TAFE NSW SYDNEY INSTITUTE LEADERSHIP FORUM

1. TAFE NSW SYDNEY INSTITUTE LEADERSHIP FORUM EXPLORING WORKFORCE DEVELOPMENT SOLUTIONS 25 February 2011

2. Who are Skills Australia? • Expert independent Board with expertise in industry, economics, education and academia; • Provides independent advice to the government on current, emerging and future skills needs and workforce development needs • Remit now includes advice on Skilled Occupation List • Covers both VET and Higher Education “Skills Australia will provide the Government with recommendations on current and future skills needs (and) inform Australia’s workforce development needs …” Source: Julia Gillard, Second Reading Speech – Skills Australia Bill 2008 (14 Feb 2008)

3. Workforce development defined as: Australian Workforce Futures: A National workforce development strategy • policies and practices which support people to participate effectively in the workforce; to develop and apply skills in a workplace context, where learning translates into positive outcomes for enterprises, the wider community and for individuals throughout their working lives.

4. Workforce development leading a new partnership approach to workforce development at government, industry and enterprise level. • Enterprise • improvements focused on people • improvements focused on the organisation of work • improvements focused on customers and stakeholders • National • economic recovery and future growth; • shared enterprise between industry, providers, jurisdictions and labour markets Individual • Addressing foundation skills especially LLN; • Assisting individuals to gain qualifications; • Fostering labour market participation by people in vulnerable groups (women, males of prime working age, indigenous etc).

5. The challenge of prosperity • When the terms of trade are high, the international purchasing power of our exports is high. • To put it in very (over-) simplified terms, five years ago, a ship load of iron ore was worth about the same as about 2,200 flat screen television sets. • Today it is worth about 22,000 flat-screen TV sets – partly due to TV prices falling but more due to the price of iron ore rising by a factor of six. Glenn Stevens Governor of Reserve BankAddress to the Committee for Economic Development of Australia (CEDA) Annual Dinner, Melbourne 29 November 2010

6. Source: Economic and Financial trends and globalisation over the next 15 years Presentation by Dr David Gruen (Executive Director, Macroeconomic Group, Treasury) to Skills Australia/Academy of Social Science Australia Scenario Development Forum 7 February 2011)

7. Exports outnumber imports in balance of tourist trade • There were 5.9 million short-term visitors to Australia last year, a rise of 4.3 per cent on the previous year. • But Australians continued to take advantage of a strong dollar and cheap air fares to holiday abroad with the overall number of departures outstripping the number of inbound visitors. The number of departures for holidays abroad rose 13 per cent in the year to 7.1 million • Overall inbound tourists are negative 100,000 per month compared to outbound tourists Julian Lee - Sydney Morning Herald, February 9, 2011

8. The strong A$ will have an adverse impact on ‘trade-exposed’ non-resource sectors such as manufacturing, tourism and education (Saul Eslake) Short term overseas arrivals and departures • The strong A$ will erode the competitiveness and profitability of non-resource exporters (including manufacturing, tourism and higher education) and businesses competing in the domestic market with imports (including parts of agriculture, manufacturing, tourism and some retailing) • There’s little if anything governments can or should do about this (beyond things which they should be doing anyway, such as regulatory reform): suppressing or offsetting these ‘market forces’ would simply result in higher inflation (as they did in the early 50s, mid-70s and early 80s) Source: ABS.

9. Source: Economic and Financial trends and globalisation over the next 15 years Presentation by Dr David Gruen (Executive Director, Macroeconomic Group, Treasury) to Skills Australia/Academy of Social Science Australia Scenario Development Forum 7 February 2011)

10. Source: Economic and Financial trends and globalisation over the next 15 years Presentation by Dr David Gruen (Executive Director, Macroeconomic Group, Treasury) to Skills Australia/Academy of Social Science Australia Scenario Development Forum 7 February 2011)

11. Even in this strong economy we have issues…. • The positive growth in productivity earlier this decade has flattened, and turned negative. • Australia ranks only 10th out of 34 OECD countries on workforce participation. • We are headed for a projected shortage of 2.4 million skilled workers by 2015 • There are 1.5 million Australians unemployed or underemployed • Currently 50% of the population has inappropriate language, literacy and numeracy levels. • On average less than 40% of VET students complete their courses

12. Australia’s productivity growth has slowed over the last five years, after 15 years of above average growth (Saul Eslake) Labour productivity Multi-factor productivity* Source: ABS, Experimental Estimates of Industry Multi-factor Productivity, Australia (5260.0.55.002). December 2010.

13. Facing the facts … • To become more productive, we need to build a deeper level of skills • We need to develop the basic skills of those not actively participating • We can do much more to use existing talents in the workplace • More resources and clever approaches are needed in the VET sector to support Australia’s skills needs SKILLS SHORTAGES POSE A THREAT TO AUSTRALIA’S ECONOMIC PROSPERITY AND SOCIAL COHESION.

14. Three routes to remedy skills shortage • Building a deeper level of skills • Tapping into under-utilised sections of the population • Making better use of existing skills

15. Building deeper level skills Jobs are becoming more complex Between 2010 and 2025, 793,000 additional qualifications will be required each year. An upsurge in demand for more sustainable skills.

