It’s trialling a program which would see people willing to make the move paid up to A$5,000 in re-location costs.
Prime Minister John Howard says it makes sense to offer unemployed people incentives to move to find a job.
"Everywhere I go in the country, when I talk to employers, all they are talking about is getting enough workers," Mr Howard told reporters in Adelaide.
"This is the product of prosperity, it's not the despair of depression - in a sense it's an interesting challenge to have."
Mr Howard told the ABC that parts of Western Australia, Queensland and South Australia all have jobs that need filling.
“I do think people who are genuinely looking work and can't get it, particularly those who don't have such strong family ties, should consider taking up these incentives.”
Pilot plan
The federal government is expected within months to pilot the plan targeting areas in NSW with higher than average unemployment.
Under the reported plan, the commonwealth would pay single unemployed people to relocate to areas suffering chronic skills shortages, such as Darwin and Western Australia.
Residents in regions suffering from higher than average unemployment, such as the NSW north coast, the Shoalhaven on the NSW south coast and Sydney's outer suburbs will be targeted.
"It won't be compulsory but I do think people who are genuinely looking for work but can't get it, particularly those who don't have such strong family ties, they should consider taking up these incentives," Mr Howard said.
"The principle is a very simple one: that in any economy that is booming, and our economy is booming at the present time ... there will be a shortage of labour in the areas of intense economic activity, there will still be some pockets of unemployment.
"And if we can persuade with incentives and assistance some
hundreds of people to go from areas of high unemployment to areas of demand ... the principle makes a great deal of sense."
Welcome step: Beazley
Labor leader Kim Beazley says the incentive is a welcome step, but says the government needs to do more to ease Australia's shortage of skilled workers.
"We really have to do something serious about skills at the national level in this country,” Mr Beazley told reporters in Adelaide. "The government goes around with little bits and pieces of action here and there, when what we need is a wholesale set of plans to make us a more skilled people."
Incentive "interesting": Iemma
Meanwhile NSW Premier Morris Iemma has cautiously welcomed the incentive, saying "it's an interesting proposal".
"On the surface, it's an interesting proposal, as long as it's voluntary," Mr Iemma said. "But there are a whole range of other issues that need to be worked through before I would commit to giving it any more than saying that it's an interesting proposal."
The premier said his government's payroll tax concession already helped create jobs in areas of high unemployment.