The author of the study says public servant spending would have injected even more much-needed income into Snowy-Monaro and South Coast regions without government-imposed freezes on wage rises.

University of Wollongong researcher Martin O'Brien found public sector employment gave economic stability during the COVID and bushfire crises for tourism- and agriculture-driven economies in south-east NSW regions.

The report, released this week, showed bushfires and COVID had hit regional economies hard in all local government areas in south-eastern NSW, which showed worse growth rates compared to the national average in 2019-20 and the first quarter of 2020-21.

Bushfire-devastated areas including the Snowy-Monaro, Queanbeyan-Palerang and Shoalhaven regions all experienced economic decline in 2019-20 before the COVID downturn.

The pandemic brought more extreme economic downturns in south-eastern NSW regional economies compared to the overall national level. Most areas suffered a downturn at least twice the size of the aggregate Australian GDP level, the report said.

Associate Professor O'Brien said federal, state and local public sector employment provided stability to the regional economies during the crises.

Public sector incomes contributed more to the regional economies during the bushfire and COVID crises, growing 4.45 per cent in Queanbeyan-Palerang to 43 per cent of gross regional product.

"It was really a counter-cyclical thing. So as the economy goes down, their relative contribution goes up," he said.

Public sector employment and incomes also helped anchor the economies during off-peak tourism seasons and the fluctuations of agriculture, Associate Professor O'Brien said.

"To have a stabilising influence, extending the whole year round, is really important to the sustainability of the local businesses there," he said.

Many South Coast areas lost their traditional summer peak tourism seasons for two consecutive years, first because of bushfires in 2019-20 and then lockdowns in over the 2021 new year period.

The report, commissioned by the South Coast Labour Council, found public sector incomes made a larger contribution to the economies of south-east NSW local government areas compared to greater Sydney. Most public sector workers spent about 80 per cent of their income at local businesses.

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Associate Professor O'Brien said public sector incomes would have contributed more to local economies but for government-imposed public sector wage freezes.

"It was putting the handbrake on at a time when you really needed to have as much assistance in those local economies as possible," he said.

The federal government said Commonwealth bureaucrats must share the economic burden of COVID-19 when it delayed public service wage rises for six months last year.

Wage freezes had been a "slap in the face" for state and federal public servants during the crises, when public sector employees had worked hard to help communities, Associate Professor O'Brien said.

"They stepped up over these periods in terms of what they had to do and the importance of their work and being the face of the response to COVID. It's a bit rich when you say you have to take one for the team after that," he said.

The findings showed any government moves to reduce spending on the public sector would impact economies in the region, Associate Professor O'Brien said.

"Whether that pulling back on spending flows through to either wage restraint in the public sector, or even trying to decrease the size of the public sector, that's going to have a real large impact on the local economies that they've provided such an important role and contribution to.

"We've heard some rumblings already about the governments really trying to pull back on their spending. On one hand, they're saying to private business 'let's step on the accelerator and let's recover' but if they pull the handbrake on the public sector at the same time, it's quite counterintuitive."

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