Since 1987–88, the efficiency dividend (ED) has
been 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 or 1.25 per cent; in some years governments have
increased the rate, with the highest ED rate being 4 per cent in 2012–13.
The ED is not always explicitly stated in the
Budget because, rather than being a budget measure, the ED is a factor
determined and applied by government in the course of developing the Budget (along
with other factors such as cost indices and policy decisions).
The 2017–18 Budget does not explicitly state
the rate at which the ED will be applied. However, the 2016–17 Budget stated
that the ED would be maintained at 2.5 per cent through 2016–17
and 2017–18, before being reduced to 2 per cent in
2018–19 and 1.5 per cent in 2019–20.
Affecting universities (and with likely
flow-on effects for university students), the 2017–18 Budget introduces
an ED of 2.5 per cent in 2018 and 2019 on the Commonwealth Grant Scheme, an ‘administered’
appropriation through which the government subsidises tuition costs for higher
education students. In 2010, the Government formalised a policy
whereby the ED could be applied to administered appropriations where the appropriations involve ‘payments for outsourced programs that could have been
managed within the Australian Government (that is, they are departmental-like
Functional and Efficiency Reviews provide the Government
with advice on opportunities to remove inefficiency or reduce expenditure in
its operations. The Government reports that, since 2014–15,
a total of 21 Functional and Efficiency Reviews have examined ‘most
Commonwealth portfolios and departments and several major agencies’.
Separately, the Department of Defence has been the subject of a First
The Government attributes Functional and Efficiency Reviews with
achieving ‘savings of around $5 billion from 2014–15 to
2020–21’ and ‘around a further $14 billion over the period
2021–22 to 2026–27’. In contrast to
2016–17, the budget papers do not indicate which entities
will be subject to review in the next financial year.
Smaller Government and
After three Budgets, the Government has declared:
The rationalisation phase of the Smaller Government agenda is
now largely complete, following delivery of a comprehensive package of Smaller
Government reforms. This phase, which has included consolidating, merging and
abolishing bodies, is estimated to achieve $1.5 billion in savings.
Coinciding with the conclusion of the Smaller
Government agenda, the Budget outlines the creation of at
least eight new entities (noted below), some of which are likely to require
Legislation to establish the Independent Parliamentary
Expenses Authority received assent in February 2017. It is likely legislation
or disallowable regulations will be needed to establish the Australian
Financial Complaints Authority, the National
Disability Insurance Scheme (NDIS) Quality and Safeguards Commission, the Regional Investment Corporation, and possibly the Infrastructure and Project
Financing Agency. It is unlikely legislation will be needed for the Cyber
Security Advisory Office (a non-corporate
Commonwealth entity), and the Western Sydney Airport (WSA) Corporation Ltd.
The design of the National Housing Finance and Investment
Corporation (and the affordable housing bond aggregator it will operate) will
be informed by the Affordable Housing Implementation Taskforce. In the UK, The Housing Finance Corporation (THFC)
is established as a not-for-profit company; if that model were adopted here,
legislation would not be necessary.
The Budget notes that ‘the Commonwealth
Governance Policy requires sunset or review dates to be set for the creation of
new Commonwealth bodies’.
Following a scoping study, the Government has decided to
retain full ownership and control of Australian Hearing Services.
The Treasurer has indicated that the Commonwealth is ‘open to acquiring a larger share or outright ownership of Snowy Hydro,
from the NSW and Victorian State Governments...’. 
In the 2015–16 Budget, the Government undertook to maintain
the size of the General Government Sector (GGS), excluding military and
reserves, at around or below the 2006–07 Average Staffing
Level (ASL) of 167,596. The projected GGS ASL
for 2017–18 of 167,064 is 15,441 less than the peak of
182,505 ASL in 2011–12, and is also close to the estimated GGS ASL for 2016–17
(167,248). Perhaps because they are yet to be established, the
eight new entities listed above do not appear in the table of staffing numbers
in Agency resourcing: budget paper no. 4: 2017–18. The extent to which
staff of the eight entities might change the projected ASL numbers is not
The Government has changed the way it counts staff at the
Administrative Appeals Tribunal (AAT). In the 2016–17 budget papers and portfolio
budget statements (PBS), the AAT’s ASL included both staff and members of the
AAT. In the 2017–18
budget papers and PBS, the AAT’s ASL includes staff but excludes AAT members. The
2017–18 budget papers appear to estimate a non-AAT member staffing increase of
93 ASL for the AAT.
Significant estimated staffing reductions
for 2017–18 include 244 ASL at the Department of Health, attributed
to ‘the department downsizing the workforce through a number of mechanisms
including a voluntary redundancy program’, and 1,188 at the Department of Human
Services (DHS), attributed to ‘departmental efficiencies, a reduction in the
level of support required by the National Disability Insurance Agency and
terminating budget measures’. The DHS reductions have attracted criticism from
the Opposition and the Community and Public Sector Union (CPSU), with both contrasting the reductions with a budget
measure proposing ‘piloting opportunities with existing accredited
Government service providers to reduce call wait times by increasing Centrelink
call centre capacity by 250 full-time equivalent roles’.
Due to the NDIS transitioning from trial to
full scheme, the National Disability Insurance Agency has an estimated increase
of 611 ASL. The Department of Defence has an estimated increase of 620 civilian
ASL due to ‘enhancements to intelligence, space and cyber security
capabilities’ and other priorities outlined in the 2016 Defence White Paper. In
February 2017, it was reported that the then Secretary of the Department of
Defence had expressed displeasure that consultants, contractors and other
service providers outnumbered departmental staff.
