industries employ large numbers of workers who do not hold any qualifications but possess skills and occupational licenses that allow them to work productively. Examples of such occupations are Truck Driver, Delivery Driver, Forklift Driver and Waterside Worker. The Aviation and Maritime and Ports sectors have relatively high proportions of workers with qualifications, particularly the former in which 76 per cent held qualifications in The highest employment growth over the past decade has been in the Logistics sector (3.5 per cent per year) and lowest in Aviation (1.5 per cent per year). The largest three occupations in the Transport and Logistics industries, each with more than 50,000 workers in 2012, were that of Storeperson and Forklift Driver in the Logistics sector and Truck Driver in the Road Transport sector.

9 EXECUTIVE SUMMARY 6 Forecasts of employment, The report uses the MONASH model to generate employment forecasts by industry and occupation. The model is one the most sophisticated and respected models of the Australian economy. Government and other agencies regularly commission forecasting and policy analysis work using the model. For example, the work modelling the impact of the carbon price on the Australian economy on behalf of the Australian Treasury was undertaken using MONASH model. The model has been adapted for use in a large number of developed and developing economies, including the U.S. The demand for labour in the economy depends on a number of factors. It depends on the macroeconomic state of the domestic economy and that of its major trading partners. Other factors that influence demand are capital investment and its distribution across industries, the pace of technical change and government policies. Moreover there is a complex interdependency between all these factors. Future growth in demand will depend on assumptions made about the state of these factors and their implications in future periods. All these factors are modelled in a computational general equilibrium framework in the MONASH model. The CEET model factors in skills deepening rates into MONASH forecasts to produce forecasts of employment by qualification. The relatively faster increase in the percentage of workers with qualifications than the increase in employment in an occupation is referred to as skill deepening. It can also refer to the qualifications profile of the occupation changing toward higher level qualifications. All sectors Employment in Australia is forecast to grow by 836,000 persons, or 1.4 per cent per year, from 2012 to About 30 per cent of this growth is forecast to be in Construction and Retail Trade. The highest rate of employment growth is forecast in the Mining sector. Health Care and Social Assistance is forecast to employ 12 per cent of all workers in 2017, the highest percentage for any sector. In the Transport, Postal and Warehousing sector, employment is forecast to increase by 29,000 persons over this period, which is an annual rate of growth of one per cent. In 2017, 1.1 million more working people are forecast to hold qualifications than in This represents an increase of 15.2 per cent. The number of people without qualifications is forecast to decline by 6.4 per cent. Altogether, 68.3 per cent of the working population in Australia in 2017 will hold qualifications. The highest growth in qualifications is forecast at the Diploma and Certificate IV levels. Numbers of workers with higher education qualifications are also forecast to grow strongly. Only a modest increase is forecast for the number of workers holding Certificate III. Fewer workers are forecast to hold qualifications at the Advanced Diploma, Certificate II and Certificate I in 2017 than in Transport and Logistics industries Table E3 shows the forecasts of employment by level of qualification in the Transport and Logistics industries in Employment is forecast to increase proportionately more in these industries than in the rest of the economy, reaching 870,000 in The Logistics sector will employ more workers than any other sector. The proportion of the industries workforce with qualifications is forecast to increase substantially, but it will still be much lower than the proportion with qualifications in non-tlisc sectors. Table E3 Forecasts of employment in Transport and Logistics industries, 2017 ( 000s) Sector Higher education VET No qualification Total % with qualifications TLISC sectors Logistics Road Transport Aviation Rail Maritime & Ports Non-TLISC sectors 3,545 4,366 3,488 11, All sectors 3,654 4,721 3,894 12, Source: MONASH economic forecasts (CoPS June 2012). Small numbers have relatively large associated standard errors and should be used with caution. % change from 2012 Australian transport and logistics industry Forecasts of labour and skill requirements

