december quarter prepared by kpmg econtech february 2009images.jxt.net.au/clarius/pdf/2008 12...

Clarius Skills IndexDecember Quarter

Prepared by KPMG Econtech February 2009

Brisbane

Sydney

Melbourne

Adelaide

Perth

Canberra

Hong Kong

Shanghai

Beijing

Auckland

Wellington

Kuala Lumpur

Singapore

Accounting, Business Support and Financial Services

Information and Communications Technology

Executive Search

IT Services

Aligned Services

Specialist White-Collar Recruitment for Permanent, Contract & Temporary Staff

Engineering and Technical Personnel

Library and Records Management

Clarius Group is represented throughout the Asia Pacific region by a network of over 20 offices

About Clarius Group

Clarius Group (ASX: CND) is a specialist in the employment services market providing recruitment, contractor and staff services in the information and communications technology, banking, finance, commercial accounting, library, records and senior management markets to governments and corporations across the Asia Pacific region.

Established over twenty four years ago and listed on the Australian Stock Exchange in 1997, Clarius Group has a reputation for high-quality delivery and remains one of the largest, longest standing and best performing recruitment suppliers in the region.

Clarius Group operates through a number of quality specialist brands including:

• Alliance Accounting, Business Support and Financial Services

• Candle ICT Information and Communications Technology

• Lloyd Morgan Executive Search

• SouthTech Personnel Engineering

• The One Umbrella Library and Records Management

• JAV IT Managed IT Services and Professional IT

Clarius Group employs over 400 staff through a network of offices located in Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra in Australia; Auckland and Wellington in New Zealand; Hong Kong, Beijing and Shanghai in China; Kuala Lumpur in Malaysia; and Singapore.

About KPMG Econtech

KPMG Econtech is one of Australia’s leading independent economic consultancies specialising in economic modelling. Its work covers the key areas of industry economics, social policy, tax policy and economic forecasting in Australia and Asia.

Contents

Foreword ....................................................................................................................................................................................... 1

Executive Summary ....................................................................................................................................................................... 2

Why a Labor Skills Index ................................................................................................................................................................ 6

Key Findings of December 2008 Quarter ....................................................................................................................................... 9

Labour Skills Outlook and Analysis .............................................................................................................................................. 10

At the Coalface ............................................................................................................................................................................ 12

Skill Shortages at a Group Level .................................................................................................................................................. 18

Skill Shortages at Occupation Level ............................................................................................................................................. 19

Significant Trends Emerging from the Clarius Skills Index ............................................................................................................. 20

Additional Outlook and Analysis of General Labour Market .......................................................................................................... 22

Summary ..................................................................................................................................................................................... 25

Methodology, Definitions and References .................................................................................................................................... 27

DisclaimerThis publication is produced by Clarius and KPMG Econtech, with all economic modelling and forecasting undertaken by KPMG Econtech. It is intended to provide general information in summary form on specific topics, current at the time of printing. The contents do not constitute formal advice and should not be relied upon as such. The findings are also subject to unavoidable statistical variation. While all care has been taken to ensure that the statistical variation is kept to a minimum, care should be taken whenever using this information.

Clarius Skills Index | 1

Foreword

Welcome to the second quarterly Clarius Skills Index analysing and reporting on the shortages and over-supply of skilled labour in 19 employment categories.

The Clarius Skills Index is the only National index which provides a clear picture of current and future availability of skilled labour against demand.

Governments, businesses and individuals are now in a position to make informed decisions about current and future education, training and recruitment priorities and policies.

Clarius Group has again combined the knowledge of the Australian employment market from its Alliance, Candle ICT, Lloyd Morgan and SouthTech businesses, with the informed and technical advice of the respected economists, KPMG Econtech, to analyse, index and forecast the labour skills shortage or oversupply.

You will note there have been a number of changes in the skills market reflected in this report – some surprising in view of the current economic climate.

Clarius Group is once again proud to be partnering with KPMG Econtech to deliver this breakthrough Index.

Geoff Moles Executive Chairman Clarius Group


Executive Summary

During the December quarter, the global economic crisis began to deeply affect Australia and unemployment began to rise, leading to an easing in the Clarius Skills Index. With a series of weak labour force outcomes likely during 2009, the Clarius Skills Index is likely to fall rapidly from its current High level into the Balanced range during the next few quarters.

The Clarius Group - KPMG Econtech methodology to determine the index is based on the premise that where demand for skilled labour (employment plus vacancies) equals supply (employment plus unemployment), the index is equal to 100. Any index above 100 indicates a skills shortage, while an index below shows an oversupply of skilled labour against demand.

For the quarter ending December 2008, the index is currently viewed as being High, with the index at 103.1. This figure is a slight decrease on the 103.5 recorded in the previous September 2008 quarter, but slightly higher than the 102.8 registered at the same time last year. However, the labour market easing is far from uniform, with extreme shortages persisting in a few professions.

Overall, there were still 39,000 unfilled skilled positions across professional occupations (which includes professions such as Building and Engineering, Accounting and Auditing, and Computing) and 60,000 among tradespersons, such as Construction trades, Automotive trades and Metalworkers, in the December quarter 2008.

