Australia’s employment market remains resilient, but hiring conditions are becoming more selective. Economic
growth is subdued, operating costs remain high and recruitment activity has softened from the post-pandemic peak. Even so, employers continue to face difficulty finding experienced candidates in several critical industries.
This creates a complex market for both sides. Businesses are receiving more applications but are taking longer to make decisions, while candidates are finding that low unemployment does not always translate into an easy job search.
“Employers were expecting the skills gap to close a little bit, and we haven’t seen that.”
On a recent Australia Market Analysis: 2026 Workforce Priorities podcast, people2people Chair Mark Smith was joined by Suhini Wijayasinghe, Head of HR Solutions, to discuss skills shortages, selective recruitment, AI adoption and the capabilities Australian employers will prioritise in 2026.
Hiring is becoming more selective
Despite slower economic growth, Suhini described the employment market as “quite resilient”. However, she also noted that “hiring activity has softened a little bit” as the post-pandemic recruitment boom has settled and fewer job advertisements enter the market.
Employers are still recruiting, but increasing overheads mean every appointment is being assessed more carefully. As Suhini explained, recruitment is “one of the biggest expenses a business can face”, encouraging organisations to become more risk averse.
Candidates are seeing the impact through longer recruitment processes. Positions that once required one or two interviews may now involve several stages before a decision is made. Suhini described hearing from candidates who are “applying for all these different jobs and getting absolutely nothing from it”.
Skills shortages remain unresolved
When Mark asked which challenge was most likely to intensify, Suhini’s response was clear: “It’s the skills shortage.”
Health, education and the trades remain particularly affected. Employers continue to struggle to find job-ready candidates, while local talent pipelines are not producing enough experienced workers to meet demand.
Suhini said there is “a distinct lack of skills coming in from where we usually access them from”. Cost-of-living pressures are also influencing career decisions, with some workers moving away from essential industries towards roles connected to technology, data and artificial intelligence.
This means employers may need to reconsider rigid requirements and invest more heavily in training people who have transferable skills and the capacity to develop.
Internal mobility offers another solution
External recruitment is not always the most practical answer. Suhini said employers are increasingly asking, “How can I upskill my current workforce that already knows how we operate?”
Developing existing employees can reduce hiring costs, shorten onboarding and help organisations retain valuable knowledge. It can also allow businesses to fill emerging capability gaps before they become urgent.
Employees who already understand the organisation’s systems, clients and culture may be well placed to move into adjacent roles. For employers, the priority is identifying people who are adaptable and willing to learn.
AI is reshaping recruitment
AI has made it easier for candidates to refine résumés, cover letters and applications. However, Suhini said job seekers now need to be “really nuanced with every single application they apply for”.
Employers are also using AI to automate recruitment tasks and process larger application volumes. However, additional volume does not necessarily produce better candidates or shorter processes.
Suhini questioned whether automation had “actually reduced the total time spent on that work”. Technology may save time initially, but employers can lose those efficiencies if they create additional screening and assessment stages.
The wider conversation has also changed. Twelve months ago, employers were asking whether they needed AI. Now, Suhini said the focus is, “How do we actually use it, and how are we going to implement it?”
Career paths are becoming less linear
Candidates may need to reconsider traditional ideas about progression. Suhini encouraged job seekers to “move away from the concept that career paths are linear”.
A sideways move, temporary position or micro-credential may provide the experience needed for a stronger opportunity later. Suhini described this as “two steps back for three steps forward”.
AI and data literacy will also become essential across industries. Suhini compared these capabilities with Microsoft Office skills, which became standard workplace requirements regardless of a person’s profession.
Employers are looking for people who will be “malleable and adaptable” as technology changes responsibilities and processes. Candidates who demonstrate curiosity and continuous learning may stand out more than those who remain limited by a fixed job description.
Communication remains a priority
Digital tools and flexible work have changed how teams collaborate, but they have also introduced new challenges. Suhini noted that it is “much easier to hide behind emails” when teams have fewer face-to-face interactions.
Employers still need people who can build relationships, share ideas and communicate confidently across different channels. Flexible work is likely to remain, but employees must have the capability to make it successful.
As Suhini explained, “Just holding the conversation is no longer enough.”
Preparing for Australia’s 2026 workforce
Australia’s hiring market is likely to remain selective, skills-focused and increasingly influenced by AI. Employers will need to develop existing employees, streamline recruitment and invest in technology that genuinely improves outcomes.
Candidates should strengthen their AI and data literacy, remain open to different career pathways and demonstrate how they can adapt as roles evolve.
As Suhini concluded, “It’s a changing world out there.” Employers and job seekers who begin preparing now will be better positioned for the workforce priorities of 2026.
How can employers and candidates prepare for Australia's changing workforce?
- Review existing workforce capability before assuming every skills gap requires an external hire.
- Build practical AI and data literacy across all roles and levels of the organisation.
- Remove recruitment stages that add time without improving the final decision.
- Give candidates clear information about expectations, timelines and selection processes.
- Remain open to sideways career moves, micro-credentials and alternative development pathways.
- Strengthen communication and collaboration skills across hybrid and remote teams.