10 more working people are forecast to hold qualifications in 1.1million 2017 than in Box E1 MONASH model for forecasting employment by occupation MONASH is a computational general equilibrium model for forecasting employment by occupation (Adams et al. 1994; Dixon and Rimmer 1996; Meagher 1997; Dixon and Rimmer 2000). It is maintained by the Centre of Policy Studies (CoPS), Monash University. An intuitive description of the model is contained in Appendix O in Industry Commission (1997)) In brief, the MONASH model is a sequence of singleperiod models, linked through time by the behaviour of capital and labour markets. It has three main elements a database, theory and parameters that are embodied in the model s system of equations. These equations describe how industries and consumers respond to changes in policy. The core of the database is a large input-output matrix, which shows how each sector of the economy is linked to other sectors. These linkages are only for a particular point in time. Behaviour responses of different groups to policy changes are based on economic theory. The model specifies likely responses of producers, consumers, foreigners and investors to policy changes. It also includes a government sector, the revenue and expenditure behaviour of which is modelled separately. While theory guides the model s broad assumptions (which can be altered to accommodate different scenarios), actual numerical parameters are required to estimate the size of the responses. In MONASH, these parameters are derived either from the input-output database or from other external sources. MONASH converts the forecast for aggregate output to forecasts for output by industry. These are then converted to forecasts of employment by industry, which in turn are converted to employment by occupation. MONASH uses a range of historical data input to estimate the model. These include: national accounts input-output tables state accounts Census data on population foreign trade statistics capital stock statistics income and expenditure surveys other unpublished data from the ABS. To generate forecasts, MONASH has to have access to informed opinion on future changes to variables that are exogenous to the system. The model is adaptable and can incorporate data from a range of sources. Currently it uses the following: Access Economics 5-year macro forecasts of output by major industry sector Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) export prices and volumes for primary products Tourism Forecasting Committee s (TFC) prospects for tourism Productivity Commission s assessment on changes in protection implied by government industry policy CoPS assessment of changes in technology and consumer tastes.

11 EXECUTIVE SUMMARY 8 Job openings for new entrants, New jobs from growth in an occupation account for only a portion of all jobs that are expected to be available during the forecast period. Many workers will leave jobs for a variety of reasons, such as death, ill-health, retirement or transfer to another occupation. These departures will create additional opportunities for workers to enter each occupation. In many occupations, the number of workers retiring will rise in coming years due to the ageing of Australia s baby boomers. These replacement needs, when added to new jobs, create a more complete picture of job openings. While projections of job growth and decline provide the best picture of how occupational employment is expected to change, job openings provide a better description of the labour market that new entrants will face. The measure of replacement needs adopted in this report is net replacement, which, when combined with growth in an occupation, best represents the job openings for new entrants to the occupation. The average annual net replacement rate across all occupations for the period was estimated to be 2.1 per cent. By comparison, the growth in employment is forecast to be 1.4 per cent per year for the same period. This highlights the importance of replacement needs relative to employment growth in estimating new entrants to an occupation. Net replacement needs are generally higher for low-skill occupations than high-skill occupations. All industries sectors About 2.2 million job openings for new entrants are forecast from 2013 to The job openings are for workers with and without qualifications. The number of job openings depends on growth and replacement needs in the occupation group but also on the current level of employment in it. For instance, the highest job openings are for Professionals which employed 2.7 million workers in 2012, the highest number in all occupation groups. On the other hand, the high number of job openings for Sales workers is mainly because of the high net replacement rate (5 per cent). Transport and Logistics industries Table E4 provides a summary of the job openings for new entrants in the transport and logistics industries from 2013 to While the employment growth rate in the industries is higher than in other sectors of the economy, the net replacement rate is lower despite the older age profile. More than 150,000 job openings are forecast in the industries during this period, most of them in the Logistics and Road Transport sectors. About the same number of job openings are forecast in these two sectors but for different reasons. While in the Logistics sector the growth rate is high and the net replacement rate is low, in the Road transport sector the opposite is the case. Table E4 Employment growth rate, net replacement rate and job openings in Transport and Logistics industries, Australia, Sector Employment growth rate (%) Net replacement rate (%) Job openings ( 000s) TLISC sectors Logistics Road Transport Aviation Rail Maritime & Ports Non-TLISC sectors ,002.1 All sectors ,153.6 Source: CEET. Table E5 Training needs in Transport and Logistics industries, Australia, ( 000s) Sector Higher education Advanced diploma/diploma Certificate III/IV Certificate I/II Total TLISC sectors Logistics Road Transport Aviation Rail Maritime & Ports Non-TLISC sectors All sectors Source: CEET. Australian transport and logistics industry Forecasts of labour and skill requirements