16. Possible Futures: workforce growth to 2025 Access Economics modelling Projected total employment growth rates 1 1. Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009)

17. Qualifications and skill shortfall Access Economics modelling However, skilled migration plays a significant role in supplementing the supply of qualifications, and if it remains at current levels, these deficits may be made up through Australia’s skilled migrant intake. 1. Access Economics Pty Ltd for Skills Australia, Economic modelling of skills demand (Oct 2009)

18. Skills and Productivity The return from investment in skills will come more from increased workforce participation than improved productivity Skills deepening is important Better language, literacy and numeracy skills are as important as more higher level qualifications

19. Qualifications and skill shortfall Access Economics modelling Groups to target • Men of prime working age (25 to 64 years) -- 10th lowest of OECD countries • Women (aged 25 to 34 years) - 10th lowest of OECD countries • Older Australians (55 to 64) - below NZ, Canada and the US Australia Source: OECD, Online OECD employment data base statistics for 2008, people aged 15 and over (accessed Feb 2010)

20. Better use of existing skills • Building skills is not enough – they have to be utilised in the workplace. • Skills wastage is widespread • 45% of Australian workers report that they are moderately or severely over-skilled. • Better organisation of work and job design can help achieve a better balance between skills and effort. • There needs to be action on the appropriate role for industry training. • The private and public sector, and education training providers, need to form stronger partnerships.

21. Funding and supporting skills The Commonwealth Government has allocated $661 million investment in skills and training over 4 years. The most recent funding boost needs to be maintained until at least 2020 for the economy to stay competitive. Market mechanisms won’t solve the skills shortage –government and ISCs need to address market failure. Some specialised positions take many years to train. Without government intervention, apprentice numbers can collapse, causing long term under-supply of skills.

22. Building capacity through migration • If targets for workforce participation are not reached, Australia will need to rely on an enlarged skilled migration program. • need to effectively integrate migrants into Australian workforce culture, and recognise their special contributions and expertise. • need to ensure marginalised Australians are not further disadvantaged. • Perceptions about the role of immigration and work will need to be carefully managed. • The revised Skills Occupation List now has a strong focus on the specialised skills needed to meet Australia’s needs.

23. Key findings Forecasting for all occupations is both impossible and impractical. Our focus should be on ‘specialised occupations’ which we can and should plan for. The 80/20 rule applies. • The current capacity of our tertiary education system will need to increase by 3% p.a, to deliver the qualifications and skills Australia needs. • Workforce participation needs to rise from 65% to 69% to provide the workers and skills we need plus improve social inclusion. • Numeracy and literacy are a major barrier to increased participation and a national plan with targets and funding is needed. • Enterprises need to make better use of the skills of their employees. While some employers are concerned about future skills shortages, at the same time 30% of workers say their skills are not being effectively utilised.

24. What might this mean for SIT? Deliver more qualifications In ever more flexible ways For existing workers often in the workplace But also in the community for those who are “discouraged” from accessing employment opportunities Develop or enhance the capacity to help organisations to achieve better skills utilisation through better organisational and job design

25. Revolutionising VET VET needs to be the driver of the skills revolution. Quality may not be an issue for you – but it is an issue for the sector The sector lacks transparency at the Institution / RTO level Too many students are dropping out or not meeting standards. Need even stronger, even more responsive links between training institutions and enterprises. Public funding of VET has been falling – and this has benhiden by a lack of overall transparency.

26. Creating a future direction for VET: three pillars

27. Creating a future for VET .... 1. The challenge: building capacity for our future prosperity 2. Strategic issues for future vocational education and training 2.1 A new mandate for the sector 2.2 Improving the VET experience – providing a better deal from learners 2.3 Re-engineering apprenticeships for lifelong learning 2.4 Shifting the quality focus—promoting public confidence, excellence and value 2.5 Better connections and pathways across education and training 2.6 Balancing responsibilities for investment in a skilled future 2.7 Governance for the future – establishing foundations for growth

28. NCVER projections of State & Territory completion rates

30. Qualification Success, Retention and Achievement rates in English FE Colleges

31. Who should pay for growth- what’s a fair balance? • Governments • Overall contribution growing • Shifts in respective shares • Individuals • Whom/what should be subsidised? • Scope for increased contribution? • Enterprises • Scope to leverage increased contribution? • Fees for service growing • Risky dependence on international education revenue?

32. Lifting VET’s reputation providers leading from the front Quality and delivery of outcomes – from ‘compliance focus’ to excellence Using data and intelligence Key performance indicators that focus on outcomes and outputs (completions and student destinations) rather than volume and activity (ASCH and enrolments) Transparency (and accountability) Linkages between sectors Investment levels and market design Governance arrangements

35. Looking in our own backyard We need more people who are able to start, re-enter, and remain in work. 1.5 million Australians are unemployed or underemployed, and 1 million not in the workforce who would like to work. 50% of the population has low literacy and numeracy. Need to address the complex skills needs of vulnerable learners and the disadvantaged. Need more creative ways of keeping people engaged with work.