Australia’s labour market appears to be tremendously healthy.
According to the Australian Bureau of Statistics’ (ABS) monthly labour market survey, the economy added 173,000 (3.5%) jobs in the year to January.
Australia’s official unemployment rate (4.1%) is also among the lowest in the advanced world, alongside the United States.
On Friday, the ABS released its detailed Labour Market account for Q4 2024, which confirmed that Australia’s job boom has been driven by government spending, most notably via the National Disability Insurance Scheme (NDIS).
As the charts from Justin Fabo from Antipodean Macro show, employment and hours worked both rose by 0.7% in Q4 2024, while the number of filled jobs in Australia rose by 0.4% (the lower filled jobs were due to an increase in multiple job holders).
The non-market (government-aligned) sector continued to contribute more than half of total jobs growth.
- In Q4 2024, the market sector added 27,700 jobs versus 38,500 in the non-market sector.
- In the 2024 calendar year, the market sector added 113,900 jobs versus 373,100 in the non-market sector.
Fabo notes that “since Q1 2018, the non-market sector has contributed more to jobs growth than the market sector, despite still accounting for just 30% of total jobs in Australia (at the start of 2018 the share was less than 26%)”.
Independent economist Tarric Brooker also showed that the growth in non-market sector jobs in 2024 was more than four times higher than the 2010s average.
As expected, the health care & social assistance industry contributed around half of total jobs growth in Australia in 2024, driven by the NDIS.
One consequence of the rise in non-market jobs has been to reduce Australia’s productivity.
As illustrated in the next chart from Fabo, non-market sector labour productivity has collapsed to around 2008 levels, whereas market sector productivity has grown strongly over the same period.
As a result, Australia’s labour productivity growth has lagged most other advanced nations.
The reality is that Australia’s economy and labour market have a soft underbelly and are heavily reliant on government spending.
