Australians’ living standards have gone backwards since the end of the pandemic in 2022.

In a healthy economy, per capita gross domestic product (GDP) should increase over time, roughly signalling an increase in living standards and material quality of life.

In Australia, however, per capita GDP has gone backwards since the end of the pandemic. Indeed, Australians have experienced per-person economic decline for 10 of the 15 quarters to March 2026 according to the most recent available data as of the time of writing.

In mid-August, the Australian Bureau of Statistics’ weekly earnings data confirm what many Australians have known all along: that their wages have gone backwards, and any wage increase they have received, has been eaten up by inflation.

That is not the full story…

Averaged across the nation, private sector employees have had their wages cut by inflation while public sector pay has kept up with inflation.

Moreover, private sector workers earn less than public sector workers. Australia’s average private sector pay is roughly $78,000 per annum. In the public sector, it is more than $100,000 per annum. This reflects a 29 per cent public sector wage premium.

It is not necessarily the case that teachers and nurses are overpaid. There is no evidence of a huge pay gap between private and public sector teachers and nurses.

There is, however, evidence that bureaucrats are earning an outrageous amount of money for producing very little value. Institute of Public Affairs (IPA) Chief Economist Adam Creighton observed in early August:

Sitting on the Victorian Department of Premier and Cabinet’s website is a job advertisement for a Multicultural Co-ordinator General with a salary of $344,616- $400,741, excluding superannuation.

And the number of Victorian public sector ‘executives’, earning between $250,000 and $800,000 per year, has almost tripled over the last decade under the Andrews-Allan government.

It makes sense, then, that Victoria boasts the largest real increase in public sector pay in the country over the twelve months to May 2026.

Incidentally, Victorian private sector employees have experienced the largest decline in real wages over the same period. Not only that, Victoria is the only state where average private sector wages were cut even in nominal terms.

Victoria has turned into an economic basket case. But the rest of Australia should not be complacent. IPA Executive Director Scott Hargreaves warned:

The concern for the country at large is now [that] the process of ‘Victorianisation’, as the style of the Andrews Government – and not least its indifference to financial management – infects Canberra and other locations…

The signs are certainly concerning. In the year 2000, private investment and net exports constituted 28 per cent of GDP, and government spending was 21 per cent of GDP. Household spending made up the rest.

By 2025, those numbers had flipped. Private investment and net exports were 20 per cent of GDP, while government spending was 29 per cent. Household spending held steady.

Out-of-control government spending has been crowding the market and pushing out private sector investment. Both Labor and Coalition governments have been responsible for the increasing socialisation of the Australian economy. New IPA research estimated:

[O]ver the past decade, there has been some $688 billion in missed investment, measured in 2025 dollars … [which] has resulted in lower wages, less export earnings, fewer jobs, less economic activity, and less taxation and royalty receipts…

While government bureaucrats are happily enjoying their cushy lifestyles on exorbitant salaries, private sector workers – who constitute some 82 per cent of employees in Australia – are paying the price through higher taxes and lower real wages.

Furthermore, business groups are advocating for higher migration to repress Australian wages in the private sector even further.

The economics of high migration, big government, and the suppression of private sector wages is not sustainable. It is a recipe for disaster.

Private sector workers are the engine of sustainable and productivity-driven economic growth. Yet, their jobs – especially in mining, manufacturing, and agriculture – have been put at risk by reckless government policies like Net Zero, the piling up of red tape, and the expansion of regulatory enforcers at both the federal and state levels.

Government is not the answer. If anything, it is the problem.

The state needs to step back, cut red tape, rein in the public sector, and encourage businesses to invest rather than lobby for higher migration and lower wages.

Dr Kevin You is a Senior Fellow with the Institute of Public Affairs