Anthony Albanese on Sunday will unveil a plan for a Labor government to deliver up to 20,000 extra university places over 2022-23 and fund 465,000 free TAFE places, including 45,000 new ones.

The $1.2 billion "Future Made in Australia Skills Plan" will be directed at giving support in areas of skills shortages.

In his second major policy announcement in two days - the climate plan was announced on Friday - Albanese is both targeting the hard-hit university sector and playing to his central campaign themes of creating jobs and addressing skills.

The university initiative will cost $481.7 million over the forward estimates.

Labor says the free TAFE places will focus on areas suffering critical skills gaps.

It says the policy would help rebuild industries hardest hit by the pandemic, such as hospitality and tourism as well as meet current and future demand in occupations such as child care, aged care, disability care, nursing and community services.

It would provide opportunities for school leavers, people wanting to retrain, and unpaid carers seeking to get back into the workforce.

A $50 million TAFE technology fund would improve IT facilities, workshops, laboratories and tele-health simulators, providing infrastructure for students' needs.

The cost of the TAFE places is $621 million over the forward estimates, which includes the $50 million for capital works fund.

The package includes about $100 million already announced to support 10,000 New Energy Apprenticeships.

The university sector has been particularly hard hit by the pandemic, with tens of thousands of job losses. The closed border cut off the flow of international students - which were vital to many universities' finances - and public universities were not included in JobKeeper.

Labor says that currently there are not enough university places, yet Australia faces shortages of doctors, engineers, teachers, pharmacists and IT experts.

Read more: View from The Hill: Albanese's 43% emissions reduction target by 2030 has some political cover

It says this year the offer rate fell to its lowest level in years, and more than 50,000 applicants missed out.

Extra funding would be allocated to universities based on

• their ability to offer more places in areas of national priority and skills shortages, such as clean energy, advanced manufacturing, health and education

• their efforts to target under-represented students - those who are the first in their family to go to university, Indigenous students, and people in regional, remote and outer-suburban areas

• student demand.

Labor says Australia should be investing in opportunities for Australians to study and raise their skills rather than relying solely on migration to fill the skills gap.

It says one in four businesses are hit by critical skills shortages. Meanwhile nearly two million Australians are unemployed or under-employed.

Albanese will address a rally in western Sydney on Sunday.

Author: Michelle Grattan - Professorial Fellow, University of Canberra