Explanatory Memorandum
(Circulated by the authority of the Minister for Skills and Training, the Hon Brendan O'Connor MP)Chapter Seven: Recommended Option
The Australian Government is committed to a skills-led recovery from the COVID-19 pandemic and Australian Apprenticeships are a key part of this plan. Reforms that redirect incentives to both apprentices and employers, align the value of support commensurate to the costs involved, and balance the Australian Government's investment towards areas of need will have the greatest success in reducing barriers to Australian Apprenticeships.
Targeting priority skills areas, and key industries reduces expenditure across the system and focuses on qualifications where there is the greatest need to ensure an appropriate level of investment is made into our future skilled workforce. This approach is expected to lead to an increase in commencements and completions in priority occupations. It is also expected to lead to an increase in the supply of apprenticeship opportunities in key industries.
Without action, Option 1, the Incentives for Australian Apprenticeships (IAA) program will be introduced on 1 July 2022. While this would simplify incentives, it would do little to address barriers to commencing and completing an apprenticeship and in turn fail to effectively address the skill shortages. The IAA was developed in the pre-COVID-19 economy and is no longer fit for purpose. If Option 1 is implemented, Australian Government expenditure on the Australian Apprenticeships system would be reduced substantially, however an opportunity would be missed to address declining commencement numbers (pre-Boosting Apprenticeship Commencements (BAC) figures) and historically low retention and completion rates that COVID-19 economic response measures have effectively reversed.
Option 2 responds to emerging skills needs and clearly targets government funding to priority areas of future growth and development, including anticipated areas of skills needs and employment opportunities. This option sends a clear message to prospective apprentices to take up an apprenticeship in an in-demand trade and care occupation. However, this option will have a sudden and negative impact on non-priority occupations, with no support available for employers or apprentices in non-priority occupations from 1 July 2022. This will result in a decrease in commencements in non-priority occupations. This outcome will be particularly pronounced for women, Indigenous Australian and rural and regional apprentices for whom it is expected to have the greatest impact.
Option 3 is the preferred option as it best addresses the feedback raised during consultation while meeting current and emerging economic conditions. This option is the only option to address each of the policy issues identified:
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- Incentives were not targeted to meet skill shortages;
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- Costs remain high and are increasing for both the employer and the apprentice;
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- Incentives do not focus on the decision maker;
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- Incentives are difficult to navigate and understand; and
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- Non-financial support is needed for apprentices.
This approach would re-direct Australian Government investment from non-priority occupations (for example office managers, general clerks and sales assistants) to priority occupations (for example carpenters, electricians and childcare workers) in phases. It would also enable a higher level of investment in the apprenticeship incentives system during the economic recovery, before reducing to pre-COVID-19 investment once post-pandemic economic conditions stabilise.