Key takeaways
Australia’s workforce shortage is no longer just demographic; it is being driven by changing values and career preferences among younger workers.
Key industries like construction and aged care are struggling to attract talent, creating structural labour shortages.
Fewer tradies means slower housing supply, which will continue to put upward pressure on property prices.
Labour shortages are pushing wages higher in critical sectors, adding to inflation and increasing costs across the economy.
Migration and technology will help, but neither will fully solve the problem, meaning these pressures are likely to persist long term.
There’s a growing imbalance in Australia that many investors are yet to fully appreciate.
We tend to focus on the usual levers such as interest rates, credit availability, or migration policy, yet a more subtle force is gathering momentum in the background, one that will influence wages, inflation, and property markets for years to come.
And it's more than just the fact that we're running short of workers.
It’s that an increasing number of young Australians are choosing not to enter the very industries our economy depends on.
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A shift in how younger Australians view work
For decades, workforce challenges were largely cyclical.
At times we had shortages, at other times we had surplus labour, and the system broadly adjusted.
However, what we’re seeing now feels different because it’s being driven by a change in values rather than just economic conditions.
Simon Kuestenmacher captures this well in our latest Demographics Decoded episode when he explains that the issue isn’t rooted in scandals or failures within industries, but in how younger people define what a job should offer:
“It’s much more about how young people view the concept of work… I want a flexible workplace… I want this job to be meaningful… I’m after more than just the dollars."
While this shift might sound subtle, its implications are far-reaching.
Note: Flexibility, purpose, and work-life balance are no longer nice-to-haves. For many younger workers, these are baseline expectations. If a role doesn’t align with those expectations, it simply falls off the list of viable options.
And that’s where the problem begins.
When industries fall out of favour
Some sectors have always been more attractive than others, but what’s changed is the degree of choice young people now have.
Low unemployment and a tighter labour market mean that school leavers and graduates can be more selective about their career paths.
They are not being forced into roles out of necessity in the same way previous generations often were.
As a result, certain industries are developing what could be described as an image problem.
This doesn’t mean they are unimportant. In fact, many of them are essential to the functioning of the economy.
However, they are increasingly seen as physically demanding, emotionally taxing, less flexible, or lacking the kind of meaning that younger workers are seeking.
Aged care is a good example. Demand for workers in this sector is rising rapidly as Australia’s population ages, yet it struggles to attract younger entrants.
As Simon notes:
“It is physically taxing, it is emotionally taxing, and it’s not all that well paid… you probably aren’t going to get all that many young people… transitioning into an aged care career."
This creates a widening gap between the roles that need to be filled and the roles people actually want.
A shrinking workforce at the wrong time
At the same time, the demographic backdrop is becoming more challenging.
Australia is retiring a large cohort of baby boomers and replacing them with a smaller generation behind them.
On top of that, many millennials are stepping out of the workforce temporarily during their peak child-rearing years.
That combination reduces the effective supply of labour just as demand for services is increasing.
Importantly, this is happening in an environment where unemployment remains relatively low, which gives younger workers more bargaining power and more freedom to choose roles that align with their preferences.
Note: When you combine fewer workers with greater choice, the result is predictable. Some industries struggle to attract staff, regardless of how essential they are.
How we contributed to the imbalance
Part of this issue has been shaped by long-term policy and cultural messaging.
For many years, Australia has encouraged young people to pursue university education as the primary pathway to success.
That has led to a large proportion of school leavers heading into higher education, often without a clear link to the needs of the economy.
Simon highlights the scale of this shift:
“We are sending 55% of our year 12 students into university… our economy doesn’t require 55% of us to go to university.”
At the same time, the pathways into trades have become less visible and, in some cases, less attractive. Trade schools have diminished, apprenticeships have lost some of their appeal, and TAFE has faced structural challenges.
The outcome is a mismatch, and we have more degree-qualified workers than the economy necessarily requires, and fewer skilled tradespeople than we need.
