"Today's employment data shows the labour market ended the year strongly, but a growing reliance on government-funded jobs augurs poorly for 2025," Innes Willox, Chief Executive of the Australian Industry Group, said.
"Despite very sluggish economic conditions, the Australian labour market remained resilient in 2024. Unemployment held at around 4.0% across the year, while participation continued to rise and under-employment pleasingly fell.
"Less appreciated is how much this resilience now depends on the Australian taxpayer."
Since the pandemic, the labour market has become increasingly driven by two groups: the public sector and the 'non-market' private industries of health, education and public administration. These industries have seen employment surge by 17% and 43% respectively since 2019. By contrast, the private sector has added only 9% more jobs.
In the year to the September quarter of 2024, these industries accounted for five in six (85%) of the 473,000 jobs created in Australia. The private sector was flat across the year, growing its employment by only 0.6%.
"Employment in non-market industries is largely shaped by government spending," Mr Willox said.
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.
"The weakness in the private market sector is also a cause for concern. These employers account for two in three Australian jobs but are struggling to grow in the face of weak economic conditions and surging business costs.
"When this taxpayer-funded jobs boom runs its course, we could find ourselves in a very difficult situation if the private sector engine still isn't firing.
"Employers concur with Jim Chalmers' assessment that 'the best kind of growth is private sector-led growth'. It is therefore imperative governments make restarting investment, job creation and growth in the private sector a top priority for 2025," Mr Willox said.
