Supporting job growth means supporting employers

Skills shortages continue to define the economy of the nation’s most populous state, according to Business NSW’s 2026 State of Skills report.

The NSW employment market is facing severe, structural challenges. According to the fifth iteration of Business NSW’s Workforce Skills survey, almost three-quarters of NSW employers are experiencing difficulties finding the people they need; and as a flow-on effect, 80 per cent experiencing shortages reported increased workloads for existing staff, and 29 per cent are likely to reduce their workforce.

The report outlined two interwoven challenges: the availability of skilled workers and the relevance of current capabilities considering changing business needs. This misalignment then affects recruitment and retention, growing general uncertainty and halting growth.

And while employers are already implementing corrective measures, including the 63 per cent that made improvements to pay or conditions and more than 50 per cent that invested in training or development, narrowing margins continues to fuel a workforce bottleneck.

Skills shortages continue to impact industries where specific qualifications, skills, and experience are required, as well as regional areas and sectors that see high rates of migrant employment.

According to Business NSW CEO Dan Hunter, “when skills shortages combined with tightening margins and weakening confidence, the cumulative effect is not simply a workforce problem, it becomes a threat to business viability and sustainability into the longer term”.

“Narrowing margins mean many have diminishing capacity to invest in the workforce capabilities they will need for the future,” Hunter said.

The statistics show that these concerns are no longer on the horizon – they are directly impacting everyday practices, with 61 per cent of employers themselves stepping back into work to keep their businesses running.

Further, 41 per cent are having to defer the expansion of their business, more than a quarter reduced the range of products or services being offered, and 28 per cent delayed the implementation of new workplace practices.

The report also referenced a weakening business environment, subdued hiring intentions, rising costs and ongoing uncertainty as identified in its 2026 NSW Business Conditions survey, all suggesting that the nature of the challenge itself is changing. As employers become more cautious, in turn, greater weight is placed on the skills, experience, and adaptability of the workers they recruit and retain.

“The challenge NSW employers face in meeting their skills needs is an evolving one. As hiring slows and margins narrow, skills relevance, workforce development and the alignment of skills with business needs become even more critical,” Hunter said.

The State of Skills report urged substantial investment in vocational education and training, existing workforce development support, more effective employment and migration services and geographically targeted responses to skills needs. Specifically, this includes a $200 million investment over four years to expand paid work-based pathways, a three-year $50 million SME Workforce Capability Fund, and a doubling of the federal government’s Work Bonus income concession from $300 to $600 a fortnight.

Hunter said: “NSW businesses have shown resilience and adaptability through years of disruption. They now need practical support to build the workforce capability required for the next phase of growth, innovation and productivity.”

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