Australia’s unemployment rate ended the year at a low 4.0%, according to the Australian Bureau of Statistics (ABS). While this may seem like positive news, a closer look at the data reveals a growing concern: job creation is increasingly reliant on government-funded sectors rather than private enterprise.
The Shift in Job Creation
The Australian Industry Group (Ai Group) has highlighted that since the pandemic, the labour market has been largely driven by two groups:
The public sector
Non-market private industries such as health, education, and public administration
Since 2019, these sectors have seen employment surge by 17% and 43% respectively. In stark contrast, the private sector has grown by only 9% over the same period. In the year leading up to the September quarter of 2024, government-funded industries accounted for a staggering 85% of the 473,000 jobs created. The private sector, however, remained flat, growing its employment by just 0.6%.
Why This Matters
Ai Group warns that while public sector job creation has helped maintain employment stability, this trend is not sustainable in the long run. The reason? The government cannot indefinitely fund job growth, especially as structural deficits put increasing pressure on both federal and state budgets.
“A genuinely healthy labour market cannot rely on ever-increasing levels of government spending. Given the structural deficits now confronting the federal and many state government budgets, nor is it sustainable to keep spending our way to job creation,” says Ai Group.
The Need for Private Sector Growth
For Australia’s labour market to remain strong and resilient, the private sector must step up as the key driver of job creation. Businesses need an environment where they can grow, innovate, and expand their workforce without being overshadowed by government-funded industries.
With economic uncertainty on the horizon, the big question remains: How can Australia rebalance its labour market to ensure sustainable job growth?
