Transport Freight and Logistics Sector Demographics

Transcription

1 Transport Freight and Logistics Sector Demographics Transport for New South Wales Final Report

2 Disclaimer Inherent Limitations This report has been prepared as outlined in the Scope Section. The services provided in connection with this engagement comprise an advisory engagement which is not subject to Australian Auditing Standards or Australian Standards on Review or Assurance Engagements, and consequently no opinions or conclusions intended to convey assurance have been expressed. No warranty of completeness, accuracy or reliability is given in relation to the statements and representations made by, and the information and documentation provided by Transport for New South Wales personnel and stakeholders consulted as part of the process. KPMG have indicated within this report the sources of the information provided. We have not sought to independently verify those sources unless otherwise noted within the report. KPMG is under no obligation in any circumstance to update this report, in either oral or written form, for events occurring after the report has been issued in final form. The findings in this report have been formed on the above basis. Third Party Reliance This report is solely for the purpose set out in the Scope Section and for Transport for New South Wales s information, and is not to be used for any other purpose or distributed to any other party without KPMG s prior written consent. This report has been prepared at the request of Transport for New South Wales in accordance with the terms of the Prequalification Scheme: Performance and Services Standard Form of Agreement as agreed on 16 April Other than our responsibility to Transport for New South Wales, neither KPMG nor any member or employee of KPMG undertakes responsibility arising in any way from reliance placed by a third party on this report. Any reliance placed is that party s sole responsibility. complexity" are registered trademarks or trademarks of KPMG International Cooperative ("KPMG International").

3 Table of contents Executive summary Introduction Project background Methodology The NSW Freight and Ports Strategy Action 3D Support the growth of the transport and logistics workforce The importance of skilled workers Definitional challenges Structure of this report Economic and industry context Australian economy overview NSW economy overview Transport, Freight and Logistics industry overview Drivers of change Workforce challenges for the TFL industry Analysis and findings What are skills shortages? Selecting occupations Historical trends in selected occupations Quantitative modelling of skills deficits Findings from stakeholder consultations Conclusion Responding to skills shortages Potential measures Conclusion Conclusion Summary of findings...37 A. TFL ANZSCO occupation categories...38 B. Demand-supply imbalance analysis for all TFL occupations C. Detailed modelling methodology...47 Modelling background...47 Labour Demand...47 Labour Supply...48 Supply Demand Imbalance...49 D. Consultation questions...51 complexity" are registered trademarks or trademarks of KPMG International Cooperative ("KPMG International"). i

4 Executive summary KPMG was engaged by Transport for New South Wales (TfNSW) to provide an analysis of the transport, freight and logistics (TFL) industry sector demographics, with a focus on specific occupations and an understanding of the prevalence of skills shortages in each. Through this project TfNSW has sought to develop a more objective, evidence-based approach to understanding skills shortages. This project provides TfNSW with: a unified framework for assessing skills gaps and shortages in key occupations for the TFL industry, reflecting discussions regarding skills categories/occupations so that project outputs are appropriate a better understanding of why particular skills shortages exist and where they are most acute initial guidance on where government and industry might work together to alleviate the gaps and shortages. This report provides TfNSW with a detailed analysis of current and forecast skills gaps and shortages within the TFL sector in NSW. KPMG s findings, conclusions and recommendations within this report have been informed by a combination of quantitative and qualitative evidence (further information is provided in section 1.2). They also reflect KPMG s experience in working at the interface between industry and government. A plethora of information already exists on the size and importance of the TFL industry to the national and state economies. Bodies such as the Australian Bureau of Statistics (ABS), Transport & Logistics Industry Skills Council (TLISC) and Bureau of Infrastructure, Transport and Regional Economics (BITRE) all produce extensive reports and statistics on the composition of the industry, not to mention industry associations such as the Australian Logistics Council and others. What makes this project unique is the application of KPMG s quantitative methodology on NSW specific information for a customised set of occupations considered as important to the industry. NSW Freight and Ports Strategy Released in December 2013, the NSW Freight and Ports Strategy provides a framework for industry, all levels of government and other stakeholders to guide investment and other decisions to enhance freight and logistics in NSW. The Strategy is a core component of the NSW Government s overall strategic planning framework and provides the State with a clear aim and achievable objectives. The objectives of the strategy are to ensure the: delivery of a freight network that efficiently supports the projected growth of the NSW economy balancing of freight needs with those of the broader community and the environment. Sustainable growth of the transport and logistics workforce is a key issue to ensure the TFL industry can meet the future requirements of the NSW economy. Skills shortages can constrain economic growth. Unaddressed, they may also compromise NSW s ability to meet current and future demand and may eventually lead to increased costs and inefficiencies at the firm, industry and economy-wide level. Addressing skills shortages must begin with a robust and comprehensive understanding of where skills shortages exist now and where they are likely to appear in future. To increase this understanding this project has been designed to quantify the scale of skill shortages in the industry and identify the occupations most in need of attention. The transport industry in NSW NSW s freight transport and logistics industry is estimated to account for up to 5.2 per cent of Gross State Product (GSP) (equivalent to $19.5 billion per annum). 1 The breakdown of contribution to GSP by industry is outlined in the table on the following page. By far the largest element of the industry is transport, and it can be divided into two key means of delivery: by road and by rail. Almost half of all interstate freight in Australia is carried on roads, and NSW accounts for more than one third of the country s total road freight. The rail transport sector is an important segment of the NSW freight transport sector, and is a crucial component of the coal chain. 1 ABS, , Australian National Accounts, State Accounts, NSW, and KPMG projections 2

