My Blog

Tag: Troy Henderson

  • The Same Mistake Twice

    COVID-19, Wages & Entitlements

    The Same Mistake Twice

    The Self-Defeating Consequences of Public Sector Pay Freezes
    by Troy Henderson and Jim Stanford

    Authors

    Troy Henderson

    Jim Stanford

    Media release



    Public Sector Pay Freezes Could Push Economy From Recession to Depression

    New research from the Australia Institute’s Centre for Future Work reveals the consequences of freezing public service pay, both for public sector workers and for the broader economy.

    Governments are devoting unprecedented resources to protecting Australians against the health and economic effects of the pandemic, but a contradictory push to adopt fiscal austerity measures is also becoming apparent. Leaders of governments at all levels — federal, state and local council — have already announced plans to freeze wages and cancel previously agreed pay raises for public servants.



    Full report

    Share

  • Messing With Success

    Public Sector, Procurement & Privatisation, Wages & Entitlements

    Messing With Success

    Victoria’s Puzzling Turn to Austerity
    by Troy Henderson and Jim Stanford

    Authors

    Troy Henderson

    Jim Stanford

    The Centre for Future Work has released new research estimating the negative impacts on wages and spending power of the Victoria government’s proposed 2% cap on wage increases for the state’s large public sector workforce.

    In recent years, Victoria’s economy has consistently been the strongest in Australia: with the most new jobs, the fastest growth in wages, and the biggest expansion in output. The state government has been both a key cause of that growth, and a major beneficiary of it. New expenditures on expanded public services and infrastructure have been crucial engines of the state’s growth. In turn, that strong growth generated huge fiscal dividends for the state government, through a robust, diversified and growing revenue base.

    Given this positive history, it seems inexplicable that the state government would now mimic tools of fiscal austerity that have been implemented, with negative and unintended consequences, in other Australian jurisdictions. The government has imposed a stringent cap on public sector wage increases: 2% per year over the coming four-year period. That cap falls well below relevant benchmarks: including growth rates for state GDP, state revenues, overall state wage growth, and Reserve Bank targets for both wage and price inflation. It also falls far below what the state’s elected representatives will receive in their own wage increase this year – including, in particular, the Premier and Treasurer, who have been awarded an 11.8% salary increase.

    The wage cap would artificially suppress total state public sector compensation by over $3 billion over the coming four years – compared to normal compensation patterns. It would short-circuit a badly-needed recovery in wage growth that is just taking hold in Victoria’s broader labour market. It would damage consumer spending, exert a chilling impact on private sector wage settlements, and do particular damage to regional communities which depend especially strongly on public sector jobs and incomes. The negative spillover effects of this unnecessary cap would extend throughout Victoria’s economy, totalling far more than the direct $2 billion hit to wages.

    The wage cap would be exacerbated by a secondary, equally puzzling austerity measure announced in the state’s 2019-20 budget: an increase in the so-called “efficiency dividend,” to take effect form 2020-21, that would impose an effective and homogeneous budget cut on departments and programs. This expanded “efficiency dividend” is justified as a tool for eliciting greater efficiency in service delivery; in practice it amounts to a mindless, across-the-board cut in expenditures, service delivery, and potentially employment.

    There is no fiscal problem that justifies either of these austere measures. The state government is not experiencing a deficit; it plans to generate consistent annual operating surpluses over the next four years. Its total revenues will continue to grow strongly. Financial analysts and debt rating agencies are unanimous that the state’s net debt and interest payments are fully manageable, and the government’s net worth remains strongly positive.

    In sum, the Victoria state government enjoys a healthy and enviable fiscal position; there is no fiscal argument at all for the imposition of these unnecessary forms of fiscal austerity. The government’s flirtation with austerity, despite the proven success (both economic and political) of its previous, more expansive approach, is puzzling and concerning. And it will undermine the positive economic success which explains why Victoria currently leads Australia in employment, growth, and incomes.

