CBA: Australian economy now a ward of the state

Via Gareth Aird of CBA comes a note to shake the towers of the great:

Overview Economic growth has slowed in Australia. But looking at the economy from a public/private sector perspective shows a marked difference in what has been occurring. Government demand has been strong while private demand has been weak (chart 1). In summary, Australia has been on a trajectory whereby the public sector has been increasing as a share of the economy on all key measures. This has been partly funded by Australian workers who are handing over an increasing proportion of their income to the Government each year.

In this note we take a look at the most recent trends in employment and consumption from a public/private sector perspective. Our findings go some way to explaining the supposed “tension” between the soft GDP and strong employment data. The results indicate that the public sector has been putting on headcount at a much faster rate than the private sector. While growth in public sector employment boosts demand in the economy in the short run, there is a financial cost that is born by taxpayers. And growth in public sector employment is generally not associated with much in the way of a productivity dividend.