5 Figure E.1: Contribution to NSW GSP by industry ( ) Industry Per cent of NSW GSP ( ) Transport, Postal and Warehousing 5.7 Agriculture 1.7 Mining 3.7 Manufacturing 8.7 Construction 6.2 Retail and Wholesale Trade 10.3 Utilities 3.1 Other Services 60.6 Source: Australian Bureau of Statistics, and KPMG projections Workforce challenges The Transport & Logistics Industry Skills Council (TLISC) estimates that the current national workforce across the industry consists of 797,000 employees across 165,000 businesses. 2 The Council expects the workforce to continue to grow significantly, predicting job openings of 151,100 for the period of 2013 to 2017, with the majority of these new jobs in logistics and warehousing, and road transport. 3 Across the TFL industry in Australia, 47 per cent of the workforce is aged 45 years or older, compared with 38 per cent for the broader Australian workforce. 4 In addition, female participation rates are exceptionally low, with some occupations, such as Truck Drivers, almost exclusively male. A major component of the development of TLISC s environmental scan is employer consultations. Through these consultations TLISC identified that only a small proportion of employers had sufficient capacity to lift the language, literacy and numeracy levels (LLN) of their workforce. Employers stated that low LLN levels affected both entry level positions and also frontline and middle-level managers, and were of particular concern with the technological and system advances requiring more advanced LLN skills than previously required. 5 Generally low LLN levels can also result in reduced productivity through ineffective work practices, materials wastage and ineffective training. TLISC sees higher qualifications and educational attainment, through graduate pathways and up-skilling of existing workers, as critical for businesses in the TFL industry to remain competitive and profitable. Moving on from the macroeconomic and industry level analysis presented in this chapter, the following chapter will focus the analysis on the occupations selected by TfNSW for modelling and investigation. Selecting occupations The Australian and New Zealand Standard Classification of Occupations (ANZSCO) and Australian and New Zealand Standard Classification of Industry (ANZSIC) publications contained over 470 occupations at the 4-digit (Unit Group) level aligned with the Transport, Postal and Warehousing industry. 6 After considering the size of the occupation and the critical importance of the occupation to the TFL industry, a final list of 37 occupations was identified for further analysis. The full list of selected occupations is provided in Appendix A. Based on this list KPMG undertook a descriptive analysis of the historical trends in these occupations, followed by a specific analysis identifying occupations in the TFL industry where an expected skills shortage was identified through an analysis of labour market data and consultations with industry peak bodies. 2 Transport and Logistics Industry Skills Council, E-Scan, 2014, p. 6 3 Ibid. 4 Ibid, p. 8 5 Ibid, p. 9 6 The ANZSCO occupation classification ranges from broad categories at the 1-digit level, down to detailed occupations at the 6-digit level. The 4-digit level was selected as it provided the optimal balance between data reliability and granularity. 3

6 Modelling of skills deficits Skills deficits result from labour demand outweighing labour supply. As such, to model skills deficits in the TFL industry KPMG had to first estimate the expected level of labour demand and labour supply for each of the 37 occupations identified for further analysis. To model labour demand KPMG used in-house macroeconomic and computable general equilibrium (CGE) models to provide forecasts of employment at the state and industry level. This information was analysed to determine employment demand by occupation. A range of demographic and education factors were considered when modelling labour supply. This included estimates of population growth (comprised of natural growth and net migration); workforce participation; and educational attainment. For each occupation labour demand was divided by labour supply to generate a Supply Demand Imbalance. The table below demonstrates how a Supply Demand Imbalance value corresponds to the skills pressure level seen in that particular occupation. Figure 1: Supply imbalance index levels range Skills presure level < 0.9 Very (strong skills excess) (moderate skills excess) Somewhat (some skills excess) S anced (balanced skills demand/supply) Somewhat Tight (some skills shortage) S Tight Tight (moderate skills shortage) Tight 1.1 > Very Tight (strong skills shortage) V Tight The index is designed to be used in conjunction with the concentration and supply measures which provide an understanding of the relative importance of that occupation in the economy. The concentration indicator measures that occupation group s share of total national labour demand. The supply measure provides the NSW share of total national employment in that occupation group. Based on the approach above, KPMG s modelling suggests that across the entire set of 37 occupations selected by TfNSW for detailed modelling and analysis, the vast majority of occupations were estimated to be either in balance or in surplus. There were however, skills deficits forecast in a number of occupations. The majority of the skills deficits that were identified fall within the Labourers category with skills deficits have been forecast for four occupations. Skills deficits have also been forecast for the Importers, Exporters and Wholesalers in the Managers category. The forecast occupations where a skills shortage is expected are summarised in the figure below. Figure 2: Occupations showing forecast skill shortages in NSW Demand - Supply Imbalance Occupation HISTORY FORECAST Occupation Demand Concentration State Supply Concentration Importers, Exporters and Wholesalers S V Tight V Tight V Tight V Tight V Tight 0.2% 33.5% Railway Track 0.1% 37.6% Workers Tight V Tight V Tight V Tight V Tight Forestry and Logging 0.0% 21.2% Workers S Tight S Tight Tight Tight Tight Tight Tight Freight and Furniture 0.1% 32.4% Handlers S S S Tight S Tight S Tight S Tight Deck and Fishing 0.1% 19.7% V Tight V Tight V Tight V Tight Hands Source: ABS Cat No ; ABS Cat No. 6227; and KPMG projections KPMG s modelling and analysis shows that skills shortages either exist or are forecast to develop in each of the five occupations identified in the table above: 4