Low

Moderate

BalancedHigh

Extreme

The National Skills Shortage stands at 103.1


During the December quarter, demand increased for Accountants and Auditors, with the number of available positions rising from 175,000 to 191,000. However, the steady level of demand for auditors and accountants during the current economic downturn may be coming from the Government sector, which has struggled in recent years to lure professionals with these qualifications away from the private sector. The Federal Government’s tax reform agenda is also expected to impact through 2009, with an increase in demand for tax accountants by the ATO.

The number of professionals available to fill these positions also increased to 188,000. We expect this figure to continue to increase in the next quarterly update of the Clarius Skills Index, given the reports of redundancies from within the big four accounting firms in early 2009.

The differential in Health professions opened slightly with 411,000 positions, down from 413,000 and vacancies with 390,000 available to fill them as in the previous quarter.

The Clarius Skills Index for Building and Engineering professionals rose slightly. However, the number of unfulfilled positions in the sector was largely unchanged compared to the September quarter, and has almost certainly peaked.

The National Clarius Skills Index shows:

• Despite the increase in national unemployment leading to a fall in the Clarius Skills Index during the December quarter, the index remains at a High level overall at 103.1 (down from 103.5 in the September quarter).

• The easing in skills shortages is not occurring uniformly across all occupations, with some professions continuing to experience extreme skills shortages.

• There have also been changes in the Top Ten Occupation skill shortages with the most significant change being very high demand for wood related tradespersons.


Overview and Outlook

In spite of reports painting a black picture of the current labour market, highlighting mass job losses, the fact remains that the latest published ABS unemployment figures for January 2009 still show unemployment below 5.0 percent. Therefore, the job market still has a long way to go before reaching the same levels as in the recession of the early 90s, where unemployment peaked at 10.9 percent with over 900,000 Australians out of work. Currently, the ABS reports that there are 540,000 unemployed Australians looking for jobs – far fewer than in the previous recession – and this does not take into account population growth over the 15 years since then.

The inaugural Clarius Skills Index for the September 08/09 quarter reported that, overall, demand for workers in 19 skilled professional, associate professional and trade occupations exceeded the supply of appropriate workers by 120,000 persons in the September quarter of 2008. As unemployment began to rise in the December quarter, this gap narrowed to around 110,000, but the published data still reflects an oversupply of skilled vacancies compared to the number of skilled unemployed available and ready to fill those vacancies. As reports continue to emerge of companies shedding workers in 2009, we expect to see the Clarius Skills Index to head further downwards. KPMG Econtech latest forecasts are that unemployment will peak around mid 2010, at around 6.5 percent.

Comparing the unemployment rates, we can see that the current economic downturn is forecast to be relatively mild compared to previous recessions in Australia. Nevertheless, because unemployment is still set to rise significantly between now and then, we expect the Clarius Skills Index to continue falling until unemployment in the current economic cycle has peaked. The Clarius Skills Index for the December quarter is at 103.1.

Looking forward, based on KPMG Econtech’s unemployment forecasts, the Clarius Skills Index would fall to the low end of the Balanced range, between 99 and 100 when unemployment peaks in mid 2010. This would translate to an oversupply of skilled labour in 2010 of between 35,000 and 50,000 people in professional, associate professional and trades.

The impact of the February Victorian bushfires and the Queensland floods will also have to be factored in to impacts on the building, engineering and construction industries in future Clarius Index Reports. The combined impact of both is likely to be spread over at least two years as demand for skilled professionals will rise significantly.

For industry sectors such as science and medical research, and food and tourism related occupations, the downward movement in the Clarius Skills Index over the next 12 to 18 months will be a major indicator of the end of what’s become known as the Skills Crisis.

However, if economic conditions were to significantly worsen and the unemployment experience of the current downturn were to match the recession of the early 90s, the Clarius Skills index would likely fall to the Low range of 95 and below when unemployment peaks.

The Clarius Skills Index is the only report that indexes the shortage or oversupply of skilled labour in Australia.


Top Ten Occupations

The top ten occupations with the highest level of skills shortages are:

1. Chefs

2. Wood related tradespersons

3. Metal related tradespersons

4. Automotive related tradespersons

5. Health professionals

6. Building and Engineering professionals

7. Hairdressers

8. Computing professionals

9. Construction tradespersons

10. Building and Engineering Associate Professionals

Skill Shortages at Occupation Level


Why a Labour Skills Index from Clarius Group KPMG-Econtech

Clarius Group commissioned KPMG Econtech to analyse, index and forecast labor demand against labor supply across 19 occupation categories as defined by the Department of Employment and Workplace Relations, using Australian Bureau of Statistics labor force data.

While other reports detail the level of unemployment data and highlight areas of skill demand, the Clarius Group KPMG Econtech Labour Skills Index is the only report that indexes the shortage or oversupply of skilled labor compared to demand.

The methodology used to determine the index is based on the premise that where skilled labour demands (employment plus vacancies) equals supply (employment plus unemployment), the index is equal to 100.

During times of labour market tightness, when employers experience difficulty finding appropriately skilled employees, the index is greater than 100. Conversely, at times when employees are easier to find (in a loose labour market), the index is less than 100.

The Index has also been interpreted into a skills shortage barometer to highlight the levels of risks to employers in relation to the availability of skilled labour. The barometer has five readings that are based on the following ranges for the index.

Low – index is less than 95

Moderate – index is between 95 and 98

Balanced – index is between 99 and 101

High – index is between 102 and 105

Extreme – index is greater than 105

Low

Moderate

BalancedHigh

Extreme


Clarius Skills Index

Clarius Skills Index – 2001 to 2008

The Clarius Skills Index shows there is currently a high level of skills shortage, with the index sitting at 103.1.

