SENATOR THE HON CHRIS EVANS

Leader of the Government in the Senate Minister for Tertiary Education, Skills, Science and Research

TRANSCRIPT
CEDA State of the Nation Conference 2012: Australia Unbound Canberra 18 June 2012 E&OE Thanks for the introduction. I understand youve heard from my colleague Penny Wong this morning. She will have explained to you why I cant afford do anything for you, so expectations will have been lowered. Actually, she started calling me the protected one because I was about the only portfolio that continued to grow strongly, but Ill come to that in a minute. I thought Id talk to you today about the skills challenge, as most of that falls within my portfolio, and the Governments responses to that challenge and where we see things going. In terms of setting the scene, I know Penny spoke to you about the underlying strength of the economy, where we are with growth and importantly with unemployment, with unemployment hovering around the five per cent mark. I know economists argue about what full employment is but were obviously in a very strong position despite the serious changes that are occurring in the economy. The structural change that is occurring in the economy is very significant and as you know, it is having huge positive impacts in areas like mining and mining services, but its causing huge difficulties in areas such as manufacturing, international education, tourism, all those areas that have been impacted by the high Australian dollar. It is very much a multispeed economy. We have some people being put out of work and businesses closing, while we have other people doing very well and seeing strong growth. Thats obviouslyboth politically and economicallyvery difficult to manage, and youve seen much of that in the current debate. Bottom line for us in terms of skills is that were going to have more jobs than people in coming years.

I regard that as a great challenge. I keep reading in the papers that its a crisis. Well, Id like to introduce you to any of the employment and training ministers in other countries. Theyve got crises. Weve got a challenge. Theyve got nine, 10, 15, 20 per cent unemployment. Our problem is actually making sure that we can fill the jobs available in the economyso its a good problem to have but, nevertheless, it is a challenge. That challenge is geographically based, its skills based, it has a whole range of dimensions. The first thing, I suppose, to say about itand its not just because Im a West Australianbut the truth is that strong jobs growth is in the north and west, and thats a challenge for people in the south east corner in terms of employment creation. Its also the case that we have very poor labour mobility in Australia and thats a challenge. In Western Australia, weve traditionally had to attract our workforce from overseas, be that British, South African, Indian and currently Irish. If you come to Perth at the moment youd think youre in Dublintheres a lot of Irish accents around. As their economy tanked, weve been able to attract some very skilled workers and professionals. But the reality is that the job growth is on one side of the country, and the pressures on the south east corner, so its a geographical issue as well as a structural adjustment issue. The other point that I always stress to people is that the new jobs emerging in the economy are higher skilled jobs. There are very few unskilled jobs emerging in the economy. We know that roughly a third of our workforce in coming years will require a Bachelors degree or higher. All the focus is on skills and training, and Ill come to that, but the reality is we need an increasingly professional workforce. Thats a challenge for us, but again, it is a good challenge to have. Unfortunately its easier for politicians to have a photo with a bloke in a Velcro vest and a big truck or digger, and its far less interesting having a shot with someone standing out the front of a university. But much of the skills challenge and the innovation challenge in the Australian economy is in the higher education space.

The other aspect of that challenge though is that were going to see about 40 per cent of the workforce require a qualification somewhere between a Certificate III and Associate Diploma, so higher technical skills. It is a real restructuring occurring in the skills needs of the economy and while we know mining is sucking up skills, and will continue to do so because miners can and do pay, there are enormous skills needs in other sectors of the economy which cant get the same focus, be it aged care or be it other services industries. The other point I make in setting the scene is the literacy and numeracy challenge. Its not often talked about in Australia but I know many employers understand this we have about four million Australians who find operating successfully in the workplace a challenge because of their literacy and numeracy skills. The point to remember when we are talking about the skills challenge, as always, is that weve got about 11 and a half million people in the workforce and 200,000 coming out of school each year. Our workforce planning cant just be about the 200,000 coming out of schoolits got to be about the existing 11 and a half million and others that are working aged and available to work. So when we are talking about upskilling, it has got to be a conversation about the 11 and a half million not just about school leavers. Now, from the Governments point of view, this challenge and these things that are occurring in the economy, have to be met a number of ways. 1. Increasing the size of the workforce. 2. Upskilling and education that will help us drive the workforce flexibility skills we need and obviously drive innovation. 3. Skilled migration, and 4. Improved planning capacity in our economy and in the area of skills. I just want to speak briefly about each of the four. And I wont take you through all of the rats and stats; Ill try to give you a sense of what the focus is. In terms of the size of the workforce, clearly with an ageing workforce and a culture which sees people retire too early, we have a challenge in terms of participation rates. They are at historically quite high levels because of the improved participation of women in the workforce but the blokes are still pretty focused on getting out early and going fishing! Thats why a lot of the focus has to be on attitudes.

