The Australian labour market is at a critical inflection point. After years of unprecedented tightness that saw employers compromising on hiring standards and offering premium compensation just to secure talent, we're now witnessing unemployment reach 4.5% – a four-year high. Yet this shift isn't as straightforward as it might appear. Applications per job advertisement have hit record peaks, signaling intense competition for available positions, while the RBA's newly introduced Searchers Index reveals that the overall measure of effective job searchers has actually declined even as unemployment rose.
For Chief People Officers, CHROs, and Heads of Talent, this moment demands more than tactical adjustments to hiring practices. It requires fundamentally rethinking workforce planning frameworks that were built for different conditions. The organisations that will emerge strongest are those that move beyond reactive responses to build sophisticated, agile workforce planning capabilities designed for sustained uncertainty.
For a comprehensive analysis of what's driving these changes and the sector-specific variations that matter, see our detailed Australian Labour Market Update: Navigating Uncertainty in Late 2025.
The Reserve Bank of Australia's recently introduced Searchers Index (SI) provides crucial insights for workforce planning. Unlike traditional unemployment metrics, the SI accounts for all effective job searchers – including employed workers looking for better opportunities, underemployed workers wanting more hours, and people outside the labour force who are available to work.
This matters because the SI reveals that while unemployment has risen, the overall measure of effective searchers has actually declined slightly in early 2024. This apparent contradiction occurs because as unemployment increased, there was an offsetting reduction in on-the-job searchers and others seeking work. The implication? The labour market is more nuanced than headline unemployment figures suggest.
For workforce planners, this means certain roles and skill sets remain genuinely tight despite rising unemployment. The quality and suitability of available candidates varies significantly by role type. Your competition for talent hasn't necessarily decreased proportionally to unemployment increases, and sector-specific and regional variations are substantial and should inform localised strategies.
Even as overall unemployment rises, specific skill shortages persist. Current data identifies ongoing gaps in IT infrastructure and specialised technology roles, risk management and compliance expertise, customer service capabilities, and industry-specific technical expertise.
Additionally, research shows that labour market tightness remains substantially above pre-COVID levels in three key sectors: accommodation and food services, arts and entertainment, and real estate.
The lesson for talent leaders: avoid blanket assumptions that all hiring has become easier. Segmented analysis of your specific talent needs is essential.
Labour market conditions vary dramatically by geography. New South Wales lost 22,100 jobs in the first nine months of 2025, compared to creating over 57,000 during the same period in 2024. Western Australia added just 400 jobs this year. Meanwhile, other regions show different patterns of growth and decline.
For organisations with multi-location operations or remote work capabilities, these regional differences create both challenges and opportunities for strategic workforce distribution.
The tight labour market of 2022-2024 forced many organisations into reactive hiring modes. Companies found themselves compromising on ideal candidate profiles, offering premium compensation packages, and making rapid hiring decisions just to secure available talent. While these practices were understandable given the circumstances, they created significant problems that many organisations are still managing today.
Internal equity became a major issue as new hires were brought in at salaries significantly higher than existing employees doing similar work. Organisations hired for immediate availability rather than long-term fit, sometimes bringing in people who could start quickly but weren't necessarily the best match for the role or culture. The emphasis on cultural alignment and values fit diminished as the priority became simply filling the seat. Assessment processes were shortened, sometimes dangerously so, missing important warning signs about candidate suitability.
The current environment provides an opportunity to reset these practices, though it's important to note this doesn't mean simply reverting to pre-pandemic approaches. Instead, a more nuanced strategy is required.
For positions where you previously compromised on requirements due to scarcity, now is the time to identify those roles and reinstitute the standards that matter. This means bringing back comprehensive assessment processes that include technical evaluations, behavioral interviews, and thorough reference checking. Recruitment timelines can be extended to ensure proper candidate evaluation rather than rushing decisions. Many roles that were classified as "hard to fill" should be reassessed based on current market conditions – some may no longer warrant that designation.
However, this doesn't mean dropping your guard everywhere. For genuinely scarce skills that won't respond to broader unemployment trends, you need to maintain close vigilance and keep your competitive positioning strong. Your employee value proposition for critical capabilities still matters enormously. And a crucial point that many organisations miss: don't assume retention is automatic just because the external market has softened. Your best people will still have options, and disengagement can actually increase when people feel "stuck" in a cooling market.
For strategies on keeping your workforce engaged during market transitions, explore our article on Maintaining Engagement and Retention.
