Tasmania needs to improve its education outcomes to get more residents into work, a new economics report says.
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"Tasmania has the lowest employment to population ratio, by a country mile," Deloitte Access Economics said in its latest Business Outlook report.
"Low labour market participation means that tapping into the state's non-working population is crucial."
It said that would support a more robust workforce, reduce welfare dependency and increase household spending.
"Lifting the state's educational outcomes is key for this to succeed," it said.
Deloitte said Tasmania had "outsprinted" the rest of Australia and most of the world economically in recent times and had navigated the first few months of opening up after the coronavirus restrictions well.
"Yet some all too familiar longer term structural challenges remain," it said.
"Population growth needs to be maintained and educational outcomes need to help lift both participation and productivity."
Deloitte said state employment was back to record highs and the underemployment rate (the proportion of workers wanting more hours) was at a near 10-year low.
It said major projects would support employment, although some, including the Project Marinus renewable energy developments remained in the "uncertain" category.
It did not expect job gains would continue at the strong pace of the last 18 months.
"In fact, income per person and employment growth is expected to trail the national average over the forecast term," it said.
"In other words, Tassie is fast approaching a crucial turning point as traditional barriers to faster economic growth again rear their heads."
Low labour market participation means that tapping into the state's non-working population is crucial.
- Deloitte
It said they were the "three Ps", being population, participation and productivity.
Issues included a smaller labour pool meaning the state did not have the skills mix it needed, while the ageing population meant there were fewer workers available to replace those retiring.
It said having the nation's oldest demographic profile posed risks to the workforce and the state budget, as extra spending was likely to be needed.
"Tassie needs to be kept attractive for migrants and young people," it said.
"Rising living costs (are) starting to pressure here."
It forecast the state would add an extra 13,000 jobs in the coming four financial years, an increasing unemployment rate and a slowing in wages growth.