The regional impact of public service job cuts

by David Richardson and Richard Denniss

The Coalition has proposed to cut the size of the Commonwealth public service workforce by 12,000 over the next two years. There has been considerable debate in Canberra, which employs more Commonwealth public servants than any other city, about the likely impact of such a contraction on the local economy. In addition to the direct effect of a reduction in the size of the public service it is also important to consider the indirect effects of such employment reductions. That is, when jobs are lost in one industry in a local economy the reduction in demand has ‘spill over’ or ‘multiplier’ effects on other industries. It was with these effects in mind that the ACTU recently estimated that, in addition to the 12,000 direct jobs that the Coalition planned to remove from the public service there would be an additional 18,000 jobs lost through this multiplier effect. The ACTU justified the claim that all 30,000 jobs would be lost in the ACT on the basis that the Coalition had ruled out cuts to ‘front line’ service delivery workers . In responding to this claim, the Liberal Senator for the ACT Gary Humphries claimed that the estimated reduction in Canberra’s employment of 30,000 was exaggerated. His critique was based on the claim that only around one third of Commonwealth employment was based in Canberra . By that logic, the job losses in Canberra would be around 10,000 with the other 20,000 job losses spread across the country. Senator Humphries view appears, however, to contradict the view of Tony Abbot who has stated that ‘front line service positions would be exempt’. While it is unclear whether or not the Coalition’s plan to cut 12,000 jobs will be concentrated entirely in Canberra or spread across the country it is clear that the direct and indirect job losses associated with the proposed policy will have significant regional effects. This paper provides estimates of the likely job losses in other regions if, as suggested by Senator Humphries, the Coalition plans to spread the public sector cuts around the country rather than confine them to the ACT.

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