7 Importers, Exporters and Wholesalers are forecast to experience a very tight labour market over the forward period. The potential impact of this is considered significant, given the relatively larger demand and supply concentration. Railway Track Workers are forecast to experience a very tight labour market over the forward period. The potential impact of this is also considered significant, given the size of the current and forecast deficit. The severity of impact is tempered by a slightly smaller demand concentration, however, NSW share of the supply of labour is more than a third of the national total. Forestry and Logging Workers are forecast to experience a tight labour market over the forward period. The potential impact of this is considered small, given the relatively smaller demand and supply concentrations. Freight and Furniture Handlers are forecast to experience a tight labour market over the forward period. The potential impact of this is considered small, given the relatively smaller demand concentration Deck and Fishing Hands are forecast to experience a very tight labour market over the forward period. The potential impact of this is considered small, given the relatively smaller demand and supply concentration. Findings from stakeholder consultations Stakeholder consultations can add richness to the analysis beyond supply and demand comparisons. Stakeholder consultations can uncover differences in the types of skills in shortage and how these skills may be changing. Stakeholder consultations largely support the outcome of the modelling with stakeholders commenting that the TFL industry is not experiencing widespread workforce shortages, however, stakeholders identified shortages existing in the following specific skill areas. Specific shortage Truck drivers It was a recurring theme from stakeholders that there is a shortage of appropriately qualified and experienced truck drivers to service the transport and logistics sector. The shortage of qualified truck drivers became more acute as the skill requirements for qualified drivers increased, from light through to heavy rigid vehicles, through to single-combine vehicles and finally multi-combine vehicles where the skills shortage was most acute. Moreover, shortages were noted in the specific skills required to load and unload certain goods to complete a delivery, with a lack of livestock handling skills specifically noted. Stakeholders noted a number of barriers to people entering the trucking industry. These include the qualification levels necessary, the compliance tasks that need to be completed to comply with regulation and the fact that driver experience levels employers demand are increasing. Furthermore, it was very difficult for inexperienced drivers to get the appropriate insurance to enable them to enter the trucking workforce. Specific shortage - Engineers The second area of ongoing skills shortages identified was in engineering, where the shortage of skilled employees is causing a significant long-term challenge for the mining sector and for the rail industry. Stakeholders identified the cause of the shortage was driven purely by an insufficient number of qualified engineers being trained in Australia. KPMG understands that in some areas, the labour market for engineers is global, further exacerbating the problem. The NSW Minerals Council placed significant emphasis on the need for a greater focus on maths and science during primary and secondary schooling. The Australasian Railway Association stated that shortages existed in signalling system engineers. Other skills shortages identified A focus on soft skills Stakeholders identified a number of other barriers inhibiting entry into the TFL workforce limiting productivity growth in the TFL industry, namely: a lack of soft skills in areas such as communications, leadership and situational awareness potential new employees lacking the necessary attitudes and values to be workforce ready 5

