Beware shallow pools – comment by CEO Craig Robertson

The Intergenerational Report is due in July. It was started by Treasurer Peter Costello in response to concern there wouldn’t be enough income generating workers to pay the pensions and health costs of the increasing number of retirees.

The health insurance industry highlights the risk in sharp relief. Analysts warn that only about three funds are expected to survive over the next two or three years because young people are abandoning cover. The risk pool is shallow – fewer younger healthier people are putting in funds to top up what drains from the reserve to covers the costs of older Australians.

We know something about shallow pools. Ask the townsfolk of Menindee who have seen the fish kill first-hand due to poor water flows, or the towns now trucking water to supplement their dams.

We were reminded this week of the shallow pool of talent we have in Australia. In Parliament last week  Shadow Minister for Education and Training, the Hon Tanya Plibersek MP reminded us of the challenges: “In September last year, the Australian Industry Group found that three-quarters of employers they surveyed could not find the skilled and qualified staff they needed for the vacancies that they had.”

Ged Kearney, Shadow Assistant Minister for Skills, said: “TAFE and vocational education funding and the number of supported students are lower now than they were over a decade ago. This is despite an increased number of jobs requiring vocational skills.”

Mitigating shallow pools is expensive – trucking of water; rationing usage; higher public health bills.

It’s hard to see that the Morrison Government  is taking the skills issue seriously. The Final Budget Outcome for the 2018-19 Budget released last September shows its funds declined by over 8 per cent, or $148 million in that year alone. It continues the slide, as shown in the graph.

Costello asked us to have a child for the country. That bubble of now 18-year olds will be flowing through for the next decade.

We’ve also relied on migrants to stoke our growth and turn the economy over, aided and abetted by rapacious numbers of international students, and we see how fragile that strategy can be.

The Productivity Commission is in the middle of its review of the funding agreement between the Commonwealth and states and territories. To a certain extent its terms of reference has it looking at the mechanics of the agreement – seeing what can be rescued from the shallow pool, so to speak. A genuine review would look at the broad economic factors at play, including low investment levels and the economic cost of shortages of skilled entrants to the labour market. Even if the Commission doesn’t  have a social mandate, surely economic stability should count in its factoring. The only conclusion must be that substantially more funding is needed to start to fill the skills pool.

By the way, in case you need convincing about our ageing population, over the last 20 years to June 2019:

• the age at which half the population is younger and other half older rose from 35 years to 37 years;
• the proportion of children of the total population decreased from 20.9% to 18.7%;
• the working-age population grew by 32% but was slower than the 40.4% of the remaining population, with the slower growth in the working-ages occurring since 2010; and
• the number of people aged 85 years and over increased by 117.1%, compared with a total population growth of 34.8% over the same period.

Time catches up on you in the end. The same is true of the neglect of vocational education and training in Australia. You can only draw from the skills pool for so long before the impact is felt. The problem with shallow pools is, apart from the smell, they eventually dry and never return.