Budget Review 2021–22 Index

Dr Hazel Ferguson

This Budget includes a number of targeted investments in areas of skills training that have come under increased pressure and scrutiny during COVID-19, including apprenticeships, digital skills, aged care, and foundation skills. Most investments are provided through temporary extensions and revisions to existing programs, including the JobTrainer Fund for free and low-fee training, introduced as part of the COVID-19 Response Package in the July 2020 Economic and Fiscal Update (the July Update, pp. 117–118), and the Boosting Apprenticeship Commencements (BAC) measure, a wage subsidy for new apprentices or trainees, which was in the October 2020 Budget.

While the short-term impact of this Budget provides opportunities to expand VET delivery, questions remain about the longer-term impacts of temporary measures, the level of VET funding after 2021–22, and the larger structural changes that may come as part of a new National Skills Agreement, anticipated by August 2021.  

Funding trends

Parliamentary Library analysis (Figure 1 below) based on Budget Strategy and Outlook Budget Paper No. 1: 2021–22 (pp. 169–170 and 188) shows total Australian Government expenditure on vocational education and training (VET) is estimated to peak in 2021–22, before declining rapidly. The announcements in this Budget delay the decline for an additional year compared with estimates at the October 2020 Budget, but the longer-term future of Commonwealth VET funding remains unclear. 

Expenditure on vocational and other education programs is expected to decrease 10.8% in real terms from 2020–21 to 2021–22, and 24.2% in real terms between 2021–22 and 2024–25. The initial decline largely reflects a lower level of JobTrainer Fund expenditure per year in 2021–22 and 2022–23 compared with 2020–21. The larger decline from 2021–22 is due to the conclusion of the National Partnership on the Skilling Australians Fund on 30 June 2022, and the JobTrainer Fund on 31 December 2022. New or extended funding agreements would usually be negotiated with the states and territories before the conclusion of such agreements, and if this occurs funding from 2022–23 will be higher that the projections shown here.

Vocational and industry training expenses, which primarily comprise Australian Government apprenticeship funding, are expected to increase by 19.8% in real terms from 2020–21 to 2021–22 and decrease by 66.2% in real terms from 2021–22 to 2024–25. The initial increase largely reflects the extension of the BAC wage subsidy, while the decline is driven by the cessation of this and other temporary COVID-19 measures.

Figure 1: Australian Government estimated expenditure on vocational education and training, 2005–06 to 2024–25 ($ million)

(e) figures are budget estimates.

Note: real funding has been calculated by the Parliamentary Library by deflating the nominal expenditure figure by the June quarter CPI and CPI forecasts from the 2021–22 Budget; this methodology may differ to that presented in the Budget papers.

Sources: Parliamentary Library based on Australian Government, Budget strategy and outlook: budget paper no. 1: 2021–22; Australian Government, Final budget outcome, various years.

Building Apprenticeship Commencements wage subsidy

This Budget continues the Government’s investment in apprentice and trainee wage subsidies, with $2.7 billion provided to extend the BAC wage subsidy to cover commencements up to 31 March 2022, extend the subsidy period to 12 months from commencement, and uncap the number of places available (Budget Measures Budget Paper No. 2: 2021–22, pp. 88–89).

The BAC funds 50% of an apprentice or trainee’s wage, up to $7,000 per quarter. The October 2020 Budget introduced the BAC wage subsidy for up to 100,000 commencements between 5 October 2020 and 30 September 2021. In March 2021, the Government reported that these places were fully taken up within five months, and BAC funding had been provided to up to 40,000 businesses, supporting ‘more than 8,000 bricklayers, 6,000 electricians, and almost 11,000 people in retail and hospitality work’. It estimated that changing the BAC to a demand-driven program will ‘generate around 70,000 new apprentice and trainee places’. The Department of Education, Skills and Employment (DESE) states that 3,000 ‘digital apprenticeships’ will be supported through the BAC as part of the cross-portfolio Digital Economy Strategy.

The Supporting Apprentices and Trainees (SAT) wage subsidy, introduced in the July Update (pp. 119–120) for apprentices and trainees already employed in small and medium businesses, concluded on 31 March 2021, and has not been continued. The Regional Ministerial Budget Statement 2021–22: Supporting Regional Recovery and Growth (p. 110) states that at 29 April 2021, the SAT had supported the retention of 129,502 apprentices and trainees.

However, as identified at the time of the original BAC announcement, it is unclear what contribution the wage subsidies will ultimately make, compared with the level of training activity that might otherwise have been expected, since more than 100,000 apprentices and trainees typically commence each year, with many in sectors that suffered comparatively little effect from COVID-19. Additionally, the commencement focus of the remaining wage subsidy may see an increase in apprentices exiting the system after 12 months, especially as a relatively large number of apprentices already cancel or withdraw each year (73,205 in the 12 months to 30 September 2020, compared with 126,665 commencements).