8 the lag between any increased demand for skills and the slow response from the training and education sector to meet industry needs and the time it takes for workers to be trained and job ready poor levels of knowledge and understanding of the broader supply chain and a worker s role within it a lack of formal logistics training offerings and animal handling training in NSW a lack of appropriate training infrastructure and associated insurance and other requirements. Responding to skills shortages KPMG utilised the insights gleaned through this project and through the completion of similar work in other jurisdictions and in other industries to propose a range of actions for to address skills shortages in the TFL industry. These proposed actions are summarised in the table below. Figure 3: Proposed actions to address and prevent TFL skill shortages in NSW Classification Issue Proposed action Planning and coordination Working with a highly fragmented industry TfNSW should work with transport, freight & logistics industry stakeholders to investigate the feasibility of industry establishing a NSW Transport Association to enhance the ability to seize opportunities and respond to issues in a coordinated fashion. Information and leading practice dissemination To promote industry self-reliance, TfNSW should look at ways to improve the dissemination of information and leading practice examples to the transport, freight & logistics industry sectors and encourage the sharing of information across industry. Education and training Rail training infrastructure TfNSW should liaise with relevant agencies including the Department of Education and Communities and TAFE NSW to identify gaps in rail skills training and to work with rail industry stakeholders to determine the potential value of a centralised Rail Skills Centre model. Capitalising on reforms to VET TfNSW to explore the option of connecting with the NSW Skills Board and determine how best to link into its operating framework. Higher level skills TfNSW could encourage collaboration between the Logistics Association of Australia (LAA), Australian Logistics Council and the university sector to explore the development of a specialised TFL bachelor program. It may involve the development of a whole qualification and/or specific electives to allow a transport, freight and logistics specialisation. TfNSW could assess whether there is any additional support it could provide to assist relevant industry associations to determine whether shortages of engineers are disproportionately affecting the transport, freight & logistics industry. Such work could be done in conjunction with a body like Engineers Australia. Workforce and participation Working with employment agencies TfNSW to support greater collaboration and engagement between various 6

9 state and Commonwealth agencies to facilitate a greater flow of workers towards transport, freight & logistics occupations. Workforce attraction and retention Expanding the role of women TfNSW to assist the relevant NSW Government agencies such as the Department of Education and Communities, including the State Training Board and NSW Skills Board and the NSW Board of Studies, to explore the potential of developing industry-themed options for Year 9 and 10 in the transport, freight & logistics industry, thereby influencing student choices at the senior secondary and post-secondary level. 7

10 1. Introduction 1.1. Project background An effective and efficient transport, freight and logistics (TFL) industry is essential for a market economy to thrive. The TFL industry in NSW is dynamic and ever-changing, and this must continue as the industry positions itself to respond to the evolving demands of the community. Over the next decade, the industry will not only need to contend with increases in volume as populations grow, housing expands and employment increases it will also need to respond to changes in the nature of what is transported and how. Volume will need to be balanced with environmental and safety considerations. There is a strong symbiosis between the TFL industry and government: the industry cannot function efficiently nor effectively without the right infrastructure roads, rail and ports (sea and air). At the same time, the government will struggle to achieve its own policy objectives without an effectively functioning TFL industry, whether it be in public transport, economic development or social policy. Such an intimate connection often means that issues cannot be resolved without cooperation and collaboration. At times, it may also lead to significant disagreement when one party dismisses or does not pay sufficient attention to the interests of the other. Ultimately, the TFL industry must work closely with government to ensure that the right infrastructure is built and maintained so that the projected growth in the freight task can be accommodated in a sustainable way. Beyond infrastructure, in areas such as education, skills and workforce development, both government and industry have an interest in working together. A growing industry can only be supported by a growing workforce. Under Action 3D of the NSW Freight and Ports Strategy, the government and industry are committed to supporting the growth of the transport and logistics workforce. 7 The first step in providing such support lies in an agreed and shared understanding of where current skills gaps and shortages exist and, as the industry evolves and where they are likely to be in the future. A shared understanding is also necessary on where industry and government need to focus their actions if skills gaps and shortages are to be alleviated. The purpose of this project To assist in this endeavour, KPMG was engaged by the Freight and Regional Development Division of Transport for New South Wales (TfNSW) to provide an analysis of the transport, freight and logistics industry sector demographics, with a focus on specific occupations and an understanding of the prevalence of skills shortages in each. Early discussions with TfNSW pointed to the lack of a structured and robust approach to the understanding of skills shortages within the TFL industry in NSW. TfNSW highlighted the challenges associated with understanding and responding to largely anecdotal evidence presented by industry stakeholders around the existence and severity of skills shortages. Through this project, TfNSW has sought to develop a more objective, evidence-based approach to understanding skills shortages. Therefore, the purpose of this project (and detailed in this report) is to provide TfNSW with: a unified framework for assessing skills gaps and shortages in key occupations for the TFL industry, reflecting discussions regarding skills categories/occupations so that project outputs are appropriate a better understanding of why particular skills shortages exist and where they are most acute initial guidance on where government and industry might work together to alleviate the gaps and shortages. This report provides TfNSW with a detailed analysis of current and forecast skills gaps and shortages within the TFL sector in NSW. KPMG s findings, conclusions and recommendations within this report have been informed by a combination of quantitative and qualitative evidence (further information is provided in section 1.2). They also reflect KPMG s experience in working at the interface between industry and government. A plethora of information already exists on the size and importance of the TFL industry to the national state economies. Bodies such as the Australian Bureau of Statistics (ABS), Transport and Logistics Industry Skills Council (TLISC) and Bureau of Infrastructure, Transport and Regional Economics (BITRE) all produce extensive reports and statistics on the composition of the industry, not to mention industry associations such as the Australian Logistics Council and others. What makes this project unique is the application of KPMG s quantitative methodology on NSW specific information for a customised set of occupations considered as important to the industry. 7 Transport for NSW, NSW Freight and Ports Strategy, November 2013, Sydney, p.150 8

