Chapter 2

Engineering in Australia: a background

Introduction

2.1        People with engineering skills and qualifications are a critical component of Australia's economy. Engineers are not only directly employed in a vast array of different industries, many of which are among Australia's most economically important, such as mining, but are also essential for underlying infrastructure projects such as roads, power, bridges and the like.  The first half of this chapter provides an overview of the engineering sector, the engineering profession and the labour market, and key government policies are described. The second part of the chapter describes the current skilled migration arrangements, before analysing the role that skilled migration might play in continuing to address the engineering shortage.

What is engineering?

2.2        It is important from the outset to provide a description of what engineers do. The committee noted a sense among witnesses and submitters that the role of engineers was not well understood by the broader population. Indeed the committee itself was enlightened to hear of the wide scope of work and many challenges facing engineers on a day to day basis across Australia. The Australian National Engineering Taskforce (ANET) described these responsibilities and challenges:

Engineers design, build and maintain infrastructure routinely used by the community – roads, railways, ports, water, electricity, gas and communications. They perform key roles in feasibility scoping, structural and system design, damage control and maintenance – monitoring and addressing safety and quality throughout systems. Engineers develop and test practical solutions to everyday and extraordinary problems. Engineers conceive, design and manufacture innovative products, processes and systems that contribute to the nation’s prosperity, security, health, culture and environment.[1]

2.3        Professor James Trevelyan had a slightly different perspective on the subject,  describing the job of an engineer as being an influence on other people to achieve real value, on the basis that:

Engineers do not build bridges. They do not build cars. They do not build roads. Engineers organise these things to happen, and the actual work is done by other people.[2]

2.4        Professor David Beanland submitted that engineering is not a well understood profession, certainly in contrast to law or medicine which receive a lot of attention in the media.[3] Professor Roger Hadgraft observed that while people can 'look out the window and see the work of engineers' they don't actually understand what engineers do 'when they get to work in the morning and what the nature of that work is'.[4]

2.5        Skills Australia noted the challenge in capturing 'engineering' with a single consistent definition able to cover all the facets of the profession.[5] For the purposes of identifying relevant data, it chose the approach taken by Engineers Australia and the Australian Bureau of Statistics: the Australian and New Zealand Standard Classification of Occupations (ANZSCO).[6]

2.6        The ANZSCO approach looks at whether occupations include engineering work, and is less focused on the existence or otherwise of professional engineering qualifications. [7]

2.7        Engineering occupations were also defined by Engineers Australia in its 2010 Report: The Engineering Profession in Australia: a profile from the 2006 Population Census. In the report, Engineers Australia decided whether a particular occupation was an engineering one or not on the basis of whether the occupation 'would reasonably allow a qualified engineer to use engineering related skills when performing the work'.[8]

A history of engineering training in Australia

2.8        Up until the early 1990s the public sector provided engineering skills training to cadets and graduates. Typically employees would enter the public sector after high school or tertiary studies. Following perhaps a decade of on-the-job experience, many of these workers would be head hunted by private industry. The practical effect was that industry did not have to train its workers: governments did. This helped to create 'a climate in which companies did not need to invest in their own education or training capabilities'.[9]

2.9        Submitters to this inquiry agreed that the quality of training formally provided by government cadetships was very high. For example, the committee heard from witnesses representing Consulting Surveyors National of the significant contribution that governments used to make to training the engineering workforce:

Government has traditionally been a very good provider of opportunity for traineeships and cadetships and those sorts of things. Certainly in Victoria, Melbourne Water Corporation were very, very good at that. There was a great pathway for many surveyors, and we are losing those opportunities. Government is demanding in its service delivery from the private sector that it has to be snappy and it has to be on the money. We have to provide it as best we can and keep the costs as low as we can, and I guess that means that the opportunities to provide incentives to traineeships with private businesses are difficult. I think we are definitely suffering from that.[10]

2.10      It is a matter of historical record that, during the 1980s and 1990s, the public sector began to outsource infrastructure and other engineering work to private industry. Government public utility, infrastructure and other departments offered redundancies to engineers and public companies were privatised. Engineering positions in the public sector dried up, and cadetship programs were cut. Consult Australia cites a study of public sector employment share over 1984–2005. During this period the percentage of electricity, gas and water supply industry employees that are in the public sector dropped from 95.9 per cent to 54.7 per cent. In the construction industry this dropped from 12.2 percent to 0.5 per cent in 2005.[11]

2.11      The first and most obvious implication of this is that government departments, having shed their engineering staff, now lack any real in-house engineering expertise. Mr Ian Marler, Vice Chairman, Consulting Surveyors National, elaborated on the difficulties that arise when government departments lose their engineers with surveying skills, using a New South Wales example:

[If] you took the Institution of Surveyors in New South Wales: many years ago it probably had 80 per cent government and 20 per cent private. I would say that almost the reverse would apply today. There has been a gradual transition as more and more government departments shed staff.