    The state government in Victoria faces no fiscal challenges that could justify either of these forays into the realm of austerity. The paper concludes with five key recommendations:

    1. The state government should abandon the imposition of a wage cap on state public sector workers.
    2. Instead, the state government should enter into normal negotiation of enterprise agreements in all broader public sector enterprises and agencies. The state’s fiscal outlook is obviously a relevant and important factor in those negotiations, but it does not justify the imposition of direct wage controls.
    3. The state government should abandon the proposed increase in the annual “efficiency dividend,” which has proven to be a blunt and ineffective budgetary strategy.
    4. Instead, the state should undertake an open-ended program review of departments and agencies. The goal of this review should be enhancing genuine efficiency – defined as improving the effectiveness and quality of public service delivery – rather than attempting to attain a target budget cut.
    5. Finally, the state should commit to no forced redundancies during the course of that program review. Any identified redeployments (motivated genuinely by improving service and better allocating existing resources) should be attained through relocation, retraining, and voluntary severance.

    Please read the Centre’s full report, Messing With Success: Victoria’s Puzzling Turn to Austerity, by Troy Henderson and Dr. Jim Stanford. The report was commissioned by CPSU Victoria.



    Full report

    Share

  • Wages, Taxes and the Budget: How to Genuinely Improve Living Standards

    Macroeconomics, Wages & Entitlements

    Wages, Taxes and the Budget: How to Genuinely Improve Living Standards

    by Jim Stanford and Troy Henderson

    Authors

    Jim Stanford

    Troy Henderson

    This week’s pre-election Commonwealth budget will feature reductions in personal income taxes, as the Coalition government tries to overcome a disadvantage in the polls in the coming federal election. Public debate in recent weeks has been focused on the economic and social hardship caused by the unprecedented slowdown since 2013 in Australian wage growth. It is likely that the government will portray its personal tax cuts as a form of “compensation” for slower wage growth.

    But new analysis from the Centre for Future Work shows it is mathematically impossible for personal income tax cuts to offset the loss in family incomes resulting from years of wage stagnation. The report simulates the effects of ongoing regular wage increases on household incomes, compared to the “savings” of personal income tax cuts. Regular, compounding wage increases provide boosts in disposable income dozens of times larger than tax cuts. Moreover, tax cuts always come with a “cost” for households – in the form of foregone public services and income supports that also contribute to workers’ standard of living.

    Highlights of the new research include:

    • Every one of the government’s budgets since its first (in 2014-15) has wildly overestimated the growth of wages in its official forecasts. Every single year-forecast in every budget (14 year-forecasts in total) has overestimated actual wage growth. If workers’ wages had actually grown as fast as government budgets predicted, the average full-time worker would have $4000 per year in additional income today than they actually do.
    • Wage increases in Australia, already inching along at record-low rates, slowed down further in the December quarter – to an annualised rate of less than 2%. A temporary rebound in wage growth earlier in 2018 was mostly due to a stronger increase in the minimum wage (3.5%), which came into effect on July 1, but has now been absorbed by the labour market.
    • Personal tax cuts likely to be included in the 2019-20 Commonwealth budget will have only a small impact on disposable incomes for workers: worth less than 0.5% for most workers (and worth nothing for many workers). Moreover, the “savings” of tax cuts are offset by the cost of foregone public services, infrastructure and income supports which inevitably accompany shrinkage of the government revenue base.
    • In contrast, annual wage increases at traditional rates (around 3.5% per year, such as prevailed in most years prior to 2013) deliver much greater benefits to workers. Even after deducting taxes on their extra incomes, workers at various income levels receive much larger gains from normal wage increases than tax cuts – especially when those increases are compounded over consecutive years.
    • For example, a worker earning $60,000 per year would see a $210 increase in disposable income from the simulated tax cuts. But they would receive almost $1400 extra disposable income (almost 7 times as much) from a single 3.5% wage increase. And close to $6000 (over 20 times as much) from 3 consecutive years of normal wage increases.

