A series of major federal government IT projects face delays and escalating costs as solid evidence emerges Australia could soon be in the midst of a high-level IT skills shortage.

The issue reached tipping point last week after Reserve Bank Governor Ian MacFarlane warned Cabinet a national skills crisis may drive up labour costs and interest rates.

"I don't think there's anyone who disputes that there are very serious shortages in some areas, that there are businesses that have to find all sorts of ways of paying more to get staff," MacFarlane said.

On the same day, Taxation CIO Bill Gibson revealed a major CRM project had been moved to Melbourne because the Tax Officer was unable to source 100 senior level IT staff in Canberra.

Gibson also conceded other government agencies face problems getting staff, but refused to name names.

Since then Computerworld has confirmed Centrelink and the Health Insurance Commission are struggling to fill roles for senior development staff and managers for a range of new IT projects.

In November 2004, Centrelink tendered for an integrated IT services panel to oversee its massive technology Refresh Program which covers almost all the agency's future IT and communications requirements. It includes mainframe, mid-range, desktop, network and communications, and security services.

Understood to have been originally pegged at between $120 million and $200 million, the cost of the panel contracts may soon rise.

A source within Centrelink, who asked not to be named, said while many government projects were initially on track, the October election caused "paralysis" on numerous projects because much policy was effectively shut down.

"There's definite [IT skills] bottleneck. Demand just built up and up... now everyone is getting funding. It is extremely frustrating. [Agencies] are rushing to spend money because the budget is coming-up. It's famine or feast...then ministers wonder why costs go up," the source said.

A HIC source, who also declined to be named publicly, said there was a "palpable fear" of telling ministers that IT related projects would now have "trouble getting up at the first gate let alone delivering on time".

"The contracting and services community will play this for every cent it's worth. They want a bidding war because it pumps margins. They want agencies to compete against each other," the source said.

The office of the Minister for Communications IT and the Arts and the Australian Government Information Management Office were both unavailable for comment.

Recruiters cash-in

Never short of a line, recruiters have their own explanation for the high-level skills shortage.

Greythorn business analyst Phillip Tusing says there is shortage of senior project managers within Australia, and expects they will be able to name their price for the next five to six months.

"The federal and state governments are searching for project managers and want ones with newer skills."

Ambition IT recruitment director Jane Bianchini said skilled project managers are in high demand, particularly if they are certified.

"The lure of higher salaries overseas has seen many highly-skilled ICT professionals lost to other countries. As new and emerging technologies reach our shores, organizations struggle to find the skills to assist," Bianchini said, noting CRM and ERP upgrades were also driving demands.

NSW general manager for Candle recruitment, Peter Zonnevylle, said chronic underspending on IT projects has gone and project approval has picked up.

"I would not say it is back to blank cheques being written, but the market is definitely coming back," Zonnevylle said.