11 1.2. Methodology Skills shortages are often the product of the interaction of numerous forces. The labour market, like any other market, relies upon the availability of perfect information. Furthermore, market players must then avail themselves of that information to make efficient choices. Like other markets, information in the labour market is not perfect and not all market participants can access it nor make sense of it. To identify, understand and respond to skills shortages requires an approach that combines data and information from numerous sources: official statistics; modelling and forecasting; and industry stakeholder intelligence. Each offers a unique perspective, however, each also comes with inherent limitations that must be understood. Statistical collections by definition, are backward looking and quickly lose currency. Such data can tell you what has happened and it can help identify historical trends but is less instructive in telling stakeholders why certain things have happened or what may happen in the future. Modelling and forecasting can shed some light on the future and, when combined with a solid grounding in historical data collections, can inform stakeholders perspectives on a plausible future scenario. Robust modelling depends upon good quality data inputs and a sound and tested methodology. The quality of data becomes an issue where small numbers are concerned. Importantly, the outputs of the modelling need to be sense-checked and validated to ensure they are logical, informative and acceptable. Industry stakeholder intelligence provides very valuable and up-to-date intelligence about how the interaction of forces is manifesting at the industry, sub-sector or organisation level. It also provide a view as to why certain things are happening. However, stakeholder intelligence, depending on how it is collected, can only usually provide a partial picture. Evidence can be anecdotal which leads to concerns about the applicability of these observations to the broader industry. KPMG s approach for this project combined all three approaches for the collection of information and intelligence to inform our understanding of where the TFL industry is experiencing skills shortages. The process to collect and combine this information and intelligence reflects both the strengths and limitations described above. By off-setting and balancing our approach, we have come up with findings that are stronger overall but most importantly at a standard that can feed into subsequent policy and action. As summarised in Figures 4 (a) and 4 (b) below, KPMG s methodology enabled an understanding of what is happening, why things are happening, and how potential issues might be addressed. Figure 5 on the following page, provides further detail of the work undertaken under each phase. Figure 4 (a): Conceptual model of KPMG methodology Figure 4 (b): Conceptual model of KPMG methodology Transport, Freight and Logistics skills categories Phase 1 Project initiation What... Skills Demand Skills Supply Phase 2 Demand and Supply analysis...is happening? Skills Deficits Phase 3 Targeted Consultations Why... Strategic Consults Strategic Consults Strategic Consults Phase 4 Addressing Skills Deficits...is it happening? How... Project 1 Project 2 Project 3 Phase 5 Reporting...can we address it? 9

12 Figure 5: Overview of project methodology Stage Details Project initiation and KPMG developed a detailed project plan, which confirmed the objectives and scope of the planning project, and the deliverables and timeframes. This included identification of relevant stakeholders for consultation. Demand and supply Using ABS data and in-house forecasts of macroeconomic activity, KPMG s Institute for analysis Economic Modelling developed detailed projections of the demand for, and supply of, skills in the TFL industry. - The modelling considered 37 occupations identified as important to the sector (see 1.3 below) - The analysis provided a quantitative evidence base for the identification of skills shortages, identifying where skills may be in deficit - This analysis was also combined with an analysis of employment across the 2006 and 2011 Census. Targeted KPMG consulted stakeholders to develop a deeper understanding of why deficits exist. The consultations stakeholders consulted included: - Australasian Railway Association - Australian Trucking Association - Logistics Association of Australia - NSW Minerals Council - Livestock and Bulk Carriers Association - NSW Farmers. Shipping Australia declined the invitation to participate in these consultations. Addressing skills deficits Based on the combined results of the demand and supply analysis (historical analysis, forecasting and identification of deficits) and targeted consultations, KPMG looked at ways for TfNSW to work with stakeholders to respond to the skills deficits, paying particular consideration to: - The split of policy responsibility for specific areas of action across government agencies - Options to better coordinate responses across government - The opening up of the training system in NSW - Strategies to improve the collaboration among industry participants and between industry and governments. Reporting KPMG provided regular progress updates to TfNSW throughout the project. Source: KPMG Along with this final report, documenting the detailed evidence base generated, KPMG also developed a set of Power Point slides to summarise the key aspects of the project The NSW Freight and Ports Strategy The projected increase of freight movement has highlighted the need for a coordinated approach between government and industry to define the nature and scope of NSW s freight task, and to understand the key issues affecting the network s ability to allow the efficient flow of goods to market. The sector must respond to the demands of industry and the community as populations grow, housing expands and employment increases. Ultimately, industry must work closely with government to ensure that the right infrastructure is built and maintained and that the projected growth in freight movement can be accommodated in a sustainable way. Released in November 2013, the NSW Freight and Ports Strategy provides a framework for industry, all levels of government and other stakeholders to guide investment and other decisions to enhance freight logistics in NSW. The strategy is a core component of the NSW Government s overall strategic planning framework and provides the state with a clear aim and achievable objectives. The objectives of the strategy are to ensure the: Delivery of a freight network that efficiently supports the projected growth of the NSW economy ancing of freight needs with those of the broader community and the environment. 10