    It is mathematically impossible for tax cuts to deliver ongoing improvements in disposable incomes, let alone of a scale comparable to the benefits of normal wage growth. To genuinely achieve rising living standards for working Australians, the emphasis of economic and budget policies should be shifted to strengthening the institutions (like minimum wages, the awards system, and collective bargaining) that could rekindle normal wage growth.



    Full report

    Share

  • What’s a Million, Anyway?

    Employment & Unemployment, Macroeconomics

    What’s a Million, Anyway?

    Australia’s 2013-18 Job Creation in Historical Perspective
    by Jim Stanford, Troy Henderson and Matt Grudnoff

    Authors

    Jim Stanford

    Troy Henderson

    Matt Grudnoff

    Senior Economist

    Media release



    Million jobs not what it used to be: new report

    In the lead-up to the 2013 federal election, then-Opposition Leader Tony Abbott made a high-profile pledge that a Coalition government, if elected, would create 1 million new jobs over the next five years. Abbott was elected (although later ousted by his own party), and total employment in Australia did indeed grow by over 1 million positions between 2013 and 2018.  Current Prime Minister Scott Morrison hopes that this success can resuscitate his party’s flagging fortunes: he has pledged, if elected, to create even more jobs (1.25 million) over the next five years.

    But a new report from the Centre for Future Work takes a closer look at the government’s claims, and finds that Australia’s job-creation record since 2013 has actually been unimpressive.

    Australia’s working age population is over 20 million, and growing rapidly.  The labour market must create well over 1 million new jobs every five years, just to keep up with population growth.  Moreover, it was only due to a surge in part-time jobs (most of them casual, low-wage positions) that Mr. Abbott’s million-job target was met.  If full-time work had retained its previous share of all work, the number of new jobs would have fallen well below the 1 million benchmark.

    The Centre for Future Work has prepared a comprehensive review of Australia’s labour market performance since 2013, on the basis of year-end employment data for 2018 just released by the Australian Bureau of Statistics.

    The report is based on a detailed analysis of official labour market statistics, going back as far as 1958.  Major findings include:

    • 2013-18 was the tenth time Australia created at least 1 million jobs in 5 years.  The first time was 30 years ago.
    • But Australia’s population is much larger now, so 1 million jobs is no longer such an “achievement.” The rate of employment growth since 2013 has been slower than the long-term historical average.
    • Part-time jobs accounted for almost half of all jobs created since 2013.  Most of them are casual jobs, and average wages are much lower.
    • Hours of employment grew more slowly since 2013 than Australia’s population.  That means the amount of work available, on average, to each potential worker declined compared to the previous 5 year-period.
    • Because new work was not keeping up with population growth, total underutilisation of workers (including unemployment, underemployment, and discouraged non-participation) got worse over the last 5 years.
    • In addition to an inadequate quantity of work, the quality of work has also deteriorated by several measures: including more casual jobs, precarious self-employment, and reduced coverage by collective agreements.
    • Since 2013, wage growth has slowed to the slowest sustained rate since the 1930s.  And since nominal wages are not keeping up with inflation, real wages have declined.

    In this broader statistical perspective, Australia’s recent labour market performance has not been stellar. It’s been mediocre, at best.  That explains the growing anger expressed by millions of Australians concerned about stagnant wages, insecure work, and falling living standards.



    Full report

    Share

  • Excessive Hours and Unpaid Overtime: 2018 Update

    Labour Standards & Workers’ Rights

    Excessive Hours and Unpaid Overtime: 2018 Update

    by Troy Henderson and Tom Swann

    Authors

    Troy Henderson

    Tom Swann

    Media release



    ‘Go Home On Time Day’ 2018: Australians Owed $106 Billion in Unpaid Overtime, Report Reveals

    2018 marks the tenth annual Go Home on Time Day (GHOTD), an initiative of the Centre for Future Work at the Australia Institute that shines a spotlight on overwork among Australians, including excessive overtime that is often unpaid.

