Australia faces labour shortages that are “only going to get worse” as large government spending squeezes the private sector, a leading economist has warned.
Independent economist Warren Hogan joined Sky News Business Now on Monday where he weighed in on why many businesses are wary about building new projects in Australia.
“Businesses will not expand, they will not invest if they don’t think they can find the staff,” he said on Monday.
Mr Hogan pointed to large government spending and the strain it has put on the private sector’s access to labour.
“The other issue is the government is madly out there expanding its footprint through funding of the care economy and this range of initiatives,” he said.
“That expenditure is labour intensive and it’s competing with the rest of the private sector for those scarce labour resources.
“We have a demographic shift that leaves us with a shortage of labour and it is only going to get worse and the government, in response, is expanding its demand for labour, its size in the economy (and) squeezing the private sectors.
“So, it’s not just construction, it’s happening everywhere.”
He went on to argue that large public spending was “dragging down” productivity as the private sector has mostly stalled in recent years.
“The (non-market) sector productivity level right now is the same as it was in 2005,” Mr Hogan said.
“That is no productivity in 20 years whereas the private sector … is up about 30 percent and up 70 percent since 1994.
“We are growing the least productive part of our economy, and we are hampering the most productive part.”
More than half of Australian voters rely on government for most of their income – through wages, benefits or subsidies – according to research by the Centre for Independent Studies.
In a paper published in July, CIS economist Robert Carling warned that federal spending alone has reached 27.6 per cent of GDP.
This was up from 24-25 per cent of GDP in 2012-13 and has been fuelled by a “program expansion in social services, defence and debt interest”.