Government job boom stifles productivity growth

Justin Fabo from Antipodean Macro produced the following chart, showing how Australia’s labour productivity growth (i.e., GDP per hour worked) has ranked among the poorest in the advanced world over the past decade.

One of the longer-term factors behind Australia’s poor productivity growth is “capital shallowing”. I.e., the population, via immigration, has grown faster than business, infrastructure, and housing investment (see Monday’s post).

The more recent driver of Australia’s poor productivity growth has been the explosion of mostly government-funded non-market-sector jobs in the public service, healthcare, and social assistance sectors, and in education.