Australia's tight labour market will be stretched even further by a marked slowdown in growth in the working-age population that could exacerbate skill shortages in coming years, a government report said.
The report from the employment ministry, at a time when the government is struggling to win support for labour market reform, said there could be a shortfall of 195,000 workers over the next five years as a result of the aging of the population.
"As the population ages, skills shortages could become even more acute, particularly in industries where there is already a high proportion of older workers," said the report, entitled Workforce Tomorrow.
The unemployment rate hit a 29-year low of 5.0 per cent in the middle of the year and now stands at 5.2 per cent. The labour market tightness has led to a shortage of workers in sectors as diverse as engineering, health and accounting.
The report said the number of people employed hit a record high of more than 10 million in July 2005.
Australia's central bank has identified the tight jobs market as an area that could prompt it to raise interest rates if excessive wages growth threatens its view that underlying inflation will be restrained. The Reserve Bank of Australia aims to keep inflation between two per cent and three per cent over the course of a business cycle.
The report said the working-age population had grown by an average of 175,000 a year from 2000 to 2005 but that would fall to 138,000 a year by 2010 and an average of 57,000 a year between 2020 and 2030.
A previous study frequently cited by the government warned that, with low fertility rates, the number of Australians aged 65 or older would double by 2042 and the number aged 85 or more would quadruple.
New workplace legislation proposed by Prime Minister John Howard would make the labour market more flexible by encouraging workers to sign contracts with individual employers rather than work under sector-wide agreements, and would make it easier for small firms to hire and fire workers.
The government says this will increase productivity and help the economy face up to a stagnating workforce but the changes have prompted mass union rallies and are unpopular with voters, with one poll showing 60 per cent of Australians were opposed.
Mr Howard's Liberal-National Party coalition government has a one-seat majority in the upper house Senate and wants the new workplace laws passed in the next two-week sitting.
"We are confident that Parliament will deal with this by the end of the year," Workplace Relations Minister Kevin Andrews told reporters in Adelaide.