Australia’s Demographic Challenges, Australian Government, The Treasury.

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Australia's Demographic Challenges


Improving the capacity for work

A key aspect of improving participation will be to ensure that all those who wish to participate have the capacity to do so. This will involve ensuring that our education system provides adequate and relevant training to equip our workers with the skills they require. In addition, our health system will need to focus both on preventing illness and injury and, where sickness and injury do occur, assisting Australians to return to health as soon as possible.

Education and Skills — the key to ensuring effective participation

Over the last 40 years, Australia has changed dramatically. We have become more educated and skilled, and we have become more flexible, adaptable and better able to use new skills and technologies. Further increasing our skills and educational attainment will be important in improving our productivity and labour force participation. Higher skills and educational levels help in the creation of knowledge, ideas and technological innovation.

As the world around us continues to change rapidly, especially with technological change, efficient and effective post-compulsory education and training systems will become more important. Current and future workers will need to improve and continually update their skill levels.

Skills and educational levels have increased markedly in Australia over time. More young Australians choose to stay at school for longer, attaining higher skill levels. Recent OECD studies confirm Australian students rate highly in international comparisons of reading, scientific and mathematical literacy.

Other Government initiatives include changes to Higher Education which deliver much needed reform, freeing universities to grow in areas of expertise, reducing class sizes and placing the student at the centre of the university experience. Combined with the measures to boost innovation — through the Backing Australia’s Future package — this will mean that the higher education sector can continue as an efficient, sustainable and high quality sector. The beneficial effect of this on economic performance will be long term rather than immediate.

In addition, apprenticeship programs have nearly tripled over the last decade, with around 400,000 trainees now compared to around 140,000 in 1995. Similarly, participation in vocational education and training has grown significantly with ongoing reforms aimed at delivering industry relevant and high quality employment and training outcomes.

While we have come a long way, we can improve further. For example, an estimated 12 per cent of 15 year old Australian students, and around 20 per cent of the adult population, continue to have very poor literacy skills. Further improvements in education would have widespread benefits. Individuals can derive greater financial and social benefits while society overall benefits from a higher average level of education and skills that lead to greater productivity and economic growth.

The Government has introduced reforms to improve the quality of school education through introducing testing and reporting of literacy and numeracy scores, moving toward common curriculum outcomes and starting ages, and improving the quality of teaching. As well, a key focus of the Australian Government, in conjunction with the States, has been to identify and help ‘at risk’ teenagers so they stay at school and benefit from schooling or better manage the transition to full-time work.

Continued improvement in education and skill levels also encourages labour force participation (Chart 2). Over the past 20 years, unskilled workers have not been as involved in the labour force as their more skilled counterparts. This applies to both men and women. Improving skill levels — particularly for the low skilled — is a key element of improving overall participation levels. 

Chart 2: Participation rates by age, educational attainment and sex

    Male participation by age and education

    Female participation by age and education

    Chart: Male participation by age and education 2001

    Chart: Female participation by age and education 2001


    Male participation by age and education

    Female participation by age and education

    Chart: Male participation by age and education 1981

    Chart: Female participation by age and education 1981


    Males percentage point difference
    1981 to 2001

    Females percentage point difference
    1981 to 2001

    Chart: Male percentage point difference 1981 to 2001

    Chart: Female percentage point difference 1981 to 2001

Source: Australian Bureau of Statistics, 1981 and 2001 Censuses.

We need to ensure that existing literacy and numeracy programs continue to produce results. How do we help people improve their foundation skills? Linked to this is how transition, counselling, or employment services could better help people in their moves between jobs, into or from education and training, and from full-time caring into employment. We should also encourage younger people to increase their levels of education so they can move more effectively into the workforce and apply remedial efforts to improve the participation rates of the current group of adult workers, particularly the low skilled and mature-aged. Currently training opportunities appear to favour those with already relatively high skills; up-front fees for vocationally oriented courses without access to income-contingent loans make them less attractive to those with lower skill levels.

The Government is currently introducing policies designed to better target and match in a more timely way the skills needs of industry to those of job seekers through improved links between industry, registered training organisations, the broader vocational education and training system and employment services such as Job Network members.

These and other policies aimed at providing higher quality education and training opportunities should make it possible for Australians to build on and improve their skills leading to higher productivity and participation in the labour force, and a more dynamic and flexible society more generally.


Health is important to the well being of all Australians. Healthy people enjoy greater freedom and opportunities to maximise their wellbeing and to participate in society. Healthy Australians are more able to participate in work, sport and family activities. During our working life, good health is an important factor in labour force participation and productivity. Poor health often leads to early retirement, spells out of work, and lost productivity through sickness or injury. Thirty per cent of 50 to 65 year olds who retire in Australia do so because of illness or disability.

Key health conditions affecting Australians are musculo-skeletal conditions, (such as back injury), circulatory diseases (such as heart conditions) and anxiety and depression. These conditions tend to be chronic and worsen over time. Living a healthy lifestyle, including through ensuring we get sufficient physical exercise, effectively managing stress and maintaining a healthy body weight can significantly reduce the occurrence of these common conditions. Physical fitness, for example, can protect against high blood pressure and mild depression, and — alongside ergonomic job design — can help reduce back injury.

A key question for Government is how to best make use of available budget funding to maximise the health of the community, thereby enhancing labour force participation and productivity. Clearly, if we can avoid ‘downtime’ from illness, we will be better off as a nation. This emphasises the importance of ‘value for money’ in a health system facing rising costs and an ageing population.

Traditionally governments have focussed health care more on those who have become ill. This has included substantial public provision in areas such as medical practitioner services, hospitals and medications. While these remain important elements of health policy, the role of preventative health deserves further examination. We need to consider the extent to which prevention might help to take some pressure off these elements, enhance the sustainability of the system as a whole, and most importantly bring benefits in terms of improved quality of life, labour force participation and productivity.

With health care resources not being infinite this raises questions as to how and to what extent the focus of the system should be redirected and the importance of individuals adopting healthy lifestyles that support their own wellbeing.


Next: Better Incentives

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