This chapter discusses the decentralisation of Commonwealth entities. It provides a brief overview of the Australian Public Service (APS), and the Australian Government’s current decentralisation program. Key factors for relocating Commonwealth agencies to rural and regional areas are also discussed.
The APS was established in 1901, at federation, and consists of Commonwealth Government departments and agencies where staff members are employed under the Public Service Act 1999.
The functions of the APS are broad, giving effect to the responsibilities of the executive government. This includes policy development and advice, revenue collection, and the provision of Commonwealth Government programs and services.
As at 31 December 2017, the APS consisted of 105 separate agencies. A list of these can be found at Appendix E.
As at 30 June 2017, there were 152,095 people employed in the APS under the Public Service Act 1999. This includes staff engaged on an ongoing and non-ongoing basis.
Over half (57 per cent) of all APS staff are employed by four Commonwealth Government agencies:
the Department of Human Services (22.4 per cent);
the Australian Tax Office (13.6 per cent);
the Department of Defence (12.1 per cent); and
the Department of Immigration and Border Protection (9.1 per cent).
The employment figures do not include contractors, staff hired through a labour hire firm, or members of the Australian Defence Force.
The Australian Capital Territory (ACT) has 37.9 per cent of the total APS workforce. This is followed by New South Wales (18.9 per cent) and Victoria (16.8 per cent). Figure 7.1 provides a break- down of APS employees by state and territory.
Figure 7.1: Location of APS workforce by state/territory, 31 December 2017
Source: Australian Public Service Commission Statistical Bulletin December 2017
Only a small percentage of APS employees are located outside the metropolitan areas of each state and territory. The state with the highest proportion of APS employees in regional areas is New South Wales, with six per cent. The lowest is South Australia, with only 0.2 per cent.
The proportion of APS employees in regional areas has remained largely constant over the past ten years; rising from 13.38 per cent in 2007 to 14.13 per cent in 2017.
Most of the senior positions in the APS are located in Canberra. As at December 2017, 1,959 of the 2,078 Senior Executive Service (SES) Bands 1 – 3 were in Canberra. Of the 37,292 Executive Level (EL) 1 – 2 staff, 22,024 (59%) were in Canberra.
History of Commonwealth decentralisation
The earliest example of Commonwealth decentralisation in Australia is the establishment of Canberra as the nation’s capital and seat of federal Parliament. In its submission, the ACT Government states:
The Australian Capital Territory was established on the traditional land of the Ngunnawal people on 1 January 1911, as a political, regional and geographic compromise between Sydney and Melbourne.
Canberra itself is the single greatest example of a successful decentralisation model, unparalleled anywhere in the world.
The Australian Constitution provides for the establishment of a territory ‘not less than one hundred miles from Sydney’ as the seat of the Commonwealth Government. Following completion of (Old) Parliament House in 1927, the Commonwealth Government moved from Melbourne to its new seat in Canberra. Over the next several years, the Commonwealth public service also relocated from Melbourne to Canberra.
Today, most Commonwealth Government departments and agencies are in Canberra, although some agencies have since re-located out of the Australian Capital Territory. Examples of Commonwealth decentralisation out of Canberra are at pages 14 – 16 of the Committee’s Issues Paper.
Many Commonwealth Government organisations have a decentralised workforce, with employees based at locations around Australia. These include the Departments of Defence and Human Services, the ATO and the Treasury. In all these examples, the head office and most of the senior staff are located in Canberra.
Decentralisation in this chapter refers to a complete relocation; where a department or agency–including the head office–is moved from a capital city to a regional area.
Current decentralisation program
As set out in the Committee’s Issues Paper, the Commonwealth Government embarked on a decentralisation program in early 2017.
The rationale for the program was to provide people in regional and rural communities with opportunities to access secure, well paid, public sector jobs, and to enjoy the benefits that flow from the presence of a Commonwealth department or agency in the region.
In announcing the government’s policy, the then Minister for Regional Development said:
Moving government functions to the regions means more people in our towns, more customers in our shops, more students in our schools, and more volunteers for the local fire brigade.
… It's important for government to lead by example and invest in rural, regional, and remote Australia, creating long-term careers and breeding confidence in those communities...
All portfolio Ministers were asked to report to Cabinet by August 2017 on which of their departments or functions are suitable for a regional move. More substantial business cases were required by December 2017.
The Committee requested further information from the Minister for Regional Development on the progress of this program. In his response, Minister McVeigh advised the Committee that ‘Ministers are working through a structured process to determine the most suitable entities and functions for decentralisation from their portfolios, and the most suitable locations to host them’. Minister McVeigh also advised that ‘the Australian Government will announce further decentralisation initiatives throughout 2018’.
