Skills and Workforce Development Agreement

I, the Hon Josh Frydenberg MP, Treasurer, pursuant to Parts 2 and 4 of the Productivity Commission Act 1998, hereby request the Productivity Commission undertake a review of the National Agreement for Skills and Workforce Development (NASWD).

Background

The NASWD is a high-level agreement that identifies the 'long term objectives of the Commonwealth and State and Territory Governments in the areas of skills and workforce development, and recognises the interest of all governments in ensuring the skills of the Australian people are developed and utilised in the economy'. Parties to the NASWD have agreed to 'the need for reform of the national training system to ensure it delivers the high quality, responsive, equitable and efficient training and training outcomes needed'. ¹

The NASWD's objectives are to ensure the vocational education and training (VET) system delivers a productive and highly skilled workforce; enables all working age Australians to develop the skills and qualifications needed to participate effectively in the labour market and contribute to Australia's economic future; and supports increased rates of workforce participation.

Scope

In the context of the VET system, the review will consider:

1. achievement of the objectives, outcomes, performance indicators, targets, reform directions and roles and responsibilities set out in the NASWD and their ongoing suitability
2. options for governments to coordinate and streamline their support for vocational education in the future
3. options for nationally consistent government funding and pricing arrangements that maximise efficiency, transparency and the supply of trained workers for the economy and promote consistency of incentives
4. options to promote consistency in funding and loan arrangements between the VET and higher education sectors, and on any cross sector impacts that there might be
5. options to ensure government investment in VET encourages increased participation in training by all Australians and is commensurate with the outcomes and benefits derived by individuals, business, industry, the local and national economy and society more generally
6. potential for future funding arrangements to achieve further targeted reforms, including extending Language, Literacy, Numeracy and Digital Literacy (LLND) programs to all Australians and other relevant recommendations from the Expert Review of Australia's Vocational Education and Training System (the Joyce review) ²
7. options for improved performance indicators, data and information sharing arrangements to enable all governments to assess the effectiveness of VET investment and delivery.

In undertaking this review, the Commission should have regard to current and potential funding arrangements, existing skills programs and contemporary policy settings and labour market needs, noting:

1. the VET and higher education sectors are closely linked with cross system impacts seen through funding arrangements, pathway policies and the skills continuum
2. responsibility for funding and financing of VET is shared between the Australian Government, state and territory governments, employers and individuals. The Australian Government provides funding to the sector through its own programs such as the Australian Apprenticeship Incentives Program, the Skills for Education and Employment program and additional financial support to students through VET Student Loans and Trade Support Loans
3. the differences in local labour market conditions and economies, and the need to deliver opportunities and outcomes for all Australians regardless of geographic, social or personal circumstances
4. the National Skills and Workforce Development Specific Purpose Payment (SPP), made under the Intergovernmental Agreement on Federal Financial Relations. These payments are made independently of the NASWD and are not tied to the achievement of outcomes. The only requirement is that the money is spent on skills and workforce development
5. the Skilling Australians Fund, currently managed through a National Partnership Agreement with signatory state and territory governments, aimed at supporting apprenticeships, traineeships and employment related training
6. the Joyce Review, commissioned by the Australian Government, recommendations in relation to skills programs and VET funding. For example, the report recommended that the Australian Government and state and territory governments agree to a new national agreement where the parties co-fund subsidised qualifications based on nationally consistent subsidy levels
7. the August 2019 COAG agreement for a shared vision for VET that delivers high quality education and training that helps all Australians, and meets the needs of students and employers and any further decisions taken by COAG and Skills Council during the review
8. the new measures in the $525 million Skills Package 'Delivering Skills for Today and Tomorrow' announced as part of the 2019-20 Budget.

Process

The Productivity Commission is to consult broadly including with state and territory governments, provide an interim report in March 2020 that has particular regard to points two, three and five above, and final report within 12 months of receipt of the terms of reference.

The Hon Josh Frydenberg MP
Treasurer

[Received 15 November 2019]

The timeline for the review has been extended, with the final report to be provided in December 2020.