That raises the other complexity, too, in that if you are tendering for government work, whether you have competent people within government able to assess the tenders and all of those sorts of things. It has that downside. But I would guess that it has been that 80/20 back to 20/80.[12]

2.12      In addition, industries which had previously drawn from the ranks of the public sector for the engineers now find themselves without a ready source of highly-trained and experienced workers. Private companies are increasingly required to take responsibility for the training and development of their own engineers.

2.13      The consequences for particular engineering disciplines with a historical reliance on cadetships were severe. Mr Craig Woolridge, from the Australian Institute of Traffic Planning and Management, explained how the Victorian government had withdrawn from offering graduate positions and cadetships and how this had impacted on the skills of engineers in the sector:

I started at 1983 at Main Roads. That was the last year they had an annual program and then they stopped and it went back to every second year. In late 1990s they stopped training altogether and decided to go to a skeleton workforce and the private sector will take care of all of our needs. Unfortunately, the private sector did not take care of all the needs and then we ended up with a training crisis. Main Roads has certainly stepped back into that fold. Whether that is enough effort is questionable. Particularly in some areas like traffic and transport, there is certainly not enough effort in there.[13]

2.14      Ms Leanne Hardwicke from Engineers Australia acknowledged that following the transition of engineers from the public sector, the private sector 'dropped the ball' on training, describing the transition in the following terms:

When it first happened, when the public sector started not taking on so many and outsourcing everything, the training of engineers, particularly the graduates, actually fell by the wayside and they kind of had to take charge of their own training and development. As the skills shortages have developed and there has been more demand for engineers, one of the main recruitment tools that they have used is graduate development programs. They get them on the pathway of training in various areas, giving them lots of experience in different aspects and moving them towards becoming, for instance, a chartered engineer. Once they are a chartered engineer, then they are considered to be capable of independent practice and able to move around the company. So they do get all those opportunities, and the skills shortage has had a positive effect in terms of the private sector taking on that key training role that the public sector used to have.[14]

2.15      The Australian Power Institute accepted that industry had fallen 'asleep at the wheel'. Mr Simon Bartlett, Chairman of the Board, explained to the committee:

The industry went through a period of really squeezing and cutting down. It went from government owned to privatised. Owners came in who really squeezed. I think the focus was taken off recruitment, development and the relationships with universities. That is not just a problem in Australia. That has happened in deregulated countries. The UK went through that. It has become even more serious there.[15]

2.16      Improvements to engineering training are discussed in Chapters 3 and 5.

Types of qualifications

2.17      Skills Australia divides engineering occupations into three categories in the table below, each of which is linked to a particular level of education. Engineers Australia and ANET accept this breakdown, noting that there are some limitiations to the approach.[16]

Source: Skills Australia.

2.18      Engineering courses taught in Australian universities are accredited by Engineers Australia, which will soon take on responsibility for accrediting TAFE courses too. Courses are accredited using regularly audited competencies developed against international standards. Engineers Australia uses these same competencies to assess the qualifications of applicants under skilled migration programs.[17]

2.19      Engineers who complete the qualifications outlined above are not recognised as fully qualified until they have completed a period of supervised practice. ANET notes that a professional engineer will usually reach the standard for admission to the status of Chartered Professional Engineer in three to five years.[18] Engineers Australia defines chartered status as 'a higher set of competencies than applied to degree accreditation and signifies the engineer offers all the attributes' of a professional.[19]

2.20      For reasons of simplicity, use of the term 'engineer' in this report will encapsulate people with any of the three categories of qualifications listed above.

The Australian engineering labour market

2.21      Skills Australia advises that it is difficult to properly analyse the labour market for engineers as there is no consistent definition of 'engineer' used in data collection by the Australian Bureau of Statistics.[20] Nevertheless, Skills Australia has worked with the available data to come to some interesting conclusions.

