New Ai Group research shows the extent of the skills crisis in Australia, and identifies what businesses are doing about it in 2023.

Skills shortages. Understaffed. Turnover and churn. Couldn't recruit. “I just need more people!”. These phrases have become all too common in Australian business. 

And if you’re using these phrases in your business, you’re not alone. According to recent ABS data, there were 444,000 job vacancies in November 2022 – equivalent to a shocking 3.2% of all job being currently unfilled. 28% of business report current vacancies.

How are staff shortages affecting Australian business? And what are business doing about it? 

New Ai Group research on staffing issues can help shed light on these vexing questions. Each year, we conduct two major surveys – our Skills Survey and Australian CEO Survey – to take the pulse of Australian business. The results for 2022 are now in. And while the data isn’t pretty, it also shows businesses are investing to tackle staffing shortages head-on in 2023.

First, let’s start with the bad news first: Staff shortages are bad, and are getting worse. According to our Australian CEO Survey:

  • 90% of businesses expect to be affected by staffing shortages in 2023
  • 36% report that skills shortages will inhibit their business growth
  • 26% say that total labour shortages – both skilled and non-skilled – would inhibit growth

Staffing shortages were one of the three top challenges – the others being inflation and supply chain disruptions – identified by business leaders for 2023.

When we talk about skills shortages, many think it refers to niche or highly advanced capabilities. But in practice, its generic skills that are often the largest challenge. Our Skills Survey found that 74% of businesses reported they are affected by low literacy and numeracy skills. The greatest increases in generic skills need were in managers, and also very high in professional staff:

Digital skills were ranked the highest priority for businesses. Businesses report they have two distinct digital skill requirements. One is for all staff to having basic digital skills, in order to integrate new digital technologies into work processes successfully. The second is for ensuring more advanced and diverse digital skillsets in the right specialist roles, such as: 

  • Marketing and social media
  • Artificial intelligence
  • Cloud computing
  • Programming/coding
  • Cyber security

Ensuring this balance – widespread basic digital skills, and advanced speciality skills – is essential for businesses to evolving with changing markets and practices.

Our Australian CEO Survey identified staff training is the top priority investment for businesses in 2023. Business process improvement, which helps utilise the existing skills based more effectively, came in a close second. And 47% of businesses have reported that they increased their investment in staff training in 2022, the highest reported business investment reported in the ten-year history of the survey.

This skills development and utilisation focus is due to businesses facing the tightest labour market since the 1970s. 39% of businesses are also willing to employ people with similar skill sets and further train them to fit their role. With only 8% reporting that they don’t expect to be affected by staff shortages in 2023, businesses instead need to ensure they can get them most from the workforce skills base that they already have or can realistically hire.

There are a range of ways businesses are looking into investing in training their staff. Using TAFE or a private RTO was the top result (27%), with in-house training a close second (24%). Consultants are also commonly used, particularly for bespoke skills requirements. By contrast, Universities are only used by a small minority of businesses (12%) to meet their training needs.

With skills in short supply, businesses are more willing than before to employ skilled migrants. Our Skills Survey found that while in 2021 only 7% of businesses were willing to hire skilled migrants, in 2022 this has jumped to a massive 44%! These numbers showcase the strong intention to make use of skilled migration to reduce skill shortages.

As our CEO Innes Willox has argued “Finding and developing more skilled people locally and through immigration remains a central workforce strategy”. 2023 is shaping up to be the year of skills and workforce strategies.

Adiba Mohammed is a Research Assistant in the Ai Group Research and Economics team. You can read all the results from our Australian CEO Survey 2023 here. and the Ai Group Skills Survey 2022 here.

Dr Jeffrey Wilson

Dr Jeffrey Wilson is Ai Group's Director of Research and Economics. He leads our economics team, and provides strategic direction in developing the research program to support our advocacy, service delivery and policy activities. He specialises in international economic policy, with a focus on how trade and investment shape the Australian business environment.