EDITORIAL: Bloated public service strangling private sector

Unemployment is rising.

Somewhat paradoxically, so is inflation.

Productivity growth has ground to a screeching halt, as has per capita economic growth.

But amid all this economic doom and gloom, there’s one sector of the economy where business is positively booming.

Australia now has just shy of 2.6 million public servants across Commonwealth, State and Territory and local governments, according to the latest figures from the Australian Bureau of Statistics.

That means about one in five Australians of working age are employed by the government at some level.

And numbers are increasing fastest at the top.

The ABS data shows that the number of Commonwealth employees soared by 5.6 per cent last financial year to hit 385,900 in June.

That’s a sharp acceleration from the growth of the previous year (4.3 per cent).

And it means the Commonwealth public sector is growing three times the rate of the general population.

The Albanese Government has sent the public service on a hiring binge.

All those extra bodies come at a hefty price to taxpayers. The Commonwealth’s wage bill came to $40.9 billion last financial year, an increase of 9 per cent on 2023/24. More public servants being paid higher wages.

Public sector workers earn about $96,000 on average, significantly more than the $76,000 paid to the average private sector workers.

The bill across the entire public service, including State and local governments, was $250 billion.

Labor governments tend to react peevishly to any criticism of public sector bloat. Which teachers, health or emergency workers would you sack, they ask?

There’s no doubt that frontline public service jobs are crucial to a functional society. But many of these extra public servants aren’t filling gaps in our schools, hospitals, aged care facilities or even at Centrelink counters.

They’re bureaucrats and paper pushers and the booming economy they exist in is strangling the private sector to death.

The fact is that all this growth in the non-market sector comes at the direct expense of the private sector.

The private sector is forced to compete with on wages, further fuelling inflationary pressure.

Pumping up the public service may help the Treasurer boast he has helped achieve an economic “soft landing” by keeping more people in jobs, but it’s bad news for everyone else.

It’s the crowding out effect — the same as when government funnel squillions into infrastructure programs, leaving fewer resources for everyone else.

University of New South Wales economics professor Richard Holden predicts it’s only going to get worse, with the Government’s universal childcare pledge to add billions in cost and suck yet more workers out of the private sector.

“It’s this creeping, growing government influence in the economy, taxpayer-funded economy. It’s problematic not only from a cost of the Budget being unsustainable.”

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.