Cutting the slack and saving the budget

The divesture of government assets played its part in reducing commonwealth government employment, but its effects were temporary as total public sector numbers once again increased over the previous decade to 243,700 people in June 2010.

A considerable number of these extra commonwealth public servants are solely engaged in policy advisory, administrative and regulatory roles that unnecessarily burden business with obligations inimical to the encouragement of entrepreneurship and a broader growth in the economy.

These burdens will only worsen when the carbon tax administrative machinery, to accompany the Climate Change Department, possibly becomes a reality next year.

And these trends do not fully account for the growth in outsourcing of government work to private sector contractors, a number of whom were themselves public servants retrenched during the period of APS rationalisation during the late 1990s.

Another factor which must be taken into account when considering the appropriateness of public service size is the increasing commonwealth policy influence over functions and services traditionally undertaken by the states.

This erosion in state policy autonomy has enabled the federal bureaucracy to mushroom in areas such as education and health, blurring financial and policy accountability to taxpayers and provoking intergovernmental blame games abhorred by most Australians.

Those arguing against retrenchment within the public service as a way to reduce the budget deficit effectively argue that the existing size and composition of the APS is optimal, and must be quarantined from further rationalisation.

It follows from this argument that the government should only seek to return the budget to surplus and pare back public debt by seeking explicit tax increases or gamble on future economic sunshine delivering additional government revenue.

There is little doubt that these propositions are instinctively supported by the current government as a matter of political principle.

This is because as domestic manufacturing industries continue their slow decline, the public sector unions have gradually displaced manufacturing unions as kingmakers within the wider trade union movement.

And spending cuts won't please public sector union members whose livelihoods depends on maintaining, and indeed growing, government expenditure.

Election survey statistics also show that the majority of public sector workers tend to vote for left of centre political parties, leaving the Gillard government to believe that it is best not to bite the political hand that feeds it.

For these reasons there is little surprise that the Australian federal government has shown so far that it reacts to calls to reduce the size of the commonwealth public sector in a manner similar to someone who endures a toothache.

But to overlook opportunities to consolidate the budget by cutting expenditure, including reducing public service numbers where the role of commonwealth government is inappropriate or no longer relevant, severely limits our options to regain fiscal credibility and sustain economic prosperity.