    Over many years, the Centre for Future Work and the Australia Institute have commissioned regular annual opinion polls to investigate overwork, unpaid overtime, and other instances of “time theft” in Australia. This year’s poll of 1459 Australians was conducted between September 17-26, with a sample that was nationally representative according to gender, age and state or territory.

    Of the 1459 respondents, 880 (or 60 percent) were currently in paid work. That subsample was then asked several questions regarding their hours of work, whether they wanted more work or less, and whether they worked unpaid overtime in their jobs.

    This report summarises the results of that polling, and places it in the context of national labour force trends:

    • There is growing evidence of a sharp polarisation in Australian employment patterns, between those with full-time, relatively secure jobs, and a growing portion working part-time, casual, temporary, or insecure positions.
    • In the survey, 54 percent were employed in permanent full-time jobs, while 46 percent were employed as part-time, casual or self-employed workers. In other words, almost half of the sample experienced one or more degrees of nonstandard or insecure work – broadly in line with the experience in the overall labour market.
    • Compared with last year, there was a significant increase in those wanting more paid hours (from 34 percent to 40 percent) and a decrease in those wanting fewer paid hours (from 19 percent to 15 percent). We believe this shift reflects the high levels of underemployment in Australia’s labour force, and the ongoing struggle of those in non-standard jobs to attain enough hours of work.
    • In the survey, 20 percent of full-time workers said they would prefer to work fewer hours, and 30 percent said they wanted more. 50 percent said their hours were about right.
    • By contrast, those in part-time or casual positions work far fewer and more uncertain hours, and most would prefer to work more – 54 percent of parttime workers and 63 percent of casual workers. This highlights the problems of underemployment and inadequate incomes experienced by the growing proportion of Australian workers in insecure jobs. Only 7 percent of part-time employees and 2 percent of casuals wanted fewer paid hours.
    • At the same time as many Australian workers report they would prefer more hours of paid work, the incidence of unpaid overtime is also growing: including coming in early, leaving late, working at home or on weekends, working through regular breaks and lunch hours, responding to calls or emails out of working hours, and more. Across all forms of employment, our respondents reported working an average of 6.0 hours of unpaid labour per week (up from an average of 5.1 hours in 2017 and 4.6 hours in 2016).
    • This translates into an annual average of 312 hours of unpaid overtime per worker per year across all forms of employment. Based on a standard 38-hour workweek, this is equivalent to more than 8 weeks (or 2 months) of unpaid work per worker per year.
    • Full-time workers reported the greatest incidence of unpaid overtime: on average 7.1 hours per week. This was a substantial increase from a reported 6 hours per week in last year’s survey.
    • Part-time workers worked on average 4.2 hours per week unpaid, while even casual workers worked on average 2.8 hours unpaid.
    • The aggregate value of this “time theft” is substantial. Across the workforce, we estimate the total value of unpaid overtime at $106 billion in 2018. This widespread non-payment for so much of Australians’ working time reduces family incomes, weakens consumer spending, and exacerbates the challenge of work-life balance.
    • In an era of wage stagnation, underemployment, insecure work and significant cost of living pressures, Australian workers cannot afford to give their time away to employers for free.



    Full report

    Share

  • Under the Employer’s Eye: Electronic Monitoring & Surveillance in Australian Workplaces

    Digital Technology & the Internet, Labour Standards & Workers’ Rights

    Under the Employer’s Eye: Electronic Monitoring & Surveillance in Australian Workplaces

    by Troy Henderson, Tom Swann and Jim Stanford

    Authors

    Troy Henderson

    Tom Swann

    Jim Stanford

    Media release



    ‘Go Home On Time Day’ 2018: Australians Owed $106 Billion in Unpaid Overtime, Report Reveals

    Each year the Centre for Future Work at the Australia Institute conducts a public survey of Australian working hours, as part of our annual “Go Home on Time Day” (GHOTD) initiative. Findings from the survey regarding hours worked, preferences for more or less hours, and the incidence of unpaid overtime are reported in a companion study.