The Committee notes the decentralisation announcements made as part of the 2018-2019 budget.
Advantages of decentralisation
The purpose of decentralisation is two-fold:
to facilitate better government through the improved provision of services and development of policy; and
to create social and economic opportunities for communities.
The Committee’s Issues Paper sets out some of the benefits of decentralising government agencies. It noted that in addition to addressing population imbalance and providing employment opportunities in the regions, decentralisation of government sector jobs may:
bring government services closer to the people;
better align government agencies to specialist regional areas and resources;
tap into specialist skills and experience of people living in regional areas; and
reduce operating costs for government.
It is the Committee’s view that public sector jobs should be more widely distributed throughout the country, particularly in rural and regional areas. Furthermore, Australians should not be prevented from joining the public service or having access to government career opportunities because of where they live.
A collateral advantage of decentralisation is reducing the congestion and population pressure on capital cities. Increased population creates a cost. The Australian Infrastructure Audit 2015 identified:
… capacity constraints along the [M80] corridor as a significant problem, and found that, without additional investment, the annual cost of congestion along the corridor is projected to grow from $86 million in 2011 to $161 million in 2031.
Centroc, in its submission to the inquiry also identified $16.1 billion in ‘avoidable cost[s] of congestion in Australia’s capital cities’ while Latrobe City Council identified a $53 billion congestion bill.
There is general agreement with the principle of Commonwealth decentralisation. However, the Committee’s support is qualified. Any decentralisation has to balance the benefits of decentralisation with the requirement for efficient government.
Many people who gave evidence to the inquiry told the Committee they did not expect whole government departments or agencies to be ‘picked up and moved’ to a regional town. For example, Ms Crisp from Spencer Gulf Cities said:
We often find that there are some pretty big myths about decentralising the public service. From our perspective in Spencer Gulf Cities, this is not necessarily just about picking up a whole department and plonking it somewhere else. Some of the successful examples globally point to starting small and being pretty niche in some ways about how you do that.
The Committee heard consistent evidence on the need for considered, strategic decision making supported by a long term commitment.
Timing of decentralisation decisions
The Committee heard that any successful decentralisation strategy should also include when to consider decentralisation.
The Committee’s attention was drawn to the decentralisation model used in Scotland. This includes the points which trigger consideration of relocation, such as when:
a new unit, agency or organisation is created;
an organisation is merged or reorganised; or
a significant property break occurs such as the termination of a lease.
Similarly, the CPSU noted that an optimal time to consider decentralisation of Commonwealth entities might be when a new agency, function or service is introduced by government. The introduction of the National Disability Insurance Scheme was a good example:
When the new function is needed, that's a really great opportunity to consider where it is. The prime example is the NDIA having its headquarters in Geelong. That's the easiest opportunity for creating jobs. Some people move to set it up and you can train locals to do a lot of the head office functions.
Deciding whether to decentralise
The Committee was encouraged by the consistency of evidence about the factors that would facilitate successful decentralisation. It was also encouraged by the consistent acknowledgement that decentralisation is more than just moving Commonwealth agencies and Commonwealth employees. Rather, decentralisation is about people. It is about their families, and it is about communities.
The Committee has identified an essential range of factors for successful decentralisation. These factors have been grouped into two areas; those affecting the employee and those affecting the agency.
For the employee
The Committee heard that for employees, important considerations include a good job with career prospects, employment opportunities for partners and spouses, and the amenity of the city or town. Ms Stephanie Foster drew on the APSC’s experience of relocating Commonwealth public servants to summarise the considerations for employees:
What we find when we are relocating people—whether it is from capital city to capital city or anywhere—is that there are three or four things on their mind. There is the quality of the job experience. […] What opportunities are going to be there for my family? I know I'm not saying anything new here but spousal employment is an enormous issue for people, as is the quality of education for kids. After those things, which are really red-line issues, they start to think about the quality of life in that area.
Employees need to not only have a good position, but also opportunities for career advancement. This could include lateral transfers, learning new skills, and promotions.
A number of witnesses told the Committee that often, people in regional towns need to move to capital cities to take up a public sector position or a promotion.
At the moment, if you want to work in government, you leave your small town, you leave your communities and you have to go.
A number of witnesses also highlighted the lack of SES positions in the regions. In responding to a question about what the Commonwealth could do to continue the strong position of NT on women in leadership in the public service, Ms Bellenger from the NT Government stated:
I think we need more opportunity here for women….It's definitely about having more jobs and a diverse ecology of jobs available. For instance, you might get to the top of the post in your area. I could give you my example. I was the state manager for Centrelink, looking after the Territory, the Kimberley and the APY Lands, but my next step had to be Canberra. […]We only go to an SES band 1 in most jobs in the Territory and then you have to go.