12 Training needs, Not only is employment forecast to grow over the next five years, but the qualifications profile of the workforce is also expected to change with more workers holding qualifications and increasingly at higher levels. Part of the future demand for skilled labour will be met by skilled workers who are currently working in the industries and who will continue to do so in the next period. However not all workers employed in the current period will be available in the next period because of turnover. The qualifications profile of an occupation will change with the entry of new people and the exit of others, some of whom will hold qualifications and others will not. In some instances the number of new entrants with qualifications will be insufficient to achieve the qualifications profile forecast for the occupation and continuing workers will need to acquire new qualifications to make up the shortfall. Some continuing workers who already have a qualification may up-skill and others who do not have a qualification may acquire their first qualification. The report provides baseline information on the minimum number of qualified workers needed in the transport and logistics industries from 2013 to 2017 due to: changes in the qualifications profile growth in employment turnover of workers. These estimates provide indications of the minimum training needs. Completion of skill sets or licensing requirements are considered additional training and not included in these estimates. Also not included are lower level qualifications completed as a pathway to higher level qualifications in the same year. All industries About 2.4 million people will need to be trained from to meet industry demand for skilled workers. This amounts to 482,000 completed qualifications per year. Slightly more than half of this demand for trained workers will be met by new entrants with qualifications and the rest by continuing workers up-skilling. While new entrants will meet significantly more of the demand for workers with Bachelor and Certificate I-III level qualifications, the demand for postgraduate, diplomas and Certificate IV qualifications will largely be met by continuing workers up-skilling. About 38.3 per cent of all demand is projected for higher education qualifications and almost all demand for VET qualifications is at the Diploma or Certificate III/IV level. Transport and Logistics industries Table E5 shows the summary of the training needs in Transport and Logistics industries. The total needs over the next five years are for 151,000 persons with qualifications. Training needs vary by sector but also by occupation within each sector. Less than half of all needs will be met by new entrants with qualifications and the rest will be met by continuing workers up-skilling. About three-quarters of training needs will be for persons with VET qualifications, 57 per cent of which will be at Certificate III/IV level. The demand for Certificate I/II qualifications will be largely met by new entrants. Concluding comments This report has produced forecasts of labour and qualification needs in transport and logistics industries in Australia from 2013 to It has used the most robust model for forecasting training and the most recent data to estimate the model. Models are only as good as the quality of the data that are used to estimate them. Even the most reliable data have limitations because they are often derived from sample surveys which contain sampling and measurement errors and also because standard classifications are used for coding the data. Economic forecasts are never precise, especially over the longer term, and always have a certain degree of uncertainty attached to them. It is inevitable that developments that are currently unforseen will eventually render forecasts from any model, not just the ones included in this report, to be inaccurate. This report contains short- to medium-term forecasts and are, therefore, unlikely to have large margins of error. Notwithstanding the limitations outlined above, the forecasts of employment, job openings for new entrants and the training needs in the Transport and Logistics industries included in this report provide sound baseline data that are systematic, comprehensive and consistent for informing policy on workforce development. The forecasts should however be validated and fine-tuned with information from other sources and stakeholder consultation.

13 EXECUTIVE SUMMARY 10 Australian transport and logistics industry Forecasts of labour and skill requirements

14

15 The purpose of this report is to provide estimates of the training needs in the occupations covered by the Transport and Logistics Industries Skills Council (TLISC) for the period

16 1 Introduction The Australian Government s interest in developing policies on skills and workforce development is ongoing and stems from a desire to sustain economic growth and to ensure Australia continues to remain globally competitive. Investment in education and training has to be appropriate and ongoing to equip the workforce with a capacity to be able to innovate, improve productivity and adapt to structural changes. A better skilled population is more likely to have higher labour force participation. Reforms that improve the quality of educational and training outcomes will also drive productivity growth over the medium term (Australian Government 2010). The link between education and training and innovation, participation, productivity and economic growth is in the first instance indicated by the strong association between higher levels of educational qualifications and higher earnings (wages are deemed to reflect the labour productivity of individuals) and labour force participation (again a reflection of the productivity of individuals). It is also indicated by the more than satisfactory rates of return to education and training (Long and Shah 2008). Statistical analyses show that an individual s education and training has a significant positive effect on their earnings and likelihood of employment, although higher earnings are more likely for higher level qualifications (Long and Shah 2008; Burke et al. 2003; Ryan 2002). Following job separation, Shah (2009) shows that males with qualifications are less likely to become unemployed and women with qualifications are less likely to leave the labour force. Even the lowest level qualifications (Certificate I/II) seem to be important in keeping people attached to the labour market.

