Cutting the slack and saving the budget

With uncertainty surrounding the growth prospects of European and US economies, and a languid non-mining economic performance in Australia, attention has again turned to how the federal government will achieve a budget surplus in 2012-13.

Despite their best rhetorical efforts, government ministers in recent months have softened their stance to now enlighten us that the surplus is now an 'objective' rather than a steadfast policy commitment.

But as the economic scene worsens internationally, there is heightened speculation that the government will have no choice but to belatedly add to the customary efficiency dividend policies by eliminating some existing programs to meet its budgetary promise.

A chorus of politicians, including Greens leader Senator Bob Brown, and business representative organisations, have not aided the fiscal consolidation cause by lambasting the surplus policy as a political ploy lacking economic merit.

Others, such as the Centre for Policy Development, have sprung up defending the commonwealth public service against the prospect of cost savings through a reduction in government employment.

A recent CPD report purports to show that the case of bloated, or excessive, government employment is overstated. According to the CPD figures, if we compare ongoing APS employment against population growth then the total number of Australians per public servant has increased from 1991 to 2009.

In the opinion of the report's key author, James Whelan, this trend means that the 'service delivery capacity of the APS has diminished.'

Alternative measures, drawn from ABS wage and salary earner statistics over a longer period, show a similar trend but it is unclear that such indicators tell us much about the appropriateness of existing public service employment.

As the CPD report rightly notes, it is true that small-government adherents such as me have suggested that numerous employees within the commonwealth public sector do not deliver any frontline services of any kind.

To a great extent this is a product of deliberate policies to reduce the extent of commonwealth services delivery, as exemplified by privatisation in the areas of aviation, banking and telecommunications from the 1980s to the mid-2000s.

Most economists agree that such microeconomic reforms were appropriate, enabling the more efficient private sector to innovatively deliver a range of additional services to customers at lower costs in real terms over time.

While the CPD report bemoans our successful privatisation record there is no credible evidence, apart from a few nationalisation agitators in the recent debate over the Qantas dispute, that most Australians are clamouring for a return to an era in which the commonwealth assumed the commanding heights over a wide range of services.