The overlooked constraint on housing supply
When we talk about housing shortages, the conversation usually centres on planning restrictions, zoning, or infrastructure bottlenecks.
Labour is often mentioned, but not always given the weight it deserves.
Yet without a sufficient number of skilled workers, new housing simply cannot be delivered at the pace required.
As Simon explains:
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“If there are not enough people to build housing… the supply… doesn’t grow as fast as it could… that means costs go up.”
This is one of the reasons Australia continues to struggle to meet housing targets despite strong demand and supportive policy settings.
Note: Even if approvals are in place, projects can be delayed or scaled back because the workforce isn’t there to execute them.
Rising costs and broader economic effects
Labour shortages don’t just constrain supply; they also push up wages in the sectors where workers are scarce.
We’ve already seen this play out in construction and trades, where strong demand has led to higher incomes for those in the industry.
While that’s positive for workers, it feeds into higher building costs, which ultimately flows through to property prices and rents.
In sectors like aged care, the impact is even more complex. As labour becomes scarce, costs rise, and services may shift towards higher-paying clients.
Simon points to a less comfortable outcome:
“If we don’t have enough aged care workers… only the people on top will be serviced… businesses shift to the top end of the market.”
This introduces both inflationary pressure and social inequality, which in turn can influence government spending and policy responses.
Migration is helping, but not solving the problem
Australia has long relied on migration to supplement its workforce, and it continues to play an important role in filling gaps.
However, it’s not a complete solution.
The current system tends to bring in skilled workers, but it doesn’t always direct them to the industries or locations where they are most needed.
As Simon observes:
“We have no control over ensuring that they actually work in the areas where they’re needed.”
Note: This means that while migration increases the overall pool of labour, it doesn’t necessarily resolve shortages in sectors like construction, aged care, or regional services.
In that sense, it softens the impact rather than eliminating it.
The geographic consequences for property markets
Workforce preferences are also shaping where people choose to live.
As the economy has become more knowledge-focused, many of the most desirable jobs are concentrated in major cities, particularly in our central business districts and surrounding suburbs.
This reinforces demand in metropolitan areas and keeps pressure on inner and middle ring housing markets.
Meanwhile, regional areas often struggle to attract workers, even when they offer lifestyle advantages.
Simon notes that despite these lifestyle benefits, many regional centres are effectively being “bled dry of workers” because the available jobs don’t align with current expectations.
Note: For investors, this reinforces a familiar, but important principle. Access to employment remains one of the strongest drivers of property demand, and that dynamic is unlikely to change.
Technology will help, but it won’t be immediate
Now there’s understandable optimism around the role of AI, automation, and robotics in addressing labour shortages.
Over time, these technologies will improve productivity and reduce reliance on human labour in certain tasks.
However, they are not an immediate fix.
They require significant capital investment, ongoing maintenance, and, at least for now, human oversight.
As Simon points out, these systems can enhance productivity, but they come with cost and complexity, meaning their adoption will be gradual rather than instantaneous.
This is not a temporary cycle
What makes this situation particularly important is that it doesn’t appear to be cyclical.
We’ve changed the way young people think about work, but we haven’t fully adapted the structure of the economy to reflect those changes.
That gap creates ongoing tension and unless there is a meaningful shift in how we educate, incentivise, and value different types of work, these labour shortages are likely to persist.
From an investment perspective, that has several implications.
Note: Constraints on construction will continue to support property prices, particularly in well-located areas. Wage pressures in key sectors will add to inflation, and migration will remain an essential, if imperfect, part of the solution.
Final thought
The most influential drivers of long-term property performance are often the ones that attract the least attention.
Workforce dynamics sit firmly in that category.
They don’t create immediate headlines, but they quietly shape the economic environment in which property markets operate.
As Simon often reminds us, demographics set the boundaries for what is possible.
Right now, those boundaries are tightening in ways that will have lasting consequences for investors who are paying attention.