13 The NSW Freight and Ports Strategy includes three Strategic Action Programs that target specific challenges associated with the forecast doubling of the NSW freight task by Strategic Action Program 1 Network efficiency Strategic Action Program 2 Network capacity Strategic Action Program 3 Network sustainability 1.4. Action 3D Support the growth of the transport and logistics workforce As part of Strategic Action Program 3, the NSW Government has identified sustainable growth of the transport and logistics workforce as a key issue affecting the industry. The TFL industry currently faces a range of challenges in attracting and retaining skilled labour, particularly in regional and rural areas. This has been exacerbated by increased competition from mining-related activities, both in NSW and interstate, and an ageing workforce. Skills shortages can constrain economic growth. Unaddressed, they may also compromise NSW s ability to meet current and future demand and may eventually lead to increased costs and inefficiencies at the organisation, industry and economy-wide level. Addressing skills shortages must begin with a robust and comprehensive understanding of where skills shortages exist now and where they are likely to appear in future. Subsequently, TfNSW has committed to developing strategies to support the industry to attract and retain skilled workers. As part of these strategies, TfNSW has sought to quantify the scale of skill shortages in the industry and identify the occupations most in need of attention The importance of skilled workers The availability of skilled workers is central to economic decision making and prosperity. A lack of workers with the right skills can constrain economic growth and lead to inefficiency and waste (adding costs) at a firm, industry and economy-wide level. At the heart of Action 3D is a desire to pre-empt the development of a deficit of appropriately skilled workers to allow industry and government to plan around, and attempt to correct these gaps. In order to do this, government and industry must: understand where skills shortages in TFL exist identify the underlying causes of the shortages work together to identify opportunities to address shortages and plan for the future. The market for labour is a complex system driven by economic, social and demographic factors. Similarly, where and why skills shortages exist is a complex question. It is rare that the root cause can be attributed to a single factor. For example, shortages may be the result of poor wages and conditions, the image and perception of an industry, ineffective management and skill development of existing workers, new and emerging technologies and education and training programs that are no longer in line with industry standards. The critical first step is to use the best available skills demand and supply data for TFL, organise it in a way that uncovers potential skills deficits and consult with the right stakeholders to better understand the factors contributing to the deficit, on the way to identifying opportunities to address them Definitional challenges Providing an accepted definition of the size and composition of the TFL industry is not straight forward. Reports on the TFL industry often present conflicting information about the size and significance of the industry. There is a view among some industry-specific organisations that official statistical collections by the ABS understate the significance of the industry in both its contribution to employment and economic output. For example, the NSW Freight and Ports Strategy notes that at the time of the strategy s development ( ), according to ABS data 128,000 people were directly employed in the TFL industry equating to approximately 3.6 per cent of employment in NSW. However, the strategy also states that the true number of people working in TFL related activities and occupations in NSW closer to 500, Differences in employment estimates are also evident at the national level. The Transport & Logistics Industry Skills Council (TLISC) estimates that the current workforce across the industry consists of 797,000 employees across 165,000 businesses. 9 This is significantly larger than the comparable figures presented by the ABS. 8 NSW Freight and Ports Strategy, November 2013, p. 7 9 Transport and Logistics Industry Skills Council, E-Scan, 2014, p. 6 11

14 Furthermore, it is estimated that in 2011, the freight and logistics industry accounted for 13.8 per cent or $58 billion of the NSW economy. 10 On the other hand, ABS data places that figure at $21.6 billion. 11 The basis of the discrepancy is often the rules applied to national accounts and classifications. For example, a study conducted by ACIL Allen consulting for the Australian Logistics Council notes that, by only recording transport services offered to third parties (called Hire and Reward services) the national accounts miss a significant amount of freight transport that is carried out by companies on their own account (so called ancillary transport ) and which is allocated in the national accounts to the primary industry of those companies. 12 A broadened view of the industry has been applied in the selection of occupations for the detailed analysis in subsequent chapters. The motivation for this selection has been to capture a broader cross-section of important occupations for the effective functioning of the industry in NSW. Notwithstanding definitional differences, government agencies and industry broadly agree that the TFL industry comprises a diverse range of occupations, across the following sectors: Logistics and warehousing Road transport Rail transport Maritime and ports Aviation Structure of this report This report is structured as follows: Chapter 2 provides background and overview information on the Australian and NSW macroeconomic contexts. It provides information on key macroeconomic indicators and labour market conditions. It also provides an overview of the TFL industry in Australia and in NSW and includes an outline of the drivers of change that are creating challenges for the industry. Chapter 3 includes the analysis and findings of KPMG s research. It includes historical trend data and analysis, outcomes of the detailed modelling of the demand for and supply of skills in TFL-related occupations, identifying where skills deficits exist. The chapter also provides the findings of the stakeholder consultations and broad conclusions. Chapter 4 builds on the findings and presents a set of options for TfNSW to consider, to respond to the identified skill deficits in Chapter 3. It considers the reasons behind the skills shortages, as identified by industry stakeholders and then takes into consideration the implications of the policy environment in NSW on the potential response measures. Chapter 5 presents the conclusions of KPMG s analysis. It also presents ideas around potential areas of further work and investigation for TfNSW to consider. Appendices include detailed outputs of the skills shortage modelling undertaken by KPMG. 10 NSW Freight and Ports Strategy, loc cit 11 Australian Bureau of Statistics, Australian National Accounts: State Accounts, Canberra, ACT. 12 Australian Logistics Council, The Economic Significance of the Australian Logistics Industry, ACIL Allen, 2014, p.1 12