Mr Jack Archer from the Regional Australia Institute also raised the impact on local decision making of few SES positions in the regions. He said:
…..17 per cent of Commonwealth jobs are outside the big five cities and Canberra, but very, very few of them are SES level, so there are virtually no decisions being made in regional areas about regional issues, whether that is in Indigenous affairs, which is overwhelmingly focused on remote challenges, or other areas. How do we give more flexibility in decision-making to people actually on the ground doing work and less consistency being driven out of Canberra?
Partners and spouses
Individual decisions to relocate are also based on whether there are employment opportunities for partners and spouses. The Committee heard that often partners and spouses will require the same calibre of employment as the relocated employee. Decentralisation is more likely to be successful where towns have employment for both the government employee and their partner.
The Committee acknowledges the number of submissions that promoted their regional town and community as an ideal location for a Commonwealth Government department. These submissions were a valuable source of data for the Committee on the amenity of regional areas.
The Committee received evidence on house prices, connectivity to town centres, facilities, dining and entertainment, and the liveability of towns. Many submissions also compared the experience of living in these regional and rural towns to living in cities; noting the expense, time, and congestion associated with more populated capital cities.
For example, the RDA Grampians Committee quantified the savings that could be made by government organisations:
Ballarat, like all comparable regional cities has a considerable lower rental cost than metropolitan equivalents. With existing A-grade office space available at between $280 - $320m2…if a 500 person decentralisation activity were to occur, then a 6000m2 space would be required. Decentralising this to a regional area would save between $7.3m and $17.7m over a 15-year commercial lease term.
Others pointed out the potential of an area to become a specialist hub or cluster. For example, in Bundaberg:
Companies compete while at the same time learning from one another about changing markets and technologies through informal communication and collaborative practices.
It was clear from the submissions that many regional areas are already able to support additional employees. The Cowra Council explained:
With ample affordable residential land, and sufficient water, sewer and NBN infrastructure to comfortably house 2,000 plus residents in Cowra without having to add to said infrastructures, Cowra has the spare capacity to feasibly support a decentralised government workforce.
Many submissions promoted the amenity – or liveability – of their towns, and what the town can offer employees and their families. For example, the Lockhart Shire Council advised:
Community facilities and sporting activities are an important part of the community, with numerous facilities, parks and reserves catering for the community. These places create a strong sense of community connection and strengthen the relationships held within the community.
Amenity was raised as a key consideration, particularly for employees who have children. Education opportunities, access to sporting and recreational facilities, and lifestyle factors such as the arts, dining and entertainment, all play an important part in a person’s decision to move.
The Committee heard that without a high level of amenity, the success of a town to attract and retain public sector staff would be limited.
In its submission to the inquiry, Orange City Council discussed its experience of the decentralisation of 430 positions in the NSW Department of Agriculture in 1992. Orange City Council identified many key factors that the city provided to create a successful decentralisation:
access to high quality health care;
higher education and ongoing learning;
lower cost of living, including housing;
career opportunities for spouse, partner or children;
access to Sydney, Canberra and other capital cities;
retail options available;
visual attractiveness of the location;
digital connectivity; and
sports and other activities outside of work.
For the agency
The Committee has identified a number of factors affecting the agency when considering whether to locate that agency to a regional town.
The Committee was consistently told that any Commonwealth Government agency or function needed to be a ‘good fit’ for the location to which it was being moved.
The concept of ‘good fit’ is more relevant to those Commonwealth organisations that have specialist functions. These can often be linked to a regional town or location that would support those specialist requirements – either due to the natural environment, presence of existing infrastructure or industry, or an available workforce. For example, a natural fit would include relocating agriculture to a farming area, fishing to a coastal area, or space research to more remote landscapes.
There are also generalist Commonwealth entities or functions that could be relocated to any regional town or city. The nature of the work is not dependant on the endogenous factors of the town or city. For example, the work of the Australian Taxation Office or the Department of Human Services, which is not closely linked to local resources. In these cases, the key consideration is that the work of the agency not be diminished or affected by the location chosen.
Some submitters contended that non-policy entities or functions are best suited to regional locations because there is no need for close proximity to Ministers or other senior decision makers. These submissions specifically identified functions that are more administrative in nature, such as call centres.
Others however, identified the value of having policy positions and decision makers in the regions. The argument is that it enables policy to be made more closely to, and with, those affected by it. Spencer Gulf Cities stated:
Similarly, at a Commonwealth level, wholly Canberra-based departments formulating and implementing policy in areas such as agriculture, animal services, water, regions and environment, often with little practical experience and high rates of employee turnover, generates scepticism and disillusionment in communities upon which these policies are imposed.
