Factors that influence the participation rate in Australia

Demographics & Population Ageing

Population aging, driven by long-term declines in fertility and increased life expectancy, has put downward pressure on aggregate labour supply as older workers retire. The changing age structure has subtracted around 0.1 percentage points per annum from growth in the total participation rate, primarily because rising life expectancy increases the proportion of the population in the low-participation 65-and-over age group.

Gender & Caring Responsibilities

The participation rate rose from 61.2% to 63.0% for women (1.8 ppts) compared to 70.4% to 71.2% for men (0.8 ppts) between December 2019 and December 2024 — women driving most of the recent increase.

Health Conditions & Disability

1.9 million people had a long-term health condition, and of these, 714,100 (38%) wanted a job. A further 1.2 million people had a disability, with 462,000 of these wanting a job.

Cyclical (Business Cycle) Factors

Labour force participation typically moves with the business cycle. When businesses are hiring more workers and offering higher wages, the incentives are greater to actively look for work. Conversely, during downturns, discouraged workers drop out of the labour force, reducing the participation rate.
the rate was 67.5% in December 2024. The 2023–24 RBA rate rise cycle then cooled hiring, contributing to the easing to 66.7% by April 2026. Unlike the US and UK, Australia avoided a persistent post-COVID participation shortfall, partly due to JobKeeper maintaining worker-employer attachment.

Wages & Economic Incentives

Higher real wages increase the incentive to enter or stay in the workforce. When businesses are not hiring and are offering smaller wage increases, there is less incentive for people to look for work. Government transfer payments (welfare, pensions) can also affect the trade-off between working and not working

Cost-of-living pressures from 2022 onwards pushed some partnered workers (especially women) into the workforce to supplement household income. Government transfer payments (welfare, pensions, JobSeeker) affect the trade-off between working and not working: the main reason 38% of non-participants gave for not wanting a job was "no need, satisfied with current arrangements" reflecting a sufficient income floor from other sources.

Education & Skills

Higher educational attainment is generally associated with higher participation, particularly for women. The introduction of the 'demand driven university' policy from around 2009 eased constraints on university places, and the number of domestic students grew from 577,000 to 769,000 between 2009 and 2017 contributing to structural shifts in participation among younger age groups

Flexible Work & Part-Time Opportunities

Structural trends that have historically lifted participation include more opportunities to work part time, increased female participation, and people working longer by delaying retirement. The increase in participation over the past 40 years has largely been driven by women entering the workforce, though employed people are now working fewer hours on average, reflecting an increase in part-time work, especially for women and older Australians

The rise of hybrid and remote work since 2020 has materially expanded participation for previously excluded groups. Workforce participation in WFH-eligible roles jumped 9 ppts for women with young children and 4.4 ppts for people with disability or a health condition (2019–2023). Working from home has held at 36% of employed Australians since 2022–23, well above the pre-pandemic average of around 25%. "Ability to work part-time hours" was consistently rated among the most important incentives for non-participants to seek a job.

Job Matching & Skills Fit

The single most important factor for non-participants who wanted to return to work was finding a job that matches their skills and experience, rated as "very important" by 31% of people. This skills-mismatch barrier affects people across health, disability, and general unemployment categories alike.

With 1-in-3 occupations in shortage between 2022 and 2024, structural misalignment between the available workforce and available jobs has been a persistent drag.

Migration

Strong migration has mitigated some of the negative impact of population ageing on labour supply in Australia. Migration tends to add working-age people to the population, directly boosting the potential participation base

Migrants from English-speaking countries tend to have participation rates above those of Australian-born residents (except for migrants who arrived 20+ years ago). Net overseas migration surged to 454,000 in the year to March 2023 after stalling during COVID border closures. Female migrants, however, participate at lower rates than native-born women, largely due to unpaid care responsibilities which is a drag on aggregate female participation.

Retirement Age & Policy Settings

Better health, greater longevity, and an increased share of employment in the services sector (where roles are typically less physically demanding) have encouraged older workers to remain employed longer. Policy changes around pension access eligibility can also significantly affect when people choose to retire

Policy has reinforced this: the Age Pension eligibility age rose from 65 to 67 between 2017 and 2023, directly keeping more 65–67 year-olds in the labour force. There are now twice as many Australians aged 65+ employed full-time in March 2025 (353,000) as in March 2012 (171,000). Superannuation preservation age rules also create incentives around work timing. However, the average intended retirement age remains 65.6 years below pension age suggesting a gap during which some rely on other payments.