15 2. Economic and industry context Although the main focus of this project is the development of a quantitative method of identifying skills deficits in important occupations, grounding the analysis within a broader context will provide useful background information, including important economic and industry context. Along with key industry statistics, this section sets out some of the major change drivers impacting the industry s skills requirements, while the next chapter increases the specificity of the analysis by concentrating on the 37 selected occupations. The skills forecasts presented in Chapter 3 have been developed within the wider context of the economic outlook for Australia and NSW. The macroeconomic environment is a key determinant of the Transport, Freight and Logistics industry performance and associated skills requirements. As such, the following sections provide an overview of the current economic environment and the factors that are likely to influence growth. Sections 2.1 and 2.2 provide a summary of the economic environment for Australia and NSW respectively. Section 2.3 briefly overviews NSW s transport, freight and logistics industry. Section 2.4 identifies the key drivers of change in the TFL industry and section 2.5 provides a high-level overview of the workforce challenges the TFL industry is facing. The following sections in this chapter are drawn from Commonwealth Budget economic outlook and ABS National Accounts data Australian economy overview Mining-related investment, which accounted for almost half of GDP growth in the past couple of years, is now expected to drop sharply in the near term. The economy is moving to a production and export phase as mining investment peaks. In comparison, activity in non-mining sectors is gradually improving. With the drop off of mining investment and a steady transition to broad base growth, growth is expected to remain broadly stable in 2014, with a modest improvement occurring in National Accounts data for June 2014 showed the Australian economy recorded growth of 0.5 per cent in the June quarter (seasonally adjusted). This took the annual growth rate up to 3.1 per cent in the year to the June quarter, down from 3.5 percent for the year to the September 14 quarter. 14 Figure 6: Key Macro indicators GDP and PRICES - percent change Unemployment rate - percent Unemployment rate Gross domestic product, constant prices Inflation, average consumer prices Source: ABS and Australian Budget Labour market conditions are expected to improve, albeit very gradually. Despite a small lift in labour force participation in August, the unemployment rate (seasonally adjusted) edged lower to 6.1 per cent in August 2014, down from 6.4 per cent for July In the year to August 2014, total employment has increased by 252,000 jobs or by 2.2 per cent. 15 While this is broadly consistent with the other labour market indicators (various business surveys and consumer sentiment), further upward movements in the unemployment rate are expected to be 13 Commonwealth Government, Budget Paper 1, Budget Strategy and Outlook, 14 ABS, , Australian National Accounts, State Accounts, Australia ABS, , Labour Force Australia, August

