Public Sector Employment in Australia

18 Feb

Australia’s major economic driver through COVID

The government sector is a major Australian employer, providing just over 2 million jobs as of June 2020. The public sector has grown by an average of 1.3% annually since 2008, moderately below the rate of Australia’s population growth (1.6% pa) over the same period.

The majority of growth was driven by State Government employment (1.5% pa), while employment by the Commonwealth and Local Councils grew by a more modest 0.3% pa and 0.7% pa respectively. Employment by State Governments now represents nearly 80% of total public sector employment with jurisdiction over public health care, education and policing.

Overall the share of public employment has been largely stable over time, at approximately 17% of total employment. The public sector has experienced periods of growth and contraction over time along with political and economic cycles (see Figure 1).

Figure 1: Public Sector Employment Levels

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Source: ABS (2020). Employment and Earnings, Public Sector, Australia, 2019-20. ABS, Canberra.

The public sector is expected to be one of Australia’s key economic drivers as many private employers continue to struggle through the COVID-19 pandemic.  However, overall public employment growth was negative over 2019-20 at -0.3%, with notable growth in Commonwealth Government employment (1.6%) offset by reduced employment by the States (-0.1%) and significant reductions by Local Councils (-4.1%). Many local councils are facing significant fallout from the Coronavirus Pandemic due to rates arrears.

Despite the decline in overall employment, Australia’s public sector wages bill grew by 4.3% over 2019-20 (4.6% on a per employee basis) to $174.1 billion. This was well in excess of overall wages growth (1.8% pa) and inflation (0.3% pa)  over the same period.

Nearly 40% of the increase ($2.8 billion) was due to growth in Health Care and Social Assistance wages, with an additional 16,400 public health workers added during the year as part of efforts to fight the pandemic. Financial and Insurance Services, Education and Training, Professional, Scientific and Technical Services, and Other Industries also experienced wages growth in excess of 5% over 2019-20. Though public employment and wages in Construction, Transport, Postal and Warehousing, and Information Media and Telecommunications declined1 over the period.

Table 1: Public Sector Employment and Wages by Industry (2020)

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Source: ABS (2020). Employment and Earnings, Public Sector, Australia, 2019-20. ABS, Canberra.

In the short term public employment looks set to recover entering 2021, with vacancies rising as the domestic economy reopens.  As would be expected, public sector hiring has been far less volatile than the private sector throughout the pandemic (see Figure 2).

Figure 2: Australian Job Vacancies Public and Private Sectors

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Source: ABS (2021). Job Vacancies Australia, November 2020. ABS, Canberra.

However, it is unlikely that wages and employment growth will remain sustainable over the medium term.  With all levels of government facing significant debts and deficits caused by COVID-19 and the associated support and economic stimulus measures, the capacity of public expenditure has come closer to reaching its limits.

Difficult decisions will be required regarding future reductions in expenditure and/or higher taxation from local rates through to federal income and state taxes to support the recovery of public finances.

Time will tell how well stimulus and support measures have been targeted at a local, state and national level to ensure an ongoing return to both communities and to government in terms of the ongoing economic growth required to support a healthy public service.

While public sector employment and stimulus efforts during the pandemic have been critical in keeping people in jobs, sustained economic recovery will depend heavily on the private sector detaching from the need for subsidisation and returning to investment and growth.

1 Arts and recreation services experienced decreased employment alongside a modest (0.4%) increase in total wages.

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