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Public policy on skills training under the former Coalition Government prioritised trade training. The Rudd Labor Government is following suit. This priority is based on the false assumption of widespread skills shortages in the trades. Such shortages as exist are largely confined to the construction industry. By contrast, demand for university-trained professionals, particularly in Australia's service industries, has grown much more strongly. Yet, the output of Australia's domestic graduates has been static over the last decade. Skill shortages currently and for the foreseeable future will mainly lie in occupations requiring university training. There is an urgent need for public policy to reflect this situation.