Article courtesy of The Australian.
Conscious of the need to kickstart the nation’s sluggish productivity and economic growth, Jim Chalmers has announced a $900m National Productivity Fund to encourage the states to achieve productivity gains through pro-competitive policies. The current situation is unacceptable. Post- Covid, the Treasurer told Australian Business Economists, productivity fell 2.5 per cent in the June quarter of 2022 – the fastest quarterly decline since 1979. Like economic growth, it has remained sluggish.
In the 12 months to June this year, GDP per hour worked increased just 0.5 per cent and GDP rose just 1 per cent.
Something is fundamentally wrong, holding back growth and revenue to government. If living standards are to be maintained, let alone improved, it must be reversed. Aside from a retrograde, rigid workplace relations system, the problem is more basic. Australia’s public sector, federal, state and local, funded by taxpayers to defend the nation, provide services and administer government policy, is growing out of proportion to the private sector, which generates the revenue to fund the services sector and living standards.
Taxpayers are entitled to be shocked and angry studying Australian Bureau of Statistics data highlighted by national political editor Simon Benson. Over the 2023-24 financial year, the cost of public wages across the three levels of government skyrocketed by $17.1bn to more than $232bn.
And the numbers of public sector employees rose to more than 2.5 million, an increase of about 87,000 in 12 months. The largest personnel increases were at state level (about 68,000 staff, with the biggest rises in NSW, Victoria and Queensland). Taxpayers have also been slugged with a $5bn spike in the wages bill for the federal bureaucracy, with Labor adding more than 26,000 new permanent public servants to the payroll since it was elected. More than half the increase has been for bureaucrats in Canberra, with a 23 per cent increase in the overall wages bill in the capital since June 2022. The ABS data shows the annual wages bill for the commonwealth public sector across the country now exceeds $37bn a year, with a total workforce of 365,400.
In his speech, Dr Chalmers boasted of a figure sometimes referred to by Anthony Albanese in question time: “More than a million new jobs, low unemployment and record high participation means more people who have historically struggled to get work are working.” The proportion of working-age people with a job is two percentage points higher now than it was before the pandemic – at a record high 64.4 per cent, Dr Chalmers said. That is a positive.
But the problem, as Jack Quail reported in September, is that the bumper jobs growth has been fuelled by public sector and government-aligned jobs – a situation exposed by Benson’s in-depth examination of ABS data. With the government funnelling more money into aged care, childcare, higher education and health ahead of the election, nearly two-thirds of the jobs created are funded by taxpayers. Dr Chalmers is right to provide incentives for the states to achieve productivity gains through pro-competitive policies such as streamlining commercial planning and zoning, and encouraging the uptake of modern construction methods. But Labor governments and the LNP in Queensland would do the economy a power of good by reducing public service numbers through natural attrition, and improving efficiency.
The key to productivity and growth lies in private sector investment and activity that fuels the production and revenue that powers the nation.
