The thesis contributes to the economics literature by providing a theoretical and empirical investigation of the effects of changes in the relative size of government on Australian economic performance.  The theoretical literature indicates that an expansion in government size is likely to induce adverse effects upon economic growth for a host of reasons. These include the distortionary effects of taxation imposed to finance government expenditures, the displacement effects of private sector economic activity attributable to public sector interventions, and the growth in governmental activity encouraging economic participants to divert their attentions away from direct market activities and towards seeking benefits through the political process.  The historical experience suggests that all levels of Australian governments have grown in terms of size and scope of functions and activities undertaken, and that this growth has transpired over a broad range of public policy interventions including expenditure, taxation and revenue raising and regulation. An assessment of various statistical measurements of public sector size tends to confirm the general proposition that the public sector in Australia has grown over the long run.  This thesis analyses the effect of government size on economic performance in Australia using annual time series data for the period 1960 to 2010.  The hypothesis that an increase in the relative size of government leads to a lower per capita economic growth rate is tested using a variety of econometric specifications, including multivariate ordinary least squares and simultaneous equation techniques. The empirical results suggest an increase in government size by ten percentage points is associated with a lower annual GDP per capita growth rate of between 1.2 and 2.5 percentage points.  This study also reveals the empirical significance of various underlying determinants of public sector growth to overall government size.  The increase in public sector service costs relative to the private sector, the greater ease of tax collection attributable to rising female labour market participation, and increasing government expenditures provided as insurance for the effects of economic openness are found to exert significant effects upon growth in public sector size. However, the empirical results indicate that ‘Wagner’s law’ of increasing government expenditure arising from general economic development does not hold for Australia