    This year, our survey also included a special section focusing on the forms, prevalence, impacts and implications of electronic and digital monitoring and surveillance in Australian workplaces. Our goal was to investigate a secondary dimension of the time pressure facing Australian workers. It is not just that work is being extended into greater portions of our days (through unpaid overtime, the use of mobile phones and computers to reach workers at any time, pressure to not fully utilise annual leave, and similar trends). In addition, even within the work day, time pressure is intensified with the expectation that every moment of work time must be used for productive purposes – an expectation that is increasingly reinforced through omnipresent systems of monitoring, performance measurement, and surveillance. The result of these twin forces is an overall inability for people to escape from the demands of work: neither at the workplace (even for short periods), nor away from it.

    Part I of this report begins by describing the main forms of modern electronic monitoring and surveillance (EMS) that have placed more Australian workers “under their employer’s eye.” These methods include the use of location tracking technologies, monitoring of emails and social media content, the “gamification” of work, digital methods of performance monitoring, and even electronic systems for employee discipline and dismissal. Following sections examine the various purposes of modern EMS systems, and the extent of their application. This is followed by a brief description of the legal and regulatory system governing EMS in Australia; current regulations limiting employers’ use of these systems are sparse and inconsistent. The last section of Part I discusses the direct and indirect consequences of these new forms of monitoring and surveillance for workers. It argues that the impact of omnipresent surveillance in workplaces may be contributing to the slower wage growth which has so concerned Australian economists and policy experts in recent years; because it is now easier and cheaper to monitor and “motivate” employees through surveillance and potential discipline, employers feel less pressure to provide positive economic incentives (such as job security, promotion, and higher wages) to elicit loyalty and effort from their workforces.

    Part II of the report then reports the findings of our original survey data regarding the forms, extent and impacts of EMS systems in Australian workplaces, and the attitudes of Australian workers towards these technologies and trends. We surveyed 1,459 people between 26 October and 6 November 2018, using an online survey methodology, conducted by Research Now. The sample was nationally representative with respect to gender, age and state and territory.



    Full report

    Share

  • Four Views on Basic Income, Job Guarantees, and the Future of Work

    Macroeconomics

    Four Views on Basic Income, Job Guarantees, and the Future of Work

    by Frances Flanagan, Troy Henderson, Ben Spies-Butcher and Jim Stanford

    Authors

    Frances Flanagan

    Troy Henderson

    Ben Spies-Butcher

    Jim Stanford

    The unprecedented insecurity of work in Australia’s economy – with the labour market buffeted by technology, globalisation, and new digital business models – has sparked big thinking about policies for addressing this insecurity and enhancing the incomes and well-being of working people. Two ideas which have generated much discussion and debate are proposals for a basic income (through which all adults would receive an unconditional minimum level of income whether they were employed or not) and a job guarantee (whereby government would ensure that every willing worker could be employed in some job, such as public works or public services, thus eliminating involuntary unemployment).

    Progressives have campaigned for generations for stronger income security programs and for a commitment to full employment by government. So these ideas have a long pedigree. However, there is great discussion over both the implementation and cost of these proposals, and their broader (and perhaps unintended) economic and political consequences.

    To shed some additional, constructive perspective on these proposals, we are pleased to present four short commentaries on basic income, job guarantees, and the future of work by four leading Australian experts on the economics and politics of work.

    The four commentaries are posted below in alphabetical order of their authors:

    • Dr. Frances Flanagan, Research Director, United Voice: The Policy and Politics of Basic Income: A Few Concerns
    • Troy Henderson, Economist, Centre for Future Work: Situating Basic Income and a Job Guarantee in a Hierarchy of Pragmatic-Utopian Reform
    • Dr. Ben Spies-Butcher, Dept. of Sociology, Macquarie University: Basic Income as a Progressive Priority
    • Dr. Jim Stanford, Economist and Director, Centre for Future Work: Work, Technology, and Basic Income: Issues to Consider

    Three of the commentaries (by Flanagan, Henderson, and Spies-Butcher) were initially presented to the recent “Reboot the Future” conference in Sydney, hosted by Greens NSW Political Education Trust. The authors expanded and edited their remarks for the purposes of this symposium. We thank the organisers for their cooperation. The fourth commentary (by Stanford) arose from recent discussions within the Centre for Future Work’s voluntary Advisory Committee.  Together, we think these nuanced commentaries add valuable perspective to these important but complex policy debates.

