Deloitte Access Economics Employment Forecasts

The latest Deloitte Access Economics Employment Forecasts report highlights the Australian labour market’s remarkable resilience in the face of broader macroeconomic headwinds. Almost half a million Australians gained a job in the year to January 2025 with around two-thirds of these being full-time positions.

While the unemployment rate has risen to 4.1%, it remains well below the historical average. The underemployment rate has been trending downward since the end of 2023, particularly among early career workers, and the participation sits at a record high, indicating minimal spare capacity in the labour market.

In 2024 Australia’s labour market challenges were far more about the productivity of labour, rather than creating the jobs themselves. Australia’s growth in economic output did not keep pace with jobs growth, which has seen a stark divergence in labour productivity growth in Australia.

Australian labour productivity has fallen considerably over the past three years. Since March 2022, Australia’s labour productivity has fallen by 5.7%, which comprises a 3.1% fall in market sector productivity, and a 9.0% reduction in non-market labour productivity. Labour productivity in the non-market sector now sits at a near 20-year low.

Chart 1: Labour productivity by sector (seasonally adjusted)

Beyond the labour market, Australia’s economy appears to have passed its low point and 2025 is expected to see an acceleration in economic growth - even if that only involves shifting from first to second gear. The economy will benefit from higher incomes, sustained public sector demand, and interest rate cuts. National economic output is forecast to increase from 1.0% in calendar year 2024 to 1.6% in 2025, with all sectors expected to benefit from the gradual economic upturn. 

The labour market will benefit from this momentum, though businesses may be cautious about increasing hiring, opting instead to better utilise existing workers. The market sector workforce experienced modest employment growth in 2024 with most job growth very much sponsored by the public sector.

National employment growth is forecast to remain relatively robust at 1.8% (257,400 workers) in calendar year 2025, before moderating to 1.2% (180,000 workers) in 2026, as net overseas migration trends downward, and macroeconomic conditions are still relatively subdued.

As employment growth moderates, the focus must turn to boosting productivity – from the market sector via investment, particularly in technology, and from the non-market sector via economic reforms.

Productivity is a key determinant of economic growth and overall living standards. Three years of near consistent declines has become a key concern. 

The solution to this productivity dilemma could be at hand. The year ahead is likely to see far greater use of GenAI in workplaces, potentially providing a significant productivity boost. The latest Deloitte CFO Sentiment survey finds that nearly half of CFOs believe GenAI is substantially transforming their industry or will do so within the next two years.

This newsletter was distributed on 25th February 2025. For any questions/comments on this week's newsletter, please contact our authors:

This blog was co-authored by Hamish Burrell, Senior Economist at Deloitte Access Economics

Click on the links below to read our previous Weekly Economic Briefings:

• Reserve Bank delivers first rate cut in four years (18 Feb)
• More uncertainty means less investment (12 Feb)
  
• Global volatility weighs on the Australian dollar (05 Feb)
• Inflation inches closer to target, but will the RBA cut? (30 jan)