17 1 introduction 14 Education and training however affect more than an individual s earnings and labour market experience. They have positive effects on the individual s health, investment decisions and consumer behaviour. Society-wide effects range from reduced crime and social welfare expenditure to expansion of general and institutional trust and civic cooperation. Sound development of policies on education and training requires up-to-date information on economic changes and how these changes are likely to affect the future demand for skills. The results of these analyses are also of vital interest to other stakeholders in the labour and education and training markets, including individuals making choices about careers and courses and education and training providers planning course offerings. In a demand-driven system, with education and training entitlements limited for each individual, the need for robust and reliable information that is easily accessible to all parties is even greater. As evidenced by the recent experience in Victoria 1, asymmetry in the information available to different parties can lead to problems such as under or over supply of specific skilled labour and sub-standard quality (e.g. anecdotal reports in the media suggest some training providers reduce hours of training delivery to cut costs). The Australian Government has set up eleven national Industry Skills Councils (ISCs) to provide advice on the skills needs of Australian industry. The mandate of Australia s ISCs is to bring together industry, educators and governments and unite them on a common industry-led agenda for action on skills and workforce development. TLISC is one of eleven Industry Skills Councils and is responsible for the assessment of current and future skills needs in Transport and Logistics industries, which include road, rail, air and water transport; transport support services; postal and courier pickup and delivery services; and warehousing and storage. These services are important for the economy as they underpin a range of other industries and activities, from transporting and storing freight to the movement of people by public and private transport. Their contribution to the gross domestic product (GDP) of Australia, in terms of gross value added (GVA), in was $70,833 million, or 4.9 per cent (ABS 2012). $70,833 million was the Gross Value Added (GVA) that was contributed by the transport and logistics industries in Victoria introduced an uncapped entitlement model for funding vocational education and training (VET) from 2009 (Government of Victoria 2008). This led to a blowout in the state budget for VET. As a result the Government drastically reduced the funding for a range of courses. Australian Australian transport and and logistics industry Forecasts of of labour and skill requirements

18 1.1 Macroeconomic context The current broader macroeconomic context is relevant in understanding the demand for labour and skills in the Transport and Logistics industries. Macro conditions have a direct or indirect impact on all industry sectors. This section provides this context. It also provides a short discussion on some of the longer term demographic and economic challenges facing Australia. The Australian economy, like most other economies around the world, experienced the fallout from the global financial crisis. While the impact of the crisis has been rather severe for many countries, Australia has escaped relatively unscathed from the experience. The Government s stimulus packages together with the continuing demand for Australian resources from China, Japan, South Korea and India cushioned the economy from the worst effects of the crisis. The economy has continued to be resilient despite the winding down of the stimulus. This was mainly because of continuing global demand for Australian resources. The economy has continued to grow, with the latest gross domestic product (GDP) figures indicating seasonally adjusted growth of 3.7 per cent (trend 3.8 per cent) in the year to June 2012 (ABS 2012a). This is higher than the 3 per cent forecast in the 2012 Federal budget (Australian Government 2012b). The budget forecasts the economy to grow by 3.25 per cent in and by 3 per cent the following year. The seasonally adjusted employment growth for was 0.7 per cent (ABS 2012b), which is slightly higher than the budget forecast. The forecast for is 1.25 per cent and for it is 1.5 per cent. The budget forecasts for the labour force participation rates for these years are constant at 65.3 per cent. The resources boom has improved Australia s terms of trade. This together with the high interest rates in Australia relative to those in most other developed countries has strengthened the value of the Australian dollar relative to most other major currencies. While the economies and labour markets of the mining states of Western Australia, Queensland and the Northern Territory are expanding rapidly as a result of the resources boom, the traditional manufacturing states of New South Wales, Victoria and South Australia are doing relatively poorly, but not as badly as some other parts of the developed world. This patchwork economic progress is often referred to as the two speed economy in the media and has become a topic of hot debate more recently because the geographic disparities seem to have increased to well above historic levels. While the average unemployment rate in Australia in the first quarter of 2012 was 5.6 per cent, in some parts of the country it was well above this level. For instance, in West Moreton in Queensland unemployment was 10.9 per cent and in Mersey-Lyell in Tasmania it was 9.8 per cent (Australian Government 2012a). Such regional disparities in output, employment growth and unemployment rates are not unique to Australia; they exist in many Organisation for Economic Co-operation (OECD) countries, with skills shortages in some regions coexisting with high unemployment in other regions (OECD 2005). The higher Australian dollar has adversely affected the trade-exposed non-resource sectors of the Australian economy (e.g. tourism and manufacturing) although for others it has meant a reduction in the input costs (e.g. costs of imported capital equipment). Tourism to Australia is not only sensitive to the value of the Australian dollar but it is also affected by the health of economies from which Australia traditionally receives tourists, for example, Europe, Japan and the U.S. However a recent report suggests inbound tourism from China is set to increase over the next few years as evidenced by a number of Chinese airlines planning to increase the number of weekly flights to Australia. This may then offset some of the decline from the traditional sources million projected Australian population by million projected Australian population by 2025.

