CANBERRA: Government spending in Australia has increased significantly in recent years, and looks likely to keep climbing. A research note from ANZ highlights that public sector spending accounts for more 23% of Australia’s GDP. The bank’s analysts said that underlying public expenditure grew by 5.4% in 2016, noting that public sector spending is not loudly promoted as governments also want to maintain their credit ratings. Despite that, the analysts said increased government involvement has provided an important cushion for the Australia economy in the transition away from the mining boom. In terms of employment numbers, the private sector is around 6.5 times bigger than the public sector, but it’s only grown at around 2.5% over the last two years. Conversely, public sector employment has shot up over the same period — growing 12.4% between May 2015 and May 2017. The public sector is also doing its part to prop up Australia’s slow wages growth, rising by 2.4% in the March quarter while private sector wages only grew by 1.8%.
According to ANZ, the public sector will continue to play an important role in the Australian economy over the next few years. “With monetary policy currently having an anemic impact outside of the housing sector, we see well-placed public sector spending as an important counter to the weaker parts of the private sector,” the analysts said. The bank expects that conditions will remain supportive for higher government spending, with the public sector to contribute around 0.7% to economic growth over the next two years. Public sector expenditure currently accounts for more than 20% of GDP.