2.22      In the diagram below, Skills Australia presents the baseline engineering workforce from 2006 to 2011. The data presented in this graph reflects the total number of persons employed in occupations that best reflect the skills that engineers possess – therefore the total number of persons employed in these occupations is likely much higher than the number of persons with engineering qualifications.[21]

2.23      The graph below shows a gradual increase in the number of people employed as managers and professionals in engineering occupations during 2006–2011 (331,000 managers in 2006 to 393,000 in 2011, and 485,000 professionals in 2006 to 615,000 in 2011). In contrast, the number of technicians and trade workers was relatively constant during the same period (179,000 in 2006 to 195,000 in 2011). The trade cohort contracted by 11 per cent during the global financial crisis in 2009 but increased by the same amount in the following year.[22]

Source: Skills Australia[23]

2.24      Skills Australia reported that the number of fully qualified engineers has increased significantly. From 2006 to 2011:

• The number of engineers with professional qualifications has increased by 27 per cent;
• The number of engineers working in management has increased by 17 per cent; and
• The number of engineers working in technician and trade occupations has increased by 11 per cent.[24]

Source: Skills Australia, Submission 80, p. 3.

2.25      University and VET pathways to engineering qualifications are discussed in Chapter 3.

Growth in demand for engineers

2.26      The demand for employees with engineering and related skills is higher than supply. The four main drivers of demand are the resources sector, defence, the National Broadband Network and other major infrastructure projects.[25]

2.27      While the figures in the previous section show that the engineering labour market is growing in all three qualification categories, this growth is not sufficient to meet the demand, and engineering skills shortages have been pronounced for many years.[26]

2.28      Skills Australia has applied the growth rates of the past 5 years to forecast Australia's workforce needs in 2016. A conservative estimate, based on the data, is that demand for professional and management engineers will increase by 37,000 persons by 2016 and technician and trade engineers by 6,000 persons.[27]

2.29      This estimate is conservative because the figures have not been adjusted to take into account the number of large infrastructure, defence and mining projects that are scheduled in the next few years. Further, these estimates have not accounted for the number of engineers approaching retirement which could be as high as 4 per cent annually.[28] Anticipated retirement rates vary between engineering fields, for example, the Australian Power Institute estimates that up to 30 per cent of engineers in that industry will retire in the next ten years.[29] Attrition through retirement is discussed in Chapter 5.

Resources

2.30      The resource sector's demand for labour is dependent on major project construction activity levels and mineral exploration investment. The Bureau of Resources and Energy Economics estimated the total value of projects at $456.5 billion, of which 102 advanced projects were valued at $231.8 billion. [30] Skills Australia forecasts that employment growth in mining operations will increase by 89,000 employees from 2010–2016, with an annual average growth rate of 7.9 per cent. Employment growth is expected to be highest for machinery operators and drivers, followed by technicians and trade workers.[31]

2.31      The committee received evidence during hearings in Queensland and Perth that was consistent with these forecasts.[32]

Defence

2.32      Engineering professions and trades are crucially important to the defence materiel supply industries. Many of these defence jobs require highly skilled employees with higher qualifications and extensive workplace experience. Skills Australia observed that these types of specialist skills are often subject to significant competition between employers, particularly the growing resources sector.[33] This situation is made even more acute when defence tenders occur at the same time as other major projects. Relevantly for the defence engineering sector, Skills Australia identified likely skills gaps in electronic, electrical, mechanical and aerospace engineers.[34]

National Broadband Network

2.33      The National Broadband Network (NBN) is a roll out a national wholesale, open access, high speed broadband network. The government has forecast that the total capital expenditure will be $35.9 billion.[35] Construction of the network is scheduled to commence by December 2012 to more than 750 thousand premises.[36] NBN Co estimates that the entire project will directly create between 16 000 and 18 000 jobs.[37] Data is not available to estimate how many of these jobs will be engineering related, however Skills Australia considers the NBN to be a driver of demand for engineering skills.[38]

Other infrastructure projects

2.34      Across the country the federal government, along with state and territory governments are making belated investments in infrastructure. Skills Australia cites a 2010 OECD report which found that Australia has an 'infrastructure deficit' arising in part from under-investment in the 1980s and 1990s.[39] Particular problem areas are:

• Port and rail infrastructure. The demand for freight is expected to double between 2000 and 2020.
• Urban infrastructure. As the populations of cities increases, so does congestion, which is estimated to cost $13 billion a year (1.5 per cent of GDP). If urban infrastructure is not improved, this cost could be more than $20 billion by 2020.
• Water and Electricity infrastructure. Chronic water shortages and water restrictions are only partly connected to climate change. A high proportion of electricity infrastructure that was built in the 1960s now requires replacement.
• Energy and rural water management, as a result of environmental concerns about greenhouse gas emissions, require significant capital investment.[40]

2.35      Infrastructure Australia was established to co-ordinate infrastructure spending and to provide advice to the government on policy. As a result of an infrastructure audit in 2008, nine priority projects and 28 other projects were identified, costed at more than $60 billion.[41] For example, the Department of Infrastructure and Transport is administering the Nation Building Program which represents an investment of more than $36 billion over six years in transport infrastructure alone.[42]

Skills shortage

2.36      When the term 'skills shortage' is used, it can mean one of two things: employers experiencing difficulty in recruiting a person for a specific vacancy; or existing employees not having the skills necessary for the position that they hold.[43] According to Skills Australia, the first situation is a recruitment difficulty and the second is a skills gap. For the purposes of the committee's deliberations, both are relevant.