The Index shows that a skills shortage commenced in 2005 and rapidly increased since then before peaking in mid 2008.

The recent rise in unemployment levels has seen the skills shortage begin to moderate. As the economy slows further, we expect to see the index fall further during 2009.

The professions which we believe will be most exposed to the harder economic conditions are those related to media and marketing, science and medical research, and food and tourism related occupations.

This is because we expect companies and individuals to cut back on discretionary expenditures such as advertising, research and development, eating out and other leisure activities.

However, going forward we expect job losses to be felt the most keenly amongst low skilled occupations, most of which are not represented in this index.

The Clarius Skills Index shows that beginning in 2005 there was a continued upward trajectory in a labour skills shortage until mid-to-late 2008.

These shortages were generated by very strong growth in a number of key industry sectors that require skilled labour, particularly in the mining and construction industries. With the Global economic crisis now significantly affecting all sectors of the Australian economy, the index appears to have peaked, dropping from 103.5 to 103.1 in the December quarter 2008.

As unemployment rises, competition for job placements should increase, leading to a moderation in skills shortages and wages growth over time.

Low

Moderate

BalancedHigh

Extreme


Source: KPMG Econtech Labour Skills Index Model

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Clarius Skills Index

In the December quarter, the Index score was at a high levels, of 103.1, lower than the 103.5 recorded in the previous quarter but still slightly higher than the 102.8 registered at the same time last year.

The fall in the Clarius Skills Index in the last quarter is not surprising given that the unemployment rate has been rising since early 2008 (from 4.0 percent in February 2008 to 4.5 percent in December 2008).

With the unemployment rate forecast to continue rising to 6 percent by the end of 2009 before peaking in 20108, the skills index is expected to fall over the next 12 months back to more balanced levels.

8 KPMG Econtech MM2 model, January 2009.


Key Findings of December 2008 Quarter Clarius Skills Index

Labour Skills Outlook Not Uniform

While a slowing economy means unemployment is now starting to rise, this does not necessarily translate into a uniform easing in skills shortages across the economy.

The skills index for some occupations rose in the December quarter, despite unemployment rising overall. For example, the Clarius Skills Index for Building and Engineering professionals rose from 104.1 in the September quarter 2008 to be 104.5 in the December quarter.

The index also rose slightly for a number of other types of professionals. This shows that there is still demand for highly skilled employees in spite of the slowing economy. However, given the recent reports of job cuts across a number of sectors (such as in Accounting) and a poor general economic outlook for 2009, we believe that the Clarius Skills Index has peaked for all professions in the current economic cycle.

It is also notable that the skills shortage index remains extreme for some occupations, despite recording a fall in the most recent quarter. For example, the skills shortage index for chefs fell from 114.0 in the September quarter to 111.2 in the December quarter. These two examples show that, although the index is generally moving back towards more balanced levels as unemployment rises, shortages do still exist in some professions.

Skill Shortages - Broken Down

When broken down by category and occupation, the Index shows that skilled occupation shortages are:

- high for professional occupations; - high for associate professionals, but extreme for chefs; and,- high for skilled tradespersons overall, but extreme in some categories.

Of particular interest are the labour market conditions looking forward for construction industry employment and accounting.

The shortage of skilled construction tradespersons, construction and engineering professionals and associate professionals has been high, bordering on extreme over the last few years driven by high engineering construction levels.

Despite the rising unemployment rate, construction labour is likely to remain tight as work on large building and engineering projects takes some time to complete. As the economy slows, we expect the flow of new major developments to slow also, which should see the construction related skills indexes fall in future.


Labour Skills Outlook and Analysis

Despite recent increases, the unemployment rate still remains around the lowest levels seen in the last 30 years. Seventeen (17) consecutive years of economic growth has led to the recent low unemployment rates, high labour force participation rates and labour shortages across most skilled occupations.

Employment (‘000 persons)

Employment growth tends to follow output growth with a lag. Recent strong economic growth supported a healthy increase in employment from 10.5 million in 2006/07 to 10.7 million in 2007/08 (2.2% increase)1. However, with the world economy heading into recession, employment growth in Australia is projected to slow, falling to 0.8% growth during 2008/09 and contracting by 0.2% during 2009/10.

Signs of an economic slowdown have already begun and weaker economic growth of 0.7% is expected for 2008/092. This is due to weaker global growth and the difficult business conditions due to the global economic crisis. At the same time, rising unemployment is dampening consumer confidence. However, a turnaround is expected in 2009/10 and 2010/11. The depreciation in the Australian dollar will drive an improved trade performance, as price effects cause imports to stabilise and exports to grow. Supported by strong Government expenditures, economic growth should recover towards more normal rates, with GDP growth forecast to recover to be 1.8 percent in 2009/10 and 4.4 percent in 2010/113.

Source: KPMG Econtech MM2 model, January 2009.

1 Australian Bureau of Statistics, Labour Force, Australia, Catalogue Number 6291.0.55.003, Table 7, Employed Persons by Occupation by Sex, November 2008.2 KPMG Econtech MM2 model, updated January 2009.3 KPMG Econtech MM2 model, updated January 2009.

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The current low rate of unemployment is expected to rise over the medium term, leading to a reduction in labour market tightness. The National shortage of skilled labour is likely to ease.