The Commonwealth Scientific and Industrial Research Organisation (CSIRO) provided evidence to the Committee of its experience as a decentralised organisation of 58 sites across Australia, including 793 staff in regional locations.
For the CSIRO, ‘good fit’ requires an assessment of the industry, research and local community aspects of a site. Ms Hazel Bennett, Chief Operating Officer, advised the Committee that deciding on locations is driven by the core business of the organisation:
It starts with the aspiration of doing the research, which itself may already be shaping the fact that we need to be embracing and working with regions. Our process for that determination is absolutely made by the science.
Employees of a department or agency may be current staff who move to the new location, locals who live in the town, or people who work remotely and are not physically located in the new area.
The Committee is mindful that one of the aims of decentralisation is to provide employment opportunities for people within the regions. It is therefore important that a Commonwealth organisation can access a skilled local workforce.
Ms Crisp from Spencer Gulf Cities acknowledged that it is imperative that regional communities are able to ‘grow their own’ workforces rather than rely on public servants who are relocated to a town. She stated:
We can't rely on a little dribble of people from the cities every five years when they're forced out into the regions. Over time, regions need to build their own capability and workforce with education and training around the Public Service as a career option as well—growing their own workforce. That way they are helping to retain people in their own communities but giving them legitimate career paths in the Public Service as well.
Here, connectivity refers to both physical and digital connectivity. Physical connectivity requires easy access – by air, road, rail – to those places that facilitate business and keep regions connected to the broader operating environment. For example, being able to travel to a capital city, access a port to import and export goods, or commute to the home or head department relatively quickly.
Case Study: NT – Lack of economies of scale hinders economic development
Although Darwin airport’s runway is sufficiently long for large wide-bodied passenger and freight aircraft, local agricultural producers are not able to export directly from Darwin to southeast Asia and beyond.
Lack of ticket sales to sufficient numbers of passengers has resulted in commercial passenger carriers not using wide-bodied jets. As a result agricultural producers need to transport their goods to Brisbane or Sydney prior to export which is both expensive and time consuming.
We have no wide-bodied aircraft travelling out of here north, so any perishables that are exported go through Sydney or Brisbane. All those sorts of things hamper industry development and cut into the margins for producers here. We don't have the economies of scale to grow a manufacturing sector here in the food area.
In addition to physical proximity, connectivity also refers to technological connectivity; internet access and the NBN.
The Committee heard a range of evidence on the NBN. While some shared their experiences of great speeds and connectivity, others relayed different experiences of slow speeds, expense, and inequality between neighbouring towns and regions. They all agreed that good connectivity is vital to building and sustaining rural and regional towns, particularly in a global market.
Challenges and risks
The Committee’s Issues Paper identified some of the risks associated with decentralising public sector agencies. For example, the potential loss of experienced and skilled staff, the costs associated with staff separation or recruitment and training, and agency establishment costs. The Committee notes these challenges, and sets out below some additional risks that have arisen during the inquiry.
No net benefits
The Committee notes that the relocation of Commonwealth agencies or entities may result in no net benefit. This is particularly evident when an agency is taken from one town and moved to another. Jobs are merely moved from one city to another, with no overall gain. With specific regard to the agricultural sector, the National Farmer’s Federation observed:
We agree that regional Australia deserves its fair share of jobs, government services, opportunities and development. Having said that, we are conscious that some jobs are best done in the cities. Because of this, NFF supports the relocation of government agencies to rural and regional Australia where there's a net benefit, it's practical and it's the best fit for regional and rural Australia… It's critical that the relocation of any agency does not result in the ongoing disadvantage of this sector.
The Committee notes that the benefits should include the benefits of decision makers being located close to the people that will be impacted by policy decisions. These benefits are real but difficult to measure.
There is a risk that decentralisation will have a negative impact on the local area if suitable infrastructure investments are not made. If a town has limited capacity to support the influx of new employees and their families, decentralisation can create additional pressures. These could include an increase in house prices, overcrowding of schools, and overloading of health and community services.
Some witnesses disputed the potential negative impact of decentralisation. For example, in Orange, Ms Julia Andrews from RDA Central West stated:
We are not aware of any major government decentralisation events in the central west that have ever left the region worse off. Decentralisation overwhelmingly results in regional economic social and cultural growth. So the key messages that we provided in our submission were, firstly, that careful and considered relocation of government bodies -and it doesn't have to be the whole department; it can be an arm of it - results in significant economic growth and stronger regional communities, greater synergies and better partnerships for the government body as well as for the community.
