Chapter published in Visions for Australian Tertiary Education, February 2017
Chapter published in Inherent uncertainties in the labour market make it hard to predict skills needs. Technological change, rising and falling industries and the economic cycle all affect the demand for labour, while migration as well as universities affect its supply. As a result, no higher education system can guarantee high skill jobs for all graduates or no skills shortages for employers. But Australia’s previous system of distributing student places to universities, which was based largely on historical allocations, led to avoidable skills shortages. The demand driven system phased in during the years to 2012 gave universities more capacity and stronger incentives to focus on skills shortages and graduate employability. In its early years, the demand driven system has successfully met most skills shortages and universities are paying more attention to general graduate attributes that contribute to employability. But a surge in student numbers has produced more graduates than the labour force needs in high-skill occupations. Better informed demand, particularly on the choice between vocational and higher education, could improve the demand driven system.