Productivity crucial to boosting Aussie labour market: Deloitte report

The Australian labour market remained strong throughout 2024 despite lagging productivity and economic challenges, reveals a new report.

Editor’s note: This story first appeared on HR Leader’s sister brand, Accounting Times.

The tight yet strong labour market is set to gain some additional momentum following much-needed relief delivered by the Reserve Bank’s cut in interest rates this week.

After the cash rate decision, Deloitte released the February 2025 version of its Employment Forecasts report, which highlighted the steady rate at which the labour market had been progressing.

Deloitte Access Economics partner David Rumbens said the labour market was resilient, with over 444,000 Australians having gained jobs in the year to December 2024, with around two-thirds being full-time positions.

“Last year saw the labour market continue to hum even as other economic indicators suggested recession-like conditions. While the unemployment rate has risen to 4.0 per cent, it remains well below the historical average,” Rumbens said.

“The underemployment rate has been trending downward since the end of 2023, particularly among early-career workers, indicating minimal spare capacity in the labour market.”

The report findings outlined that beyond the labour market, Australia’s economy appeared to have passed its “low point”, and 2025 was likely to bring an acceleration in economic growth.

The labour market would be set to benefit from this momentum, though businesses may be cautious for a little while longer when looking to hire, Rumbens added.

“The market sector workforce experienced modest employment growth in 2024, with moist job growth very much sponsored by the public sector. Over the year to September 2024, the ABS Labour Account data showed some 85 per cent of job gains are estimated to have come from the non-market sector,” he said.

Deloitte found the problem never stemmed from finding the jobs themselves but rather the productivity of labour as Australia’s growth in economic output did not keep pace with job growth, which directly impacted labour productivity.

Since March 2022, labour productivity fell by 5.7 per cent and was made up of a 3.1 per cent fall in market sector productivity and a 9 per cent reduction in non-market labour activity.

Rumbens said labour productivity in the non-market sector was at a near 20-year low.

“Labour productivity is a key determinant of economic growth and overall living standards. Three years of near-consistent declines have become a key concern. Australia needs a productivity boost – from the market sector via investment, particularly in technology, and from the non-market sector via economic reforms,” he said.

National employment growth was forecast to slow to 1.8 per cent over 2025 before slowing even further in 2026 to 1.2 per cent when public spending began to slow, macroeconomic conditions eased and net overseas migration started a downward trend.

In the report, Deloitte predicted the human services workforce and white-collar worker sectors to experience growth throughout 2025, while growth in the blue-collar workforce was expected to soften.

“All sectors are expected to benefit from the gradual economic upturn, with consumer-facing industries poised for growth due to the combined effects of tax cuts, government rebates, and anticipated cuts to interest rates,” Rumbens said.