The Budget includes a measure that aims to:
achieve savings of $304.1 million out of $150.6 billion in
Department of Defence (Defence) funding over four years from 2017–18 through
efficiencies resulting from reductions in the numbers of consultants and
contractors used in Defence, as well as limiting the costs of non-operational
overseas and business travel.
The salaries of the majority of public
servants are determined in agency enterprise agreements. In general, agreements
made in 2011 had a nominal expiry date of 30 June 2014, and to commence
the negotiation process, a workplace Bargaining Policy was released in March
2014. Since then, negotiations
for new agreements have been protracted, and have included the issuing of a
revised Bargaining Policy in November 2015.
The Australian Public Service Commission has
reported that, as at 4 April 2017, a total of 90 enterprise agreements had
been agreed to in 86 Commonwealth agencies. However, a media
article on 4 May 2017 reported that enterprise agreements were still not in
place at two agencies with significant numbers of employees—the Department of
Human Services (29,835 ASL in 2016–17) and the Australian Taxation Office
(17,901 ASL in 2016–17).
In the 2017–18 budget
papers, the Government reports:
Australian Bureau of Statistics data shows that over the last
two years total wages and salaries in the Commonwealth public sector grew by
2.4 per cent compared to State Government which grew 6.1 per cent and Local
Government which grew 5.9 per cent.
Property portfolio and decentralisation
‘Operation Tetris’ requires public sector agencies to fill
vacant leased office space rather than entering into new leases or renewing
expiring leases. The Government anticipates that Tetris will yield savings of
‘nearly $300 million’ over the next ten years.
On the decentralisation of non-policy Commonwealth entities
to regional areas, the budget papers state that ‘business cases for entities
being considered for relocation are expected to be completed by December 2017’.
No financial impact of decentralisation is specified.
In relation to the overseas property portfolio within the
Department of Foreign Affairs and Trade (DFAT), one budget measure proposes the
centralisation of portfolio management, including ‘the development of a common
office and residential accommodation strategy’. The cost will be met from
within DFAT’s existing resources, and the benefits will include opportunities
to ‘capture economies of scale in service provision’.
Parliamentary budget measures
The Budget provides $12.4 million to the Department of the
House of Representatives and $15.0 million to the Department of the Senate over
four years from 2017–18 to ‘strengthen the capacity of the departments to
provide assistance to Senators and Parliamentarians’, including ‘further
support to Parliamentary committees’.
The Independent Parliamentary Expenses Authority is funded with
$13.2 million over five years from 2016–17.
Departmental funds are generally intended to cover agency running
costs such as salaries and the purchase or lease of equipment and property. In
contrast, administered funds are those administered by a Commonwealth entity on
behalf of the Government. They usually relate to activities governed by
eligibility rules and conditions established by the Government or
Parliament—such as grants, subsidies and benefit payments.
Department of Finance and Deregulation (DoFD), Report
of the review of the measures of agency efficiencies, DoFD, March 2011,
Australian Government, Agency
resourcing: budget paper no. 4: 2016–17, p. 2.
For more on this measure, see C Ey, ‘Higher education reform’, Budget review 2017–18, Research paper series, 2016–17,
Parliamentary Library, Canberra, 2017. The budget figures in this brief have
been taken from the following document unless otherwise sourced: Australian Government, Agency measures: budget paper no. 2: 2017–18, pp. 63, 83, 98, 99, 102, 137, 139, 141, 147, 154, 162, 169, 189; Australian
Government, Agency resourcing: budget paper no. 4: 2017–18, pp. 4, 5,
6, 8, 9, 79, 127, 134, 136, 137, 138, 139.
Report of the review of the measures of agency efficiencies, op.
cit., p. 20.
Completed Functional and Efficiency Reviews are listed in Agency resourcing: budget paper no. 4: 2017–18, p. 6.
First Principles Review of Defence, Creating
one Defence, Department of Defence, .
S Morrison (Treasurer), Budget speech 2017–18, p. 4.
For options for establishing Commonwealth entities, see the Department of
Finance website and P Hamilton, ‘A new way to set up a Commonwealth organisation’, FlagPost, Parliamentary Library blog, 29 June 2016.
Australian Government, Budget measures: budget paper no. 2: 2014–15, 2014, p. 117.
Budget speech 2017–18, op. cit., p. 4; Australian
Government, Budget strategy and outlook: budget paper no. 1: 2017–18,
The General Government Sector comprises government
departments and agencies that provide non-market public services, or involve
the transfer or redistribution of income, and are funded mainly through taxes. Budget strategy and outlook: budget paper no. 1: 2017–18, op. cit., p. 10–38. Average Staffing Level (ASL) is 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. In this discussion of ASL, GGS
figures exclude military and reserves.
Australian Government, Agency
resourcing: budget paper no. 4: 2016–17, p. 130,
and Australian Government, Portfolio budget statements 2016–17: budget related paper no. 1.2:
Attorney-General’s Portfolio, op. cit., p. 44.
Australian Government, Portfolio budget statements 2017–18: budget related paper no. 1.2:
Attorney-General’s Portfolio, p. 44.
L Burney (Shadow Minister for Human Services), Tudge
to slash almost 1,200 DHS jobs, media release, 10 May 2017; Community
and Public Sector Union, Turnbull
Budget bad for Centrelink, doubles down on disastrous cuts, media
release, 9 May 2017.
N Towell, ‘Public
service boss bares his teeth’, Canberra Times, 20 February 2017, p.
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.
APSC, ‘Bargaining policy
2015’, APSC website.
APSC, ‘Agencies with enterprise agreements’, APSC
N Towell, ‘ATO
backs down on work conditions’, Canberra
Times, 4 May 2017, p. 5.
All online articles accessed May 2017.
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