The slowing economy is far from uniform across industry sectors and as such skills shortages are likely to persist in some occupations, particularly the Construction , Engineering and Health professions.


This current economic slowdown will ease labour market tightness, with unemployment forecast to climb from a low point of 4.0% (437,300) in February 2008 to more than 6.3% (720,000) by the end of 2009 before turning around in mid 20104.

Since these forecasts were generated in November 2008, the ABS has released unemployment data for January 2009. The latest ABS labour force figures, show full time employment falling and unemployment rising to 4.8% (540,200 persons) in January 2009). This figure is consistent with the KPMG Econtech forecasts, which predict unemployment during the first quarter of 2009 to average 4.9 or 5.0 percent

4 ibid5 Dun and Bradstreet Business Expectations Survey, January 2009.

Unemployment Rate (%)

Other indicators of future labour demand have also eased, further suggesting the jobs market will weaken in the short term. The number of job vacancies as reported by DEEWR has recently declined sharply, and business surveys indicate that business confidence is at rock bottom.

Reflecting the poor business conditions created by the global financial crisis, a recent business expectations survey reported that only 6% of employers expect an increase in staff numbers, compared to 20% expecting a fall5. Rising unemployment over the next twelve months should lead to significant easing in the Skills Shortage Index, although shortages may persist in some areas such as construction related occupations.

Source: KPMG Econtech MM2 model, October 2008.

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At the Coalface

Geoff Moles, Executive Chairman of the Clarius Group, said the tightening of the Australian economy and a continued shortage of skills in certain sectors is changing how employers are selecting staff.

The constant need for good quality staff in professional and associate professional and trades remains strong and selective in the Construction and Engineering, Health and certain Financial sectors.

But employers are becoming more selective and looking for an extra skills edge in sectors where there is an oversupply of potential employees – notably Marketing and Advertising – keenly looking for staff with revenue generating capabilities and a pro-active approach.

Overall, for the December quarter there were 3,276,000 million employed or jobs available in the 19 employment categories measured by the Clarius Skills Index, but only 3,166, 000 to fill them, in the final quarter of 2008. However, the global and national economies are changing quickly for the worse. The Mining and Accounting/Auditing areas have seen big lay-offs in the new year.

Out of the tragedies of the Victorian bushfires and the Queensland floods comes some ironically positive implications for employment. The devastation, particularly in Victoria, and the desperate needs to rebuild will see an upswing in skilled employment demands in the Architecture, Design, Construction and Engineering industries. The flow on from these disasters will resonate through the economy for the next two years at least

In other sectors, Chefs still constitute the highest single skills shortage category but are expected to be impacted as the economic downturn impacts the restaurant industries.

And the Healthcare industry, particularly for Health professionals, is still of concern with an immediate requirement for at least 11,000 more personnel.

Clarius Group


Accounting and FinanceAt the Coalface

Paul Barbaro, Executive General Manager for Alliance Recruitment, which specialises in Accounting and Financial services, said:

Clients continue to seek quality candidates for internal roles, and demand remains stable across the accounting landscape nationally despite the current economic environment.

The issue is not that demand has diminished but the manner in which clients are recruiting. There is a reluctance to use recruitment consultants without going to market directly first.

This has resulted in some good outcomes for clients, but the majority understand that many skilled and quality candidates remain in the workforce and this is where their recruitment partners have helped them find these professionals.

Mr. Barbaro says the general feedback from clients has been they are inundated with resumes from the market, however the quality remains moderate. Clients have continued their use of recruitment firms to increase the quality of candidates sought from the market.

The increase for Auditors has not been quashed by the GFC (Global Financial Crisis) – in fact there has been an increase in demand for these professionals. Clients are looking at reducing costs – particularly discretionary costs – and therefore looking for these professionals to assist with the internal analysis.

There have not been many clients who have not told us they are looking to reduce expenditure and analysis has confirmed they can achieve cost savings in key areas with some assistance from Accounting professionals – specifically Auditors.

Additionally, clients understand that providing quality services is paramount to sustaining business, and auditing processes has become an intensive part of the company’s procedures.

Another key area of growth has been within the Tax Accountant environment where clients are preparing for financial year end, along with ‘tidying’ up their books for impending sale or acquisition.

Management Accountants too have been in high demand with a 5 percent increase in the volume of vacancies listed – largely due to clients wanting more intense scrutiny about their financial state than ever before.

The salary expectations of candidates has softened with quality skills being accessed by clients at between 10 – 15 percent lower base salary rates than for the same period last year.

Alliance


Building and EngineeringAt the Coalface

Steve McNaughton, CEO for SouthTech, which operates a specialist Engineering recruitment company, said worsening economic conditions are starting to impact projects which are heavily dependent on private funding or are highly leveraged.

The project design sector is always the first to feel the effects of a downturn. Though to date both contract Design and Drafting have held up very well in comparison to permanent employment in that sector.

Demand for Design and Project Engineers for civil infrastructure such as roads, transport, water and power is expected to remain fairly strong, and we are seeing good activity among Architects and Consulting Engineers who are providing design services to State Government Departments, particularly Education and Housing. This is expected to grow as the Federal Governments proposed funding initiative of almost $15b towards school infrastructure and maintenance, announced on 3 February, starts to flow through.

Demographic factors contribute to the skills shortages in Engineering, where a high proportion of employed Engineers will be approaching retirement age in the next 5 to 10 years.