19 1 introduction 16 However, prices for iron ore and coal, the two commodities that make up a significant proportion of Australia s exports, have declined. This has largely been a result of softening of the Chinese economy and increasing new supplies of these commodities coming on the market. China has also built up large stockpiles of these commodities. Partly as a result of these developments there has been some slowing down and some cancellations of resource projects. (e.g. BHP Billiton decision to defer expansion of Olympic Dam project in South Australia and delay Port Headland harbour expansion and Fortescue Metals decision to cut jobs and defer several projects). To ensure growth continues, the Chinese government has launched a new stimulus package worth US$150 billion to be spent on infrastructure. The Australian Government has initiated some major economic and social reforms, the pricing of carbon and the construction of the National Broadband Network being the most significant. Pricing carbon, however, is unlikely to have much employment effect, at least in net terms. However additional skill needs may arise from adaptation and mitigation activities (e.g. improving vehicle fuel efficiency through CleanRun Ecodrive program developed by the Department of Environment and Conservation in Western Australia). The price on carbon has the potential to spur innovation in the more efficient use of resources. The other major reform has been the introduction of the Minerals Resource Rent Tax on iron ore and coal, the intention of which is to provide an improved return to the community from the mineral wealth. Many long-term challenges, however, remain for Australia. The Intergenerational Report contains population and macroeconomic projections for Australia to 2050 (Australian Government 2010). It identifies ageing (particularly the increase in the old age dependency ratio 3 ) and climate change as presenting significant long-term risks for the economy and sustainability of government finances. IGR (2010) determines long-term projections of economic growth based on the three Ps population (15 years or older), participation (average hours worked per working person 15 years or older) and productivity (average output per hour worked). The future size of the population is determined on the basis of assumptions made about the future fertility and mortality rates and the level of net migration. The age-gender composition of the population affects the participation rate and future growth in productivity is based on historical experience. On this basis IGR (2010) projects GDP growth to slow to an average of 2.7 per cent per year until 2025 from the 3.3 per cent reported over the last 40 years. Growth in real GDP per capita is also projected to decline from 1.9 to 1.5 per cent per year over the same period which is mainly a result of declining labour productivity. The report expects the labour force participation rate of those aged 15 years or older to decline from about 65 per cent in 2010 to 63 per cent in IGR (2010) expects the demand for Australian resources from East Asia and India continuing. Australia s population is projected to grow to 23.5 million by 2015 and then 26.8 million by 2025 (ABS 2008). 4 The projections assume net overseas migration averaging 180,000 per year, fertility rate of 1.9 babies per woman and increasing life expectancy. Current Australian Government policy puts a relatively higher emphasis on skilled migration in the overall migration program. Skilled migrants generally have a much higher participation rate in the labour force than other migrants. The skilling of Australian residents must however remain a priority to ensure future growth, improved living standards, social inclusion and equity (Australian Workforce and Productivity Agency 2012). The ageing of the population will also affect future labour supply. Reforms that reduce barriers to participation can lift growth and reduce future pressures on labour supply. Improving educational attainment would be one way to lift aggregate labour force participation because people holding qualifications are more likely to participate than those who do not hold qualifications. Improving the skills base of the workforce is thus emerging as a critical factor if Australia is to meet the economic, environmental and social challenges of the future. Skilled migration may provide a shortterm solution, but a long-term sustainable solution requires continual improvement of the skills of the existing workforce and higher level skills for new entrants. This has to be more than just an increase in the volume of completed qualifications. The more important issue is the quality of the product. If the quality is poor then the confidence in the whole system will be undermined (Australian Workforce and Productivity Agency 2012). Reputation and confidence once damaged can take a long time to rebuild. 2 IGR (2010) 3 The old age dependency ratio is the number of people aged 65 years or older to the number in the working age population (15 64 years). 4 These are Series B projections. Series A projections are 23.8 million and 28.1 million, respectively and Series C projections are 23.1 million and 25.6 million respectively. Australian Government (2010) projection of population in 2025 is 27.5 million. Australian transport and logistics industry Forecasts of labour and skill requirements