2.37      Skills Australia pointed the committee to research indicating skills shortages are 'relatively widespread for engineering professional and para-professional occupations'.[44] Of the fifty engineering occupations surveyed only 3 were not experiencing skills shortages in 2011.[45] Significantly, a number of these professions have been experiencing skills shortages for protracted periods of time. For example, civil engineers have been in short supply since early 2000.

2.38      The Chamber of Minerals and Energy of Western Australia agreed that the skills shortage is more pronounced for professional and para professionals. Mr Bruce Campbell-Smith, Executive Officer, acknowledged the perception in the rest Australia that anyone could get a job in mining in Western Australia, and stated that this simply wasn't the case:

There is an expectation issue and not just within the Eastern States. We are talking about growing our workforce another 20,000 in 2012. We are at pains to say that it is a skilled workforce we are chasing. For example, the number of jobs advertised on a popular employment website, Seek, for mining engineers, week to week you get up to 1,000 mining engineers advertised. Now, some of those may have dual ads, dual listings with different HR firms, but at the same week there will be 43 truck drivers advertised or 21 kitchen hands, in low, low numbers entry level positions into the mining industry. I think mining companies are not finding it hard to source entry level and unskilled people into the industry. Our challenge is skilled labour. With respect to some of the people in the eastern states, that problem is probably exacerbated.[46]

2.39      Employers throughout 2011 continued to have difficulty recruiting in most of the professional engineering specialisations, indeed the proportion of vacancies filled was only 41 per cent – lower than any other employment group assessed by DEEWR.[47]

2.40      In relation to engineering trades, employers experienced some difficulty in recruiting appropriate staff, as demonstrated on the graph on the following page.

Low participation rates of women

2.41      The low participation rates of women in engineering professions and trades are clearly an important factor in the skills shortage. As demonstrated by the graph below, the participation rate of women in engineering professions has increased by 1.7 per cent since 2006, but remains low at only 21.5 per cent. 

2.42      Dr Sally Male reported that the unemployment rate for female professional engineers is twice as high as it is for male engineers. Further, among engineers with five to ten years experience, women have an average salary that is 8.5 per cent less than their male counterparts.[48]

Government policies and programs

2.43      The Australian government has a number of policies and programs targeted at addressing skills shortages, or at the very least minimise their impact. This section outlines these programs, and the policy and advice structures that underpin them. While the focus here is on action taken by the federal government, the committee acknowledges that state and territory governments have also implemented measures to address skills shortages.[49] This policy area cuts across a number of government portfolios and in many instances enjoys bipartisan political support.

Skills and training

2.44      Unsurprisingly, measures to improve skills and training for engineers are central to government's efforts to address the shortage. Under machinery of government changes announced in November 2011, commonwealth administrative responsibility for skills and training moved from the Department of Education, Employment and Workplace Relations (DEEWR) to the Department of Innovation, Industry, Science and Research (DIISTRE). Neither department made a written submission to this inquiry, but DIISTRE did give evidence at a public hearing in Canberra. The committee would have found a submission from DEEWR (in particular) useful, and considers that, as a matter of course, the Department should make submissions to future inquiries of this committee.

2.45      The DIISTRE website provides the following statement in relation to government funding for skills development:

The competitiveness and productivity of an organisation is dependent on its access to the skills it needs. To build a highly skilled Australian workforce, individuals and businesses require access to high quality training. The Australian Government meets this need through initiatives and programs designed to help individuals and businesses access training and workforce development advice. It also supports the organisations that provide these services.[50]

2.46      A number of training, trades and apprenticeship programs are administered by DIISTRE. These include:

• The National Workforce Development Fund, which provides funding to industry to support training and workforce development to meet current and future skill needs;
• The National Resources Sector Workforce Strategy, which addresses the skills and labour needs of the resources sector;
• The Critical Skills Investment Fund, which provides co-funding for industry projects that provide training and employment opportunities in critical industry sectors (this is part of the National Workforce Development Fund);
• The Australian Apprenticeships Access Program, which provides vulnerable job seekers with nationally recognised pre-vocational training, support and assistance to overcome any barriers they might experience when seeking skilled employment; and
• The Productivity Places Program, which provides training to support the development of skills in Australia to meet existing and future industry demands.[51]