The shift should also involve moving from urgent gap-filling to proactive pipeline development. Rather than scrambling to fill positions as they open, create talent communities for critical roles. Engage promising candidates even when you don't have immediate openings. Develop relationships with passive candidates in areas where skills remain scarce. This transforms recruitment from a reactive function to a strategic capability.
With external talent more accessible, the classic "build vs. buy" equation shifts, but the answer isn't simply to buy more talent. A more sophisticated approach is needed.
External hiring makes the most sense for immediate capability gaps where qualified candidates are now more available and you can't afford the time to develop people internally. It's appropriate for skills that would take too long to develop given your business timelines, and when you need fresh perspectives and new approaches to avoid groupthink. Specialised expertise that doesn't exist anywhere in your organisation often needs to come from outside.
On the other hand, internal development remains critical for core capabilities that are central to your competitive advantage. Leadership and management skills at all levels are almost always better built than bought. For emerging capabilities where external expertise is still limited – like AI literacy, which is growing at 2.8% among LinkedIn members in Australia but still relatively scarce – you may have no choice but to build. And deep organisational and industry knowledge, the kind that takes years to develop, can't be easily acquired from outside.
The most effective organisations are taking an integrated approach. They're building continuous learning into their culture to keep pace with technological advancements. This means developing tailored training programs that focus on both technical skills like AI literacy and digital capabilities, as well as soft skills like communication, adaptability, and strategic thinking that remain highly valued even as technology evolves.
For a deeper exploration of building critical capabilities, see our article on Investing in Critical Capabilities for the Future.
Practical implementation of this approach includes conducting skills assessments to understand what capabilities currently exist internally. Organisations are creating personalised development plans supported by one-on-one coaching rather than generic training programs. Structured upskilling programs for existing employees, particularly in emerging areas, are becoming standard practice. Clear career pathways motivate people to invest in their development, knowing there's a future payoff. And partnerships with educational institutions provide access to specialised training that would be difficult to develop in-house.
Conduct a Talent Market Reset
Convene HR leadership and key hiring managers for an honest conversation about current realities. Review all open requisitions against new market conditions rather than assuming previous urgency still applies. Identify where you can genuinely increase hiring standards versus where scarcity persists and you need to maintain aggressive approaches. Reassess truly urgent needs versus important but less time-sensitive hiring that can afford proper process.
Audit Current Workforce Planning Assumptions
Review attrition rate assumptions that are likely to decrease in the current environment. Reassess time-to-fill estimates by role family since many should improve while others may not change. Update compensation benchmarking data to reflect current market realities. Identify potentially vulnerable workforce segments, particularly if you serve declining industries.
Analyze Your Talent Pipeline Quality
Review recent application volumes and candidate quality by role type to understand where things have actually changed. Identify where you're seeing improved candidate pools that justify raising standards. Reconnect with strong candidates from recent searches who narrowly missed selection. Build proactive pipelines for roles with persistent shortages.
Segment Your Talent Market
Analyze your critical roles across business criticality, current scarcity, turnover risk, and future importance. Create distinct strategies for high-supply segments where you can be selective, persistent-scarcity segments where you must remain competitive, and emerging-opportunity segments where you can access non-traditional talent. Allocate resources differentially based on strategic importance and market dynamics.
Enhance Your Employee Value Proposition
Don't abandon EVP work just because market shifts favor employers. Conduct employee research to understand what actually drives attraction, engagement, and retention. Refresh EVP messaging to emphasize non-compensation elements like development opportunities, purpose, culture, and flexibility. Ensure your EVP resonates with diverse segments including older workers and underemployed talent.
Begin Skills Taxonomy Development
Start identifying critical role families and breaking down roles into component skills. This foundational work will enable the skills-based approaches discussed in our article on Embracing Skills-Based Workforce Planning.
Quality Metrics
Efficiency Metrics
Strategic Metrics
The shift to more balanced labour market conditions provides a critical opportunity to reset workforce planning fundamentals. By moving from scarcity-driven reactive hiring to strategic selection, rebalancing build versus buy decisions, and establishing proper talent segmentation, you create the foundation for more sophisticated approaches.
However, strategic workforce planning requires more than just better hiring practices. It demands transformed forecasting models that can anticipate and respond to rapid market changes. Our next article, Transforming Your Talent Forecasting Models, explores how to move from static historical projections to dynamic, scenario-based planning that keeps you ahead of market shifts rather than constantly reacting to them.
The organisations that emerge strongest from this transition will be those that use the current moment not just to fill positions more easily, but to fundamentally strengthen their workforce planning capabilities for whatever conditions lie ahead.