    Our publication of these commentaries coincides with this week’s annual General Assembly of the Basic Income Earth Network (BIEN), being held this year at the University of Tampere in Finland.  In a personal capacity, Centre for Future Work economist Troy Henderson is presenting at the Assembly on his Ph.D. research regarding the fiscal and labour market impacts of basic income.

    We will continue to consider the advantages and disadvantages of both these important policy proposals in future research and commentary. We thank the authors for their contributions to this discussion, and welcome further feedback!



    Frances Flanagan



    Troy Henderson



    Ben Spies-Butcher



    Jim Stanford

    Share

  • The Economic Importance of Public Services in Regional Communities in NSW

    Employment & Unemployment, Public Sector, Procurement & Privatisation

    The Economic Importance of Public Services in Regional Communities in NSW

    by Troy Henderson

    Author

    Troy Henderson

    Public sector austerity has become a “policy fad” in Australia, at all levels of government. Its hallmarks are unnecessary public sector wage caps, outsourcing, downsizing, privatisation and the imposition of so-called “efficiency dividends” which allegedly drive productivity growth but in reality cut spending and reduce the quality of public services. These policies of austerity are not justified by economic theory, especially not in conditions of chronic macroeconomic weakness, unemployment, and underemployment (such as characterise most areas of Regional NSW). They may be politically convenient for political leaders positioning themselves as “tough on deficits,” but in reality they impose a wide range of harmful economic and social consequences. At best they represent lazy thinking in policy; at worst they constitute deliberate attempts to erode the public sector and the critical services it provides.



    Full report

    Share

  • Wages, Taxes, and the Budget

    Tax, Spending & the Budget, Wages & Entitlements

    Wages, Taxes, and the Budget

    by Jim Stanford and Troy Henderson

    Authors

    Jim Stanford

    Troy Henderson

    The Coalition government’s 2018 budget features a plan to cut personal income taxes for many Australians over the next several years. The government claims it wants to reward lower- and middle-income wage-earners with tax savings.  However, the biggest personal tax reductions would not be experienced until 2022 and beyond (after at least two more federal elections).  And the biggest savings go to those with incomes over $200,000 per year (the richest 3 percent of tax-filers).

    Our Briefing Note on the 2018 Budget explores the relationships between wages and taxes, and shows that working to reverse the recent unprecedented wage stagnation is the key to achieving ongoing improvements in living standards – not pre-election tweaks in the tax code.

    Our budget analysis finds that:

    • The boost in disposable incomes for most Australians from these changes will be miniscule, not making any measurable difference to their standard of living.
    • The biggest cause of stagnating living standards in Australia has been the deceleration of wage increases since 2012. The budget assumes that wage growth will suddenly rebound in coming years to more traditional rates (of 3.5 percent per year). This assumption underpins the government’s revenue forecasts – but there is no plan for achieving faster wage growth.
    • To the contrary, the government’s continuing labour policies will suppress future wage increases. This includes its own 2 percent cap on wage increases for federal public sector workers; the government is restraining wage growth for its own employees to barely half of what it hopes for the whole economy.
    • Restoring normal wage patterns would boost disposable incomes for Australian workers many times more than tweaks to personal tax rates and thresholds.

    For example, for a worker earning $60,000 per year (higher than the median income of Australians), the Coalition tax plan will increase disposable income by $530 by the last year of the budget period (2021-22).  In contrast, annual normal wage increases (of 3.5 percent per year) would boost disposable income that same year by almost $6000 – 11 times as much.



