What Economic and Fiscal Update means for Australian Apprenticeships

Last week the Australian Treasurer released an Economic and Fiscal Update, with the full Budget pushed back to October. This Update focused on the effects of COVID-19 and the Government support available to those affected.

Why is Government support so important?

Restrictions implemented to slow or stop the spread of COVID-19 have negatively affected businesses and industry. This in turn has affected employees and job seekers.

The current Australian unemployment rate is 7.4% and is expected to rise to 9.25% this year. This reflects thousands of Australians being out of work and unable to find employment. In addition to these ‘unemployed’ Australians, there are thousands more who have given up on job hunting and are therefore not included in the official unemployment rate.

Initiatives such as JobKeeper enable businesses to keep staff on, both reducing the number of unemployed Australians and enabling businesses to continue operating. As the Australian economy improves, these businesses have staff already engaged to help with their recommencement of operations.

However, there is uncertainty around the future, including when restrictions may lift and whether there will be further waves of COVID-19. The Treasurer has announced several assumptions that their modelling is based on but has made it clear that rapid changes to the spread of the virus and subsequent restrictions makes any modelling difficult.

The Government has indicated that it will take these changes into account and update support measures accordingly, while also adopting the aim of growing the economy.

What Government support is available in the Australian Apprenticeships sector?

Employers of Australian Apprentices are covered by JobKeeper, and data from the National Australian Apprenticeships Association (NAAA) (https://www.naaa.com.au/wp-content/uploads/2020/07/Covid-19-impact-on-Apprenticeships-16.7.20.pdf) indicates that around 154 000 apprentices and trainees were benefitting from JobKeeper earlier this month. This covers 56% of businesses with an Australian Apprentice.

A large number of businesses with apprentices and trainees on JobKeeper are planning on, or considering, cancelling them when JobKeeper ends. Over 50 000 apprentices and trainees are at risk of cancellation. This is in addition to the almost 15,000 Australian Apprentices who have already been cancelled.

The Supporting Apprentices and Trainees (SAT) Wage Subsidy is available to employers of apprentices and trainees, based on eligibility criteria. At the end of June, NAAA data shows that over 80,000 SAT claims had been processed. Employers cannot receive JobKeeper and SAT at the same time for their Australian Apprentices but may be able to move from one to the other depending on eligibility.

The JobKeeper and SAT initiatives are specifically used to support the continuation of current employees, including apprentices and trainees. They are short-term measures, currently due to expire in early 2021. They are not designed to get new apprentices and trainees into work.

A new streamlined and simplified Incentives for Australian Apprenticeships scheme was due to start on 1 July this year but due to COVID-19 has been pushed back to 1 January 2021. The existing incentives, including an expanded Additional Identified Skills Shortage payment, continue to support employers of commencing or recommencing apprentices and trainees.

How has the job market reacted to COVID-19?

The Australian job market has been responding rapidly to COVID-19 and the restrictions placed on businesses and the public. As restrictions were introduced in March and April, job vacancies plummeted (https://lmip.gov.au/default.aspx?LMIP/GainInsights/VacancyReport). Data from National Skills Commission surveys (https://lmip.gov.au/default.aspx?LMIP/Gaininsights/COVIDInformation/ResearchandInsights) shows that businesses quickly started expecting they would need to decrease staff.

With relaxing restrictions throughout May and June, both months saw increases in advertised job vacancies, according to National Skills Commission data (https://lmip.gov.au/default.aspx?LMIP/GainInsights/VacancyReport). Despite these increases from previous months, overall vacancies were down compared with the same time last year.

From May to June, businesses started reporting an expectation they would need to increase staff. With the current COVID-19 outbreak in Victoria, going forward we would expect to see significant variations based on the location of the employer. As reported earlier in July, the highest risk for businesses to stay open over the next 6 months is another outbreak of COVID-19 (https://lmip.gov.au/default.aspx?LMIP/Gaininsights/COVIDInformation/ResearchandInsights).

What does this mean for Australian Apprenticeships?