The rate of ‘baby boomer’ retirement though is expected to moderate due to shrinking superannuation funds and pensions helping persuade prospective retirees to remain in the work force a bit longer.

SouthTech


At the Coalface

David Stewart, Executive General Manager of leading IT recruitment company, Candle ICT, said:

That since the last report we have seen a significant reduction in demand for permanent hires. There has also been an increase in the number of skilled IT personnel seeking new positions, including quality candidates – particularly project and program managers and testers. These tend to be professionals who have been “let go”, as those in roles are increasingly reluctant to seek new positions being less likely to take the risk of jumping to an unknown entity.

This reluctance to move is contributing to the continued shortages of good candidates in some areas. There has been a tendency for contractors to start looking for the security of permanent positions, however these are now few and far between.

The demand for contractors is principally being driven by major blue chip companies, and tends to relate to major infrastructure projects or to large merger related work. These are closely followed by CRM/Business Intelligence or Data warehouse types of roles. This may reflect that businesses are rationalising spend, analysing clients and customers to maximise efficiencies. Projects involving ‘customer information’ are taking priority due to the global economic uncertainty.

There is an increased use of Business Intelligence tools to extract historic information out of data warehouses using skills relating to products such as Oracle, Cognos and Informatica.

Computing


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State Breakdown

• ACT and QLD are seeing a reduced demand for contractors, while the demand for contract IT staff remain strong in the other states.

• ACT is seeing more Project Managers, Program Managers and Testers looking for work.

• QLD report an increase in roles in the infrastructure space, voice and data as well as Business Analysts with a clinical/health background.

• SA also note a particular shortage of Business Analysts and SAP.

• SA report that roles for Project Management requirement’s are dwindling due to the delay or cancelling of projects.

• VIC SAP & CISCO are still in short supply. Vendors & Telco’s are continuing to pursue existing projects, though new projects are increasingly being put on hold.

• WA is still finding it hard to source SAP, Cisco, Oracle and Sharepoint talent.

Candle ICT

Average Hourly Wages

Computing


MarketingAt the Coalface

Kym Quick, Executive General Manager, Lloyd Morgan, which specialises in executive search, said the sales and marketing space continues to see both head count freezes and job losses, particularly at management level.

The initial hesitation around reduced head count experienced late last year has been removed by the belief that any turnaround is further away than initially thought. However, to counter this, some organisations are using the current environment to review their sales and marketing activity with the view to taking advantage of some of the talent available to replace underperforming individuals and teams.

This will be a major driver of any activity in that space in the short term.

Demand for revenue generating sales staff will continue to be strong, in fact, on the radar of most organisations. Many are taking the opportunity to review their existing sales teams and strategies and implement a more aggressive approach.

With the demand being reduced, the ability to restructure as a mandate for change is taking place with the knowledge that staff are more open to new ways of doing things if it results in making their organisations more successful and help them to retain their role.

Wages

As you would expect given the market environment, salary expectations are starting to soften. Senior marketing professionals who have been the victims of headcount reduction are looking to take opportunities they may not otherwise consider to “batten down” for the uncertain times ahead. Many are conscious that being selective may result in them being unemployed for some time.

Overall, the uncertainty of what lies ahead is driving a lot of unprecedented behaviours by both individuals and organisations. While some are going into immediate “damage control” others are looking to how they can use the current environment to ensure that they come out of this economic downturn stronger than before resulting in a rapid increase during the upturn.

Lloyd Morgan


Skill Shortages at Group Level

When the index is applied to groupings of skilled labour:

• The shortage of professionals in the labour market is currently high at 102.1, meaning that demand for professionals is 2.1 percent higher than the available supply. The higher than average wage of this group, compared to other skilled labour groups, reflects not only their productivity levels but also the current shortage of professionals. Because of the relatively high levels of skills and education in this category of employment, we expect the labour skills index for professionals to be the least affected out of the three categories by the economic downturn. The figures for the December quarter support this theory, with the professionals index remaining steady while the indexes for associate professionals and tradespersons fell in response to higher unemployment.

• The labour skills index is currently highest for associate professionals. Since 2002, the shortage of associate professionals has been more severe than the shortage of professionals. The Associate professionals skills index has moderated this quarter but remains high at 104.6. This shortage of associate professionals has been particularly severe for Chefs (skills index of 111.2).

• Since 2001, the labour skills index has risen most significantly among tradespersons than other skilled labour groups. Specifically, it has increased from a low 95 in 2001 to its current high level of 104.3. This has primarily been driven by the strength in engineering construction and mining activity which has increased demand for tradespersons, while the supply of skills has not kept pace.

Source: Clarius Group - KPMG Econtech Skills Index Model

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The Skills Shortage has moderated among associate professionals and tradespersons.

Despite rising unemployment, the Skills Shortage Index for professionals remains steady.