I used to be involved with the Firefightersand their mentality was, you dont work a day past 55; and thats the way the super scheme was set up and thats partly because it was such physically challenging work. It is very much a mentality that we are going to have to change in Australia. The Government can only do so much. Those attitudinal issues are really important. So, weve got an ageing population; weve got a retirement culture that sees people go too early; and we obviously have other sectors of the workforce that arent fully engaged. Workforce participation is a key. Thats why in the 2011 Budget, the Building Australias Future Workforce was a large part of that Budget. It was about trying to increase participation of a whole range of groupsmature age workers, parents, people with disability and the long-term unemployed. Weve actually got a resource in Australia, in terms of the workforce, that has been untapped. Many of them are prevented from entering the workforce because of skills issues, or language and literacy issues, so we are driving programs to try to support them with the training and the language and literacy skills they need to enter the workforce. Obviously there is a social justice issuethe reality is when people are in work they have better outcomes, and their kids have better outcomes. But the Building Australias Future Workforce strategy which has been rolling out for the last year and a half is actually starting to deliver some dividends in terms of participation. And there were further changes in this years Budgetwhich some people regard as controversialwhich is moving people off parenting payments when their children are at younger ages. But weve got to drive that connection with the workforce. And what we find is that when people are on income support measures for a longer period of time, they are less likely to stay connected to the workforce and are less likely to rejoin the workforce. So weve got in place a whole range of training and other support mechanisms but we have got to keep trying to connect those people to the workforce. Participation is a key part of the Governments response and it is reflected in that range of initiatives aimed at those groups who have traditionally been cut out from full participation in the workforce and in society.

It is an equity and an economic measureand one of the key measures there is the change in the tax free threshold, lifting it to $18,000. That does make work, part-time work, much more attractive to a whole range of those groups. Effectively, you dont pay tax on the first $18,000 which, for many people, is around 15 to 20 hours work a week. It makes that reconnection with the workforce very attractive. I think that will be one of the single biggest drivers of helping reconnect a whole range of people to part-time work. So the size of workforce participation has been a major focus for the Government in the last couple of budgets and is hugely important in increasing the size of the workforce. Skills and education is obviously also a major focus for usinvestment in our human capital. Its been a major focus for this Government since we came to office. People will remember the Building the Education Revolution and the schools buildings programs, deliberately designed as a stimulus package to give us better quality schools but also to invest in education. We get a double bang for our buck in these projects in that they are delivering better facilities for our education system throughout the tiers. There has been a huge investment in TAFEs and universities as well. But effectively Australias future is as a high skills, high wage economy. We cant compete on a low wage basis so in the end our future, both during and after the mining boom, is driven by the capacity and talents of our people. Weve got to make sure we have invested in those skills, in their flexibility and in their capacity to innovate, thats where the future of the country is. Thats why in successive budgets we have made record investments in higher education, skills and science and researchbecause thats the investment that will eventually drive strong productivity growth and leave Australia well placed. Our economic potential will be driven by the capabilities of our people. One of the things that doesnt get enough recognition is that already this Government has got 150,000 more people in university. In a couple of years time it will be 770,000 at university, compared with just over 400,000 when we came to office. Why? Because the jobs of the future are graduates jobs.

Weve got to meet workforce needs and we know those jobs will require people with degrees or higher. We already see that. I think theres people better qualified from the mining industry and oil and gas industry around the room. But when I talk to someone like Chevron, they talk of 500 jobs long term on the Wheatstone and Gorgon projects offshore and 2500 in Perth. Two and a half thousand are engineers, geologists, human resource people, planners, the whole gamut of professions. The mining industry and the oil and gas industry are creating professional jobs now in large numbers but that will grow, particularly when we move to a more maintenance side once the big construction activity is completed. Weve almost doubled our investment in higher education and thats reflecting that need to drive the improved capacity of our workforce. Its the same in the skills area. As I said earlier, we know the jobs emerging in the economy are high skill jobs. Weve got more people in training than we had before the global financial crisis. Its come off a bit in the last few months, as a result of the softness in areas like construction where we traditionally employ a lot of apprentices, but its still very strong compared to what it was before the GFC. There are however, some serious challenges in the skills area. We have some poor outcomes, we have very poor completion rates in much of the VET sector and there are challenges there where the VET sector needs to be able to lift its performance. We are regarded worldwide as having one of the best vocational training systems in the world but in my view its a bit creaky. Its creaking under the pressure of having to produce a large number of skilled workers quickly and its also creaking under the weight of history and the changing needs of employers and the economy. Its one of the reasons why the Commonwealth has initiated a reform partnership with the states. The last deal was signed off a couple of months ago which was designed to reward the states for lifting quality, lifting outcomes and making sure were actually providing more skilled workers for the economy and giving more people a chance to lift their skills. Again, its not just about school leavers. Its about upskilling the current workforce. Thats one of the reasons why weve introduced the National Workforce Development Fund.