20 1.2 Measures of education and training Individuals accumulate human capital through learning which can be formal or informal. While there are measures of formal learning, none exists for informal learning, which means informal learning cannot be included in a model to assess future demand for education and training. The outcomes of formal learning can be completed qualifications or skill sets, which includes certificates of attainment. Skill sets are defined as single units of competency or combinations of units of competency from a nationally endorsed Training Package, which link to a licence or regulatory requirement, or a defined industry need. Regular labour force surveys conducted by the Australian Bureau of Statistics (ABS) collect data only on qualifications and not on skill sets. This is because there is no agreed standard for skill sets for general use although skill sets are already being developed for use in some industries. Notwithstanding the limitations of qualifications as a complete measure of the human capital of an individual, they are nevertheless very important in the labour market for both employers and employees. The signalling theory suggests employers use qualifications to screen and match applicants to jobs. Qualifications can be particularly important for new entrants to the labour market (e.g. young people (15 24 years) and recent migrants) who may lack work experience and acceptable employer references. New entrants generally have a high job turnover and frequently use qualifications to indicate their human capital value to employers (Shah 2009). In this report, therefore, qualifications are used as a measure of education and training. Furthermore, only the highest qualification a person holds is considered even though many people hold multiple qualifications at the same or different levels. Once again, this is because data on multiple qualifications are seldom collected. In the transport industries many people hold occupational licences (e.g. drivers, pilots etc.) which are often not part of a qualification. This is an additional unmeasured demand for training in these industries.

21 1 introduction 18 Table 1.1 Population projections by age, Australia, (millions) Year Age group Total Change Change (%) Source: ABS (2008) Series B. 1.3 Future supply of vocational qualifications The future supply of people with qualifications will largely be a function of the: number of people who will complete qualifications net migration of people with qualifications to Australia. The two main factors affecting the number of people completing qualifications in the future will be the size and age structure of the population and participation rate in education and training. NCVER (2012) shows the participation rate in VET among the population aged years increased from 11.3 per cent to 12 per cent from 2007 to While the participation rates increased for all age cohorts, the highest increase was for the cohort aged years. Part of the increase in the participation rate in 2011 can be attributed to the introduction of the entitlement model in Victoria. The reduction in the funding for VET in the 2012 Victorian budget will see participation rate moderate in coming years. Table 1.1 shows population projections for Australia by age from 2012 to Under a middle scenario (Series B) the ABS projects Australia s population aged years will increase by about 635,000 people from 2012 to The largest percentage increase will be in the size of the cohort aged years followed by the cohort aged years. Only a marginal increase is projected in the size of cohort aged years. Even if participation rate were to return to the pre-2011 rate, the number of people participating in VET will continue to increase over the next five years because of the expected increase in the population across all age groups. However this will depend on further increases in public funding of the system. While current Australian Government policy is to increase, or at least maintain, the current level of funding, various state governments are keen to reduce funding to help balance their state budgets. The supply of qualifications is also affected by the willingness of employers to take on trainees and apprentices, which in turn depends on the state of the economy. The supply of people with VET qualifications can also be boosted with little additional cost by improving course completion rates which are relatively low compared to completion rates for undergraduate courses. 5 Net overseas migration has the potential to increase the supply of people with VET qualifications. The number coming through this source depends on government policy on migrant intake and the proportion of the intake that hold VET qualifications. It also depends on whether the migrants qualifications are recognised in Australia. 5 Foyster, Hon and Shah (2000) estimated course completions in TAFE institutes in Australia from 1994 to 1996 to be about 27 per cent. In a more recent study, Mark and Karmel (2010) also estimate course completion of about 27 per cent for students who commenced in Undergraduate course completions in higher education have been estimated to be at least 65 per cent (Shah and Burke 1999; Urban et al. 1999; Martin, Maclachlan and Karmel 2001). Data on completions of courses provided by private providers are generally available. Australian transport and logistics industry Forecasts of labour and skill requirements