There is another risk of a town becoming dependent on the Commonwealth agency or service as its main economic driver. This makes a town vulnerable to machinery of government changes, or policy changes, which could relocate the agency away from the town. For example:
Benalla was a community that was very dependent on government departments—the department of education and a number of government departments were relocated there, and it was a strong community. Over a period of time, as Wangaratta became stronger in its own right, those government agencies moved to Wangaratta, leaving quite a hole in Benalla.
This challenge aligns with the principle that underpinned much of the evidence the Committee heard through the inquiry; the principle that long-term regional development requires a regional area to be resilient and self-sufficient.
The Committee heard evidence that choosing the right regional location can create a perception of the organisation favouring that region. Although the Murray Darling Basin Authority considers the current program of increasing their regional presence to be successful, representatives of the Authority identified the risks of choosing a regional location:
If you go to the Riverland region, they'd really like to have the office up there. But the people at the Murray Mouth, in the Coorong, go, 'That looks like you're favouring the irrigation industry.' If we locate the office down in the Coorong, then it looks like we're doing that.
The Committee notes a related risk in locating regulators close to the industry being regulated. Close relationships, and a small regional employment market, can potentially lead to government employees being unduly influenced by industry priorities.
If the decision to relocate an agency is made–taking into account the risks and benefits outlined above–there are a number of steps that can be taken to ensure successful implementation. The Committee heard evidence that successful decentralisation requires a long term commitment, planning and communication, and supporting staff.
Long term commitment
The Committee appreciates that the prospect of decentralisation and relocation can be daunting and stressful for public sector employees. It is also aware that, over time, there are many examples of successful moves for individuals, for families, for communities, and for government.
Decentralisation of a Commonwealth entity or function needs to be a long term commitment. This is important for two reasons. It provides staff with certainty that they will not need to move again in the short term. It also gives the relocation time to take effect; for communities to adjust and build, and to take advantage of the opportunities.
This point was made by Mr Jack Archer, CEO of RIA:
… If you decide to move some elements of administration to a regional area and you stick to that for 10 years or more, you will change things in that place for the better usually, particularly if that decision to move people is made with some sense of what that region can offer existing labour markets and what else is happening there. The international and local benefits of that approach are pretty clear. If you chop and change all the time, and governments change and we bring things back and we move things around, then it does not go very well.
The Committee heard that although there had been initial resistance by some staff to the relocation of Commonwealth agencies, in the long run these relocations have been beneficial. Many relocated staff still remain in the new location.
Planning and communication
The basic principles of managing change also apply to relocation. It is important for a relocating agency to make thorough plans, to communicate with staff and the community, and to work in stages with a reasonable timeframe.
The Committee heard about the experience of relocating the head office of the NSW Department of Primary Industry to Orange. Mr Garry Styles from Orange City Council, summed up the experience:
It's been enormously successful in Orange. There is a large cohort of scientists and managers that work there who are part of our community. It's been in place for lots and lots of years. It's almost generational now that it's part of Orange.
The importance of communication with staff was emphasised by Mr Reg Kidd, Deputy Chair, RDA Central West:
You have to give them that opportunity to get rid of the fear factor.
The Committee heard evidence about how best to support employees who relocate with an agency to a regional town. These included multiple visits for employees to a prospective town to see what the town has to offer.
There was also some discussion about the use of incentives for employees to relocate. These include flights back to employees’ home towns, relocation allowances, or extra leave.
There was general agreement that while this may be useful in the short term, it would probably not be enough to sustain a relocation over the longer term. Several witnesses noted that such incentives tend to disappear over the years as budget priorities alter.
The Committee heard that the move of the Rural Finance Corporation to Bendigo was supported through a staged transition:
The move was done in a tiered approach: some staff moved first, to create the office here. Many of the team were provided the opportunity to move or choose to exit the business.
Solutions other than whole-agency relocation
Much of the evidence to the Committee focussed on moving entire government organisations to regional areas. However there are other approaches that may achieve the benefits of decentralisation without the risks and costs of whole-agency relocation.
In its submission to the Committee, the CPSU offered three approaches to increasing the APS in regional areas without decentralising whole departments. This includes reversing regional job losses, adding new jobs to existing regional locations, and extending the existing regional footprint through new agencies or functions.
A further option is to increase the number of public servants teleworking or remote working. As noted in Chapter five, the Blue Mountains Living Lab made a number of suggestions for increasing the number of government employees in the regions by ‘taking a digital approach to regional development and decentralisation as opposed to a focus on physically relocating Commonwealth entities and their employees’.