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The problem of skills shortages is regularly highlighted in the media with comments from governments, employers and unions and shortages are one of the issues that public training authorities are concerned with when considering the provision of training. This paper aims to contribute to an understanding of these issues. It provides an overview of skills needs, suggests the definition and causes of skills shortages and reviews the various ways skills shortages can be identified and measured. It looks at selected studies of skills shortages, and some of the policy implications for Australia, providing a context by examining recent reviews of skill needs and offering an overview of the meaning of skills, focusing on generic skills as well as more vocational skills. Ways in which shifts in demand can give rise to shortages that may persist for a considerable time are explored and a possible organisational response, with changes in over-time, an increase in casual employment or an increase in ongoing employment, is described. Short overviews of some recent Australian studies of skills shortages and of policy responses to skills shortages are given. The paper concludes that economic theory suggests that some skills imbalances are a feature of a competitive market. However, before any effective policy is designed and implemented, it is important to understand the operation of the current market and to investigate reasons for its failure. Lack of good empirical knowledge of how markets adjust, and the time lag between an imbalance being observed and the impact of a policy makes effective intervention difficult in practice.