16 modest over the coming year as resources investment falls sharply. 16 As indicated in the Budget, the Treasury expects the unemployment rate to peak at 6.25 per cent in 2015, largely due to emerging spare labour capacity in the mining sector along with declining terms of trade. 17 The March 2014 quarter s price inflation edged higher with the headline inflation rising by 0.5 per cent and the underlying measure by 0.8 per cent. Despite this, the annual growth rate of these key measures remains inside the RBA s 2-3 per cent per annum target band. The annual pace of growth of tradables and non-tradables inflation appeared to move closer together as did goods and services inflation. However, non-tradables inflation, a big influence on services prices, is still relatively high and sticky. Private demand outside the mining sector, particularly the housing market, has picked up steadily amid the record low interest rate environment. Monetary policy has clearly played a role in facilitating the transition towards nonresource sectors by supporting domestic demand. The Reserve Bank of Australia has cut its policy rate by 225 basis points over the past two years and, at 2.5 per cent, the cash rate is currently lower than it was at the height of the Global Financial Crisis in 2008/09. As a result, the real policy rate and borrowing rates for households and businesses are well below average. The transmission of monetary policy to the real economy is working much as the RBA expects, with interestsensitive sectors of the economy responding to the accommodative policy stance. Most notably, activity in the housing market has picked up with turnover increasing and prices rising, led by capital cities such as Sydney and Brisbane. Recent house price developments are a generally expected consequence of this accommodative monetary policy, and are providing a boost to housing investment which has been structurally weak for some time. A key challenge to maintaining Australia s high living standards continues to be that of boosting productivity. To this point, one downside risk is if the transition to broader-based growth is more difficult than expected. Further, if the terms of trade were to decline faster than anticipated, the associated impact on nominal output would pose further pressure on budget revenue. We note that Australia s floating exchange rate should help buffer the impact of these types of shocks (depreciating when terms of trade fall, making tradable goods and export more competitive) NSW economy overview As a diversified economy, NSW is likely to experience an easier transition from mining investment to non-mining investment. KPMG estimate that the NSW economy grew by around 3 per cent in following 2.4 per cent growth in Stronger investment on infrastructure and further recovery in dwelling investment should support a further pickup in growth in The low interest rate environment is particularly supportive given larger average mortgages in NSW. Growth in State final demand for NSW was strong in the March quarter, growing above its long-term average in annual terms for the first time since the June quarter Private investment, including dwelling investment, infrastructure and commercial construction were key drivers of growth in the March quarter and this trend is expected to continue. The strong growth in the NSW economy is being underpinned by low interest rates and the improvement in the State s housing sector. Sydney house prices continued to rise and have outperformed the Australian capital city average. Residential construction activity has risen solidly in line with the earlier increase in building approvals and is expected to contribute solidly to economic growth over the next year or two. Low interest rates should continue to support a recovery in dwelling investment. The strong pipeline of road and rail projects will be another positive for the NSW growth outlook and will assist in filling the gap when mining investment is softening. NSW was a major beneficiary of infrastructure spending in the Federal Budget. Projects in the pipeline in NSW include the WestConnex road project, the NorthConnex road, the North West Rail Link and the South West Rail Link. An estimated $61.5bn is expected to be spent on infrastructure over the coming four years. 19 There remain a number of potential mining projects in the pipeline. The Bureau of Resources and Energy Economics has estimated that $3.0bn worth of projects were at the committed stage. These are projects which 16 ABS, , Australian National Accounts, State Accounts, NSW, Commonwealth Government, Budget Paper 1 Budget Strategy and Outlook, s1-p5 18 ABS, , Australian National Accounts, State Accounts, NSW, NSW Government, State Budget Paper 4, Infrastructure Statement, , s1-p1 14

17 have received final investment approval and are very likely to go ahead. The majority of projects are within the coal industry including coal mine projects or infrastructure to support coal transportation. Associated with this, exports should continue to show solid growth on the back of stronger production capacity in thermal coal and a weaker Australian dollar. The low interest rate, healthy dwelling investment and strong infrastructure pipeline are expected to help the State economy moving as the Australian economy continues to transition. Reported NSW business conditions have picked up modestly in July 2014, likely signalling an improvement in non-mining business investment going forward. Against this backdrop, we expect NSW GSP to pick up from growth of 2.4 per cent in to around 3.0 per cent in This is broadly in line with the NSW Government forecasts of 3.0 per cent GSP growth for The improving outlook for NSW would be a positive change from NSW s previous slowing performance over the past decade as mining investment in the resource states drove economic growth. Over the long-term, industries such as tourism, international education, wealth management, gas and agribusiness have been considered as areas of strong growth. Many of these sectors have a presence in the NSW economy and NSW has the potential to take advantage of these key growth areas. According to KPMG analysis, NSW should continue to benefit from shifting growth drivers in the economy and is expected to outperform the Australian average Transport, Freight and Logistics industry overview Building on the macroeconomic analysis of the previous sections, this section is not intended to be an exhaustive account of every statistic for the TFL industry TfNSW already has a firm grasp of the key industry statistics rather, the purpose of this section is to provide some further detail regarding the transport, freight and logistics industry in Australia and NSW, against which analysis of skills requirements can be undertaken. Despite the aforementioned definitional challenges, a point of agreement across industry analyses is the projected growth in the size of the freight task nationally, regardless of the measure adopted. Driven by population growth, globalisation and ongoing changes in demographic trends, transport and logistics in Australia continues to grow rapidly. As shown in the chart below, freight tasks are reportedly predicted to double by 2030 and triple by According to the BITRE, Australia s freight task (estimated to be 600 billion tonne kilometres) is expected to increase by 80 per cent between 2010 and 2030, with this rate of growth seeing freight triple by Similar growth is expected for the NSW TFL industry. According to the NSW Freight and Ports Strategy, the volume of freight moved is forecast to grow to 794 million tonnes, from a base of 409 million tonnes in NSW s freight transport and logistics industry is estimated to account for up to 5.2 per cent of GSP (equivalent to $19.5 billion per annum). A number of occupational sub-sectors are included in the transport freight and logistics industry, including logistics management and planning, warehousing and distribution, maritime/sea freight, stevedoring, aviation, air freight, road transport, rail freight, intermodal operations, courier delivery services, and customs and forwarding agencies. 15