Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry, said the low jobless rate corresponded with a 48-year-high skills shortage, which would hold the economy back.
The number of unemployed is now at 537,000, down from 700,000 just before the COVID-19 crisis, and the latest Australian Bureau of Statistics job ads data suggests businesses are trying to fill more than 400,000 positions.
Call for ‘ambitious plan’ to resolve shortages
NAB’s first-quarter business survey showed a near-record 84 per cent of companies were reporting difficulties in finding suitable labour. Last week, the bank said the growth in labour costs in April hit its highest since records began in 1997.
More investment in skills development and a temporary two-year increase to 200,000 in the skilled migration intake were needed to fix the situation, Mr McKellar said, calling for an “ambitious plan to resolve” shortages.
Ms Westacott said targeted migration to fill critical shortages at every level was needed “right now.” A skills system that lets workers easily and quickly train for employer needs was required urgently.
“You can’t employ hundreds of Australians on a construction job if you don’t have a surveyor, and you can’t transform our economy to decarbonise, digitise and diversify without access to the best talent in the world,” she said.
CommSec chief economist Craig James said further gains in employment could be soft as some states were arguably already at full employment.
“The assumption is that ‘full employment’ is consistent with a jobless rate near 3.5 per cent to 4 per cent,” he said, which was already the case in NSW, Tasmania and Western Australia, the latter being on 2.9 per cent.
Mr James said more and more businesses were frustrated by the lack of suitably qualified workers, and the party that formed government after Saturday’s election would need to comprehensively deal with the issue.
Vacancies were becoming increasingly harder to fill, JPMorgan economist Jack Stinson said, and the global investment bank expected the jobless rate to show signs of stabilisation in the coming quarters.
“We also see further gains in participation to be increasingly hard-fought as cyclical participation falls and trend growth slows, weighing on the outlook for potential growth … at the margin,” Mr Stinson said.
Economists are mixed on how low the unemployment rate will go. ANZ is tipping it will fall to the “low 3s” later this year, and the Reserve Bank of Australia think it will fall to 3.6 per cent by the end of 2023 and then stabilise.
Unemployment fell by 11,000 people in April, and with only 4000 finding work, that means about 7000 left the labour force, prompting Australia Institute senior economist Matt Grudnoff to demand closer security of participation, hours worked, security of employment and real wages growth.
Participation rate falls
The participation rate fell over the month, but remained elevated near the record highs achieved in February and March; the underemployment rate fell to 6.1 per cent and the underutilisation rate fell to 10 per cent.
“These were their lowest levels since 2008,” Westpac senior economist Justin Smirk said.
Seasonally adjusted hours worked increased by 1.3 per cent in April, largely reflecting a bounce back from the March falls in flood-affected areas.
The strong labour force result came a day after ABS wages data showed just 2.4 per cent growth in the year to March 31. With CPI inflation running at 5.1 per cent over the same period, real wages went backwards by 2.7 per cent.
But economists believe wages are already beginning to firm.
“The tight labour market evident in the fall in both unemployment to its lowest since 1974 and labour underutilisation to its lowest since 2008 point to an acceleration in wages growth ahead,” AMP Capital’s Shane Oliver said.
The soft wages and employment results this week have economists mostly expecting the RBA to raise the cash rate by 0.25 percentage points in June. That follows a similar increase in May that lifted the record low rate to 0.35 per cent, the first increase since November 2010.
“Added to the disappointing wages data yesterday, this suggests a 25 basis point cash rate hike at the RBA’s June meeting is more likely than a supersized 40-50 basis point hike,” Ms Birch said.