Skill Shortages Index by Occupation

Source: Clarius Group - KPMG Econtech Skills Index Model

Skills IndexLabour Demand

‘000 personsLabour Supply

‘000 persons

Dec 01 Dec 05 Dec 07 Sep 08 Dec 08 Dec 08 Dec 08

Professionals 98.6 100.6 101.7 102.1 102.1 1758 1719

Science 98.1 99.6 101.4 102.4 102.6 86 83

Building and Engineering 99.9 101.7 104.2 104.1 104.5 172 165

Accountants and Auditors 99.8 101.2 101.2 101.2 101.4 191 188

Marketing and Advertising 97.2 98.3 98.6 98.4 98.5 88 89

Computing 98.5 101.6 103.6 104.3 103.9 193 185

Business and Information 97.3 98.7 99.2 99.4 99.2 198 199

Health 99.9 102.6 103.9 105.0 105.2 411 390

Social 97.3 98.9 100.1 100.2 99.8 419 419

Associate Professionals 99.6 102.2 105.3 105.9 104.6 239 228

Medical and Science 97.6 99.1 99.6 100.9 99.9 45 45

Building and Engineering 98.8 100.1 103.6 103.5 103.1 128 124

Chefs 102.8 108.3 111.9 114.0 111.2 66 59

Tradespersons 96.1 100.2 103.9 105.0 104.3 1279 1219

Metal 96.2 101.0 105.2 107.6 107.9 251 231

Automotive 96.6 100.9 103.8 106.1 105.5 159 150

Electrical and Electronics 95.7 99.3 101.8 101.8 101.3 232 228

Construction 95.5 99.6 103.9 103.9 103.2 401 386

Food 96.0 100.7 104.9 104.8 103.4 106 102

Printing 97.2 100.4 104.3 103.9 101.6 27 26

Wood 96.8 100.8 106.8 112.0 110.2 38 34

Hairdressers 98.4 101.5 104.6 107.3 104.3 65 62

All 97.7 100.5 102.8 103.5 103.1 3276 3166

Skills Index

Top Ten Occupations

The top ten occupations with the highest level of Skills Shortages are:

1. Chefs

2. Wood related tradespersons

3. Metal related tradespersons

4. Automotive related tradespersons

5. Health professionals

6. Building and Engineering professionals

7. Hairdressers

8. Computing professionals

9. Construction tradespersons

10. Building and Engineering Associate Professionals


Significant Trends Emerging from the Clarius Skills Index include:

When viewed by occupations, the Index identifies a number of interesting trends that have emerged. For example:

Health professionals shortage high:

The shortage of health professionals has continued to rise despite higher unemployment. The Clarius Skills Index for health professionals rose by 0.2 to be a high 105.2.

Even though unemployment has risen, leading to a lower value for the Clarius Skills Index overall, demand for health professionals continues to outstrip supply. This trend will continue in the future as demographic changes increase the demand for health and aged care services, especially as the baby boomer generation retire and move into old age.

Chefs shortage extreme:

The skills shortage among Chefs continues to be extreme with a current Clarius Skills Index of 111.2.

Two factors have combined to create the current shortage in Chefs. First, there have been a large number of new cafés and restaurants opened in the last few years, driven by the strong economic conditions which lasted until the latter part of 2008.

Second, many Chefs leave the industry within their first five years, likely due to the tough lifestyle that often accompanies the job.

While the economic slowdown in Australia will help to moderate the demand-supply in balance in this profession, skilled Chefs will continue to be in high demand in the short term.

Accountants and Auditors high:

There have been recent job cuts by some large accounting firms which may suggest that the Clarius Skills Index for Accountants and Auditors has peaked and is set to drop in the first quarter of 2009.

However, the public sector has struggled in recent years to fill vacancies within their financial reporting areas due to the strong competition for qualified Accountants within Australia from the private sector.

We may see Government departments taking the opportunity to snap up some of these skilled workers, supporting demand for Accountants and Auditors and preventing a sharp fall in the Clarius Skills Index for this profession.


Construction professionals and tradesperson skill shortage high:

The skills shortage among construction professionals and tradespersons is currently high. The Clarius Skills Index for Building and Engineering professionals rose from 104.1 in the September quarter 2008 to be 104.5 in the December quarter.

A shortage of skilled construction workers has built up over recent years due to record levels of non-residential construction of commercial buildings, especially offices and retail, and also due to high engineering construction activity levels driven by the mining boom.

The labour market situation for non-residential construction is easing as businesses curtail their investment levels in response to the financial market crisis and higher costs of finance, but on the engineering construction side there are still several new, large infrastructure and mining construction projects in the pipeline.

Although the outlook for the construction sector is much gloomier than it has been in recent times because of the global economic downturn, employment should be sustained in the short term by the pipeline of existing work from large projects initiated during 2008.

In the medium term, increasing competition for new work should begin to exert downward pressure on construction costs, which may encourage homeowners to revisit renovation or rebuilding plans which were abandoned during the economic boom due to the difficulty of finding tradespersons.

Over the next 12 to 18 months, demand for workers in the construction industry will remain strong as families in VIC rebuild following the tragic “Black Saturday” bushfires, and flood-affected families in QLD and NSW renovate and refurbish their homes. In VIC, it is estimated that 750 homes will need to be rebuilt, while thousands of homes in QLD and NSW have been affected by flooding. In Ingham, QLD alone – one of the worst affected towns – it has been estimated that 2,900 homes were damaged by flooding.

With such a large amount of extra rebuilding and repair work to be done following these natural disasters, employment in construction related occupations could be boosted by anywhere between 5,000 and 15,000 workers, possibly even more, recognising that the rebuilding and repair projects will take place gradually over the next few years. However, because it will take some time before families are ready to begin the construction work, we may not see any impact on the Clarius Skills Index until the June Quarter 2009.

