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4.4 Implications for public service staffing

The size of the public sector, including staffing, requires a judgement about what governments should do and what citizens can best do for themselves.

The Commission considers the public service should be appropriately resourced to efficiently and effectively deliver services to the community where the rationale for ongoing government involvement is strong.

Since the late 1980s, ‘efficiency dividends’ have promoted greater cost efficiency in the Australian Public Service. There is some rationale for a consistently-applied low rate of efficiency dividend, given the public sector is not subject to commercial discipline to restrain costs and improve productivity.

That said, efficiency dividends are a particularly ‘blunt instrument’ to achieve budgetary savings.

Rather than make explicit and often difficult decisions about what government should do and the extent of public sector resourcing, an efficiency dividend reduces funding to both areas of high priority and areas of low priority; to areas already operating efficiently, and to areas where there could be significant efficiency gains.

In recent years, relatively high efficiency dividends have been applied to deliver short‑term budgetary savings.

The Commission recognises that some agencies, through the efficiency dividend and other decisions, have already had significant reductions in funding, requiring voluntary and, in some cases, forced redundancies. This includes the Departments of Health, Environment, Communications and the Treasury.

The Commission considers that public sector staffing levels should reflect the Government’s conscious choices about the functions to be delivered by the public sector, and reasonable expectations about the efficiency with which they can be delivered.

Many of the Commission’s recommendations, including those relating to a rationalisation of Commonwealth bodies and agencies and efficiency of corporate services, will have implications for public sector staffing levels.

Given the existing activity within agencies to reduce staffing levels, the impact of the Commission’s recommendations may be within, or additional to, planned reductions.

Over the medium term, if the Commission’s recommendations to reform the Federation are progressed and a fundamental re-alignment of roles and responsibilities occurs, the reduction in duplication will mean fewer federal public servants. This has particular implications for departments such as the Department of Education and the Department of Health.

The Commission has made recommendations about absorbing agencies into portfolio departments, such as the Defence Materiel Organisation into the Department of Defence. It has also proposed that the headquarters structure in Defence, including the number of senior positions, should be realigned to 1998 levels.

Its recommendations to increase spending on foreign aid at a more measured pace will mean that not as many people will be needed to deliver the Australian aid programme, while opportunities to outsource visa processing could also have consequences for public sector employment.

As part of reforms to improve the effectiveness of Indigenous expenditure, the Commission has recommended consolidating the existing 150 or so Commonwealth Indigenous programmes and activities into no more than six or seven programmes. This is likely to impact on the total number of Commonwealth employees required to deliver Indigenous programmes.

The Commissions’ recommendations to better target welfare payments would mean an overall reduction in the number of staff required to administer the system.

In addition, the Commission has identified scope for potential improvements in organisational structures within departments and agencies, including through increasing spans of control at the Executive Level 1 and 2 classifications.

Depending on how these opportunities are progressed by departmental secretaries and agency heads there could be significant reductions in the number of mid-level public servants employed by the Commonwealth.

In 2013-14, as reported in the Budget papers, the Average Staffing Level in the Commonwealth General Government Sector was just over 257,300.

The General Government Sector provides public services that are mainly non‑market in nature. The sector comprises all government departments, offices and some other bodies such as ComSuper. It excludes the public non-financial corporations sector (for example Australia Post and the Australian Submarine Corporation) and the public financial corporations sector (for example Medibank Private and the Reserve Bank of Australia).

Estimates of the employment consequences of the Commission’s recommendations at an aggregate level are necessarily indicative. As was the case with its estimates of savings, decisions on detailed programme design and timing of implementation will impact on any employment implications arising from the Commission’s recommendations.

Nonetheless, as a broad guide, the Commission expects that around 15,000 fewer public servants could be required flowing from the recommendations presented in this Report. This would represent a reduction of around 5 per cent of total General Government Sector employment.