In times of crisis, governments have a responsibility to their citizens to maintain and expand their role in the economy – for both economic and social reasons. This responsibility has never been clearer than during the current COVID-19 pandemic, and its associated economic downturn. Australians are counting on their governments to protect them from the pandemic, support them through the resulting recession, and play a leading role in rebuilding a stronger, healthy society in the aftermath of this unprecedented catastrophe.
Moreover, the economic benefits of providing those essential services spread throughout the state economy, supporting jobs and incomes including in the private sector.
In the context of the upcoming Queensland election, new research from the Centre for Future Work shows that in addition to some 331,000 direct jobs providing broader state-funded public services, 150,000 private sector positions depend on the economic stimulus provided by public sector work. In total, some 480,000 positions are supported, directly and indirectly, thanks to the provision of state-funded public services in Queensland. In particular, regional and remote Queensland depends on the public sector as a crucial source of decent, socially valuable jobs, performed by well-qualified people, earning (and spending) middle-class incomes in their regional communities.
Cutting public sector jobs and wages not only directly affects their own economic fortunes, but also negatively impacts the broader economy through spillover reductions in demand, spending, and production. To dramatise these broader economic consequences, this report describes simulations of two possible three-year austerity scenarios:
- A one-year ‘freeze’ in aggregate public sector payrolls (considering both wages and staff levels).
- A one-year 5% ‘cut’ in aggregate public sector payrolls (effected through some combination of wage and staff cuts).
Over three years, the ‘freeze’ scenario reduces total GDP by a cumulative total of over $9 billion: including the loss of incomes for state public servants, and the resulting loss of income and output in the whole range of consumer goods and services industries which depend on the consumer spending of public sector workers. This decline in GDP translates into the loss of 20,000 person-years of employment in the private sector industries which are hurt by the freeze. Over a similar three-year period, the ‘cut’ scenario would reduce cumulative GDP by $15 billion, and eliminate some 35,500 person-years of employment in private-sector goods and services industries.
In this unprecedented moment, the maintenance of public services (and supporting the jobs that depend directly and indirectly on those services) is surely a more urgent priority than cutting government spending in pursuit of some illusory fiscal target.