Australia's Looming Economic Shadows: Lessons from Britain's Decline, By Richard Miller (Londonistan) and Tom North

The economic trajectories of Britain and Australia, once marked by robust growth and budget surpluses, are beginning to converge in troubling ways. Britain's recent struggles, highlighted by a spiralling reliance on non-market sector employment, fiscal deterioration, and politically fraught policy choices, offer a stark warning for Australia. If Australia continues down a similar path, it risks replicating Britain's "dark days," with profound implications for its economic and social fabric.

Britain's economic decline has been both dramatic and sobering. The nation's fiscal position has worsened significantly, with persistent budget deficits, rising taxes, and cuts to public services becoming commonplace. The brief tenure of Prime Minister Liz Truss, famously outlasted by a livestreamed lettuce, underscored the political instability that accompanies economic mismanagement. Since the Global Financial Crisis (GFC), Britain has increasingly leaned on non-market sectors, public administration, education, healthcare, and social assistance, to drive employment growth. These sectors, heavily reliant on taxpayer funding, now account for the largest share of employment in the Anglosphere.

This shift has not been a recent phenomenon but a gradual one, rooted in policy choices that chose short-term stability over long-term sustainability. By 2010, Britain's non-market employment was already significant, and it has only grown since, crowding out private-sector dynamism and straining public finances. The Starmer government now faces a narrowing window of options, with "politically easy solutions" exhausted. The choices ahead, likely involving austerity measures or structural reforms, are deeply unpopular and risk fracturing Britain's social cohesion.

Australia's economic story mirrors Britain's in unsettling ways. Post-GFC, Australia has seen a meteoric rise in non-market sector employment, which has become the primary driver of job growth. While Australia's proportion of non-market employment today roughly matches Britain's in 2010, the trajectory suggests it could soon surpass it. This reliance on taxpayer-funded sectors masks underlying weaknesses in the broader economy, where private-sector innovation and productivity growth are stagnating.

Like Britain, Australia has enjoyed periods of strong living standards and budget surpluses in the past. However, the increasing dependence on non-market jobs signals a shift toward a less sustainable economic model. Government-funded employment may provide short-term relief, but it risks creating a cycle of fiscal strain, higher taxes, and reduced competitiveness, precisely the challenges Britain now grapples with.

Australia stands at a critical juncture. It can continue to emulate Britain, papering over economic challenges with more public-sector spending and employment, or it can chart a different course. A sustainable path would require confronting hard truths: addressing structural inefficiencies, fostering private-sector growth, and reducing reliance on taxpayer-funded jobs. This could involve reforms to streamline public administration, incentivise innovation, and bolster industries that compete globally, such as technology and manufacturing.

Failure to act risks entrenching a cycle of fiscal deterioration and social unrest, as seen in Britain. The Starmer government's predicament, forced to choose between unpopular cuts and divisive reforms, serves as a cautionary tale. Australia has the advantage of foresight, but only if it acts decisively to avoid Britain's fate.

Britain's economic decline, marked by fiscal strain and an overreliance on non-market sectors, is a grim preview of what could await Australia.

https://www.macrobusiness.com.au/2025/07/britains-dark-days-are-australias-future/

Britain's dark days are Australia's Future

Tarric Brooker

In recent years, the hard reality of the economic, social and fiscal situation of Britain have gradually come to the forefront.

Some examples have been surprisingly humorous, such as the livestream of a lettuce that ended up outliving the government of Conservative Prime Minister Liz Truss.

Others have been cold and concrete, such as the numerous announcements of cuts, tax increases, and seemingly never-ending deteriorations in the position of the U.K. budget.

Looking at the path taken since the days of strong growth in living standards and budget surpluses in both nations, one can't help but be struck by the similarities with Australia.

When assessed against other countries across the Anglosphere, Britain takes the top spot for the largest proportion of people employed by non-market sectors of the economy.

Non-market sectors of the economy are defined as public administration and safety, education, healthcare, and social assistance.

While there has been a recent surge in the proportion of the British labour force employed in non-market sectors of the economy, the shift to relying on generally taxpayer-funded industries to drive employment growth has been a long time coming.

In the years since the GFC, Australia has also seen a meteoric rise in the level of total employment, resulting from non-market employment taking over as the driver of the majority of employment growth. But despite seeing by far the largest rise in the proportion of the workforce employed in non-market sectors of the economy, Australia's total today is roughly where Britain's was in 2010.

As the avenues of politically easy solutions continue to be shuttered to the Starmer government, harder choices will need to be made to get Britain back on a sustainable path.

This path is challenging and will almost certainly require highly unpopular and controversial choices to be made, and if the wrong path is pursued, it could be highly damaging for Britain's social fabric.

Australia has an opportunity to do things differently, to choose a more fiscally and economically sustainable pathway in which the challenging realities of the economy are confronted and addressed, rather than papered over with another round of government-funded employment and economic growth.

Or not."