2.47      An engineering cadetships program was announced by the government in December 2011. Over the next four years the government will fund 265 commencing engineering cadets a year for higher degree research students participating in the cadetship in engineering or science. The cadetships will involve a combination of formal research training at university and work experience with a business to conduct research and development tasks.[52]

2.48      In the past, the government has provided HECS-HELP discounts to engineering subjects. This practice was discontinued in the 2012-2013 budget. The department advised the committee that there is limited evidence that discounted student contribution amounts encourage students to pursue studies in a particular field, explaining that:

Students are predominantly motivated not by price but by their interests, abilities and career preferences when selecting courses. This is particularly the case when students have access to an income contingent loan, such as HECS-HELP, that allows them to defer payment of their contribution amounts until they are earning enough to do so.[53]

Infrastructure

2.49      While programs administered by the Commonwealth Department of Infrastructure and Transport do not necessarily address the root cause of shortages, the Department assists the government to 'promote, evaluate, plan and invest' in infrastructure and aims to foster an improved transport system across Australia, and as such has a role to minimise the impact of shortages.[54] Infrastructure Australia was established to co-ordinate infrastructure spending and to provide advice to the government on policy. As a result of an infrastructure audit in 2008, nine priority projects were identified and 28 other projects flagged, costing more than $60 billion.[55]

2.50      The Department for Infrastructure and Transport is administering the Nation Building Program, representing an investment of more than $36 billion over six years to 2013–14 in transport infrastructure.[56] In its submission to this inquiry the Department identified three key initiatives aimed at improving infrastructure delivery:

• The National Infrastructure Construction Schedule (NICS), launched in May 2012;
• Microeconomic reform delivered through the Council of Australian Governments Infrastructure Working Group, including a prequalification system, public private partnerships, alliance contracting and design and construction; and
• Measures to encourage further competition through the involvement of international firms.[57]

2.51      Chief among these initiatives is the NICS, which establishes a national government infrastructure project pipeline. The NICS is implemented through collaboration between federal, state and territory and local governments, and aims to provide industry with online information on major infrastructure projects committed by governments across the country.[58]

2.52      The NICS contains information on all infrastructure projects over $50 million procured by the general government sector as defined by the Australian Bureau of Statistics. It also contains information on tender opportunities within a project for contracts estimated to be worth more than $25 million. Currently, the NICS only lists those projects seeking tenders on contracts. Over time, the NICS will show how projects move along the project lifecycle, 'leading to a deep and liquid pipeline of infrastructure opportunities.'[59]

2.53      Each government provides information on the NICS for the projects it has procured. This information will be updated on a regular basis, according to each jurisdiction’s budget cycle. Where a government announces a new commitment, the NICS will be updated within a week of that announcement.  Local Government projects will be included on a voluntary basis, with information updated regularly.[60] The NICS may also include information on projects below $50 million, or projects procured by Government Business Enterprises if the responsible jurisdiction provides the necessary information.

2.54      The NICS enjoys support among submitters, with a number calling for its establishment earlier this year.[61] Engineers Australia described the NICS as 'the first step toward providing a transparent, long-term view of infrastructure 'pipeline planning''.[62]

2.55      The committee is pleased that the NICS has come to fruition, and can envisage the system helping to efficiently allocate scarce engineering and related skills across the pool of major infrastructure projects.

Advisory bodies

2.56      Professor Ian Chubb AO was appointed Chief Scientist on 19 April 2011 and commenced on 23 May 2011.  The Chief Scientist provides independent advice to the government on matters related to science, technology and innovation.[63]

2.57      The government established the Prime Minister's Science, Engineering and Innovation Council, as the 'pre-eminent science advisory body to government'. [64] Members include the Prime Minister, Ministers, the Chief Scientist (Executive Officer) and a group of experts. One of the five experts, Dr Cathy Foley, has an electrical engineering background.[65]

Skilled migration

2.58      A well-publicised consequence of the skills shortage across a number of industries has been the increased use of skilled migration. This can be approached by employers in one of two ways. Australian companies may recruit skilled workers from overseas, or project management tenders are awarded to international engineering companies who bring their employees into the country to fulfil the contract.