Australian Apprenticeship commencements have been trending downwards over a number of years, in both trade and non-trade occupations (https://www.ncver.edu.au/research-and-statistics/data/all-data/historical-time-series-of-apprenticeships-and-traineeships-in-australia-from-1963-to-2019). Initial data from NAAA (https://www.naaa.com.au/wp-content/uploads/2020/07/Covid-19-impact-on-Apprenticeships-16.7.20.pdf) shows the sign-ups of new apprentices and trainees were significantly down from 2019 levels: Both April and May showed a 33% reduction in sign-ups, while June showed a 15% reduction.

While these June figures show an initial improvement in the months preceding, it is far too early to determine whether we are seeing genuine improvements to the Australian Apprenticeships market. Given that commencements in the 2018-19 financial year were at the lowest point since 1999 having decreased each year since 2011-12, even a small decline is problematic.

The National Skills Commission is working to identify areas of national skills shortage (https://www.nationalskillscommission.gov.au/our-work/forecasting-skills-and-analysis), however pre-COVID-19 reports and current data both suggest that many Australian Apprenticeship occupations are currently facing shortages or will be in the near future. This would indicate that we need to not only support current apprentices and trainees to complete their training but increase the numbers of new commencements to higher levels than previous years.

Looking forward

Policy and initiatives supporting apprenticeships and traineeships have been a huge part of government responses to the COVID-19 crisis. They are having a significant impact on employers and employees.

Since April, $377.6 million has been paid to employers in the Supporting Apprentices and Trainees initiative – $344 million for trade apprenticeships and $33 million for non-trade.

Government support during COVID-19 has focused on keeping current apprentices and trainees, and other employees, in employment. These initiatives have been successful, supporting many thousands of Australian Apprentices. The expanded and extended support will be valuable for the system. The Group Training Expansion announced on 22 April covers employers receiving JobKeeper but provides a $1500 per fortnight payment to their apprentices or trainees employed by Group Training Organisations (GTOs).

The Expansion program has so far proved valuable as a response to COVID-19, with more than $27 million paid to GTOs to support retention of Australian Apprentices since April, with support leading to ongoing training in 67 occupations. In this case, the work of Australian Apprenticeships Support Networks has been crucial to helping the VET sector avoid training and employment disruption to thousands.

The government’s JobTrainer program has also extended by 6 months the time period for the Supporting Apprentices and Trainees assistance package, which will now end on 31 March 2021. This expands eligibility for support to medium-sized businesses with an Australian Apprentice in-training on 1 July 2020. Positively, this will extend assistance to an expected 180,000 apprentices and trainees across 90,000 businesses and applies to apprentices and trainees employed through a GTO (based on the size of the host employer).

While this is an initial positive support for the economy and the Australian Apprenticeships system, this improvement is in comparison to the significant employment and training low point earlier this year. Recovery in May and June has been marginal and with a second wave of COVID-19 in Victoria placing Greater Melbourne and Mitchell Shire in strict lockdown, a geographic area that accounts for twenty per cent of Australia’s economic activity has suffered a great setback.

Even before taking this into account, compared with previous years, much greater improvements are needed to support Australian Apprenticeships. Commencements have been in decline for several years and returning to pre-COVID-19 levels.

There have been a range of policy initiatives highlighted in recent reviews which will positively impact on the take-up of Australian Apprenticeships. Among them is likely to be the need for further investment, or changes to investment approaches, by Government to build the Australian Apprenticeships market to levels needed for skills and employment growth. The Australian government has recently also stated a commitment to stimulating growth.

Looking beyond the current exceptional circumstances is difficult. Economic forecasts point to a long road to recovery for Australian business, jobs, apprenticeships and traineeships. However, a key way of not just resetting but growing Australian Apprenticeship commencements is to frame targets driven by forecasts of the skills capacities needed to expand the economy.

For Australian Apprenticeships to rebound from the COVID-19 economic crisis, it will be important for government to support the VET sector not just by keeping current apprentices and trainees in employment and training. Government must also ensure that when the economy eventually rebounds, the VET sector is central to recovery by delivering a range of opportunities for future generations of workers that will help strengthen the economy and society.

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