    Full report

    Share

  • The Consequences of Fiscal Austerity in Western Australia

    Public Sector, Procurement & Privatisation, Tax, Spending & the Budget

    The Consequences of Fiscal Austerity in Western Australia

    by Cameron Murray and Troy Henderson

    Authors

    Cameron Murray

    Troy Henderson

    Media release



    Don’t blame it on the deficit: WA

    This report critically responds to the call for fiscal austerity and public sector downsizing, being made in response to the emergence of fiscal deficits in Western Australia (WA). Those deficits arose in the wake of the slowdown in mining activity and corresponding deceleration of employment and economic growth. Many observers immediately conclude that the only response to a deficit must be some combination of cutting program spending, reducing public sector employment, freezing or reducing public sector wages, and selling public assets.

    In reality, there should be no alarm about the WA state deficit. To the contrary, that deficit merely confirms that state fiscal policy is in fact doing what it is supposed to: namely, provide essential public services that make a key contribution to quality of life and the health of communities, and provide a solid base for private-sector economic activity (including helping to stabilise private-sector activity through its inevitable ups and downs). Knee-jerk spending cuts or asset sales in response to deficits that are caused by cyclical developments in the private-sector economy would only make matters worse in the short-run – and they would significantly undermine the public sector’s capacity to provide sustainable public services in the long-run.

    This paper explains the important economic functions played by the automatic stabilisers that are built into the tax-and-spending system of the state economy. It discusses the normal and even desirable functions of public debt, and catalogues the ongoing economic and social value of good quality public sector employment. All of these factors provide needed context for debates over the direction of fiscal policy in WA in the wake of the mining downturn and subsequent recession.

    The key findings and recommendations of the report include:

    1. A budget surplus can be a very effective way to slow economic growth, especially during a recession. The assumption that government should achieve a surplus as quickly as possible is fundamentally wrong.
    2. Deficits are acceptable – and positive – during periods of weak economic growth. Attempts to forcibly repair budget deficits during recessions will make the economic situation worse.
    3. Western Australia’s recent budget deficit is the result – not the cause – of deteriorating economic conditions. The budget deficit has helped to stabilise overall economic conditions in WA in an economically efficient manner.
    4. WA’s deficit and debt service charges are not large relative to the productive capacity of the state economy, nor to the overall revenue base of the state government. Indeed, WA’s interest payments are smaller as a share of total state government revenue than is the case for many large corporations and millions of households.
    5. The automatic stabiliser function of the budget should be amplified through additional discretionary counter-cyclical policy measures, such as increased government spending and investment during economic slumps.
    6. Privatisation of state assets is an accounting trick that does not actually improve the deficit (instead, it trades one asset for another on the government’s balance sheet), and will weaken the government’s fiscal position if the privatised asset generated revenue at a higher margin than the government pays interest on its debt.
    7. Public sector employment in WA has stagnated since the onset of the recession in 2013. In fact, Western Australia has the third lowest level of total public sector employment (14.5 percent) as a share of total employment of any state. The assumption that the state’s public sector is bloated is factually wrong. 
    8. Between 2013 and 2017, state public sector employment was essentially stable (at around 110,600 full-time equivalent workers). But during this period, WA’s resident population continued to increase (adding around 100,000 new residents). Therefore, WA’s public sector workforce has not kept up with the population it must serve.
    9. During the 2014 to 2017 recession, labour incomes in the private sector declined, shrinking at an average annual rate of 2.4 percent per year. In contrast, total wages and salaries paid in the public sector continued to grow at a modest but positive rate (of 3.9 percent per year). This continued, normal growth in public sector income helped to moderate the negative economic effects of the recession in the private sector.
    10. Like other forms of government spending, public sector payrolls acted as an automatic stabiliser during the recession – despite deliberate (and ill-advised) government efforts to suppress public expenditure. If public compensation had declined at the same rate as private compensation between 2014 and 2017, consumer spending, state output, and even the state government’s own revenues would have been lower than they were.



    Full report

    Share