The state of Victoria has the highest unemployment rate in the nation.
As illustrated below by Alex Joiner from IFM Investors, Victoria’s unemployment rate was 4.55% in July, 0.32% above the weighted average of the rest of the nation.
The next chart from CBA plots trend unemployment rates across the states and shows that Victoria’s unemployment rate of 4.5% is significantly higher than the other jurisdictions.
Victoria’s high unemployment rate comes despite the explosive growth in the public service.
In the 15 years to 2022-23, Victoria’s public sector headcount increased by 59%, outpacing population growth of 29%.
Source: The Australian
The state’s public servant wage bill also ballooned by 152%, outpacing all other Australian states.
Source: The Australian
Victoria’s wage bill, which is the state government’s largest expense, totalled $19.5 billion in FY15. The most recent state budget projected that employee expenses will reach $44 billion by FY29.
The state government’s use of external consultants and contractors has also ballooned.
Shane Oliver, chief economist at AMP, attributed Victoria’s high unemployment rate to the state government’s handling of Covid-19 and the “psychological impact” lockdowns had on business and consumer confidence.
“The basic problem has been the recovery from the pandemic has been slower than in other states and that partly reflects the extent of damage done by the pandemic to Victoria”, he said.
“Most of the response in terms of winding back the budget deficit has been through tax and imposts which have discouraged spending”.
Oliver also said Victoria’s strong population growth has contributed to the state’s higher unemployment.
The bad news is that with Victoria drowning in debt, the state faces further increases in unemployment.
As of FY25, Victoria’s net debt has skyrocketed to $155.5 billion and is projected to rise to $194 billion by FY29.
“You could argue it’s probably going to require a newly elected government to (address) it”, Oliver said “Shrink the size of the public sector, remove a lot of the tax imposts that are discouraging investing and regulatory restraints, and then you’d go through a tough patch and in theory, you’d pop out in time for the next election”.
Around 3000 Victorian public servants—or roughly 5% to 6% of the workforce—are slated to lose their jobs as part of a plan to restore the public service headcount to its pre-pandemic levels.
Victoria experienced a 48.2% annual increase in business insolvencies last financial year, significantly higher than NSW (22.8%) and Queensland (32.2%), as well as the national average rise (33.1%).
New company registrations per 1000 existing businesses are also significantly lower in Victoria than elsewhere.
In short, Victoria’s unemployment rate is destined to rise.
