Employer group warns Victoria’s economy is in ‘decay’ with nine out of every 10 jobs created backed by the government

An alarming analysis of employment data has exposed how job creation within the state’s private sector has dried up and virtually all employment growth is being paid for by taxpayers.

Nine out of every 10 jobs being created in Victoria are in the public sector and government-funded industries, according to analysis by one of the nation’s biggest employer groups, which is now warning the state’s economy is in “decay”.

The alarming analysis of employment data — carried out exclusively for the Herald Sun — has exposed how job creation within the state’s private sector dried up after the pandemic, with virtually all employment growth paid for by taxpayers.

The breakdown of Australian Bureau of Statistics data by the Australian Industry Group reveals the “non-market” sector of Victoria’s economy accounted for 88 per cent of all jobs created in 2023 and 2024.

The non-market sector comprises the public sector and industries overwhelmingly funded by governments such as health and education.

Victoria’s current level compares to 34.7 per cent pre-pandemic, and a national rate of 78.7 per cent.

And in a grimmer sign, Victoria’s private sector shed 3900 jobs overall last year, the Ai Group analysis found.

It was the first time the market sector, which covers private employers, lost jobs since 2020 when Covid-19 shut down the global economy.

And before that in 2023, the market sector only added 24,400 new jobs compared to a huge 72,900 in the non-market sector.

88 per cent of jobs created in Victoria during 2023 and 2024 were supported by the Allan government. Picture: David Crosling

Ai Group chief executive Innes Willox said Victoria was in economic decline and increasingly becoming “irrelevant” to the national and international business communities.

“In response to the country’s highest taxes, charges and levies, the most regulation, seemingly rampant violent crime, untenable energy cost increases and reckless talk of compulsory work from home rights, business is making it clear it increasingly doesn’t feel welcome in the state,” he said.

“Other states are successfully feeding off Victoria’s malaise and investment and jobs growth that would normally be created for the state increasingly headed interstate and even overseas.

“The rapid growth in public sector funded work is economically unsustainable. That Victoria now leads the way on that measure is a clear and sad sign of relative economic decline.”

Interstate, 72.1 per cent of jobs added in South Australia were in government-supported sectors in 2023 and 2024, compared to 74.1 per cent in Queensland and 84.6 per cent in New South Wales.

Veteran economist Saul Eslake said Victoria had now secured a reputation as no longer “business friendly”.

“Something clearly is weighing more heavily on consumer confidence and household spending in Victoria than in other states – consumer confidence in Victoria in September was further below its long-run average than in any other state except Queensland,” he said.

The private sector shed 3900 jobs in 2024, according to the Ai Group analysis undertaken for the Herald Sun. Picture: Darrian Traynor

Mr Eslake, a former chief economist at banking majors ANZ and Bank of America Merrill Lynch, said hikes in payroll and land tax as well as stamp duties had further fuelled concerns the state government would increase taxes on businesses to pay for its spending.

“The biggest risk (of this trend continuing) is a further decline in Victorians’ material living standards relative to the rest of Australia,” he warned.

The Allan government needed to reduce spending rather than raising taxes to pay off its raging debt, or make way for a government that would, Mr Eslake said.

“But I’m more likely to see a thylacine on my front lawn of a morning than for either of those things to happen,” he said.

When shown the Ai Group analysis, an Allan government spokesperson claimed it was “selective, sloppy and out-of-date”.

They said the first data release of 2025 (below) showed market sector jobs had increased by 0.55 per cent since the year prior — representing 2.3 jobs in every 10 jobs added in the state.

But that dataset also revealed market sector growth remains a quarter its normal level, and Victoria was still generating some of the lowest levels of private sector job creation seen across all mainland states.

The spokesperson said: “Victoria’s economy is thriving — a direct result of our focus on growing jobs, supporting families, and delivering state changing infrastructure.”

“Over the last year (to August 2025) Victoria has created 77,900 jobs — the highest employment growth in the nation — with non-market sector jobs growth (to March 2025) broadly in line with New South Wales,” they said.

“Many of these jobs are in the human services. We value workers in these sectors — they keep us fed, housed, and healthy. Without them, Victoria wouldn’t have the core foundations that underpin a fair and growing economy.”

Opposition Leader Brad Battin slammed Premier Jacinta Allan’s “economic mismanagement” and pledged the Coalition would cut red tape and make it easier for businesses to invest, grow and create jobs.

“Labor has introduced or increased more than 60 taxes that are hitting all parts of the economy and driving away jobs and investment,” he said.

“Victorians are paying $20 million a day just to cover the interest on Labor’s debt.

“The Liberals and Nationals will cut five Labor taxes and guarantee no new taxes or charges.

“We will give Victoria a fresh start: less waste, lower taxes, less crime.”