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What these three job market trends mean for employers
From the outside looking in, Australia's labour market looks robust: inflation is easing, wages align with expectations, and falling interest rates are boosting jobs amid already low unemployment. The numbers support this — over the past year, 389,800 people found employment, with roughly two-thirds of those jobs being full-time.
The unemployment rate stands at 4.1 per cent, well below the historical average, representing one of the smallest unemployment increases following a major disinflation period in Australia's history. Underemployment has also declined since late 2023.
However, these headline figures obscure some of the more complicated dynamics at play in the labour market and their implications for employers, which we have explored in Deloitte Access Economics' most recent edition of Employment Forecasts.
Public Sector Leads Job Growth; White-Collar Expansion Slows
Australia's economy is set to strengthen in 2025, supporting labour demand. However, some continuing economic challenges and global uncertainties mean many private sector firms remain cautious about expanding their workforce, instead focusing on maximising existing staff.
Consequently, non-market employment — which means public sector jobs and roles in health, education, and social assistance — will continue to drive most job growth. In the year to December 2024, this sector accounted for about 80 per cent of employment gains.
Overall employment growth is forecast to ease from 2.7 per cent (375,300 workers) in 2023-24 to 2.3 per cent (324,600 workers) in 2024-25, then slow further to 1.5 per cent (218,800 workers) in 2025-26, influenced by reduced public spending and lower net migration.
David Rumbens is Partner, Deloitte Access Economics
Of this, market sector jobs are expected to grow by just 1.2 per cent (113,700 workers) in 2024-25 and 0.8 per cent (84,400 workers) in 2025-26. In contrast, non-market sector employment is expected to rise 4.9 per cent (210,900 workers) in 2024-25 and 3 per cent (143,400 workers) in 2025-26.
White-collar employment growth is projected at a modest 0.9 per cent — or just 48,600 workers — in 2024-25, the slowest since the pandemic slowdown of 2019-20. By contrast, blue-collar job growth is expected to ease to 1.7 per cent in 2024-25 and 0.3 per cent in 2025-26. Despite a focus on residential construction, capacity limits will restrict growth in construction employment.
The human services sector stands out, with workforce growth expected at 4.1 per cent in 2024-25 and 2.7 per cent in 2025-26, significantly above the overall workforce average.
Remote Work is Here to Stay
The tug-of-war between employers and employees over working arrangements appears to have settled. Research from the Australian HR Institute (AHRI) shows that the share of employers requiring office returns has remained steady between 2023 and 2025. About 80 per cent of Australian HR professionals expect hybrid working arrangements to stay the same or increase over the next two years.
Moreover, businesses with no office attendance mandate rose from 25 per cent to 28 per cent over this period. Hybrid work is now firmly embedded in Australia's labour market — roughly 40 per cent of employed Australians worked remotely late last year, well above pre-pandemic levels of 20-30 per cent (1989-2019).
This isn't too surprising — Australian workers clearly prefer hybrid or flexible work. The ABS Working Arrangements report finds around 88 per cent of workers want to work from home at least partly, with 60 per cent favouring hybrid setups.
Financially, an average Australian worker can save about $5300 annually on transport costs by working from home full-time, according to the Grattan Institute, who also highlight that flexible work supports participation among older Australians, people with disabilities, and carers, broadening the labour pool.
While employee preference for flexible work is clear, its impact on productivity is less certain. Research by Professor Nick Bloom at Stanford University suggests hybrid arrangements boost profitability by reducing turnover without harming productivity. About three days in the office per week appear sufficient for mentoring and collaboration.
For employers, flexible work will remain a key feature of the labour market. Balancing business goals with employee flexibility will be crucial going forward.
Productivity Challenges and AI Opportunities
With unemployment remaining relatively low and wages growing in real terms, it is clear that Australia's current labour market issues mainly concern low productivity growth — with clear implications for employers.
Since peaking in March 2022, labour productivity has fallen 5.7 per cent, with productivity in the non-market sector near a 20-year low. Without improvement, this risks further damage to business performance and living standards.
Improving productivity is, therefore, critical for governments and employers alike. One promising solution is the growing use of artificial intelligence (AI) in workplaces. AI's impact will vary across industries and roles.
Deloitte's recently launched Work Analyser tool assesses AI's potential to streamline tasks and has been integrated into Employment Forecasts projections. AI-driven labour savings will likely alter how many tasks are performed, improving efficiency and often allowing higher-quality work, making certain roles more attractive.
To stay competitive, employers who haven't developed an AI strategy should consider how the technology may change the way various roles at their organisation will be performed, whether that may require a chance to workforce composition, and how to use the efficiency gains generated.
David Rumbens is Partner, Deloitte Access Economics.
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