Recent government incentives in relation to first home buyers is also expected to have a positive impact on demand in the construction industry.

Computing professionals shortage high:

Although the Clarius Skills Index for Computing professionals has eased, competition for the services of skilled Computing professionals remains strong. In the past few years, enrolment into tertiary IT related degrees has been low, which has led to the current shortage of skilled Computing professionals – a fact highlighted in the previous

quarter Clarius Skills Index.

We expect demand for Computing professionals to ease during 2009, in line with a slowing business sector in the current economic climate. However, the recent big drop-off in student numbers means that the supply of new workers joining this occupation will be limited over the next few years, which will cause some upwards pressure on the skills index for this occupation going forward.


Additional Outlook and Analysis of General Labour Market

Average Earnings ($’000 per quarter)

Wage Changes

Wages have accelerated in an attempt by employers to attract and retain workers. Since 2005, compensation of employees has increased by a strong 14 percent6. Rising unemployment will moderate wages growth in the medium to long term. Specifically, wages growth is forecast to fall to just 1.9 percent during 2009/107.

Source: KPMG Econtech MM2 model, October 2008.

6 KPMG Econtech MM2 model, updated October 2008.7 ibid

10

12

14

18

16

May-0

1

May-0

3

May-0

5

May-0

2

May-0

4

May-0

6

May-1

1

May-0

7

May-0

9

May-0

8

May-1

0


State Comparisons

Unemployment rates vary from state to state. The large population states of NSW and VIC generally have similar unemployment rates to the national average. However, unemployment in NSW has risen more quickly than the national rate due to:

• The advent of the economic slowdown impacting on the state before other parts of Australia. This is mainly due to the relatively high proportion of business and finance jobs in Sydney, which is the industry which has felt the bite of the economic downturn most quickly and keenly.

• NSW’s relatively high level of household gearing and higher house prices make the state more sensitive to difficult financial conditions than other Australian states.

Unemployment in VIC has fallen in spite of the difficult economic conditions because of a recent decline in the labour force participation rate. This may reflect some people giving up looking for work due to the more difficult economic circumstances now prevailing. But, as noted elsewhere in this report, VIC’s circumstances will change through 2009 and 2010 because of the devastation and rebuilding required of around 1,000 homes and commercial structures.

Unemployment in WA has been low over the last three years, due to the mining boom that dominates the state’s economy and has snapped up labour resources. However, with commodity prices now much lower than they were in mid-2008, the mining sector has begun shedding jobs and as this continues, the unemployment rate in WA will slowly rise to be more similar to the other states.

Similarly, unemployment in QLD has been low due to the mining boom as well as heavy spending on infrastructure projects, both of which have generated high demand for labour. But, with the mining boom now over, job cuts amongst the big mining companies will lead to higher unemployment in QLD.

Unemployment Rates by State (%)

Source: ABS, Labour Force Australia, Table 2, Labour force status by State, Capital city / Balance of state and Sex, Catalogue Number 6291.0.55.001, September 2008.

2

Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08

WA

QLD

AUSTVIC

NSW

3

4

5

6

7

8


Generational Comparisons

The majority of Australia’s labour force is currently made up of generation X (aged 27 to 42) and baby boomers (aged 43 to 62). The chart below shows that in November 2008, those aged 25 to 54 made up the majority of the labour force (67%). Younger people (aged 15 to 24) made up 18% and mature-aged people (aged 55 and over) made up the remaining 15% of the labour force.

Labour Force by Age Group, November 2008 (‘000 persons, %)

Australia’s workforce is beginning to experience significant changes in its age structure which will continue into the future. In particular, the ageing population will mean that the age structure of the labour force is older than it has been in the past. Hence, the average age of workers is expected to increase.

At the same time, many workers in the baby boomer generation will choose to retire over the next decade, so it will be important for employers to plan ahead to avoid the loss of the valuable skills, knowledge and experience held by them..

Source: ABS, Labour Force Australia, Table 01. Labour force status by Social marital status, Age and Sex, Catalogue Number 6291.0.55.001, December quarter 2008.

15-24

25-54

55+

7454, 66%

1999, 18%1726, 15%


In Summary...

Despite the current economic slow-down and resulting unemployment growth, the labour market in Australia currently remains tight. This is proving costly to employers in terms of a higher wages growth and productivity losses. The Skills Shortage Index is high, with the index at 103.1, down just 0.4 from last quarter.

The shortage of skilled professionals, associate professionals and skilled tradespersons is high. Shortages are particularly prominent among the occupations of Health Professionals, Chefs, Wood, Metal and Automotive tradespersons and Construction related occupations.

Over the short term, labour market conditions are expected to continue easing as unemployment rises due to weaker economic growth. This will help to moderate the National Skills Index, however for some occupations the skills shortage issue is likely to remain.


Methodology, Definitions and References

Methodology

The Clarius Group – KPMG Econtech Labour Skills is calculated as: Labour Demand

Labour Supply

Where:

Labour Demand = number of skilled employed persons + number of skilled job vacancies

Labour Supply = number of skilled employed persons + number of skilled unemployed persons

The number of skilled employed persons is based on ABS employment by occupation data (catalogue number 6291.0.55.003, Labour Force, Australia, Detailed, Quarterly, November 2008)

The number of skilled unemployed persons is based on ABS unemployment by occupation data (catalogue number 6291.0.55.003, Labour Force, Australia, Detailed, Quarterly, November 2008). Those included in the ‘worked more than two years ago’ and ‘never worked for 2 weeks or more’ categories are separated into occupations, using the same profile as the unemployed persons who are assigned occupations.