It builds on the critical skills investment part of that, which is designed to partner with employers to upskill and to skill new employees to meet the emerging skills need in the economy. Quite frankly, the VET system is supply driven. Students choose a course and often they come out with a qualification, be that origami or whatever, which is not necessarily what the economy needs. What were trying to do with the National Workforce Development Fund is change it to a demand-driven model where we partner with employers to train the skills that are emerging in the economy. Thats going very well. Weve got huge demand. Were able to invest the Governments contribution into those skills that are emerging in the economy. Obviously thats mining, but its also areas like aged care and health services where theres huge demand for workforce. That sort of the employer-led partnership, which is driven by demand not supply, is starting to make a difference and obviously getting the states and the VET systems more in tune with that philosophy has proved to be important in meeting the skills demand. The third aspect of building the workforce and skills demand is the skilled migration programs. Weve put a lot of work in, and I did as Immigration Minister, into reforming those. As you know, the skilled migration program was driven by overseas student enrolments seeking permanent residency. Many of them werent actually then moving into skilled work because they didnt have the right skills or werent able to get a job in their chosen field. So weve reformed the system to have much stronger links to skills demand in the economy. And thats starting to bear fruit and change in the mix and were prioritising those skills in demand and making sure that people are employable. One of the major changes is the increase in the use of the 457 scheme which is, again, employer driven and, interestingly, much of the permanent migration now is driven by 457s converting to permanency. Some people complain about that but I always make the point that you cant get a better migrant than someone who has been here four years, has been in work, likes the place and the employer still wants to employ them. Thats a 100 per cent outcome from a migrant point of view. So 457s converting to permanency is, in my view, the ultimate migration program in terms of its outcome. So I think the reforms there have worked and have started to drive the skills we need in the economy.

Weve set a strong permanent program and obviously the temporary programs are also allowing us to meet peak demand. Now weve had this debate in the last few weeks about the EMAs and essentially its the debate about how you use skilled migration to meet the peak. The peak is not in the mining sector, the peak is in the construction. Many of the jobs are in civil constructionbuilding the mines, building the ports, building the railways. The ongoing mining workforce will increase, but it wont increase to the sort of peak levels of employment that are now being generated and will be generated in the next couple of years. So the challenge for Australia is to meet the peak. You dont necessarily want to train to the peak because a lot of that will be construction workforce and they will have difficulty adjusting as we come down the other side of the peak. Weve got to make the balance right in the sense of lifting our training effort, lifting our skills, to meet the mining workforce needs and the other needs in the economy. But in managing that peak workforce there is a huge role for both permanent and temporary skilled migration. The point I want to make today, to employers in the room, is the EMA debate opened up the same debate that we had before the last election about population. This is a very difficult debate politically in Australia. It brings out strong emotions in the community and employers have to understand the social contract thats involved here; people will support migration provided they think their children, and they, are getting the first opportunity at the jobs available in the economy. Its a contract. They want to know that employers are training, that governments are supporting training and that Australians are getting the first opportunities to the jobs that are emerging in the economy. And quite frankly, thats absolutely fair enough. Thats what the Governments policy is. I think its what all thinking Australians policy isthat is you give the first opportunity to the residents of country, and the citizens of the country, to the benefits of economic growth.

But if youre going to manage migration to meet those needs that training cant meet youve got to have your credentials strongly in place; and youve got to have training programs that convince the Australian public you doing all thats necessary. And the performance by employers is patchy. Many stopped training in the 80s, many trained very well. I actually think small businesses often make a bigger investment than larger businesses. Some do it really well, some do it really poorly. But if youre going to win the debate about the need for skill migration in this country, and Im a strong supporter of that, youve actually got to prove that youve honoured your part of the social contract. And that is, that you have a huge investment in training, you seek to employ Australians and give them the opportunities that are availableand that you use the skill migration as the top-up, if you like, for that training effort. Lastly, Ill just mention planning capacity because the National Workforce Development Agency starts up on the first of July. Weve taken Skills Australia and grown its function. This will be a very important agency in trying to meet these huge issues that are emerging in the economy and skills space. How do we better plan? How do we link employer demand with whats going on in the education sector? How do we anticipate the sorts of issues, skills issues, emerging in the economy? The National Workforce Development Agency, which is led by industry people, is designed to try and meet that need. And in a planned economy itd be a lot easier. Democracy can be a bit difficult at times. I cant tell people theyve got to move to WA to take a $200,000 job. I cant tell employers how many people to train, even though I wouldnt mind having that capacity on occasions. So it is difficult and challenging. Were a democracy people can move according to their own desires and train in the skills they want.

But we can, I think, do much better than we have in the past about trying to provide information and education and better link employers to whats going on in the training and education markets. Anyway, its a huge skills challenge but, as I say, a great challenge to have. Similar discussion in any other country in the world is about what you do with rising unemployment and often discussions about unskilled jobs in the economy. Ours is a question about rising demand for skills, rising demand for labour, and meeting that challenge. There are a whole range of issues were going to have to tackle in addition to the ones Ive mentioned. Labour mobility and flexibility in the workplace. Weve got to make it more attractive for older workers, for women, for people with disabilities, for a whole range of people to re-enter the workforce to tap into their skills. But thats a speech for another day. Ill conclude on the message that our skills challenge is one that we can meet. It is a good problem to have. But it is one we all have to make a commitment to. Its not something governments can fix alone. And a lot of this will rely on employers committing to training. As I say, some do a fantastic job, others need to lift their performance and the Government, and the community, will be looking to ensure that all are making a contribution to this challenge. Thank you very much. ENDS.