The NSW Government plan to cut the pay of public servants and spend more money on capital works will likely lead to a reduction of 1,100 jobs according to a new analysis by the Australia Institute.

“While spending money on new construction projects will likely create some jobs in some parts of New South Wales, cutting spending on public servant salaries will simultaneously lead to a reduction in employment in other parts of state,” said Dr Richard Denniss, Chief Economist at the Australia Institute.

“In fact, according to the Australian Bureau of Statistics, every million dollars spent by public servants in their local shops creates many more jobs than one million dollars spent on capital works.”

Analysis of Australian Bureau of Statistics (ABS) data shows the construction industry generates 0.97 direct jobs for every $1 million spent on construction. ABS data also shows that for every $1 million spent by consumers in Australia 1.79 direct jobs are created.

“Even after accounting for the fact that NSW public sector workers have to pay tax to the Commonwealth Government the evidence is quite clear, pumping money into the economy through public sector pay-packets delivers more jobs per million dollars spent than buying a lot of concrete and renting a lot of equipment,” Dr Denniss said.

“Reducing the incomes of around 400,000 public sector workers leads to a significant reduction in the amount of money being spent in small local business, like the local shops, hairdressers, and restaurants around the state. Public sector workers are the backbone of regional Australia and cutting the pay of public sector workers means cutting the incomes of small business in regional Australia.”

“With unemployment expected to rise sharply it is more important than ever for governments to focus on what really works. It’s easy to spend money, but it is important that we spend it effectively. There is plenty of data on the most labour intensive industries, and there is plenty of data on which regions are experiencing the highest unemployment. If the NSW Government is serious about creating jobs they need to target their spending at the sectors that create the most jobs per million dollars spent and in the regions with the highest level of unemployment,” Dr Denniss said.