2.59      For many years the federal government has operated skilled migration programs to enable businesses to bring workers from overseas to address skills shortages. The most common program is the Temporary Business (Long Stay) – Standard Business Sponsorship (Subclass 457) visa (Subclass 457 visa). More recently, Enterprise Migration Agreements (EMAs) have been introduced to streamline the Subclass 457 visa application process. The government also operates a General Skilled Migration program, under which people with qualifications on the Skilled Occupations List may apply for permanent migration to Australia, independent of employer sponsorship. Most engineering occupations are listed on the Skilled Occupations List, which is produced by Skills Australia and used by the Department of Immigration and Citizenship (DIAC) to determine eligibility for independent skilled permanent migration.[66]

2.60      The table below, prepared by Skills Australia on the basis of data provided by DIAC, shows recent migration trends of engineering managers, professionals and technicians and tradespeople by visa category:

Source: Skills Australia [67]

2.61      The table above indicates an increase in visa grants for subclass 457 temporary business visas and employer sponsored visas, but a reduction in visa grants under the General Skilled Migration program.

Subclass 457 visa

2.62      The 457 visas enable employers to recruit skilled overseas workers to meet the shortfall of skills demands in Australia. Among other requirements, employers with a business that operates in Australia must meet benchmarks relating to training Australian citizens and permanent residents to be eligible.[68] Employers who have been trading in Australia for more than 12 months may select between different training benchmarks:

• Training Benchmark A: the employer pays the equivalent of at least two per cent of recent payroll expenditure to an industry training fund for the training of Australian citizens or permanent residents, each year that the employer is a sponsor [69]; or
• Training Benchmark B: the employer must provide evidence of spending the equivalent of one per cent of payroll on training for their employees who are Australian citizens or permanent residents.[70]

2.63      Eligible expenditure for the purposes of meeting Training Benchmark B includes the following types of training:

• paying for a formal course of study for the business’s employees who are Australian citizens and Australian permanent residents, or for TAFE or University students, as part of the organisational training strategy;
• funding a scholarship in a formal course of study approved under the Australian Qualifications Framework for the business’s employees who are Australian citizens and Australian permanent residents or, for TAFE or University students, as part of the organisational training strategy;
• employment of apprentices, trainees or recent graduates on an ongoing basis in numbers proportionate to the size of the business;
• employment of a person who trains the business’s Australian employees who are Australian citizens and Australian permanent residents as a key part of their job;
• evidence of payment of external providers to deliver training for Australian employees; and
• on-the-job training that is structured with a timeframe and clearly identified increase in the skills at each stage, and meeting specific criteria.[71]

2.64      The wages paid to staff for time spent attending training are not expenditure for the provision of training, and cannot be counted towards Training Benchmark B, except where the staff are apprentices, trainees or recent graduates.[72] In general terms, 100 per cent of apprentice, trainee and graduate salaries can be counted towards the training benchmark.

2.65      Where an applicant employs an apprentice or trainee, and there is a formal apprenticeship or traineeship agreement in place, 100 per cent of the salary provided to this apprentice or trainee can be counted towards calculating whether the training benchmark of one per cent of payroll expenditure has been met.[73]

2.66      Where a company has a formal graduate program, 100 per cent of the graduate's salary can be counted for the length of that program (up to two years). In order to be eligible, the graduate must be working in an occupation that is relevant or related to their recently completed qualification. Expenditure on graduate salaries where there is no a formal graduate program cannot be counted.[74]

2.67      Companies must provide 'auditable' evidence of expenditure to meet the training benchmarks and non-compliance will result in ineligibility to apply for subclass 457 visas in the future.

2.68      Employers must meet nine sponsorship obligations, including an obligation to ensure that sponsored employees enjoy equivalent terms and conditions of employment as Australian workers undertaking the same work at the business's workplace in the same location.[75] The temporary skilled migration income threshold has been set at $49,330 per annum, meaning that workers in occupations that have a market salary below this rate may not be sponsored under the Subclass 457 program.[76]

2.69      A number of submitters praised the subclass 457 visa program, arguing it was a crucial measure to meet short term skills shortages. During the Brisbane hearings Ms Megan Motto, Chief Executive Officer, Consult Australia, explained to the committee that skilled migration was absolutely imperative, particularly because around two thirds of projects have been delayed in the short term, or indefinitely, because of skills shortages. Indeed, a reduction in skilled migration would 'cripple' Australian industry. [77] Ms Motto stated:

I would say that the firm-sponsored skilled migrant entries—that is, those that come in on a 457 as sponsored by firms—have a very high success rate because they are hand-picked by the firms and the firms are picky about who they have working for them. They have good English language skills and they have a high degree of confidence that they will transition into the Australian culture and the particular firm's culture and that they will have a high degree of success, because firms are not going to go to the expense of bringing people into Australia if they think they are going to fail.[78]

2.70      The Association of Mining and Exploration Companies also praised the flexibility of the subclass 457 visa program, as it enable companies to meet short term demand in a cyclical industry.[79]

2.71      Submitters reminded the committee that the training requirements attached to the subclass 457 visa program assisted in addressing skills capabilities. These conditions were outlined in detail earlier in this chapter.

