Australia’s job market is experiencing a significant upswing, with government-driven employment playing a dominant role in recent growth. According to the Australian Bureau of Statistics (ABS), the labour market added 173,000 jobs in the year to January, bringing the unemployment rate to 4.1%, one of the lowest among advanced economies.
However, this expansion has been largely fuelled by public sector spending, particularly through the National Disability Insurance Scheme (NDIS), raising concerns over long-term productivity.
The ABS’s latest Labour Market Account for Q4 2024 confirms that non-market jobs—those linked to government services—accounted for more than half of the total employment growth. While sectors like healthcare and social assistance have driven this surge, independent economists warn that this trend may be hindering overall productivity.
Public Sector Employment Outpaces Private Sector Growth
Data from the ABS shows that Australia’s employment surge has been led by government-driven jobs rather than private sector expansion. In Q4 2024, the market sector added 27,700 jobs, compared to 38,500 in the non-market sector.
Over the entire 2024 calendar year, this trend was even more pronounced, with 113,900 market-sector jobs created versus 373,100 in the non-market sector.
According to economist Justin Fabo of Antipodean Macro, the non-market sector has been the main driver of job growth since early 2018. Despite representing just 30% of total employment, its contribution to overall job creation has steadily increased from under 26% six years ago.
Independent economist Tarric Brooker further highlights that the growth of government-aligned jobs in 2024 was more than four times the average of the 2010s, reinforcing the dominant role of public spending in employment trends.
A significant share of this increase has come from the healthcare and social assistance sector, largely due to the NDIS. This programme, designed to support Australians with disabilities, has led to a sustained rise in public sector employment.
While this has bolstered job numbers, concerns are mounting over the economy’s increasing dependence on government funding to maintain labour market strength.
Rising Employment, Falling Productivity
While job creation remains strong, Australia’s productivity growth has failed to keep pace. According to Fabo’s analysis, non-market sector labour productivity has declined to levels last seen in 2008, while market-sector productivity has continued to improve. This divergence has contributed to Australia’s overall productivity growth lagging behind that of other advanced nations.
Economists suggest that the structural differences between market and non-market jobs are key to understanding this trend.
Public sector employment, particularly in social services, tends to be less directly linked to economic output compared to private sector roles, where efficiency and profitability drive productivity gains. As a result, the rapid expansion of non-market jobs has placed downward pressure on the country’s overall productivity figures.
This change has ramifications that go beyond labor market data. The sustainability of this approach is called into doubt as the Australian economy grows more dependent on government-driven jobs.
Even if jobs in the public sector offer security and necessary services, sustained economic growth will probably necessitate greater private sector expansion and productivity gains.
