Efficiency measures and targeted savings
In place for over 25 years, the efficiency
dividend (ED) is an annual funding reduction for Australian government
agencies, in general applied only to ‘departmental’ expenses. The ED has
usually been applied at a rate of either 1.00 or 1.25 per cent; in some years
governments have increased the rate, with the highest ED rate being four per
cent. The 2015–16 Budget provides that, as efficiencies are increasingly being
sought from targeted, known areas of inefficiency in specific agencies, from
2017–18 the Government will return the ED to a base rate of one per cent,
subject to ongoing monitoring. The Budget does not
specify the ED rate over 2015–17; in 2013 the previous Government set the ED at
2.25 per cent for 2014–17, and in the 2014–15 Budget the current Government
increased the rate by a further 0.25 per cent for 2014–15, 2015–16, and
The proposed reduction in the ED will be welcomed by public
service managers and commentators who have long argued that, after more than
25 years, there are few substantial savings to be achieved by a blunt
instrument such as the ED, and that the ED has placed particular burdens on
The Government’s use of targeted savings began in the 2014–15 Budget, with the targeting of agencies’ communications and
public affairs functions. Specific targeted savings
identified in the 2015–16 Budget include:
$31.4 million over two years from 2017–18
by consolidating agencies’ Enterprise Resource Planning Systems; that is,
agencies’ ‘back‑office’ IT systems. This is consistent with a
recommendation of the National Commission of Audit in 2014, and the example of
the current Shared Services Centre (SSC), which provides services to the Education
and Industry departments and some of their portfolio agencies.
An expansion of coordinated procurement arrangements for ICT
products and services, including software licensing, for estimated
whole-of-government net savings of $13.7 million over four years from 2015–16.
$55.1 million over four years from 2015–16
in the Human Services portfolio by ceasing, from 1 July 2015, the payment to
the Australian Taxation Office for the Child Support Lodgement Enforcement
Programme, and by changing mechanisms for payments by Centrelink, Medicare and the
Pharmaceutical Benefits Scheme.
$13.2 million over five years will be sought through
efficiencies to arts and cultural programmes administered by the Australia
Council, Screen Australia and the Attorney-General’s Department (AGD). Savings
of $54.2 million over five years from 2014–15 will
also be achieved through a reduction in departmental funding for AGD and
efficiencies in a range of administered programmes. Current funding levels will
be maintained for the Family Relationship Services Programme, Grants to
Australian Organisations Programme, the Australia New Zealand Counter Terrorism
Committee, and payments to the International Criminal Court. There will also be
a redirection of funding for discretionary legal assistance to ensure a more
The Government has also commenced Functional and Efficiency
Reviews to determine whether the functions of departments and large agencies
are aligned with the Government’s policy priorities, and whether they are
working as efficiently as possible. Two such reviews have examined the
departments of Health and Education and Training. As a result, in Health the
Government expects net savings of $96 million through efficiencies in
contracting, corporate, staff and property costs. Education and Training is to
achieve savings of $131 million by ceasing and redesigning programmes;
$7.6 million of this is in the operations of the department.
After the Budget, further recommendations from the Education and Training
review will be considered, focussing on the department’s administrative costs. In
2015–16, Functional and Efficiency Reviews will be
undertaken of the departments of Agriculture, the Environment, Foreign Affairs
and Trade, Treasury, Attorney-General’s and Social Services, as well as the
Australian Taxation Office and the Australian Bureau of Statistics.
Funding for whole-of-government
The 2015–16 Budget includes expenditure
measures that are significant for the whole public service. The Budget provides
$254.7 million over four years from 2015–16 to the
Communications portfolio to support the initial implementation of Digital
Transformation Agenda (this includes savings redirected from other portfolios—$120 million
in over five years from 2014–15). The first phase
of the Agenda will include: improved myGov services; a Digital Service Standard
to make services faster and easier to use; and a new service to simplify the
process of registering a business. In addition, funding of
$106.8 million over four years is allocated to establish a
whole-of-government grants administration process.
The Digital Transformation Office (DTO) will be established as a new Executive
Agency in the Communications portfolio, with $95.4 million over four years
from 2015–16, although staffing levels for the DTO are yet
to be determined.
Extending a measure in the 2010–11
Budget, the Department of Finance will be funded to further redevelop the
Central Budget Management System (CBMS) that underpins the budget and financial
management of the Government. The financial impact of this measure is not
disclosed. Delays in the CBMS
project have been canvassed at Senate Estimates.
From September 2013 to February 2015 over 17,300 public
servants left the Australian Public Service, with the Government providing $212 million
to 38 agencies to assist with redundancies. In 2015–16, reductions
in staffing levels are expected in a number of portfolios, notably a net
reduction of some 1,000 ASL as the Defence Materiel Organisation is merged into
the Department of Defence. Relatively significant
reductions will also occur at the Australian Broadcasting Corporation and the
Bureau of Meteorology. Staffing at the Clean Energy Finance Corporation is
projected to reduce from 54 to 30 ASL, anticipating the abolition of the
Corporation from 31 December 2015.
The 2015–16 Budget forecasts that, for
2015–16, total staffing will return to the level last recorded in 2006–07 as measured across the General Government
Sector (GGS) excluding military personnel and reserves: the
total ASL for 2015–16 is estimated to be 167,340, but this
may drop depending on further Functional and Efficiency Reviews and efficiency
measures through 2015. Notably, this is very
close to the total ASL for 2014–15 (167,411 ASL). Overall, staffing reductions
will be offset by temporary increases in particular areas, for example, in the ABS.
