Victoria’s economy is facing a stark warning after a detailed analysis by one of Australia’s largest employer groups revealed that nine out of every ten jobs created in the state are backed by government funding.
The findings, prepared exclusively for the Herald Sun by the Australian Industry Group (Ai Group), show that private sector job growth has virtually stalled, with taxpayers footing the bill for nearly all new employment.
The Ai Group’s examination of Australian Bureau of Statistics data shows that the “non-market” sector—which includes public sector employment and government-funded industries such as health and education—accounted for 88 per cent of all jobs created in 2023 and 2024. By comparison, this figure was just 34.7 per cent before the pandemic and remains higher than the national rate of 78.7 per cent.
Victoria’s private sector, meanwhile, shed 3,900 jobs last year—the first decline in market sector employment since 2020, when the pandemic shut down the global economy. In 2023, private sector growth added only 24,400 jobs, compared with 72,900 in the non-market sector.
Ai Group Chief Executive Innes Willox described Victoria as “in economic decline” and increasingly “irrelevant” to national and international business communities. He cited high taxes, strict regulations, rising energy costs, and concerns over public safety as discouraging business investment. “Other states are successfully feeding off Victoria’s malaise,” he said. “The rapid growth in public sector-funded work is economically unsustainable.”
Veteran economist Saul Eslake added that Victoria has developed a reputation for being “no longer business-friendly,” noting consumer confidence in September fell further below its long-term average than in any other state except Queensland. He warned that the trend threatens Victorians’ material living standards relative to the rest of Australia.
The Allan government defended its record, claiming Victoria has generated 77,900 new jobs over the past year—the highest employment growth in the nation—and highlighted the essential role of workers in human services. An Allan government spokesperson dismissed the Ai Group analysis as “selective, sloppy, and out-of-date,” noting market sector employment had increased by 0.55 per cent in early 2025.
Opposition Leader Brad Battin slammed Premier Jacinta Allan for “economic mismanagement” and promised the Coalition would cut red tape, lower taxes, and make Victoria a more attractive place for business and investment. “Victorians are paying $20 million a day just to cover the interest on Labor’s debt,” he said. “We will give Victoria a fresh start: less waste, lower taxes, less crime.”
