Australia enters 2026 with a labour market that is no longer cyclical but structurally tight particularly in Western Australia. While the volatility of the previous year has eased, employers now face a market defined by sustained skills shortages, elevated labour costs, increased compliance obligations, and a workforce that is more mobile.

This outlook is especially relevant for WA employers in manufacturing, logistics, warehousing, construction, defence, and infrastructure, sectors already competing directly with major government projects for increasingly finite labour pools. 

Western Australian Labour Market Conditions 

Unemployment is expected to remain low by historical standards throughout 2026, sitting in the low-to-mid 4% range nationally, with Western Australia consistently tighter. Workforce participation remains high, driven by strong engagement across older workers, women, and skilled migrants. However, participation gains are no longer sufficient to offset demand. 

Major defence, energy, and transport investments continue to absorb skilled and semi-skilled labour across Western Australia. In particular, expansion across the Henderson defence and shipbuilding precinct is drawing heavily on trades, fabrication, maintenance, engineering, and logistics capability. 

At the same time, sustained activity across Perth’s manufacturing and logistics corridors including Kwinana, Welshpool, Malaga, and the broader south-east industrial belt continues to intensify. 

For WA employers, this means vacancy will be more difficult to fill, particularly candidates with the right skills and experience. Replacement risk is also high with employees becoming increasingly mobile. Retention has always been a priority, it's now more than ever, a multi-faceted imperative.   

Worker Mobility and Retention Pressures

Employee mobility will remain elevated in 2026. Cost-of-living pressures will of course continue to drive employee behaviour. But notably, retention is no longer primarily about pay. Flexibility, predictable hours, supervisor leadership capability, workload management, and workplace culture now carry equal if not greater weight in retention decisions. Employers who fail to address these factors face higher voluntary turnover, escalating recruitment and onboarding costs and loss of capability and productivity. 

Wages, Costs, and Compliance Pressures

Wage growth has moderated slightly from the peaks of 2023–2024 but remains structurally higher than pre-pandemic norms. Award rate increases, superannuation changes, workers’ compensation premiums, and ongoing minimum wage adjustments mean labour is now a permanently higher input cost. 

At the same time, employers have seen increased scrutiny across: 

• Industrial relations compliance and responsibilities 
• Pay pressures, particularly from skilled, qualified and experienced employees 
• Increasing psychosocial safety obligations 
• Record-keeping, classification, and pay accuracy 

This has brought workforce planning and strategy sharply into focus. With continued pressure on costs, employers should be taking a wholistic approach to recruiting, retaining and leading their Teams. The outcome should result in productivity improvement which requires close monitoring of key metrics.

Flexibility Is No Longer Optional

Flexible work arrangements are now embedded in the Australian labour market. While fully remote work has stabilised, hybrid models, flexible rosters, compressed work weeks, and non-standard engagement structures are normal expectations for many employees. 

Casual, contract, and labour-hire models remain critical for workforce agility, particularly in project-based, seasonal or volatile environments common across WA. 

Employers will benefit from good workplace design principles which attract and retain talent, while also driving productivity. 

Persistent Skills Shortages and Structural Gaps

Skills shortages persist into 2026, driven by sustained industrial, defence, and logistics demand across Western Australia. Shortages are most acute across: 

• Skilled trades 
• Maintenance and reliability roles 
• Forklift, logistics, and warehousing supervisors 
• Engineering and technical support functions 

Training pipelines have improved but continue to lag demand. Migration remains essential in Western Australia where global competition for skilled workers is intensifying. 

What We're Seeing on the Ground

Across Perth’s industrial south and south-east, we see direct competition for labour between private manufacturers and large-scale defence and industrial projects. Employers with strong retention and productive labour hire partnerships are holding talent. Those relying on last minute hiring for skilled and even semi-skilled talent are experiencing extended vacancies or relaxing recruitment and selection standards to hire the experience.

Unfortunately, it often results in higher turnover and constrains productivity.

What WA Employers Should Do Now

To remain competitive in 2026, employers should be investing more time and effort in purposeful and strategic workforce planning, linked to productivity targets:

1. Retention is a commercial priority 
   Measure turnover costs, identify specific risk points, and address supervisor leadership capability, management and workload. 
2. Secure talent earlier 
   Build candidate pipelines before vacancies exist particularly for hard to replace roles and in-demand skills. 
3. Design flexibility into workforce models 
   Use a mix of permanent, labour-hire and contract arrangements to manage demand. Examine methods of flexing work arrangements to secure and retain employees who help drive productivity up. 
4. Partner for workforce planning  
   Work with employment partners who have local labour market insight, access to the right talent and can work with you to build sustainable operational and workforce performance. 
5. Link productivity to people strategy 
   Focus on skills utilisation, onboarding quality, building capability and driving retention, not just headcount. 

Looking Ahead

Western Australia’s labour market in 2026 remains resilient and opportunity rich but unforgiving for employers who underestimate competition for talent.

Sustained defence investment and continued manufacturing and logistics activity across Perth’s industrial corridors mean labour constraints will remain elevated well beyond 2026. 



Organisations that plan earlier, partner smarter, and treat workforce strategy as a core business function will perform well. For employers prepared to act decisively, 2026 offers a genuine opportunity to build stronger, more sustainable operations.