"Australia's low unemployment rate has created a blind spot to labour market trends that are decreasing our productivity, our wellspring to national wealth," said Innes Willox, Chief Executive of the Australian Industry Group.
"While the labour market has remained resilient, with the jobless rate around 4% for the past three years, in many other respects it is failing to meet the broader needs of our economy or productivity.
"There are four key areas that are a material drag on productivity – job creation has become almost entirely dependent on government spending, a growing regulatory burden has increased private sector costs, there is a persistent overhang of excess job vacancies and mobility is declining.
"These are all make job creation more expensive and difficult, reducing the efficiency of matching jobs to employers, while disrupting productivity and sapping business growth.
"To maintain steady unemployment and participation rates, the economy needs to create 400,000 new jobs every year. The private sector, which normally accounts for two-thirds of those positions, has collapsed since 2023 and last year created 53,000 new jobs – or one fifth of what it should provide.
"Government sectors have taken up the slack – adding 670,000 jobs in the past two years, or 82% of the total. There is an urgent need to transition to the private sector resuming its role, or our labour market resilience will be at risk.
"Regulation has pushed up employment costs since the pandemic, with growth in superannuation, workers compensation and payroll tax adding $14 billion to annual wage costs. The regulatory costs for employment, on top of wages, have grown to 15.6% from 14% in the past three years.
"We have a plague of excess job vacancies, which disrupts business operations, make it harder to allocate resources properly and less likely to pursue new opportunities for growth. Some 330,000 jobs remained unfilled at the beginning of 2025 – around 100,000 more than the historical average.
"This persistence of excess vacancies has exacerbated a further challenge for employers – a crippling skills shortage. Our Occupation Shortages List has identified 112 occupations – or one-third of jobs that are in national shortage. It's worst in the industrial sector, where shortages account for up to 53% of positions (construction) and the care sector, where up to 60% are in shortage (healthcare and social).
"The sectors with the most chronic shortages – healthcare and social – also delivered the worst productivity outcomes, so there is a clear link between the two.
"Job mobility, or the frequency people changed roles, fell to a record low in 2025. It has halved in the past five decades to 8% from 16%, and it is particularly the case for 15-24 year olds, which has declined 10 percentage points. Mobility is directly linked to productivity – employees who stay in the same job for longer miss advancement in pay and/or skills.
"An industry that is struggling to recruit and retain its workforce is also going to find it harder to deploy its workforce in a productive and efficient manner – so it needs to be clearly on the roundtable's agenda," Mr Willox said.
