As Big as the Mining Boom: The Rise of the Public Economy

Public spending in Australia has reached a record 35% of output and 40% of employment, a structural shift comparable to the 2000s mining boom. This expansion is creating persistent capacity constraints and inflationary pressures across the economy.

Key Takeaways

• 1.Australia is experiencing a structural change in its economy comparable to the 2000s mining boom, with public spending now generating 35% of output and 40% of employment.
• 2.Public demand has significantly penetrated market industries, with the median public share of output across market industries rising from 17% to 25% over the last decade.
• 3.The expansion of the public sector is creating capacity constraints and inflationary pressures in sectors like construction and health, while potentially reducing trend productivity growth by 0.1ppts.

Table of Contents

• Key points
• As Big as the Mining Boom: The Rise of the Public Economy
• The Quiet Structural Shock Reshaping the Australian Economy
• How Government Now Drives Large and Growing Parts of the Economy
• A Structural Shift with Macro Consequences
• What does this imply for trend growth in Australia?
• What happens next?
• What's the bottom line?
• Appendix A: Methodology overview

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