2.72      The committee asked Consult Australia to comment on the allegation that firms will always resort to use of skilled migration because it is cheaper than employing local labour, and that as a consequence, firms will have no incentive to train and develop staff capability. Mr Jonathan Russell, Senior Policy Adviser, Consult Australia, observed that most companies prefer Australian labour as it is cheaper and immediately productive, further, companies who recruit overseas workers have to meet strict training criteria.[80] Ms Motto pointed out that there is a significant difference between 'employers who are doing the right thing by Australian industry but fundamentally need additional skills to complete projects' and 'those industries that are employing low-level non-technical labour style skills and whose industries have more of a history of abuse of the 457 system in terms of employing Australians to do the same level of work'.[81]

Enterprise Migration Agreements

2.73      Enterprise Migration Agreements represent a streamlined and fast tracked Subclass 457 visa program. In July 2010 the National Resource Sector Employment Taskforce recommended, among 30 other recommendations, that the government introduce EMAs. In March 2011 the government accepted all 31 recommendations.[82] On 10 May 2011 the federal government announced a new temporary migration initiative to help address the skill needs of the resources sector, Enterprise Migration Agreements (EMAs).[83]

2.74      EMAs are available to projects with a capital expenditure of at least $2 billion and a peak workforce of 1500 workers. Applicants must also submit a comprehensive training plan that demonstrates how the project will equip Australians to meets future skills needs in the resources sector. The EMA process is intended to streamline negotiation arrangements for access to overseas workers and guarantee faster processing times for visa applications.[84]

2.75      The first EMA was approved on 25 May 2012 and was granted to the new iron ore mining Roy Hill project in the Pilbara region of Western Australia. The EMA permits Roy Hill to sponsor up to 1715 workers through the 457 visa program during the three year construction phase, where Australian workers cannot be found. The project requires more than 8000 workers, and it is expected the remaining 6285 jobs will be filled by Australian workers. As part of the EMA, Roy Hill must provide 2000 training places for Australians, including more than 200 Australian apprentices and trainees.[85]

2.76      The Australian Association of Mining and Exploration Companies (AMEX) argue that EMAs should be available to all mineral resource projects regardless of their value or size, and the $2 billion threshold should be removed. AMEX reports that its members have indicated that smaller projects are also faced with labour shortages.[86]

General Skilled Migration program

2.77      The government also operates a General Skilled Migration program, where people with qualifications on the Skilled Occupations List may apply for permanent migration to Australia, independent of employer sponsorship..

2.78      Companies are increasingly resorting to skilled temporary migration in an attempt to fill vacancies. However this brings with it challenges, as without careful management can result in a deterioration of the underlying problem. The limitations of the skilled migration program are discussed in the next section.

The role of migration in addressing the shortage

2.79      Currently migration provides about half of the skilled engineering workforce in Australia. The committee received conflicting evidence in relation to migration policy in Australia. Some submitters called for greater migration, such as the expansion of the Enterprise Migration Agreements and skills visas, where other submitters called for caution – arguing that while skilled migration was essential, it would not address the skills shortage in the long term.

2.80      In simple terms, those who urged caution did so on the basis that the use of skilled migration can have both positive and negative effects. In the short term, if appropriately trained overseas workers are employed in industries suffering acute skills shortages, then projects may proceed without delay and are consequently more likely to be completed on time and to an appropriate standard. However, too strong a focus on overseas migration to address skills shortages can result in industry continuing to neglect  investment in training and support for the Australian workforce, thereby entrenching the shortage and worsening the underlying problem.

2.81      The committee is aware of calls to expand the migration programs, or at least retain current conditions. For example, in a recent report, the Business Council of Australia (BCA) makes several recommendations in relation to migration, calling on the federal government to:

• set policies to support a growing Australian population and workforce over time by committing to a long-term strategy in accordance with the projections in the 2010 Intergenerational Report
• maintain the annual permanent migration program at least at its current levels (currently at a minimum of 190,000 total; 129,500 of those are skilled migration)
• ensure flexibility in uncapped temporary migration schemes such as 457 visas and the efficient implementation of the Enterprise Migration Agreement program and do not make the requirements to comply with the EMA program any more onerous for eligible projects
• remove all barriers to the recruiting of engineers and project managers with the appropriate levels of experience to oversee very large projects in Australia.[87]

2.82      However, the committee received evidence that increased short term migration was not a sufficient measure to address the engineering skills shortage.

