This report aims to help businesses understand, predict and respond to the complex changes in the labour market unfolding in Australia over 2025–26. It outlines the economic context, labour market dynamics and impacts for employers.

Key findings

• Business conditions are at a very low ebb, struggling through the longest period of low growth since the early 1990s.
• The labour market has not adjusted in line with the broader economy.
• Unemployment remains very low due to a boom in government-funded jobs, confronting employers with the tightest labour market since the 1970s.
• Inflation is back under control after three years of high rates and energy subsidies.
• Government spending has artificially propped up the labour market since the pandemic.
• Across the economy, 32% of the workforce are in roles classified as in national shortage.