Australia faces the challenge of increasing labour supply to sustain growth in view of rising skill shortages and population ageing. Priority should be given to improving incentives to work for groups with the greatest scope to raise supply, such as women with families and lone parents, disability benefit recipients and older workers over 55. Immigration remains an important contributor to labour supply, helping to alleviate skill shortages. Given the high skill level of Australia’s immigration intake, the adequate use made of immigrants’ human capital is a matter of key importance. A significant challenge lying ahead is to remove potential barriers to increased immigration.