The number of skilled job vacancies is based on DEEWR job vacancy data (State Occupation Counts data). The DEEWR data is based on job vacancies that are advertised in newspapers. To account for vacancies that are advertised on the internet, the vacancy data is adjusted by a coverage factor. Job vacancies for computing professionals are dominated by internet advertising and so are treated differently.

The original index is seasonally adjusted using seasonal factors that are estimated over the time period 2001 to 2007.


Definitions

Employed: This includes people aged 15 and over who are working full time or part time. Employment represents labour demand.

Unemployed: This includes people aged 15 and over who are looking for full-time work or part-time work, or waiting to start a new job.

Unemployment rate: The number of unemployed persons expressed as a percentage of the labour force.

Labour Force: This includes the total number of people employed and unemployed (see above). The labour force represents labour supply.

Participation Rate: The percentage of the population aged 15 and over that is in the labour force.

Average earnings: The average gross (before tax) earnings of employees. It is estimated by dividing quarterly total earnings by the number of employees.

Science Professionals perform analytical, conceptual and practical tasks in relation to the chemical and physical properties of the universe, life forms including the physiology and biochemistry of humans, animals and plants, environmental factors and agricultural production, disease prevention and the extraction and processing of mineral ores. (ASCO 211)

Building and Engineering Professionals perform analytical, conceptual and creative tasks in relation to the design and function of structures, machines, production systems and resources or products and develop plans for related environmental and organisational concerns. (ASCO 212)

Accountant and Auditor Professionals plan and provide accounting, auditing and treasury systems and services to individuals and enterprises. (ASCO 221)

Marketing and Advertising Professionals plan, develop, coordinate and implement programs of information dissemination to promote a favourable view of an organisation, products and services and represent companies in selling a range of goods and services. (ASCO 222)

Computing Professionals design and prepare software to meet specific requirements in all aspects of the computing environment, and control and audit the operation of computing facilities within an organisation. (ASCO 223)

Business and Information Professionals refers to miscellaneous business and information professionals not elsewhere classified. It includes human resource professionals, librarians, mathematicians, business analysts, property professionals and other business and information professionals. (ASCO 229)

Health Professionals diagnose and treat physical and mental illnesses and conditions and recommend, administer, dispense and develop medications and treatment to promote or restore good health. (ASCO 23)


Social Professionals provide social, vocational, spiritual and legal advice to clients and the community, communicate ideas and facts in a wide range of media, command and navigate aircraft and ships, and develop and implement policies regarding occupational health and safety and the conservation of materials and objects in museums and galleries. (ASCO 25)

Medical and Science Associate Professionals perform laboratory tests and other technical support functions to assist health professionals engaged in the diagnosis, monitoring and treatment of disease, and in research, design and production in all areas of the natural and physical sciences. (ASCO 311)

Building and Engineering Associate Professionals assist engineers and building professionals in research, design, construction, operation and maintenance of equipment, distribution systems and installations, and resource estimation and site inspection. (ASCO 312)

Chefs plan and organise the preparation and cooking of food in dining or catering establishments. Apprentice Chefs are excluded from this unit group. (ASCO 3322)

Mechanical and Fabrication Tradespersons cut, shape, cast, join and finish metal and metal parts and sub-assemblies, aircraft systems and precision instruments, excluding motor vehicles. (ASCO 41)

Automotive Tradespersons repair and maintain motor vehicle engines, electrical and electronic systems and bodies, paint vehicles, construct specialised vehicle bodies, and fit or replace interior trim and upholstery in vehicles. (ASCO 42)

Electrical and Electronic Tradespersons assemble, install, test and repair electrical and electronic systems and equipment, telecommunications and transmission equipment, refrigeration and air conditioning equipment, and electrical distribution networks. (ASCO 43)

Construction Tradespersons construct and repair buildings and other structures, provide plumbing, drainage and mechanical services, and apply final finishes such as painting and flooring. (ASCO 44)

Food Tradespersons perform the more complex tasks at various stages of food preparation, applying technical expertise and knowledge of the properties of food. (ASCO 45)

Printing Tradespersons compose and set type prior to printing, set up and operate printing presses, bind and finish printed products, or prepare stencils and operate screen printers. (ASCO 491)

Wood Tradespersons set up and operate woodworking machines and wood turning lathes to shape wood stock, fabricate, repair or finish wooden furniture and fit and assemble prepared wooden parts to make furniture, picture frames and other wood products. (ASCO 492)

Hairdressers cut, style, colour and treat hair. (ASCO 493)


References

Department of Education, Employment and Workplace Relations, Vacancy Report Data, December 2008.

Australian Bureau of Statistics, Average Weekly Earnings, Australia, Catalogue Number 6302.0, November 2008.

Australian Bureau of Statistics, Labour Force, Australia, Catalogue Number 6202.0, December 2008.

Australian Bureau of Statistics, Labour Force, Australia, Detailed, Quarterly, Catalogue Number 6291.0.55.003, November 2008.

Australian Bureau of Statistics, Australian Standard Classification of Occupations, Second Edition, Catalogue Number 1220.0, 1997.

ANZ, ANZ Job Advertisement Series, December 2008.

www.clarius.com.au

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