Continuing to shrink the public service is ‘bad economics’, says Per Capita’s Emma Dawson

By Shannon Jenkins

Thursday October 15, 2020


The determination to shrink the Australian Public Service over the past four decades has hollowed out the middle class and reduced living standards, according to Per Capita executive director Emma Dawson and historian professor Janet McCalman.

Speaking at a Mandarin Talks webinar on Wednesday to discuss their new book ‘What Happens Next?’, the authors rejected the myth that having a big bureaucracy is a bad thing.

Dawson argued that the notion is a “very deliberate lie spread by a particular economic model that wants everything outsourced to the private sector because that supposedly drives competition”.

“What it actually does is drive profits for the owners of those businesses,” she said.

McCalman argued the pandemic has actually highlighted the problems that come with cutting government jobs.

“One of the things we’ve seen in COVID is when you under invest in your public service, as we’ve been doing, you pay a price in a crisis like this. Though if you go and outsource things which should be public service, you end up with very poor services,” she said.

“We spend billions on companies like KPMG and Deloitte to do the work that used to be done by people who had a salary in the public service.”

Increased outsourcing of public service jobs, particularly to the Big Four consulting firms, has meant that “expenditure on the business of government is just as much, if not more, but there are fewer secure jobs”, Dawson said, noting that this can also negatively impact the middle class.

Read more: Big Four consultancy firms receive $640m a year to perform ‘day-to-day’ public service jobs

For McCalman, the “most distressing” example of outsourcing within the public sector has been that of the NDIS.

“It doesn’t work for the clients, above all. It wastes money, it’s dreadful for the employees as well, and you’re now seeing scandalous cases of neglect and so on,” she said.

“I predict there’s going to be a horrible royal commission on the NDIS one day to show what a disaster it was to outsource it. And so, you know, this is a perfect example of where you would get it wrong. Whereas if you employed all those people within the government, they wouldn’t have to pay that extra bit of profit to the private providers.”

Dawson argued that continuing to shrink the public sector — along with implementing public sector pay freezes — is simply “bad economics”. She said that when politicians suggest a halt on pay increases could save money, they “like to paint the picture of a kind of fat cat bureaucrat sitting on $400,000 a year”.

“What they’re really talking about is the nurses and the paramedics and the people that have kept our economy and our way of life going through this crisis, and that has an impact on all of those communities,” she said.

“These are foundational jobs, they are key workers, and the more of them that are employed securely on decent salaries through public sector employment, [the more] that actually has a kick on effect to drive wage growth through the whole economy.

“So it’s just bad economics to keep shrinking the public sector. We need a massive restoration, I think, of the public sector in this country.”

Read more: An evolution in consulting: how the federal government is shaking up procurement

Moving past COVID-19 and into a better Australia

COVID-19 has “accelerated” and highlighted many pre-existing issues within Australia, including growing income and wealth inequality, insecure work, underemployment, and the need to “decarbonise the economy and to take advantage of some of the new jobs and new industries that will come along with an embrace of renewables”, according to Dawson.

“I think even before the pandemic hit the evidence was strong that we needed to rethink the direction in which our country and our world was heading,” she said.

However, with the government being forced to borrow and spend huge amounts of money, Dawson said the pandemic has presented an opportunity to reassess what needs to be invested in and what needs to change to ensure that “our children and our grandchildren don’t come out of this crisis with declining living standards and an uncertain future”. It would also be a chance for Australia to move away from the persistent obsession over debt and deficit that became embedded under Howard and Costello.

“So if one thing comes out of this crisis, it’s that I hope we never return to that obsession with balancing the budget, because it’s actually much more important to balance the economy,” Dawson said.

“Going into this crisis Australians had some of the highest levels of household debt in the world and that’s actually a much greater concern for our future prosperity and our ability to come out of this crisis than is the level of government debt.

“Having such high levels of private household debt could be a very real break on our recovery because households that are so highly leveraged are probably going to be less likely to spend willingly in the face of economic uncertainty, and we’re seeing that already with the national savings rate having gone up from 6% to 20% in the last national accounts .”

On ensuring Australia doesn’t return to pre-COVID ways, McCalman suggested that, in order to deal with pressing issues such as climate change, Australia needs a mechanism like the 1983 Accord between the Hawke-Keating government and the unions “to bring the parties together for some sort of commitment to a social contract”.

“That’s what provides a moral framework for collaboration across the state and federal, between business and government, between sectors, between regions, between universities and research and industry and government, the arts — everyone — in which you can start to work towards some common goals. And if you signed up to it, then you’d be eligible for various tax cuts, incentives, support, and so on,” she said.

“I think the will is there. I think we need the mechanism, and a narrative of a new Australian Accord … And that narrative I think might bring people along with it, that they’d feel this was constructive and bringing people together, rather than carrying on with the awful fighting and bickering and division that we’ve had for so long.”

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1 year ago

The productivity commission releases NDIS market concentration data quarterly. The vast majority of services are provided by existing legacy not for profit providers. The argument of profit making reducing service quality is entirely unfounded. Moreover, the funding is set to the persons level of need and constrained by price limits. This isn’t a standard privatizing event, and glib attributions don’t apply.

Your thoughts on reducing living standards are accurate however. The reason you have massive market concentration by not for profits is because the margins are too small to engage for profit providers. This naturally reduces competition for labor and therefore wages.

If you want answers about this privatizing event, I suggest you start by looking at the government award compared to the SCHADS award. The labor component alone is 30% higher for no discernible improvement in quality. This doesn’t include deliberate inefficiency management structures.

I think the rest of your argument is sound and it is obviously extremely distressing to witness the hollowing for the middle class. The NDIS however wasn’t designed to add wealth to private business owners, it was designed to have not for profits subsidize the true cost of care for vulnerable Australians.