Mark Harrison, Founder & Director · October 2026 · Data current as of 15 October 2026
The first in a quarterly series. A new update is published at the end of each quarter.
In brief
- The labour market is softening, yet the Reserve Bank raised the cash rate to 4.60% on 29 September 2026.
- Demand has concentrated on work that protects the business or lifts its productivity.
- Supply is shrinking: the technology workforce contracted in 2025 and new ICT enrolments fell 21% in a year.
- Wage growth in professional, scientific and technical services has fallen below inflation.
- Over the next 12 months, expect specialist scarcity to persist and the contract share to keep rising.
Where the market sits
The Australian technology market has stopped moving as one thing. The headline numbers look like a slowdown; trying to hire a cloud engineer or a cyber specialist does not. That gap is the story.
Unemployment reached 4.7% in September 2026, with employment down 39,300 on the month (4.6% on the trend measure) (ABS Labour Force, September 2026, released 15 October 2026). Against that softening, the Reserve Bank raised the cash rate to 4.60% on 29 September, citing inflation that remains too high, higher global energy prices, and rising AI-related demand pushing up the price of technology goods (RBA, 29 September 2026).
For anyone planning headcount, a rate rise into a loosening labour market means IT investment faces a higher hurdle rate just as AI spending competes for the same budget.
Where demand sits
Employers are funding work that protects the business or compounds its productivity, and deferring the rest. The most in-demand disciplines are software engineering (38% of employers), data and analytics (30%) and project management (29%), while AI and machine learning (28%) and cybersecurity (26%) rank among the most acute areas of skills shortage (Hays IT Contractor Rates Guide FY26/27, via ARN, 8 October 2026).
The premium has moved from building the thing to governing, securing and controlling the cost of what AI and cloud already do.
Where supply sits
The supply squeeze is structural.
- Australia’s technology workforce contracted 0.3% to 967,000 workers in 2025, against an ACS projection that the country needs 259,000 more technology professionals by 2035 (ACS Digital Pulse 2026).
- New university ICT enrolments fell to 7,686 in 2026, from roughly 9,750 the year before — a 21% drop in one year, putting the industry’s goal of 1.2 million technology workers by 2030 in serious doubt (ACS Information Age, 3 February 2026).
Fewer people are studying technology, there are fewer first rungs for those who do, and the workforce is shrinking. Employers report receiving more CVs than ever (Morgan McKinley, via IT Brief, 3 March 2026) — roughly 185 applicants per role (Emanate Technology, 31 March 2026) — yet find specialist briefs no easier to fill, because volume is not fit.
What is happening to pay
Professional, scientific and technical services recorded the lowest annual wage rise of any Australian industry: 2.5% in the year to the June 2026 quarter, against all-industry growth of 3.2% (ABS Wage Price Index, June quarter 2026, released 19 August 2026) and inflation of 3.8% (ABS CPI, year to June 2026). For many technology workers in that industry, that is a real-terms pay cut.
Technology salaries have stabilised after several years of volatility, and employers are less inclined to offer salary premiums (Robert Half 2026 Technology Salary Guide, 12 February 2026).
Where a specialist skill is needed for a defined piece of work, contract is the common route: 60% of employers engage contractors to access specialist skills for project-based work (Hays IT Contractor Rates Guide FY26/27, via IT Brief, 6 October 2026).
The next 12 months
The Reserve Bank’s forecasts have unemployment rising gently: 4.5% in December 2026, 4.6% by June 2027 and 4.7% by December 2027, with wage growth easing from 3.3% to 3.1% and trimmed mean inflation falling from 3.3% to 2.6% across the same period (RBA Statement on Monetary Policy, August 2026).
September’s actual 4.7% has already reached the December 2027 forecast, more than a year early — either the forecast is stale or the easing is running faster than the Board expected.
Four expectations, with confidence levels:
- Specialist scarcity persists — high confidence. A shrinking workforce and a collapsing graduate pipeline cannot resolve in 12 months.
- Pay growth in professional services stays below inflation — high confidence. 2.5% against a 3.3% inflation forecast.
- Contract share keeps rising — moderate to high confidence.
- Entry-level hiring remains very difficult — moderate confidence. Its pace is not well quantified.
The downside risk is a further rate rise, which would compress discretionary technology programmes. The upside risk: AI adoption remains in its early stages, with a growing number of businesses beginning to test proof-of-concept projects (Robert Half 2026 Technology Salary Guide, 12 February 2026). If those projects move into production, demand for implementation, governance and security talent steps up sharply against a contracting workforce.
What this means
For hiring: put the salary range on the advertisement — 63% of technology hiring managers have lost a candidate because salary expectations were misaligned, with the salary range not shown on the job ad (Robert Half 2026 Technology Salary Guide, 12 February 2026). Where a skill is scarce, a scoped contract gets it into the business this month rather than next quarter.
For technology professionals: the generalist middle is crowded and the specialist end is not. That distance is a skills gap rather than an experience gap.
For workforce planning: the pipeline problem is structural. Building capability now is cheaper than competing for the same specialists in 2028.
Sources and method
Official and central bank: ABS Labour Force, Australia (September 2026, released 15 October 2026); ABS Consumer Price Index (year to June 2026); ABS Wage Price Index (June quarter 2026, released 19 August 2026); RBA cash rate decision (29 September 2026) and Statement on Monetary Policy (August 2026, source of all forecast figures).
Industry body: ACS Digital Pulse 2026 (workforce size, 2035 projection); ACS Information Age (ICT enrolments, 3 February 2026).
Recruiter surveys and estimates — self-reported, not independently audited: Hays IT Contractor Rates Guide FY26/27 (via ARN, 8 October 2026, and IT Brief, 6 October 2026); Robert Half 2026 Technology Salary Guide (12 February 2026); Emanate Technology (application volumes, 31 March 2026); Morgan McKinley Australia Salary Guide 2026 (via IT Brief, 3 March 2026).
If you’d like to talk through what this means for a specific role or team, start a conversation with Mark.