This OECD report comes at a time when governments around the world are beginning the process of recovery from the COVID-19 crisis. With the closure of its borders to non-residents in March 2020, and by quickly imposing social distancing rules and closures of non-essential services, Australia, with among the lowest death rates in the world, has weathered the pandemic relatively well compared to many other countries but some of its regions have been hit harder than others. Small outbreaks have led to short localised lockdowns and some state border closures. Vaccinations began in February 2021, with widespread vaccination expected by the end of 2021.

While Australia has weathered the COVID-19 crisis better than most OECD countries, some communities were initially hit hard. Like many other countries Australia’s labour market felt strong impacts from the first wave of the pandemic, with employment dropping by almost a million between March-May 2020 and the unemployment rate reaching over 7% in July 2020. However, employment was back at pre-pandemic level by February 2021, and unemployment rates dropped below pre-pandemic levels in all regions except the Australian Capital Territory. Until August 2021 when New South Wales began experiencing a spike in COVID-19 cases, Victoria took the brunt of COVID-19 and accounted for about 75% of COVID-19-related infections in Australia, which led to the state implementing some of the most stringent measures against the pandemic. Between February-September 2020, employment in Victoria dropped by 6.6%, but as of June 2021, the number of jobs surpassed the pre-pandemic mark.

Australia’s labour market rebounded quickly from the COVID-19 shock. According to Australian labour force statistics, during the first wave of the pandemic, employment levels fell by almost a million between March and May 2020, and for the first time in over 20 years, Australia’s unemployment rate rose to over 7%. However after peaking at 7.4% in July 2020, unemployment began to fall, and by June 2021 was below its pre-pandemic rate.Employment also started to rebound in June 2020 and reached pre-pandemic levels in February 2021.

COVID-19 has put pressure on regional labour markets in Australia, as it has around the world. The number of employed people dropped by almost a million between March and May 2020. Employment started to rebound in June 2020 and total employment across Australia recovered to pre-pandemic levels by February 2021. COVID-19 is also likely to accelerate the adoption of automation, as firms seek to increase their productivity. The risk of automation varies at the local level in Australia, with some regions more at risk than others. This chapter looks at how automation could impact people and places across Australia, with a special focus on the regions of Sydney-South West (New South Wales) and Warrnambool and South West (Victoria).

COVID-19 risks exacerbating skills mismatches in Australia. This chapter explores recent evidence on firm hiring trends in light of COVID-19. It also looks at available evidence on how skills mismatches and job polarisation were affecting Australian regions before COVID-19. As Australia recovers from the pandemic and prepares for the future of work, action on both the supply and demand side of the labour market will be crucial to ensure workers can make good transitions into new and emerging jobs.

Challenges associated with COVID-19 and the future of work will diverge by place depending on the profile of the local labour market. This chapter outlines policies and programmes being undertaken in Australia to prepare people, places and firms for the future of work. It highlights local examples as well as international practices from other OECD countries.