Statement 12: Trends in Public Sector Finances
The size and structure of Australia's public sector provides a useful context for interpreting trends in the total public sector. The total public sector1 constitutes a significant portion of the Australian economy (around 21 per cent of domestic final demand).
Domestic final demand (as shown in Chart 1) is made up of public final demand (which comprises public gross fixed capital formation and public final consumption expenditure) and private demand (consisting of private gross fixed capital formation and private final consumption expenditure). The Australian Government constitutes 39 per cent of public final demand, while the State/local level of government accounts for 61 per cent.
Chart 1: Contribution of public and private sectors
Domestic final demand
Sources: ABS cat. nos. 6248.0, 6202.0 and 5206.0.
There are significant differences in the roles and responsibilities of the two main levels of government. Major components of the Australian Government's expenses include transfer payments in relation to social security and welfare, and defence expenditure. Transfer payments, such as Australian Government income support payments, are not included in the Australian Government public final demand. Rather, these payments, along with payments that the Australian Government makes to the States and the private sector to assist in funding important services like education and health, are reflected in either State/local public final demand or private demand.
In terms of employment, the total public sector employs approximately 16 per cent of wage and salary earners (Chart 1). The State/local sector accounts for approximately 13.5 per cent of all wage and salary earners and for approximately 84 per cent of total public sector wage and salary earners. The Australian Government accounts for approximately 2.5 per cent of all wage and salary earners and for approximately 16 per cent of total public sector wage and salary earners. The State/local sector's larger share reflects that sector's major responsibilities for service delivery in the areas of education, health, transport and public order and safety.
1 The total public sector includes the non-financial public sector (comprised of the general government sector and the public non-financial corporations sector) and the public financial corporations sector for the Australian Government and State/local levels of government.