Data about the final quarter of 2020, when both the BAC and the SAT were in place, is not yet available. The most recently-available apprenticeship data shows that in the year to 30 September 2020 (just before BAC funding was introduced) there were 126,665 apprenticeship commencements, down 18.8% from 2019. Declines were seen in both trade (15.7% decline) and non-trade (21.4% decline) occupations. Although there were already widespread concerns about declining apprenticeship numbers before COVID-19, the declines in 2020 were more pronounced than would have ordinarily been expected from recent year commencement numbers. Prior to the pandemic, apprenticeship commencements had started to stabilise after a longer-term downward trend in apprenticeship numbers from 2012, which was largely driven by sharp decreases in non-trade (traineeship) commencements after employer incentives were reformed from 2012.

Another key concern raised in the context of the October 2020 Budget announcements was that apprenticeships are predominantly taken up by young men, while women and older workers have been more impacted by COVID-19 related job losses. The most recent apprenticeship data shows women accounted for 64,205 apprentices in training at September 2020 (24.3%), compared with 200,220 men (75.7%). This disparity is more significant in trade apprenticeships, where there were 17,735 women (9.9%) compared with 161,865 men (90.1%). This Budget (the Regional Ministerial Budget Statement, p. 98) allocates $2.6 million in 2021–22 to the Australian Apprenticeship Support Network to deliver 5,000 additional Gateway Services to women to match them with the right apprenticeship or other training option, and to provide in-training support services for women commencing in non-traditional trade occupations. While this is a relatively modest investment, an additional 5,000 women entering trade apprenticeships in one year would be a substantial increase in percentage terms (28.2%).

JobTrainer Fund

Many of the targeted announcements in non-apprenticeship skills in the Budget are delivered through an extension and revision of the JobTrainer Fund.

Australian Government funding of $500.0 million was initially provided in the July Update for 2020–21 (p. 117), and an additional $500.0 million is allocated in this Budget, to be split between 2021–22 and 2022–23. An additional $6.3 million has also been allocated in 2021–22 for a campaign to encourage take-up of training opportunities (Budget Paper No. 2, p. 88).

The current estimated distribution of the JobTrainer funding is provided in Table 1 below. Australian Government funding is generally allocated between states and territories based on population, although it appears in this case $39.1 million funding for Victoria has been reallocated from 2020–21 to 2021–22. This does not affect the overall funding to Victoria over the three-year period.

Table 1: JobTrainer Fund, estimated Australian Government funding at 2021–22 Budget ($ million)

Source: Federal Financial Relations Budget Paper No. 3: 2021–22, p. 44.

Under the current JobTrainer agreement, which covers the first year of operation and subsequent reporting, the Fund provides free and low-fee training for school leavers and job seekers, and states and territories determine their mix of subsidised courses based on their skill needs.

The Budget papers estimate that the extension of the Fund will provide around 163,000 additional free or low-fee training places in areas of skills need, with around 33,800 of these reserved for aged care, and around 10,000 for digital skills. Eligibility will be expanded to include people who are employed in sectors that continue to be affected by COVID-19. Continuation of the Fund, and the implementation of targeted investments in aged care and digital skills, will depend on the further agreement of the states and territories, as well as their willingness to provide matched funding.

According to the Health Portfolio 2021–22 Budget Stakeholder Pack (p. 135), the additional 33,800 subsidised places will be for personal care workers to attain a Certificate III in Individual Support (Ageing) or a higher qualification. The Certificate III is already widely used (76,930 enrolments and 28,250 completions in 2019, although this includes those taking the qualification for occupations in disability support and other similar areas). The Certificate III is also already subsidised in most jurisdictions through JobTrainer. A large body of work is currently in progress to ensure the Certificate meets the needs of students and people in care. The aged care training places form part of the Government’s response to the Final Report of the Royal Commission into Aged Care Quality and Safety, discussed elsewhere in this Budget Review. Contrary to the recommendations of the Royal Commission, these arrangements would not mandate the Certificate III as the minimum mandatory qualification for a personal care worker.     

Digital skills training places are less straightforward, as digital skills are broadly required across different occupations. Places could be allocated to specialised Certificate or Diploma level qualifications, such as those in digital technologies or information technology, or sub-qualification skill sets, made up of one or more nationally recognised units of competency (or subjects) intended to meet a defined industry need. Nine new internet communication technology skill sets were endorsed in July 2020, and two in September, the Digital Skills for Small Business Skill Set and the Entry into Technology Skill Set, designed to support small businesses to adapt to operating in an online environment, and assist displaced workers to secure employment in areas of labour market growth.

Additional training scholarships have also been provided for young people through the Schools and Youth package, discussed elsewhere in this Budget Review.     

Foundation skills

Although investments in higher-level skills to address specific workforce needs form the centrepiece of this year’s budget for VET, improving foundation skills is also crucial to ensure equitable access to, and increase the uptake of, training opportunities. Foundation skills are adult language, literacy and numeracy (LLN) skills, as well as employment skills such as problem solving. The most recent OECD survey of adult skills, undertaken in 2012 (pp. 13–16) estimated that one in five Australians aged 16 to 65 have low literacy and/or numeracy skills, and that successfully investing in these skills is needed to prevent Australia being left behind in terms of innovation and economic growth.

