APS cuts: tough times for Canberra, no economic armageddon

By Stephen Easton

July 21, 2014

In its latest Business Outlook report, Deloitte Access Economics notes that federal public service cuts are yet to take their toll on the nation’s capital, foreshadowing a “bitter pill to swallow” in the form of 6000-7000 local APS jobs to go over the next two years — but hardly the economic ruin that Canberrans have been told to expect.

“The good news is that the medium to longer term outlook for Canberra really hasn’t changed that much,” the report says, adding that the increasingly combative Senate appears likely to knock back further cuts to federal programs that would have hurt the ACT economy.

It also points out that a major contraction of the federal public service has been on the cards for a while:

“For all the screaming headlines about the federal budget, it didn’t really add that much to the woes faced by Canberra’s economy. Labor’s decisions while still in power had produced a pipeline effect that will reduce the size of the federal public service by 14,500 people, and the Coalition’s budget has merely topped that up by an extra 2000 people.”

Over the past decade, federal spending has grown at about 3% above inflation and was on course to accelerate slightly over the next 10 years, before the federal budget which proposed cuts that would get the decade average growth figure down to about 2.7%.

But according to the DAE Business Outlook, other forces are likely to frustrate the Coalition’s plans and keep public sector growth about where it is now:

“… by the time the Senate, the States and other parties have carved their pound of flesh from this attempt at shoring up the nation’s fiscal foundations, chances are that real Federal spending growth in the coming decade will be pretty much the same as it was in the last decade.

“To be honest, we see that as something of a fiscal fail. But with our Canberra residents’ hats on, it’s a reminder that … Canberra’s share of Australia’s economy and population aren’t set to shift particularly sharply in the years to come.”

DAE has also identified a few mitigating factors for the ACT, including “the well-worn path from those accepting redundancies into consultancies or small business”, as well as the ACT government’s attempts to offset the effect of the cuts and a long run of low interest rates, which “tend to be good news for the ‘one big mortgage belt’ that is Canberra”.

The nationwide APS workforce shrunk by about 2000 ongoing employees between June 2012 and June 2013 — its first decrease since 1999 — according to the 2012-13 State of the Service report.

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