Latest news with #Australian Industry Group
News.com.au
7 days ago
- Business
- News.com.au
‘Crisis': Major problem hanging over treasurer ahead of economic roundtable
A glaring problem is hanging over Treasurer Jim Chalmers ahead of this month's economic roundtable: Australia's growing addiction to public sector jobs. More than 80 per cent of all jobs created in the last two years have been in the non-market sector, according to a new analysis from Australian Industry Group. Usually, the private sector accounts for about two-thirds of job creation in Australia, but since 2023 its job creation rates have collapsed, adding just 53,000 new jobs last year. The government picked up the slack with new jobs in the public sector, where workers are directly employed by the government, and the non-market sector, which includes jobs in the ballooning National Disability Insurance Scheme (NDIS), projected to cost the government $52.3 billion this year. The boom in government-supported jobs led Anthony Albanese to trumpet job creation and low unemployment during the election, but experts warn it is hurting rather than helping the economy. Although unemployment has held at about 4 per cent since the pandemic, for the past two years the government has been creating most of the 400,000 new jobs needed each year to sustain the figure. While public sector jobs are essential for delivering services like health and education, they're less productive than market sector jobs. Having too many creates a drag on overall productivity and poaches labour from the private sector, which is struggling with high vacancies and skills shortages. Mr Chalmers has described productivity as the primary focus of his second term as treasurer. But it's feared the government will heed calls from unions for tax hikes at a key meeting on August 19, initially billed as a 'productivity summit' but later re-named as the 'economic reform roundtable'. 'The reason our living standards have gone up over time is because productivity has gone up over time. It's basically the key driver,' AMP chief economist Shane Oliver told 'If we don't make strides in improving productivity it will mean lower living standards over time. That's why this summit is so important. 'The risk is it just turns into a revenue-raising exercise and we don't get meaningful reforms from it.' Government-funded jobs are tied to public sector spending, which had soared 'sky-high' in recent years, from about 22 per cent of GDP historically, to about 27 per cent after the pandemic, Mr Oliver said. 'The treasurer has said it's a key role of the private sector to grow the economy, but for that to happen the public sector has to get out of the way. 'I'd like to see a cap on public spending of 25 per cent of GDP - that would free up scope for the private sector. It would mean more resources (including workers) available for the private sector and lower taxes long-term.' Deregulation, and tax reform to rebalance income tax to GDP, were two other changes Mr Oliver hoped to see come out of the roundtable. 'If all that comes out of this is a higher tax burden on one group of income earners, it won't achieve its objectives and will result in a worse situation. '...If we want to spend more on NDIS jobs, for example, then we've got to find more public sector jobs to cut back on.' Dr Jeffrey Wilson, head of research and economics at the Australian Industry Group, said the surge in government-supported jobs from 2023 had suppressed unemployment, but at the cost of rebalancing the labour market, which had become 'increasingly dysfunctional' since the pandemic. The issue was a 'notable blind spot' in the public discussion leading up to the economic reform roundtable later this month, Dr Wilson said. But there was an urgent need to turn the private sector back into the main engine of job creation. 'This trend of government-supported job creation is not ultimately sustainable,' he said. 'It places an ever-increasing pressure on state and federal budgets, whose current fiscal positions cannot maintain these record rates of job creation indefinitely. 'Cost blowouts in many areas of government service provision - including but not limited to the NDIS and public sector wage bills - are the corollary of this stimulus.' Dr Wilson argued the Australian labour market's resilience - its ability to withstand economic shocks or disruptions - had become 'wholly dependent' on government spending. Critics took to social media to express outrage at Ai Group's findings. 'These figures demonstrate what those of us in business knew was happening,' former Queensland Premier and Brisbane Mayor Campbell Newman said. 'This is a crisis and it's been caused by over-spending politicians and governments. 'It's not sustainable and yet as we head towards a 'productivity summit' all we hear about is 'tax reform', i.e. more tax needs to be paid. 'This is not the answer - it's government spending that has to be brought under control.'