More broadly, the recruitment ‘freeze’ introduced
in November 2013 will end. From 1 July 2015, agency heads will be able to
recruit without seeking approval from the Australian Public Service Commission,
although this will be subject to ongoing monitoring by the Commission.
The salaries of the majority of public
servants are determined in agency enterprise agreements. In general, the
agreements made in 2011 included a nominal expiry date of 30 June 2014.
New workplace bargaining arrangements were
released in March 2014. In December 2014,
the Prime Minister made a commitment that ‘no public sector worker will be paid
at a higher rate of increase than our defence forces.’
At that time, the offer to defence personnel was 1.5 per cent per year
(later increased to two per cent); for the public service, the December 2014
Mid-Year Economic and Fiscal Outlook statement noted the Government’s
‘intention to keep average annual wage rises across the public service to 1.5
per cent or less over the next three years’. In
contrast, the major union representing public servants is seeking a 4 per
cent pay increase each year.
Early in May 2015, it was reported that ‘most [agencies] are offering a pay increase of about 1 per cent a year’
and that no new enterprise agreements had been signed.
In an escalation of the apparent stand-off in negotiations, on Budget day the
public sector union commenced a series of stop-work meetings that will affect a
number of agencies. This prompted media coverage predicting that the APS ‘is
facing its worst industrial strife for 30 years.’
According to the Opposition, the 2015–16
Budget provides that public sector wages will increase by only 1.49 per cent by
2018–19, which is less than inflation. Suggested consequences include a wage
freeze or ‘thousands more public sector workers sacked by 2018–19.’
Australian Government, Budget measures: budget paper no. 4: 2015–16, p. 3.
C Bowen (Treasurer) and P Wong (Minister for Finance and Deregulation),
statement August 2013, media release, 2 August 2013; Australian Government,
measures: budget paper no. 2: 2014–15, p. 69.
Horne, The Commonwealth efficiency dividend: an overview, Background
note series, 2012–13, Parliamentary Library, Canberra, 2012.
Budget measures: budget paper no. 2: 2014–15, op. cit., p. 113.
Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 70.
National Commission of Audit, Towards responsible government: appendix: volume 2, March 2014, p. 247;
Shared Services Centre (SSC), ‘Introducing
the Shared Services Centre’, SSC website.
Budget measures: budget paper no. 2: 2015–16, op. cit., p. 94.
Ibid., p. 115.
Budget measures: budget paper no. 2: 2015–16, op. cit., p. 59.
Budget measures: budget paper no. 4: 2015–16, op. cit., p. 2.
Budget measures: budget paper no. 2: 2015–16, op. cit., pp. 67–68.
Australian Government, Overview: budget 2015, 2015, p. 28.
Budget measures: budget paper no. 2: 2015–16, op. cit., p. 68; see also Interim Digital
Transformation Office (DTO), ‘Better grants administration’, DTO website.
Budget measures: budget paper no. 2: 2015–16, op. cit., pp. 67–68; Budget measures: budget
paper no. 4: 2015–16, op. cit., p.
Budget measures: budget paper no. 2: 2015–16, op. cit., p. 91.
Senate Finance and Public Administration Legislation Committee, Official
committee Hansard, 20 November 2014, pp. 125–9.
Budget measures: budget paper no. 4: 2015–16, op. cit., p. 129.
Ibid., p. 134. 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.
Budget measures: budget paper no. 4: 2015–16, op. cit., pp. 129, 133, 135, 139 and 141. A Bill
to abolish the Corporation has been in the Senate since March 2014.
Total ASL for 2006–07 is estimated to be 167,596: ibid., p
131. The General Government Sector comprises departments
and agencies that provide public services which are mainly non-market in
nature, mainly for the collective consumption of the community, involving the
transfer or redistribution of income and financed mainly through taxes and
other compulsory levies. Australian Government, Budget measures: budget paper no. 1: 2015–16, 2015, p. 9-33.
Budget measures: budget paper no. 4: 2015–16, op. cit., pp. 129–31.
Ibid., p. 129.
Australian Public Service Commission (APSC), Australian Public Service bargaining framework: supporting guidance, APSC, Canberra, 2011, p. 8.
APSC, ‘Australian government public sector workplace bargaining policy’, APSC website.
T Abbott, ‘Answer
to Question without notice: Minister for Defence’, [Questioner: B Shorten],
House of Representatives, Debates, 1 December 2014, pp. 13674-75.
T Abbott (Prime Minister) and N Andrews (Minister for Defence), Joint
press conference: Joint Operations Command Centre, Carwoola,
transcript, 4 March 2015; Australian Government, Mid-Year
Economic and Fiscal Outlook 2014–15, p. 26.
. Community and Public
Sector Union (CPSU), ‘CPSU
bargaining claim 2014’, CPSU website, p. 1.
M Mannheim, ‘Only one in five bureaucrats back strikes‘, Canberra
Times, 7 May 2015, p. 1.
N Towell, ‘Biggest PS 'fight' in 30 years‘, Canberra
Times, 2 May 2015, p. 1.
All online articles accessed May 2015.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to email@example.com.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.