Smaller government

Budget Review 2014–15 Index

Philip Hamilton

Reducing the number of government entities

The government reported that, through closures, mergers and consolidations of functions, the Budget resulted in the abolition of 36 government bodies. These 36 were in addition to a reduction of 40 entities initiated in the first few months after the 2013 election. In announcements coinciding with the Budget, the government characterised the 36 and 40 as the first two steps in a three-phase ‘smaller government’ agenda.[1]

Phase 1 – September 2013

The first Phase comprised the Machinery of Government changes following the 2013 election, and initiatives in the Mid-Year Economic and Fiscal Outlook (MYEFO) 2013–14.[2] Phase 1 included the merger of the Australian Agency for International Development (AusAID) into the Department of Foreign Affairs and Trade (DFAT); combining the Department of Resources, Energy and Tourism into the Department of Industry and DFAT; abolishing 23 advisory bodies; and commencing the process to sell Medibank Private.[3]

While many of these changes could be effected by the government or the Governor-General, the intended abolition of statutory authorities will require the passage of legislation. This category includes the Climate Change Authority, the Clean Energy Finance Corporation, and the Australian Charities and Not-for-profits Commission.[4]

Phase 1 was followed by the establishment of the National Commission of Audit (NCoA) with a brief that included public sector performance and accountability. The NCoA identified nearly 900 bodies, including 696 that it described as ‘non-principal’; generally, councils, boards, and committees. The NCoA made specific recommendations in relation to a large proportion of the bodies it had identified, particularly with a view to reducing their number.[5] In line with two broader NCOA recommendations, the government has committed to producing a publicly-searchable directory of government bodies, and an Australian Government Governance Policy, with a view to limiting the creation of new government bodies in the future.[6]

Phase 2 – May 2014

The Finance Minister issued a list of actions that reported ‘smaller government and related budget measures’ undertaken in the Budget.[7] These included the abolition or merger of seven committees and working groups in the Agriculture portfolio and 14 entities in the Health portfolio, six of which are intended to combine into a new Health Productivity and Performance Commission. Four civilian tribunals will create a single merit review tribunal. The Australian Customs and Border Protection Service will merge into the Department of Immigration and Border Protection to form a single operational border group, the Australian Border Force.

The corporate back-office functions of seven Canberra-based cultural institutions will be consolidated (see the Arts and Culture brief). Scoping studies will be undertaken into the possible privatisation of Defence Housing Australia, the Royal Australian Mint, Australian Hearing, and the Registry function of the Australian Securities and Investments Commission (ASIC). The Council of Australian Governments (COAG) Reform Council will be abolished, with some functions to be undertaken by the Productivity Commission and the Department of the Prime Minister and Cabinet.[8] As in Phase 1, some of the measures will require the passage of legislation.

Phase 3 – Late 2014

Later in 2014, in time for the MYEFO 2014–15, the third and ‘most comprehensive’ phase of consolidation will focus on reducing the number of small agencies. This phase could potentially draw from the recommendations of the NCoA.[9]

Further efficiencies will be sought through the implementation of a ‘Contestability Framework’ to assess whether particular government functions should be open to competition, and how competition should occur. Under this new framework, government functions will be reviewed over the next three years to determine whether they are appropriate for competition, in whole or in part.[10]

The smaller government reforms outlined in the 2014–15 Budget are forecast to deliver savings of $530 million through to 2017–18. Not all the savings will accrue to the government; in some cases, where a service was delivered by a government body funded by a levy and that body is abolished or streamlined, those who formerly paid the levy will make the savings.[11]


A focus of the NCoA and the Budget was the number of advisory bodies. One experienced commentator on public administration observed that, of the entities identified for abolition or merger:

More than half [are] advisory boards, advisory committees, councils and that sort of thing. And although people sit on those, they don't actually employ people directly. So that won't make any real difference. It'll mean a reduction in the amount of advice flowing through, but it'll make no difference to service delivery.[12]

The challenge for a department will be to assure itself and its minister that an appropriate range of reliable information and advice has been obtained and assessed from, for example, representatives of industry, academia, non-government organisations and sectoral interest groups.

The abolition of the COAG Reform Council, as discussed in ‘Federalism – an overview of changes,’ raises the risk of missed opportunities for independent assessment of and reporting on federal-state issues. Similarly, if the government were to act on the NCoA’s recommendation that the role of the Australian Public Service Commission should be subsumed into the Department of Employment, there is a risk that modest savings in the short term could be overshadowed by inefficiencies arising from the removal of a source of relatively independent information and advice about the public service.[13]

Although the government has identified a quantum of savings expected to result from the measures, previous experience points to difficulties when it comes to demonstrating that savings have been achieved.[14]

As outlined in the brief on ‘APS staffing and efficiencies,’ bargaining for enterprise agreements has commenced on an agency-by-agency basis. According to one commentator, a public service wide bargain would be a more efficient approach as it would minimise duplication of effort by government bodies – this represents an opportunity for savings that has been disregarded by the government.[15]

[1].           M Cormann (Minister for Finance), Smaller and more rational government 2014–15, Ministerial paper, May 2014, p. 2, accessed 16 May 2014.

[2].           The Mid-Year Economic and Fiscal Statement (MYEFO) is usually delivered in November or December each year.

[3].           Cormann, op. cit., p. 2.

[4].           Ibid., p. 7.

[5].           National Commission of Audit, Towards responsible government: appendix: volume 3, March 2014, p. 129, accessed 15 May 2014.

[6].           National Commission of Audit, Towards responsible government: phase one, February 2014, recommendation 55, p. 218, accessed 15 May 2014, and Cormann, op. cit., p. 13 and p. 2.

[7].           Cormann, op. cit., p. 26.

[8].           Australian Government, Budget measures: budget paper no. 2:2014–15,  2014, pp. 70–71 and related entries, accessed 16 May 2014.

[9].           National Commission of Audit, volume 3, op. cit., p. 129.

[10].         Cormann, op. cit., p. 7.

[11].         Ibid., p. 8.

[12].         S Bartos in S Lane, ‘Government braces for budget tough sell’,7.30 transcript, Australian Broadcasting Corporation (ABC), 12 May 2014, accessed 14 May 2014.

[13].         National Commission of Audit, Towards responsible government: phase two, March 2014, recommendation 6, p. xxi, accessed 20 May 2014.

[14].         Cormann, op. cit., p. 8.

[15].         P Gourley, ‘Abetz’s failed attempt to fix pay-fixing will waste millions,’ Canberra Times, 6 May 2014, p. 4, accessed 20 May 2014.


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