2.83      Skills Australia, while supporting the greater use of overseas students who have completed engineering studies in Australia to meet the shortfall, emphasised that any use of former international students or overseas workers should not supplant investments in skills developments for Australians.[88]

2.84      Engineers Australia warned that prolonged use of short term skills migration (in contrast to permanent migration) can exacerbate the impact of Australia's skills shortages in the long term. Mr Christopher Fitzhardinge explained to the committee:

What happens is that you lose the ability for native engineering expertise to develop within your country and the types of components, the types of modules and services tend to be global rather than local. If we are trying to use the investment cycle we have now to grow our economy—the Australian economy tends to be quite volatile and lumpy—we have to capture economic advantage from investment cycles and we have to develop capability that will strengthen us in our economy in the longer term. Typically, that involves development of professional services not only on the construction side of projects but on the operation and long-term support of projects. The use of global procurement managers not only sabotages the local content and the development of local engineering expertise during the construction phase but also has an impact on the longer term supply of goods and services to sustain that project into perpetuity.[89]

2.85      Engineers Australia cautioned that migration may not always be an available resource to companies, if costs in Australia continued to increase. Mr Christopher Fitzhardinge explained:

Previously, Australia had a cost advantage in terms of migration from a number of countries. People could sell their houses, move here and make a significant profit. What has happened is that with the high Australian dollar, high Australian property prices and high Australian cost of living, the thing that will prevent us from securing the engineering skills that we need will be the differential cost structures between the countries that are our strong source of migration. In Western Australia, typically it has been the UK, Europe and South Africa that have provided a significant proportion of our engineering skills. It really depends on the economic drivers for people to migrate to Australia from those countries and at the moment they are not as positive as they were, say, five years ago.[90]

2.86      Professor James Trevelyan agreed with this assessment, submitting that the experience of migrant engineers in Australia 'is not a happy story universally'. Professor Trevelyan concluded that from his preliminary research for the Western Australian government, he believed many migrant engineers on subclass 457 visas would 'be on the next plane out' if there were improvements in economies in the rest of the world. [91] This observation is telling, when coupled Skills Australia's anecdotal evidence that a significant numbers of qualified but unsuitable applicants for engineering professions have come through the General Skilled Migration program.[92]

2.87      The Australian National Engineering Taskforce (ANET) submitted that reliance on immigration to meet the skills shortage is a risky, short term approach. This is because its success is dependent on the Australian economy performing well and remaining an attractive destination. ANET urged the government to adopt a target to reduce the reliance on immigrant engineers over the next ten years, by increasing domestic graduates and trades.[93]

2.88      The committee was also mindful of the fact that overseas workers who come to Australia to work in engineering jobs have a higher rate of unemployment. In a 2010 survey conducted by DIAC, the unemployment rate of all independent skilled migrants was 3.3 percentage points higher than the national unemployment rate.[94] The survey results indicate that engineering professionals have a higher unemployment rate than total engineers, and this rate is also higher than the general unemployment rate in Australia. Research has not been conducted into the cause, but Skills Australia advises that is aware that 'some employers prefer not to employ qualified engineers who complete their education overseas, complaining that few meet Australian employment market needs and lack adequate English language skills'.[95]

2.89      Australia's Chief Scientist, Professor Ian Chubb, told the committee that as 'a good global citizen' Australia should think about how it supports engineering capability in developing countries, and this was not done by 'drawing away their talent'. Professor Chubb submitted that Australians need to 'do something about our own back yard', rather than rely on skilled migration indefinitely:

I do not think it is a solution simply to say we will import the skills when we need them and turn off the tap when we are replete. We actually have a need to ensure that we are trying to improve the supply within the country and to increase it as other countries are doing and then to top it off through immigration processes, to target particular skill areas where we might be deficient or take a long time to get up to the need of whatever it might be. So I think it is a combination but I do not think that, because we can presently recruit people, it means that we will always be able to in the areas we want, with the skill level we want, with the capabilities that we want.[96]

2.90      The committee considers that current skilled migration programs are an effective tool to address immediate skills shortages, but like the majority of submitters, does not take the view that it is a solution for the underlying need to invest in education and training programs domestically.

2.91      In the next chapter the committee examines the current education and training pathways for engineers in detail.

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