Daily Mail
17-07-2025
- Business
- Daily Mail
The shocking new economic figure Anthony Albanese doesn't want you to see as immigration surges
Australia's unemployment rate has shot up to the highest level since late 2021, when Sydney and Melbourne were emerging from Covid lockdowns. The jobless rate of 4.3 per cent in June was the highest since November 2021, with 33,600 people losing their jobs and boosting the prospect of an August rate cut. This occurred as the number of full-time jobs fell by 38,000 while 40,000 part-time jobs were created, signalling a sharp drop in working hours. Canberra, the home of federal public servants, had Australia's lowest jobless rate of 3.6 per cent. This was a result of federal government spending hitting the highest level since 1986 outside of the pandemic. Australian Industry Group chief executive Innes Willox said public sector job growth was holding up the labour market as private sector demand for labour weakened. 'For over a year, there has been negligible job growth in the private market sector, with government-supported employment in the public and non-market sectors doing the heavy lifting,' he said. 'A rise in unemployment to its highest level since the pandemic points to the impact that our weak private sector is having on the labour market. 'With the private market sector accounting for two-thirds of employment in Australia, it was inevitable that its sustained weakness would eventually spill over to the broader labour market. It appears this problem is now coming home to roost.' Unemployment was higher than average in New South Wales and Victoria where migrant numbers are highest. 'Excessive migration has played a significant role in pummelling Australia's economic productivity,' Institute of Public Affairs deputy executive director Daniel Wild said. 'It has created extended periods of negative per capita economic growth, and exacerbated the housing and rental crises. Australia's unemployment rate also rose for the first time since December even though the Reserve Bank had cut interest rates in February and May. The latest jobless data from the Australian Bureau of Statistics is also worse than the RBA was forecasting in its May statement on monetary policy, with the 4.3 per cent figure slightly higher than the 4.2 per cent level it had predicted. The bad news on the labour market could make the Reserve Bank more inclined to cut rates on August 12 should upcoming June quarter inflation data show a moderation in underlying price pressures. KPMG chief economist Brendan Rynne said the fact that 34,000 more people are looking for work would make a rate cut next month more likely. 'While quarterly inflation data is still a week or so away, today's data will reinforce the weakness that is continuing within the private side of the Australian economy, and even by itself should be enough for the RBA to drop the cash rate at its next meeting,' he said. The RBA surprised financial markets earlier this month when it kept the cash rate on hold at 3.85 per cent. Governor Michele Bullock argued the underlying rate of 2.9 per cent was still too high in the March quarter, even though it is within the RBA's two to three per cent target. AMP economist My Bui said the fact just 2,000 new jobs were created, compared with market expectations of 20,000, suggested the labour market was weakening, with employers mainly hiring new part-time staff. 'Today's jobs data suggests a potentially broad weakening in the labour market,' she said. 'The composition of jobs gains was also weak.' This also suggested unemployment was now at a level less likely to fuel inflationary wage increases. 'We believe that the state of the Australian labour market is more balanced than tight and is not a source of inflationary pressures, warranting a rate cut in the August meeting,' Ms Bui said. AMP is expecting the RBA to cut rates in August, November, February and May, which would take the cash rate down to 2.85 per cent for the first time since December 2022. That is slightly more optimistic than the futures market pricing for a 3.1 per cent cash rate by early next year. Victoria was by far Australia's worst performing labour market with the highest jobless rate of 4.6 per cent, even though Melbourne receives a large share of overseas migration. New South Wales and South Australia had higher-than-average jobless rates of 4.4 per cent. Queensland and Western Australia had below-average rates of 4.1 per cent. The Australian Capital Territory, the home of federal public servants in Canberra, had the lowest jobless rate of 3.6 per cent, which was better than Tasmania's 3.8 per cent level and the Northern Territory's 3.9 per cent. National unemployment has risen despite rapid population growth, with 447,620 migrants moving to Australia on a permanent and long-term basis in the year to May. This was 33.6 per cent higher than the 335,000 level Treasury forecast for the 2024-25 financial year that ended in June.
