How Australia’s Economy Shifted the Workforce 2016 to 2026

Over the past decade, Australia’s economy has changed in ways that aren’t obvious in the headlines but Australian businesses trying to hire and retain people can feel them.
Between 2016 and 2026, wage growth stalled, housing costs surged, migration reshaped labour supply, and productivity failed to keep pace with population growth. Together, these changes have permanently altered how Australians view work, stability, and employment decisions.

For businesses across manufacturing, construction, logistics, trades, services, and professional sectors, this has created hiring pressure changing the methods of planning.

This article breaks down what has changed and why recruitment structure requires a more measured, forward thinking approach.

A Decade of Wage Pressure Changed Staff Behaviours

From 2016 to 2019, wage growth in Australia sat around 2 to 2.5 % annually. While stable, it failed to improve living standards. Productivity growth was weak, and real income gains were modest at the best of times.

The COVID period temporarily distorted this picture. Government stimulus supported households, savings rose, and the immediate impact of stagnant wages was masked.
That changed sharply from 2022 onward.

Inflation surged well ahead of wage growth, driving the largest real-wage decline in decades. By the time inflation eased in 2025, nominal wages had improved, however, real incomes were still below where many households sat during the mid 2010’s.

The workforce impact

• Employees became more “risk aware”
• Job changes became more selective, not more frequent
• Stability, location, and reliability gained importance alongside pay

For employers, higher wages alone stopped being enough to attract or keep the right people.

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Housing Shifted from Expensive to Exclusionary

Housing has been one of the most commanding forces influencing workforce decisions over the last decade.

From 2016 onward, prices were already higher. Ultra low interest rates during 2020/21 quickened the demand even further, and as broader economic uncertainty increased, subsequent rate rises slowed price growth but this did not restore affordability.

By 2025/26:

• Home ownership was increasingly delayed
• Rental affordability became a structural issue
• Housing access was determined more by existing wealth than income

Why this matters for hiring

• Workers are less mobile geographically
• Commute time and location now influence job choice
• Outer suburban and regional labour pools behave differently from inner city markets

This is especially relevant in Melbourne and Sydney, where population growth has concentrated housing pressure and changed local labour availability.

Migration Solved Labour Gaps and Created New Ones

Australia’s population grew from roughly 24 million in 2016 to around 27.5 million by 2026. The vast majority of that growth came from overseas migration.
Post-COVID migration rebounded strongly, supporting labour supply and economic growth. However, it also introduced new complexity.

Key implications

• Labour supply increased, but unevenly by skill level
• Competition intensified in lower and mid skill roles
• Infrastructure, housing, and services struggled to keep pace

Migration supported growth, but it did not eliminate skills shortages especially in trades, technical roles, and experience reliant positions.

Australia Grew Bigger, Not More Productive

Across the decade, GDP growth was steady but unremarkable. Much of that growth came from:

• Population increases
• Resource exports
• Services expansion

Productivity growth, however, remained weak.

This matters because productivity is what supports sustainable wage growth, investment, and business resilience. Without it, businesses face higher labour costs without proportional output gains.

For employers

• Every hire now carries greater operational risk
• Poor hiring decisions are more costly
• Capability matters more than headcount

This is why businesses are increasingly selective, even under hiring pressure.

Melbourne: A Case Study in Workforce Pressure

Melbourne illustrates these national trends clearly.

Between 2016 and 2026:

• Population growth outpaced all other capitals
• Growth was driven overwhelmingly by overseas migration
• Housing demand continued to exceed supply
• Infrastructure expanded but remained strained

Melbourne’s median age remains relatively young, and its workforce is diverse and internationally connected. At the same time, housing affordability and congestion have reshaped how and where people are willing to work.

For employers, this has created:

• Strong candidate demand, but tighter availability
• Increased competition for reliable, experienced staff
• A need to plan hiring earlier, not later

What This Means for Employers in 2026

The past decade didn’t just create “short term” labour challenges. It rewrote the employment market structurally.
Today’s workforce is:

• More selective
• Less geographically flexible
• More “risk aware”
• More focused on stability and fit

For businesses, this means recruitment can no longer be reactive. Early workforce planning, realistic timelines, and clarity around role requirements are now essential not optional.

At TRS Resourcing, we work with businesses across Melbourne and Sydney that recognise this change and the most successful employers are the ones who plan early, understand their labour market, and secure people before pressure peaks.

How Australia’s Economy Shifted the Workforce 2016 to 2026

 

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