Australia is facing a problem of skills shortage that might impact on human capital. This may lead to unsustainable economic and productivity growth. The problem is caused by a combination of factors, such as low fertility rate, an ageing population and restricted immigration policy in recent times among others. In order to address this problem Australian government applies some policies including increasing skill migrants, extending the retirement age, increasing women participation in labour market and so on. This paper discusses the Australian policies to address the skills shortage problem and analyse the implications on the economy. In addition, the alternatives of the policies also will be discussed.