An examination of the connection between skills development and productivity growth in Australia, this paper calls for a capability development agenda to address lagging productivity. It proposes a significant shift in education and training policy to  enhance productivity by better aligning skills development with current and anticipated industry needs.

The paper highlights the long-term decline in productivity growth rates and the need to address this issue to maintain and improve living standards and overall economic well-being. It emphasises that a well-trained workforce is essential for successful adoption of technological advancements, process improvements, and effective work organisation and underscores the need for strong partnerships between employers and education providers in policy design, implementation, and curriculum delivery.

Key recommendations

• Reform the tertiary education system to create a coherent and connected system that values both vocational and higher education and enables lifelong learning.
• Improve policy integration to better connect workforce demand and supply.
• Invest in foundation skills development, particularly literacy, numeracy, and digital skills.
• Support lifelong learning through policy settings such as ‘second chance’ learning, funded micro-credentials, and more flexible apprenticeship pathways.
• Promote work-based and work-integrated learning through apprenticeships and quality work-integrated learning opportunities.
• Focus on enhancing Australia’s leadership and management skills.
• Embed sustainable diversity and inclusion strategies to increase participation of underrepresented groups in the workforce.