It's official: Australia's skills shortage is back with IT managers confirming they are working longer hours and struggling to retain staff.

While the impact is only starting to emerge in some states, the nation's capital, Canberra, is being hit the hardest.

Brynten Taylor, technical services director at the Department of Employment and Workplace Relations (DEWR), said every federal government department with a substantial IT shop is suffering from a skills shortage.

Taylor said his team of 40 people could easily be 10 to 20 percent larger "just to handle the work we have at the moment".

"Another four to five would go down well," Taylor said. "We do have to advertise but we'd listen to anyone who is knocking on the door as we have vacancies all the time and it's just a case of re-advertising."

Although DEWR is not slowing down projects as a result of the labour shortage, current staff are working harder and longer to get projects done which is "increasing stress levels".

He admits some agencies are being forced to outsource.

"Canberra is a small town and the IT community is small, so the supply isn't increasing dramatically. Many rob Peter to give to Paul," Taylor said.

"When DEWR advertises a position if it can pick up one or two people "that's been good".

"There doesn't seem to be that many people coming into IT, and no, it's not just about enough people.

"We're focusing on growing our own - but when you skill them up you have a retention issue. Over the last couple of years it seems to have worsened a bit and we haven't seen any improvement yet."

The department's skills problem forced it to open an office in Sydney where the branch head of application development, Mark Webb, has hired around 150 staff for application development.

Webb said there is probably a 10 percent shortfall in necessary IT staff, but it varies across skill sets, geographies, and experience.

"I've not had any trouble attracting new graduates but at the more experienced end of market it's more competitive," Webb said.

Finding suitable talent has also been a problem for SBS information systems manager Greg Koen, who recently sifted through more than 100 applications in six months to find the right person to fill a network security position.

"I had to replace someone who was here nine years and it's tough to get hold of someone good at Unix and networking," Koen said. "Networking, to a lot of people, means hooking Windows PCs together, but someone with deep knowledge of TCP/IP is a rare commodity."

With more than 100 applicants for the job, Koen narrowed the list down to only three, because "I met some very ambitious people rather blind to their own abilities".

"The skills shortage also happens when you try a one-for-one fit for a long-standing member of a team - that's tough," he said. "I'm not sure what the light at the end of the tunnel is. There will be quite a generational change where more intellectual property will be embedded into devices and the gap between people with technology skills will broaden."

IT departments struggle to increase headcount

While not suffering a skills shortage himself Geoff Lazberger, Stella Resorts Group CIO, said it is "obvious" there is a skills shortage resulting from a combination of outsourcing and the subsequent loss of skills.

"CIOs are having trouble finding people, and it's not just IT skills, but people with business backgrounds," he said. "It's not just IT people for IT's sake, but people who can commercialize projects."

Lazberger said there is a general lack of skills and experience and "the second is more important than the first".

"The affect of the skills shortage depends on the business requirements and what their needs are - from network administration to database development to project management," he said.

"I don't think there is any relevance to size, because there is no formula for how big your IT shop should be," Lazberger said.

According to the 2006 State of the CIO Survey, which interviewed 275 local CIOs, IT departments are buried under the weight of a backlog of requests.

Compiled by Computerworld's sister publication, CIO magazine, the survey found 37 percent of respondents plan to increase headcount over the next 12 months; while 59 percent expect no change, a paltry 4 percent will reduce staff.