A dynamic economy depends on movement. When people change jobs, ideas travel with them. A nurse brings new techniques to her next hospital; a software engineer introduces smarter code to her new firm. Economists call this allocative efficiency. Most people just call it getting a better job.
Yet in too many workplaces, that movement is quietly being stifled. Over the past decade, clauses that prevent people from joining competitors, known as non‑compete clauses, have crept into millions of contracts. Once reserved for senior executives, they now appear in agreements for teachers, carers, tradespeople, even baristas.
A survey by the e61 Institute found that around 1 in 5 Australian workers, some 3 million people, are bound by a non‑compete. Often these clauses are slipped into contracts automatically, copied from old templates without discussion or scrutiny. Many workers only discover them when they try to leave a job and are told they cannot.
What began as a narrow tool to protect trade secrets has become a broad restraint on opportunity. The effect is to trap people in roles that may no longer suit their skills or family circumstances, and to deprive the wider economy of the benefits that come when talent moves freely.
Treasury's consultation uncovered countless stories of Australians whose livelihoods have been shaped by these clauses.
Nick, a disability support worker on the NSW South Coast, was banned from working within 50 kilometres of his employer's base. To keep working in his community, he would have had to breach his contract.
Holly, a small‑business owner in Queensland, started her own NDIS provider after years in the sector. When some former clients followed her, her old employer demanded she stop operating within 50 kilometres of several sites, effectively banning her from working anywhere nearby.
Jessica, a 20‑year‑old dance teacher, left her studio after workplace harassment. Her contract prohibited her from working within 15 kilometres for 3 years. When she took another job, her former employer threatened legal action. She had to give up teaching entirely.
These are not outliers. Treasury's analysis shows that non‑competes now appear across low‑ and middle‑wage industries where the justification of protecting commercial secrets simply does not hold. In reality, they control people's choices. They stop workers from using their skills where they are most valuable, and they hobble sectors already crying out for staff.
Even when a restraint would never stand up in court, it often achieves its aim through fear. Defending an injunction can cost tens of thousands of dollars. Few workers are willing to risk financial ruin to test whether their clause is enforceable.
The result is what economists call a chilling effect: workers stay put even when they have every legal right to move. Businesses shy away from hiring candidates who might trigger a dispute. The labour market loses its fluidity, and innovation slows.
Non‑compete clauses are like sand in the gears of the economy. They do not have to be legal to be effective. Their power lies in intimidation, not legitimacy.
The economic toll is significant. Other research by e61 shows that workers covered by non‑competes earn about 4 per cent less than comparable employees without them, around $2,500 a year on a typical salary. Treasury's analysis finds that workers leaving firms that use non‑competes heavily are less likely to switch industries, limiting both career growth and innovation.
Overseas evidence is even stronger. A study in the Journal of Political Economy found that non‑competes slowed wage growth and reduced mobility. The authors estimated that banning non‑competes nationwide would lift average wages by between 3.5 and 13.7 per cent. Another US study found that non‑competes reduced patenting and innovation.
The message is clear: when people are free to move, productivity rises and ideas spread faster.
From 2027, the Albanese government will ban non‑compete clauses for employees earning under the Fair Work Act's high‑income threshold, currently $183,100. We will also close loopholes that allow wage‑fixing and no‑poach agreements between firms, quiet arrangements that suppress pay and opportunity.
This is a balanced reform. Businesses will still be able to protect genuine interests such as intellectual property, confidential information and client relationships. What will end are blanket clauses that prevent people from earning a living in their chosen field.
The legislation will apply only to new or varied contracts after 2027, giving employers ample time to adapt. Treasury received 67 submissions during consultation from unions, business groups, legal experts and workers, and those insights are shaping the final design.
The goal is simple: a labour market that rewards merit and mobility, not litigation and lock‑in. Workers will gain the freedom to move to roles that fit them better. Employers will benefit from a larger, more motivated pool of talent.
Australia's prosperity has always depended on openness. Many of our ancestors crossed oceans seeking opportunity; our cities grew because people were free to move where the work was. That same principle should apply within our labour market today.
When workers change jobs, they carry knowledge with them. A lesson learned in one business improves the next. Productivity is not just about machines or management, it is about how quickly ideas flow through an economy. Non‑competes block that flow. Removing them will let innovation travel faster.
This reform is about fairness and growth. A nation that wants to compete globally cannot afford to have millions of its citizens bound by outdated restraints.
Nick, Holly and Jessica did not want to steal secrets or poach clients. They just wanted to work. By freeing them, and millions of others like them, we will build a fairer, faster, more dynamic Australia.
Mobility is how potential becomes progress. Open the doors, and everyone moves forward.
To protect privacy, the 3 names in the case studies have been changed.
