Research Note: How Australia’s labour market has evolved in 2026

Our Economic and Labour Market Outlook 2026–27 shows that Australia’s labour market is easing, but that the experience differs considerably across occupations and industries. This research note examines five areas of unevenness: overall labour market conditions, recruitment difficulty, employment on-costs, access to working from home, and the role of migrant workers.

Labour market pressures are easing, but demand for skilled staff is still strong

Results from the middle of 2026 show the labour market has cooled somewhat from its post-pandemic surge but is still historically tight. Unemployment sits at 4.5%, against a pre-pandemic average of 5.5%. Underemployment (6.5%), employment growth (2.4% vs 1.6%) and vacancies (2.0% vs 1.3%) indicate that it is the tightest labour market since the 1970s, with only marginal further loosening forecast (to 4.6%) in 2026-27.

Historically, labour market conditions track the broader economy: when growth weakens, hiring slows and pressure on wages and recruitment eases. That adjustment hasn’t happened as usual over the past three years, leaving employers to navigate a slowing economy without the labour supply relief that would typically follow.

The employment resilience is due to three things:

• A flip in where jobs are being created: Government-funded sectors, including public administration, education and health, accounted for three-quarters of job creation in 2023–24 as spending on services increased. Since 2025, this has reversed, with the private sector accounting for around 70% of job creation. Much of this growth has been in construction, transport and professional services, supported by data centre development and housing activity.
• a vacancies overhang of around 70,000 since 2024, concentrated in professional services, admin, accommodation & food and healthcare;
• and wage growth still outrunning the market: wages grew 3.2% over 2025-26, above the normal pace of 2.7%. This reflected persistent inflation flowing into remuneration decisions, a 3.5% FWC minimum wage decision affecting around a fifth of award employees, and enterprise bargaining outcomes of 3.6%. By contrast, wages set by individual arrangement grew by just 2.8%, and a 4.75% FWC decision due in 2026 is likely to widen the gap further.

Normally a weakening economy would produce a broader pool of applicants to draw on, fewer pressures on wages growth and a less reliance on migration to fill vacant roles. With unemployment expected to increase only marginally over the next year, businesses need to plan for these hiring challenges to continue in the near term rather than a marked improvement over the year ahead.

Hiring difficulties persist for technical roles

Hiring challenges peaked in the period immediately after the pandemic, when 70% of employers reported difficulties filling vacancies. By mid-2026, this had fallen to 45%, reflecting broader easing across the labour market, with many employers likely to have noticed a larger field of applicants for some positions

Employers are finding some roles harder to fill than others. Technicians and trades workers remain in greatest demand, with 61% of employers having some difficulties in recruiting them, driven by strong demand from house and data centre building activity. More than half also report challenges hiring equipment operators, with supply constrained by lengthy training pipelines and occupational licensing requirements.

In contrast, shortages for professional roles have largely returned to historical averages after two years of elevated demand. Hiring difficulties for clerical (39%) and sales (34%) occupations are now below average.

This points to a split labour market. Employers recruiting professional, clerical and sales workers have seen conditions improve, while businesses dependent on technical, trade and operator skills continue to face structural shortages. Vacancy rates and recruitment difficulty measure different things: vacancies remain elevated in several service industries, while the hardest-to-fill occupations span multiple industries.

Lengthy training and licensing requirements limit entry into many technical roles. These jobs also usually require workers to be on-site, giving employers less scope to expand their candidate pool through offering remote work as a means to access a larger pool of talent. Training, licensing and migration settings will therefore continue to be critical to the supply of specialised occupations and within multiple industries.

The cost backdrop, rising employment on-costs

Regulatory employment on-costs rose from a historical average of around 14% of wages to an estimated 16.2% in 2024–25, adding approximately $21 billion to employers’ costs. They could reach 17% this financial year as superannuation and workers’ compensation costs continue to increase.

Three developments drove the increase.

• The first is the statutory rise in the Superannuation Guarantee from 9.5 to 12 per cent over five years, which has driven about half the increase.
• Second, is much higher workers' compensation premiums, which are associated with rising psychosocial injury claims.
• Third, is the increasing payroll tax burden following rule changes in several states.

