Our quarterly Survey of Business Conditions has shown how workforce challenges continue to feature among the primary concerns of NSW employers. Informed by this, Business NSW initiated the Workforce Skills Survey in 2017. This survey has since made an invaluable contribution to our understanding of the challenges NSW employers face in meeting their skills needs. The survey shows the impact of those challenges, and how employers are adapting and responding in a dynamic and challenging labour market.

The Business NSW State of Skills 2024 report found that NSW employers continue to face significant challenges in meeting their workforce need.

1. Responding to skills shortages

Skills shortages look set to remain a feature of the NSW economy in the near term. Of the employers who responded to the 2024 Workforce Skills Survey:

• 77% reported they had considerable difficulty in recruiting, or were unable to recruit the people they need;
• This figure was 81% for employers of five or more staff;
• More than 80% of employers in the Hunter, Western NSW, Western Sydney and Riverina Murray regions continue to experience significant difficulty in meeting their skills needs; and
• Sectors experiencing ongoing recruitment challenges include manufacturing, health, hospitality, construction and technical services industries, with shortages in these industries being particularly acute in regional areas.

Increased costs and declining margins have led some business to scale down, move operations to a different state, or even close their business entirely in the face of skills shortages:

• 75% of employers experiencing a skills shortage reported an increase in the workload being carried by existing staff, with many business owners having to ‘get back on the tools’ in order to keep the business running;
• 38% of employers anticipate significant negative impacts for their business if these challenges continue; and
• 4% fear their business may not survive if they are unable to meet their skills needs.

Our 2024 Workforce Skills Survey also saw many employers embracing innovation in the workplace. From automation to recruitment strategies and improving workplace culture, there is clearly an appetite for workplace innovation among businesses of all sizes in a dynamic and changing environment. Employers are taking the lead in responding to skills shortages. They are innovating and investing in training and recruitment. They are adapting pay and conditions to meet the needs of current and future employees. They are focussing on the workplace health and wellbeing. They are building communities – both within and outside their own organisation.

Our advice to State and Federal Governments is to take a greater role in helping to ease the pressure on businesses, and to help them to build resilience and sustainability for the longer term through investing in vocational education and training, and helping employers in regional NSW meet their skills needs.

2. Investing in vocational education and training

The Vocational Education and Training (VET) sector serves a critical role in the NSW economy. It provides pathways to education and work and helps ensure that businesses have access to the skills they need. There are significant reforms occurring at both the state and federal level that promise to substantially improve the quality, availability and relevance of vocational education and training opportunities. However, these reforms will need to be matched by ongoing funding commitments if they are to be sustainable. They will be essential if we are to keep Australia on track for productivity and prosperity.

Business NSW initiatives in skills and education align with major policy initiatives being undertaken by the NSW Government. These include the NSW Skills Plan 2024-28, the NSW Digital Skills and Workforce Compact, the NSW Higher Education Strategy 2025−29, Apprenticeship and Traineeship Roadmap and outcomes associated with the NSW VET Review 2023–24.

The NSW Skills Plan 2024–28 sets out a vision for a skills system that supports participation and drives economic growth in NSW. The plan aims to strengthen the VET system and ensure a future-ready workforce for NSW. It aligns with the NSW Government’s ongoing commitments under the National Skills Agreement and provides the basis for responding to the NSW VET Review 2023–24. Business NSW is working with the NSW Government on the development and place-based and industry-specific compacts for workforce development and other strategic initiatives arising from the NSW Skills Plan 2024–28. 

Inconsistency and uncertainty have hindered the ability of providers of VET to meet the demands of businesses and students. Regional business, for example, report that VET courses are often full, cancelled, or unavailable due to funding and staffing constraints. Others have reported a poor alignment between the training on offer and contemporary skills needs. There remains scope for ensuring the courses funded through the NSW Government’s Smart and Skilled program are able to keep pace with current and future labour market demands. Providers need certainty if they are going to be able to ensure the quality and relevance of their programs. The volatility and uncertainty associated with the Smart and Skilled program in its current form remains an impediment to quality, innovation and scale in our education and training system. 

Substantial investment in vocational education will be essential if we are to meet our current challenges and sustain a skilled workforce in the longer term.

Opportunities for doing so include to:

• Ensure TAFE NSW serves as the gold standard for VET, ensuring quality, consistency, and industry relevance (in line with recommendations 1, 2 and 3 of the NSW VET Review);
• Strategic investment in facilities will also be essential in ensuring TAFE remains at the heart of regional communities (in line with recommendation 21 of the NSW VET Review); and
• Ensure that the NSW and Federal Governments ensure funding growth for vocational education and training, in real terms, for the life of the National Skills Agreement.

3. Meeting regional skills needs

There are substantial opportunities for enhancing productivity and widening participation in regional Australia. Our 2024 Workforce Skills Survey found that geographical location itself posed a challenge for 27% of NSW employers (29% of those facing a skills shortage), with many struggling to attract workers to regional locations. Difficulty accessing relevant local training opportunities also remained a challenge for 17% of employers. These challenges are accompanied by a range of follow-on impacts for regional communities. Employers also found it difficult to attract workers to remote locations, putting even greater pressure on existing staff challenged with maintaining service standards across regional NSW. 

Employers in regional NSW are facing particular challenges in meeting their skills needs. These include difficulties in recruitment, access to affordable housing and access to relevant education and training opportunities. The NSW Skills Plan 2024–28 aims to establish a new regional skills planning model that embeds stronger community-based decisions and supports collaboration, connection and innovation within local communities. This includes the establishment of place-based and industry-specific compacts for workforce development. These compacts would see local employers, training providers, and community organisations working together on collaborative programs and initiatives in meeting skills needs. Business NSW is working with the NSW Government on the development and place-based and industry-specific compacts for workforce development and other strategic initiatives arising from the NSW Skills Plan 2024–28.

Other opportunities for improvement include to:

• Introduce Fringe Benefits Tax concessions for employer-provided housing in areas of acute skills shortage; 
• Ensure vocational education and training opportunities are available across the state through implementing a Student Access and Training Commitment to improve access to training that is both local and relevant as part of the TAFE NSW Charter (in line with recommendation 9 of the NSW VET Review); and
• Establish a Regional Skills Fund to foster innovation, collaboration and the development of local solutions that are fit for purpose across NSW.