What is the major factor limiting Western Australia's continued prosperity? It's not water, global warming, Canberra or even the OBE, but people. The State needs people, lots of people who are willing and able to work.
The State has gone beyond full employment. The unemployment rate now stands at 2.7 per cent -- a historic low. Youth unemployment which was above 25 per cent seven years ago now stands at 6 per cent. At the same time the proportion of the population in the workforce has been pushed to historic levels.
The pressure on the labour force is growing. Vacancies are at record levels with the number of registered vacancies exceeding the number of people on unemployment rolls. While the vacancies are largest in construction and mining, all occupations, businesses and locations are facing labour shortages.
This is not a temporary phenomenon, but a pointer of things to come. We have entered a world where the key limiting factor is people.
The population bomb was a dud. Fertility rates have declined sharply for decades in all but the most dysfunctional countries. All countries, including Catholic Ireland and teeming China, are preparing for the day when their populations begin to decline. Japan's population is already in freefall and most of Europe is on the edge of doing so.
Australia, while better off than most wealthy countries thanks to its high immigration levels, is already experiencing the effects of slowing population growth. The workforce is ageing, becoming less mobile and less willing to work full time. At the same time the flow of new entrants into the workforce is declining. These trends are expected to accelerate over the next 50 years, leading eventually to a declining workforce.
While WA faces a slightly less-pressing population outlook than the nation as a whole, it confronts much greater opportunities and demands for labour.
We are now in the largest boom in the State's history. The challenge for the State is to make the most of the boom and getting more people to the State is the key to doing so.
The main task is to ensure that as many long-term resource projects get built and are operating so that when commodity prices do fall and investment slows we have a large stock of working mines and processing facilities to keep the economy growing and the Government coffers full.
We also need to use the boom to build Perth as a resource hub for the region and beyond. This is a real opportunity and challenge which offers the potential to both diversify the State's economic base and strengthen the mining and energy sector.
However, projects are already getting delayed and cost overruns are rampant because of the lack of workers. These cost overruns are permeating throughout the economy, pushing up costs, undermining competitiveness and causing some firms to simply shut down.
The labour shortage might ease once the boom subsides but it will not go away.
Most sectors throughout the economy, but particularly the mining sector, face a rapidly ageing and retiring workforce.
The average age of mining and construction workers is 48 years with most retiring at 55. Moreover, our young are avoiding these occupations despite the high pay and the steady work
This along with growth in demand will cause large on-going labour shortages even when the boom subsides.
Recent research by Flinders University predicted that the State's mining sector will in just 10 years face shortages in its operating workforce in excess of 50 per cent across all occupations, with the greatest shortages among labourers (81 per cent) and tradesmen (70 per cent).
The teaching, health, government, farming, manufacturing, transport and property and finance sectors face a similar scenario.
The real challenge is getting people. The world is short of people particularly of the types we need. The mining and building boom is a global phenomena and its workforce is in high demand around the world. Moreover, as people age they become less mobile.
In the past we have relied heavily on interstate migration to fill our labour shortage. However, people are no longer coming in numbers, at least on a permanent basis. Indeed, the available data indicate there has been no growth in interstate arrivals for over a decade.
Instead we need to look overseas for people, preferably as permanent migrants, but if not then as temporary ones.
While more people will bring challenges, such as ensuring that there is adequate land for housing, schools, hospital beds and roads, it is the key to our future prosperity.
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