Austerity measures targeting Queensland public sector would cost economy $9bn over three years

Freezing public sector wages would cost the Queensland economy $9bn over three years, according to a new economic analysis that warns of the “deeply damaging” results from any austerity measures targeting government workers.

The report, released on Friday by the Australia Institute’s Centre for Future Work, says women workers and those in regional areas would be hardest hit by governments who seek to balance economic stimulus with cuts to the government sector.

In Queensland, some public sector employees have already been denied promised pay increases, amid political pressure on the state government ahead of the 31 October election. Federally, prime minister Scott Morrison yesterday criticised ABC staff for rejecting a proposal to defer a pay increase.

The Centre for Future Work report, by economist Dan Nahum, says such moves would ultimately counteract other attempts to stimulate the economy.

Related: Remote working is not going away: who wins and loses when workers stay home?

“If you pull money out of the public sector, you’re pulling the money out of the private sector in the same way,” Nahum said.

Alex Scott, the secretary of Queensland’s largest government sector union, Together, said the analysis should prompt policymakers to tailor economic responses to those who have been most deeply impacted by the pandemic, and “not those people who make good photo opportunities”.

“You end up with blokes in hi-vis suits as an economic strategy rather than looking at what is happening in the economy, and the people who are losing their job are women.

“This is a really important report in terms of providing that broader economic framework. The worst possible budgetary response right now is to try to fix the debt and deficit.”

The report found that a wage freeze (or other measure that kept the total public sector payroll stagnant) and a subsequent cap on public sector growth would cost the Queensland economy $9bn over three years. A 5% cut in public sector payrolls – either by wage cuts or worker cuts – would take $15bn out of circulation.

“A more constructive and effective response to the pandemic and associated recession is to expand the economic and social footprint of government, including state governments,” the report said.

“We will need more public services, more government income supports, and more decent public sector jobs as Australia strives to recover from this unprecedented crisis.”

Nahum said: “The idea of pulling money out of an economy at a time like this, and pulling services out at a time like this, is a really alarming idea.”

The report noted that two in three public sector jobs in Queensland are based outside of Brisbane, and that regional and remote areas would be more acutely affected by the economic fallout of an austerity policy towards the public sector.

Two in three of the state’s public servants are women.

“Women have been hit especially hard by the economic impacts of coronavirus, experiencing a disproportionate share of job losses due to their concentration in part-time and casual jobs,” the report says.

Related: How the coronavirus is affecting women’s work in Australia

“That makes it all the more important to preserve the public sector workforce and the compensation paid to it.”

The report makes several recommendations, including repealing the state’s “charter of fiscal responsibility”, which does not allow it to respond to extraordinary circumstances like the pandemic; expanding output in female-dominated sectors; and increasing and accelerating the state’s public works program.

Scott said there would be “enormous challenges cutting through the debt and deficit mantra of conservative politics” during the state election campaign, but that Queenslanders were genuinely supportive of public sector workers and the role they played in local communities.

“If you talk to people in Townsville and Charleville and Longreach, they know that every time you lose a public sector job it effects the economy. The only way to win this [argument] is at the ballot box.

“We need to cut against some of that … wrong thinking about how the economy works, that for some reason we’re better off as a society if the government saves money.”