For years, Australia basked in the glow of strong employment rates, buoyed incomes and the perception of steady growth. Much of that comfort came not from internal dynamism, but from favourable external tailwinds: global demand (especially from China) for our resources, high commodity prices and the mining boom helped mask underlying structural weakness.
But the engine of growth has run flat. Productivity, the ability to produce more output from the same input, has stalled. According to the Australian Bureau of Statistics, the 20-year average annual labour productivity growth is now around 0.8 %. The downward trend is clear. Once Australia’s economic reforms powered high productivity, now growth in output per hour is weak, capital investment is thin, and the service economy dominates more than ever.
This stagnation matters. Productivity gains are the primary source of rising living standards over time. If output per worker stalls, real incomes flatten, wage growth falters, and the capacity of the economy to bear heavier burdens such as healthcare and an ageing population comes into question.
Strong employment, but the illusion of health
In Australia, employment metrics still look solid. Unemployment remains comparatively low and labour market participation healthy. That can create a perception of economic robustness.
However, strong employment alone does not compensate for weak productivity. If more people are working more hours but producing less output per hour, or if the capital per worker falls, then the economy is not getting proportionally better. The Productivity Commission observed that in 2022-23 productivity fell by 3.7 % as hours worked surged with insufficient investment in output capacity.
Much of the growth in employment has been in sectors with inherently lower productivity, such as services and human-care roles, rather than in high-productivity tradable sectors. The mining and commodity boom helped inflate our terms of trade, which for a time masked productivity weakness.
Another layer is healthcare and other non-market sectors, which have expanded significantly, absorbing labour and budget. Their productivity gains and capacity to generate output per unit of input tend to be weaker than in competitive market sectors.
The broad outline is clear. Employment looks healthy, but the underlying engine of growth, productivity, is stalled. That means the capacity for wage growth, living-standards improvement and resilience to shocks is weaker than it seems.
The looming shortfall of white-collar and professional workers by 2030
While employment is strong now, a structural challenge is emerging. By 2030 Australia is expected to face a shortfall of about 250,000 workers in finance, technology and business roles.
A few points worth emphasising:
- Demand for finance, technology and business talent is projected to grow by 2.2 % per annum to 2030, whereas overall employment growth is estimated at 1.3 %.
- The pipeline of skills, training and migration is currently not aligned to deliver this level of demand.
- Low productivity means less space for boosting output via existing labour, so filling higher-skilled roles becomes even more critical.
In short, the labour market looks superficially healthy, but beneath that there are mismatches in skills, rising demand for professionals, and the risk that Australia cannot generate enough of the right talent or raise their productivity to meet 2030’s requirements.
Why general sentiment is flat
Putting these pieces together, it is not hard to understand why the broader sentiment in Australia feels muted:
- Productivity growth is weak, which means incomes, wages and living-standard improvements are more modest than in previous decades.
- Employment is high, but that does not necessarily translate into more output per person, better pay or future capacity.
- The external boom from China and resources that once covered for internal weakness is waning, so the economy must now generate its own momentum.
- A looming skills and worker shortage adds uncertainty. If businesses struggle to acquire the talent they need, growth will be constrained and the nature of work will shift.
- When people look around at cost of living, housing, wage pressure, job insecurity, and digital disruption, the optimism of previous decades is harder to muster.
Australia is at a crossroads
The external drivers of growth that served us well are fading, while internal drivers such as productivity, skills and innovation have not stepped up at the required pace. The employment numbers may look comfortable, but they mask deeper structural headwinds, including a productivity slowdown and a growing shortfall of professionals by 2030.
For those in the recruitment and talent space, that mixture of challenge and opportunity is real. Organisations and individuals who recognise the need to not just hire but to develop, enable and deploy high-value talent will be better placed. The country’s broader economic future depends on it.