Federal Budget 2017: small enough government

By Stephen Easton

May 9, 2017

Graphite pencils getting shorter – symbolic for contraction, reduction, decrease, loss. Isolated vector illustration on white background.

Finance Minister Mathias Cormann’s campaign to slim down the public service and squeeze out savings wherever possible has come to its natural conclusion, the 2017-18 Budget papers confirm.

The “smaller government agenda” the government has pursued for almost four years appears to have had the desired effect, with Cabinet now satisfied, more or less, that government is small enough.

“The rationalisation phase of the Smaller Government agenda is now largely complete, following delivery of a comprehensive package of Smaller Government reforms,” Cormann explains in his agency resourcing paper.

“This phase, which has included consolidating, merging and abolishing bodies, is estimated to achieve $1.5 billion in savings.

“To actively manage the size and shape of government going forward, the Commonwealth Governance Policy requires sunset or review dates to be set for the creation of new Commonwealth bodies.

“The Government is reviewing options to ensure that the necessary rigour and discipline is in place to effectively manage the structure and size of government and the creation of new bodies into the future.”

The Commonwealth estimates its average staffing level for 2017-18 will be 167,064 excluding military personnel, down from 167,247 in 2016-17 and a reduction of about 8.36% from a peak of 182,505 in 2011-12. The arbitrary policy of keeping the ASL around 2006-07 levels — 167,596 — remains in place.

“The continued restraint on the size of the public sector has been achieved over a period while the private sector has expanded, the Australian population has grown and demand for Government services has broadened (particularly in disability services),” Cormann reports proudly.

Cutting from “lower priority areas” and using “more efficient models, including through non-government providers, to achieve the same outcomes” are the keys to keeping a lid staffing levels, according to Cormann.

New technology and automation, which are helping governments to cut back their lower-level staff everywhere, are also considered part of the answer. Cormann says this leaves “more analytic and higher priority and value-add work” for public servants to do, while they aim to build the capability required for “more open and collaborative solutions to emerging complex challenges and opportunities” in future.

“The Government is also increasing the agility of the public sector by improving its span of control, management ratios and mobilising staff to move more quickly between agencies in response to government priorities,” he adds.

The APS workforce is “becoming more flexible, less top-heavy and deployed more widely outside Canberra” — but also more transient, with less ongoing staff and the APS Commission’s Operation Free Range exploring the possibilities for cross-portfolio bureaucrats in future.

See also: Public sector underpins Turnbull’s new pragmatism

This year, federal agencies will be responsible for administering $464.3 billion in expenditure. The amount agencies spend on their own running costs are a much smaller fraction of the whole than at state level, but the Finance Minister is keeping an eye on those in-house expenses nonetheless.

The proportional figure has been dropping steadily since 2007-08, when running costs were 8.5% of spending, to 7.1% in 2015-16. A graph shows the government projects the proportion of its budget it spends on administration to decrease more rapidly in coming years.

Cormann is optimistic about savings that will flow from the functional and efficiency reviews that have gone over 21 portfolio departments and major agencies. He expects to bank $5b between 2014-15 and 2020-21 and another $14b over the following five years.

Several vague allocations that look almost like bail-out packages, in that their purpose seems to be supporting core agency functions, contribute to the impression that there is very little left to cut in many parts of the APS.

The Department of the Senate — whose former head Rosemary Laing has publicly lamented the effect of efficiency dividends on such small agencies — gets a boost of $15m over four years, while the Department of the House of Representatives gets an extra $12.4m, to essentially help the two agencies do their everyday work.

The Budget documents say the money is “to strengthen the capability of the departments to provide assistance to Senators and Parliamentarians” and support parliamentary committees.

Meanwhile, a round $20m split evenly over the next four years has been bestowed on the Department of the Prime Minister and Cabinet as a “supplement” and to “support the delivery of critical policy advice and assist the Government in meeting its objectives”.

There’s also $29.5m over two years — including $6.2m in capital expenditure — for enhancing Treasury’s capability to support government on “issues including taxation policy and forecasting of revenue, macroeconomic modelling and foreign investment”.

The National Capital Authority also gets additional funding, so it can “undertake essential maintenance of Commonwealth assets and for strategic investment in improved asset management systems”, but the amount has been declared commercial-in-confidence.

Specific “efficiencies” listed for this coming year include $300m in savings over the forward estimates from the Department of Defence, resulting from cutting back on contractors and consultants, and limiting travel expenses. It’s big money on one hand, but for a department that will spend $150 billion over the same period, it’s like change found behind couch cushions.

There’ll also be savings from three Department of Education and Training programs. After a small $13.7m boost this year, $112.4m will be clawed back over five years by “identifying efficiencies” in the Skills for Education and Employment program while “reducing uncommitted funding” from the Industry Workforce Training program is expected to net $43.3m over six years. Efficiencies extracted from the Framework for Open Learning program will provide another $2.5m over four years.

Government employees posted overseas will collectively contribute $37 million in savings, as the arrangements for their allowances are standardised.

Restructuring the Australian Electoral Commission’s Northern Territory office will tip a tiny $8.4m back into the budget over the forward estimates, and efficiencies achieved from leasing two Border Force patrol boats to Defence will put $2.7 million back on the bottom line this financial year. But it all helps, right?

According to the Finance Minister, $7.6 billion has been saved since 2013 through his efforts to shrink the bureaucracy, efficiency dividends extracted from departmental budgets, the contestability program, and the Operation Tetris office space consolidation project.

“Building on these initiatives, the Government will continue to invest in transforming the Commonwealth public sector and its traditional operating models to drive productivity and achieve greater value for public money,” the Finance Minister writes.

A public service Modernisation Fund is flush with $500 million from the efficiency dividends, squirrelled away in last year’s Budget, and this year it’s time to spend some.

The measures this will pay for involve use of “leading technology and collaborative approaches to address complex problems facing society” and aim to enable a smaller APS to do a better job for more citizens at lower cost.

“The Government is investing to enable a more adaptive and productive public service, able to respond quickly and expertly to emerging priorities, while remaining trusted, capable and high performing,” writes Cormann.

“This Budget contains a number of initiatives that lay the foundation for improving public sector productivity. These initiatives will support the continued delivery of high quality, value for money policies, programs and services for the benefit of citizens and business, in a more sustainable way.”

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