The Budget includes $23.6 million over four years from 2021–22 (Budget Paper No. 2, p. 94) for foundation skills:

• The Skills for Education and Employment (SEE) program, which is designed to improve LLN among job seekers, will be expanded. Currently, job seekers must meet certain eligibility criteria in order to be referred to the program by Services Australia or an Employment Service Provider, and access is limited to 650 hours at a time, with a waiting period of three months between referrals. The expansion will uncap the number of hours available through SEE and expand eligibility to all job seekers. A 2015 evaluation (p. xiii), undertaken when the program was limited to 800 hours, found the time available was generally sufficient, but recommended the limits be reviewed for people with very low levels of LLN, who often needed more support. According to DESE, $4.0 million of this funding will go to 40 projects to incorporate digital literacy training. 
• The outreach role of the Reading Writing Hotline will also be expanded. The Hotline is a nationally available telephone service, providing advice and referrals to adult literacy and numeracy courses. Unlike SEE, access to the Hotline is not restricted.
• Funding has also been provided for foundation skills policy development, which may aid in the formulation of a replacement for the National Foundation Skills Strategy for Adults 2012–22, which is due to conclude next year.

The Budget also includes a number of employment services measures, some of which may facilitate greater access to training for some job seekers, discussed in the Employment Services Measures section of this Budget Review.

Digital cadetships

Although the digital sills training investments in the Budget are delivered largely through the existing mechanisms discussed above, an additional investment of $10.7 million (over three years from 2021–22, Budget Paper No. 2, pp. 7–75) has been allocated as part of the Digital Economy Strategy for up to four industry-led Digital Skills Cadetships to develop innovative training pathways.

Cadetships combine formal training with an employment relationship in a similar way to an apprenticeship, but are not subject to the same state and territory regulatory frameworks which require, for example, that a training contract be registered with the relevant training authority. According to DESE, each Cadetship is expected to take four to six months, with the training component comprising nationally recognised units of competency, VET and higher education units packaged into new forms of micro-credentials and/or formal training augmented with industry accredited training, such as that offered by global technology companies.

Skills reform

In response to findings from recent reviews such as the Review of the National Vocational Education and Training Regulator Act 2011 (Braithwaite Review), the Expert review of Australia’s vocational education and training system (Joyce Review), and the Rapid review of the Australian Skills Quality Authority’s regulatory practices and processes (ASQA Rapid Review), the Government is currently undertaking a VET reform process focusing on quality, industry engagement, and qualifications.

The Budget (Budget Paper No. 2, pp. 93–94) contains additional funding for some of this work:

• To improve collaboration with industry, $149.2 million over four years from 2021–22 will be provided to establish up to 15 industry-owned Skills Enterprises. DESE states that the new Skills Enterprises will constitute ‘new industry engagement arrangements for the VET system… to ensure a strong, strategic industry voice, drive collaboration across sectors, address workforce challenges, and improve the speed to market of qualifications to meet evolving industry needs’. It is unclear how these will relate to existing intergovernmental governance structures, including the Australian Industry and Skills Committee, and the Skills Organisation pilots implemented in response to the Joyce Review.
• $69.1 million over five years from 2020–21 will be allocated to the Australian Bureau of Statistics to establish a new VET National Data Asset to provide information about VET outcomes at provider and course levels to improve the information available to prospective students about VET qualifications. Currently, VET student outcomes data is managed by the National Centre for Vocational Education Research (which also manages other key VET data collections). The current collection does not include course or provider level detail, while in higher education, Quality Indicators for Learning and Teaching provides information by study area and institution.
• To support work with the states and territories on qualifications design, $30.9 million over four years from 2021–22 will be allocated to deliver a new National Training Register—the current version is at training.gov.au.
• $12.1 million over four years from 2021–22 will be allocated to simplify information about apprenticeship pathways, and develop a single National Digital Australian Apprenticeships Portal. According to DESE, the Portal will be a ‘one-stop-shop to help employers manage their apprentice workforces and for apprentices to understand their entitlements’.

Larger-scale skills reform announcements are anticipated by August 2021, when a replacement for the National Agreement for Skills and Workforce Development (NASWD) is expected to be finalised. The NASWD is the agreement which sets out jurisdictions’ shared responsibilities for VET, and under which Australian Government National Specific Purpose Payments for skills and workforce development are currently provided, at approximately $1.5 billion per year over the forward estimates (Budget Paper No. 3, p. 43).

The replacement of the NASWD is in response to a review of the Agreement, undertaken by the Productivity Commission from November 2019, which reported in December 2020. A Heads of Agreement for Skills Reform was signed by all jurisdictions in 2020, as a condition of state and territory access to JobTrainer Funding.