Budget Review 2014–15 Index

Philip Hamilton

Efficiency measures

In place for over 25 years, the efficiency dividend (the ED) is an annual funding reduction for Australian government agencies, in general applied only to ‘departmental’ expenses. Usually applied at a rate of either 1.00 or 1.25 per cent, in some years governments have increased the ED; the highest increase has been to four per cent.[1]

The previous government set the ED at 2.25 per cent for the 2014–15, 2015–16 and 2016–17 financial years.[2] This Budget increases that rate by a further 0.25 per cent in each of those years, and forecasts savings of $569.0 million over four years (including $25.0 million in capital savings). The Budget papers provide guidance to agencies in how the ED should be applied by indicating that ‘savings [are] to be targeted in areas such as reduced advertising, consultancy and travel costs and deregulation efficiencies.’[3] The Australian Research Council has had a one-off 3.25 per cent ED applied to its administered funding for 2015–16.[4]

A number of agencies usually exempt from the ED will be subject to one-off reductions that resemble the ED. For example, a reduction of one per cent will be applied to the Australian Communications and Media Authority, the Australian Broadcasting Corporation (ABC), and the Special Broadcasting Service Corporation (SBS).[5] In the case of the ABC and SBS, an Efficiency Study is reviewing operations to ensure the organisations are as efficient and cost effective as possible. In that context, the one-off reduction is characterised as a down-payment on back office savings to be identified over the coming months.[6]

Staffing—Reductions

It was no surprise that the Coalition’s first Budget included a reduction in public service staffing. Since May 2010 a target of 12,000 positions had been proposed by the Coalition, with the expectation that numbers would be reduced through natural attrition.[7] In addition, the National Commission of Audit notes that implementation of its recommendations could result in ‘significant reductions in the number of mid-level public servants employed by the Commonwealth.’[8]

However, in mid-November 2013, it became apparent that the 2013–14 Budget had included measures that would reduce public service numbers by approximately 14,500.[9] Debate ensued about Labor’s ‘secret, unfunded’ cuts, and whether 12,000 would be in addition to 14,500.[10] By Budget night, the government’s position was that the ‘indiscriminate’ reduction of 14,500 positions would be ‘managed,’ and augmented by the reduction of a further 2,000 positions arising from ‘deliberate decisions about functions, priorities and the proper scope of government.’[11] The Treasurer stated that ‘16,500 staff will leave over the next three years without compromising frontline services,’ in line with the government’s view that ‘a smaller, less interfering Government won't need as many public servants.’[12]

Staffing levels in the General Government Sector (GGS) are forecast to return to levels similar to those in place at the end of the Coalition government in 2007.[13] Excluding military personnel and reserves, the forecast for the GGS in 2014–15 is 169,222, which is close to the 2006–07 figure of approximately 167,500.[14] A peak of 182,505 was reached in 2011–12.

The Budget papers compare entities’ budgeted staffing numbers for 2014–15 with 2013–14. Entities with major reductions include the Australian Taxation Office (2,329), the CSIRO (489), the Australian Federal Police (347), and the departments of Foreign Affairs and Trade (535), Health (326), and Agriculture (232).[15] The Budget papers report staffing numbers in terms of Average Staffing Level (ASL), a method of counting that adjusts for casual and part-time staff in order to show the average number of full-time equivalent employees. ASL is almost always a lower figure than a headcount of actual employees so, when staff are shed, the number of individuals who leave the public service will be higher than the ASL figure. This will contribute to the effects of job losses being particularly acute in Canberra.[16]

Not all positions will be lost through natural attrition, and redundancies are foreshadowed.[17] While the media and Opposition observed that the Budget’s provisions for redundancies were reducing, the government indicated that Budget measures for agency mergers and abolitions also included funding for redundancies.[18]

The Minister for Finance has noted that the interim ‘recruitment freeze’ arrangements announced in October 2013 will continue.[19]

Further reductions

The Finance Minister has foreshadowed that the ‘most comprehensive’ phase of consolidation in the number of government bodies will be considered by government in time for inclusion in the MYEFO 2014–15.[20] With a stated focus on reducing the number of small agencies, potentially drawing from the recommendations of the National Commission of Audit, this phase could be expected to result in a further reduction in the number of public servants.[21]

The Budget also included the relocation of approximately 600 public service positions to Gosford, about half comprising ATO positions.[22] The government has indicated that ‘where there is the opportunity, where it makes sense,’ further one-off proposals for ‘decentralisation’ would be considered on their merits.[23]

Enterprise agreements

On Budget night, the Treasurer announced a one‑year freeze on the salaries of senior public servants.[24] The salaries of the majority of public servants are determined in agency enterprise agreements which, in general, have a nominal expiry date of 30 June 2014.[25] Following the release of new workplace bargaining arrangements in March 2014, negotiations for new enterprise agreements have commenced.[26] The government’s position is that ‘public service conditions must not only be in line with community expectations, but they must be affordable and sustainable [and] agencies will be required to negotiate genuine productivity gains to offset public sector wage increases.’[27] With that context, further impacts are to be expected in terms of staffing and conditions.

Implementation of new Commonwealth financial framework

On 1 July 2014, the Public Governance, Performance and Accountability Act 2013 (PGPA Act) will replace the Financial Management and Accountability Act 1997 and the Commonwealth Authorities and Companies Act 1997 as the Commonwealth's primary resource management legislation. The PGPA Act represents a shift in public resource management from a compliance approach to a principles-based framework. Transitional legislation, anticipated to be introduced in the Budget sittings, will address any changes required to implement the PGPA Act. Note, though, that materials for the Budget 2014–15 have been prepared with reference to existing legislation and frameworks.[28]

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