Artificial intelligence (AI) has “profound implications” for improving efficiency and compliance in the vocational education and training (VET) sector, a new report has advised while warning that just 1 in 5 institutions has incorporated AI into their digital strategies.

Just 44 per cent of the 276 directors, CEOs, and VET administrators responding to ReadyTech’s Voice of VET 2024 report said their institution has a formal digital transformation strategy, although 61 per cent agreed that digital transformation is a high priority as institutions seek to deal with challenges such as staffing resources, skills, training, and wages.

Although surveyed registered training organisations (RTOs) were positive about their finances overall, ReadyTech general manager for education Trevor Fairweather warned that their optimism “is tempered by the persistent challenge of staffing,” which was identified as the primary obstacle to progress this year.

“In a tight labour market with rising living costs,” he said, “recruiting and training the right people remains difficult for training providers.”

The new National Skills Agreement – introduced last year to improve the VET sector’s national consistency and resourcing – would be “a huge step towards bolstering Australia’s workforce,” Fairweather said, adding that “for far too long, Australia has grappled with workforce shortages, hindering progress and growth across critical industries.”

Challenges ahead

Surveyed institutions expect to invest more in student retention over the coming year, with pressure from competitive activity easing but staffing resources, skills, training, and wages named as the biggest administrative challenges for the sector.

Digital transformation is seen as a way of meeting those challenges, with fully 73 per cent agreeing that improving the student experience is a high priority and 71 per cent of respondents saying the same about increasing employee productivity.

Nonetheless, half said their institution is not funding digital transformation sufficiently – something that could prove problematic as the VET sector increasingly pivots to remain relevant in a climate where students are less interested in formal VET Certificate courses and far more interested in flexible, targeted learning.

Amidst surging demand for accredited short courses, non-accredited short courses, and non-accredited microcredentials, the report found that demand for traineeships, apprenticeships, accredited VET Certificate courses and non-accredited long courses is declining the most.

Those findings corroborate a recent analysis by the Future Skills Organisation (FSO), which released an initial workforce plan based on six months operating as the Jobs and Skills Council for finance, technology and business sectors – and called for major changes including clearer pathways from VET courses into tech occupations.

Facing shrinking relevance to employers and a steady decline in completion of VET Certificates, the FSO noted that many employers prefer university educated workers to those from VET streams – even though earlier studies have found many universities are not producing job-ready IT workers – and warned VET institutions “to shift both reality and perception” to maintain the VET sector’s relevance.

Could AI save the VET sector?

While many in the VET sector see digital transformation as naturally important, AI could accelerate that transition by more actively attracting and engaging with students throughout their learning.

“AI’s potential to enhance accuracy and productivity in compliance is evident, providing a dynamic solution to the complexity of regulations,” Fairweather said in calling effective adoption of the technology “crucial for educational excellence” – and warning that those without AI strategies were “at a disadvantage in a race with profound implications for VET.”

Some 57 per cent of respondents said AI will impact their delivery of course content – which was named as the second most promising opportunity facing RTOs – while AI technologies are also expected to affect training and course management (named by 45 per cent of respondents), student experience (42 per cent), learning management (40 per cent), and student productivity (35 per cent).

AI could also prove invaluable as the VET sector fights to improve overall student completion rates that averaged 80 per cent over the last year – but plunged to between 50 and 79 per cent at a quarter of institutions.

Better utilisation of data, supported by relevant AI technologies, will be crucial as RTOs invest to sharpen their student retention and completion strategies in the shadow of a major overhaul of university teaching.

RTOs must be better at identifying students at risk of dropping out of courses – and intervening to keep them engaged – as well as providing online training, changing delivery times, and looking for better qualified students who are more suitable for specific courses.

Ultimately, embracing not only digital transformation but AI capabilities will be crucial in helping the sector attract new students and equip them with the skills the job market needs.

“A high-performing VET sector is crucial for achieving a fairer society and a stronger economy,” said ReadyTech CEO Marc Washbourne, who welcomed the VET sector “thinking deeply and long-term about how they are likely to deliver education and training into the future.”

“It’s clear,” he said, that “digital transformation remains pivotal in enabling RTOs to keep up with the evolving landscape and drive positive outcomes for students and employers.”