The final super guarantee increases are a certainty and will lead to increases this financial year, workers’ compensation premiums will continue to increase unless there is regulatory reform to cap their growth.

The impact on industry is widespread. Utilities carries the highest burden, at close to 19-20% of wages. Healthcare started from the lowest base of any major industry (around 11%) but has recorded the largest increase, to around 15.5%. Transport and construction also rose more than average, while education and rental & real estate continue to have oncosts lower than the average.

The result is that total payroll costs now account for fewer employees, and puts an increased pressure on recruitment as hiring decisions carry more weight.

Work from home as a result of occupation, not policy

Working from home (WFH) has become a major part of Australian working life, but it is far more common in some jobs than others. While 28% of employees work from home, most do so for only one or two days a week, and fully remote work is still unusual outside ICT-related roles. Around three-quarters of ICT professionals work from home, along with 65-70% of CEOs and business managers and 40-60% of white-collar professionals. By comparison, the rate is close to zero for hospitality, farm, forestry, garden and factory process workers, at just 2-4%, while clerical and technical service roles sit at 10-20%.

Around three-quarters of employees have little or no meaningful access to working from home. Access is mainly determined by the tasks involved in a role, rather than an employer’s workplace policy. This creates a particular challenge for industrial, consumer and care businesses because many of the occupations with the greatest recruitment difficulties, including technical, trade and operator roles, need to be performed on-site. Employers cannot use remote work to widen the geographic candidate pool or offer the same flexibility available as office-based roles. WFH therefore provides little relief from shortages in these occupations, which instead require responses focused on training pipelines, retention and the supply of appropriately skilled workers.

The growing role of migrant workers

Migration is another increasingly important part of the Australian workforce outlook. Given our persistent labour shortages, employers have increasingly relied on migrants to fill workforce gaps. Recent migrants, those that have arrived in the last five years, now make up 5.7% of the workforce up from 4.4% a decade ago. The increase has been unevenly distributed across industries with three sectors in particular accounting for most use of migrant workforce - accommodation and food services, administrative services, and health and social care. Accommodation and food saw the biggest change, rising by around five percentage points over the decade.

Changes to migration settings will therefore have more significant consequences for employers in these sectors but a reduction in migrant inflows will affect the total economy which depends on population growth to expand. It will also have an outsize impact on industries reliant on migration for specific skills including specialist construction, manufacturing and ICT.

Industries such as manufacturing, construction, ICT and information media depend on many of the occupations that are already hardest to fill. Changes to migration policy are likely to make accessing these skills more challenging. Service industries will be more affected by the overall supply of workers, while industrial sectors will feel the impact through access to specialised skills.

Other service industries highlight the different roles migrant workers play across the broader economy. Growth in information media and telecommunications has kept pace with healthcare, likely reflecting demand for specialist technology skills. Mining has also grown strongly from a low base, while professional services continues to have a high and stable migrant share.

Australia’s labour market is easing, but the outcomes are mixed. Some employers may find it easier to recruit for some professional, clerical and sales roles, while technical, trade and operator skills are still much harder to find. These skilled shortages are likely to persist because many of the roles require lengthy training and licensing and need to be performed on-site, leaving little scope for expedited training solutions or for working from home to expand the candidate pool.

At the same time, the cost of employing people continues to rise. Higher superannuation, workers’ compensation and payroll tax costs are adding to existing wage pressures, although the impact varies across industries and changes to migration policy will also shape the number of workers available and employers’ access to specialised skills.

Taken together, these trends show why the broader easing in the labour market will feel different from one business to another. Some employers will benefit from a larger pool of candidates, while others will continue to operate in a tight market for the skills they need. The challenge over the coming year will be to understand which pressures matter most for each industry and change policy settings to improve the outcomes for employers.

Australia’s labour market will continue to change in complex and uneven ways. Keeping up to date with these changes will help businesses better understand where conditions are improving, where pressures are likely to persist, and what they mean for future workforce needs. To keep up to date with key labour market developments in the context of broader economic developments, data and analysis can be found in Australia’s labour market in 2026: Performance and outlook and in our Research & Economics resources.