Australian prime minister Julia Gillard has revealed she intends to tackle the problem of the country's skills shortage.

In a speech to the Committee for Economic Development of Australia (CEDA), she said the lack of skilled workers is the largest challenge to arise from the economic boom of the last 25 years.

She pointed to the mining sector as being in particular need of staff due to a predicted shortfall of 36,000 skilled employees by 2015.

Another important issue is the ageing population, Ms Gillard added, along with the high number of Australians currently outside of the labor market.

"This year I will continue to take steps to improve the incentives for such potential workers to rejoin the labor market, while also investing in the intensive support needed to lift their skills and job readiness," she said.

Figures from the Australian Bureau of Statistics suggest December employment rose to 11.4 million, while unemployment fell to 618,800.

The overall unemployment rate dropped to 5.1 per cent, with the participation rate increasing to 66 per cent, according to the report.

Posted by Sarah Dixon