Remember the ‘rivers of gold’ days? Bet Treasury wishes it had some of that lovely money now

By Verona Burgess

Thursday September 17, 2020

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It would be nice to think that the APS might be rewarded for doing a good job during the pandemic with no draconian cuts – but this seems like a pipe dream, because the public service is rarely rewarded for getting things right, writes Verona Burgess.

In the cold light of day, it will be the hard numbers that signal what the story of COVID-19 means for the Australian Public Service workforce in the rapidly approaching October 6 federal budget.

It would be nice to think that the APS might be rewarded for doing a good job during the pandemic with no draconian cuts – but this seems like a pipe dream, because the public service is rarely rewarded for getting things right.

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More likely is that the new “flexibilities” of working from home, inter-agency bulk temporary transfers, vastly reduced travel and pimped-up agency data sharing offer the opportunity to slash staff, even as the PM, his eye on the next election, spruiks jobs, jobs and more jobs in the $200 billion-plus chasm of the recession.

At least one culprit is likely to be yet another hike in the discredited but politically popular so-called efficiency dividend.

As expected, the July economic statement did not drill down into the facts and figures of public service employees, so we need to go back to the Mid-Year Economic and Fiscal Outlook statement of last December and, before that, the Budget 2019-2020 that was brought down in May, 2019, to remember the pre-bushfires and pre-COVID base lines.

The budget always uses the Average Staffing Level resource-based measure to count public service jobs, unlike the Australian Public Service Commission’s twice-yearly headcount snapshots of the actual people who are employed strictly under the Public Service Act, so we won’t compare apples with oranges.

Neither set of tables includes specific costs for and numbers of the “shadow” workforce of consultants and contractors, a grey area that may or may not be included in the usual “supply of goods and services” expense table in the budget papers.

The preface to the May 2019 Budget Paper No. 4 outlined the “roadmap” of public service reform since the 2013 election. It summarised “the journey so far” as: 2014-15, “A journey towards a smaller public service and government; 2015-16, “Building efficiency and effectiveness in the public sector”; 2016-17, “Modernising the business of government”; 2017-18, “Improving public sector productivity and sustainability”; 2018-19, “Better services to citizens and businesses, delivered more efficiently”; and last but not least, for 2019-20, “A professional and connected public sector, delivering results for all Australians.”

Not quite the yellow brick road, but in their wildest dreams, the drafters of those tidy little aspirations could hardly have imagined just how desperately the Australian community would be relying on the nation’s public servants to deliver the last part of that “journey”.

The preface also said boldly, “The 2019-20 Budget delivers a surplus for the first time in over a decade.”  That’s right, the “back in black” theme that didn’t quite make it, rendering a number of ill-fated coffee mugs redundant and not a few red faces in government. Instead, we’re back in a black hole – but this time, only the wildest conspiracy theorist could believe it is the coalition’s fault.

BP4 also said that the “general government sector” would, by June 30, 2019, have 244,306 employees expressed as ASL, including the Australian Defence Force and reserves, and 165,491 without the ADF.  It forecast that by June 30, 2020 there would be a total of 247,302 and a net 166,762. The forecasts do not go beyond, but at least by October the final numbers for 2019-20 should be available.

In December the MYEFO update came along (not quite two weeks after the APS was suddenly restructured from 18 to 12 departments of state and five secretaries were shown the door). MYEFO does not, traditionally, include staffing figures per se, but updates the expected employee and superannuation “expenses” for the four-year estimates.

As an aside, because the machinery of government changes did not take effect until February, the December APSC headcount snapshot obviously did not reflect them. The figures for 2019-20 that will be made available later this year will make interesting reading, but that’s another story, apples being apples.

Now back to the oranges. In its notes to the financial statements, MYEFO pegs wages and salaries expenses at $21,366 million in 2019-20; $21,350 million in 202021; $21,542 million in 2021-22 and $21,697 million in 2022-23. Not an encouraging sign in terms of maintaining the workforce at about the same levels over the forward estimates, given the wage rises and increments that would have been expected when those sums were done.

Of the other operating expenses, separations and redundancies were pegged as steady in 2019-20 and 2020-21 at $55 million and $54 million respectively, but a big jump was earmarked for 2021-22 at $72 million, before dropping to $62 million in 2022-23. So quite a lot of job cuts were already expected in 2021-22, aka next financial year, and more the year after.

Superannuation expenses were pegged at $20,072 million for 2019-20, then $17,426 million, $17,822 million and $18,156 million for the next three years.

An added headache on the superannuation front is the news that the APS is facing a likely bill of hundreds of millions of dollars in unpaid superannuation entitlements.

This seems to be coming to fruition at last, after departments and agencies have been obliged to trawl the records and to figure out the effect that certain allowances should have had in augmenting superannuation entitlements. It is no easy exercise, and how the back-pay will delivered and accounted for in the next budget is not clear yet.

Those who remember back to the days of the rivers of gold when the Howard government set up the Future Fund will recall that it was supposed to cover the annual unfunded Commonwealth superannuation liability, which has always been drawn from consolidated revenue, starting in 2020. In 2017 the terms were changed to allow the fund to grow at least until 2026-27 instead.  Last December it was valued at $168 billion.

Bet Treasury wishes it could get its hands on some of that lovely money now that the virus has wrought such economic damage, especially after the unfunded liability blew out to more than $233 billion in 2019 after interest rates crashed. That’s the total estimated liability, of course, not what’s required annually, but there’s an irony in the fact that the coalition made such a political point out of it way back when.

Yet it is always “out of the mouths of babes”, in this case during the most recent Working with Purpose podcast produced by the ACT Division of the Institute of Public Administration with the APSC.

The podcast was a broad, generally harmless  discussion between the moderator, former journalist David Pembroke, the secretary of the Department of the Prime Minister and Cabinet, Phil Gaetjens and a PM&C 2020 graduate, Eleanor Kay.

Asked whether she had been struck by the mission of the public service, Kay said it was the reason she had chosen to apply to PM&C. “And, and in the public service, is this sense [that] government plays such a large role in people’s lives. [As] Phil said, people expect things from the government, particularly in times of crisis. And I think [this year] has demonstrated to us … that the government has an incredibly large role to play in people’s lives and in shaping our country.”

A very large role indeed. Not exactly something that outgoing Finance minister Mathias Cormann would have liked to have heard back in 2013 when he was starting out on his “Smaller government” roadmap for the brave new era of the Abbott government’s 2014-15 budget.

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