Don’t be so reckless: Coalition government is anything but efficient

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Australia election campaign, government efficiency
Back up the truck

With an election looming, the Coalition government will attempt to recultivate its image as the party for efficient government, and Labor as the party of bureaucratic red tape. Callum Foote investigates how the government has been run.

The Coalition government has pulled a swifty on Australians for eight years, boasting its efforts to keep the cost of government down whole presiding over ballooning expenditure – Covid or no Covid.

While keeping a lid on the size of the public service (APS), the Coalition has opened an Aladdin’s Cave to the cowboys and gals of the consultancy game. As an MWM investigation has shown, spending on consultants has exploded.

The running costs of the Commonwealth government are set to exceed $100 billion in 2021 according to the last budget.

This is up roughly 100% in the last 10 years and 70% from Labor’s last federal budget. What is the Australian taxpayer buying with this increase in departmental expenses?

Inefficiency ratio

Mike Keating, former secretary of the Department of Finance, then the Department of Prime Minister and Cabinet, between 1986 to 1996, told MWM that the real measure of government efficiency is the ratio of the running cost of government, captured by departmental expenses, compared to total government expenditure.

According to Keating “at the end of the day, the government is delivering services. Rising running costs are perfectly legitimate if the government is also delivering more public services to match.

“If the cost of providing the services is outpacing the services themselves, then the government is becoming less efficient.”

Keating is talking about how much it costs a government to deliver the services of a government. This ratio is a measure of inefficiency. The lower the better.

When John Howard was ousted in 2007 the running cost of the government was $50 billion. That entailed total expenses of $221 billion sitting at a ratio of 22%. Kevin Rudd’s first term in office brought this ratio down to 15% where it has roughly remained since then. It grew to 17% in 2018-19, but that was a blip.

The levels for 2020-21 have obviously been impacted by pandemic response measures, which if not factored in would have kept the ratio hovering around the 17-18% levels.

Ultimately, if all we are counting is the running cost of government to its total expenses then both major parties are roughly equivalent in terms of efficiency, with Morrison’s government being roughly 15% less efficient at worst.

Public servants vs consultants

There are other ways to measure government efficiency, namely to investigate how the government is running itself.

To do so we must, according to Keating, compare the running costs to public service salaries.

There are 150,417 Commonwealth public servants. That figure is only 3% higher than 2006 levels. The level of public servants peaked under Rudd, at 167,000 in 2013, and has decreased since then.

The cost of public servants has increased by 14% during that period to roughly $23 billion today. However, as a percentage of running costs, public servants are making up an ever-dwindling portion. From just over a third under Rudd, this number has been brought down to under a quarter of running costs under Morrison. 

During that same period, expenditure on consultancy has ballooned from $360 million in 2007 to $1.3 billion under Morrison, or a real increase of 253%.

The ratio between expenditure on APS employees to consultants has increased from 1.8% to 5.6% during that same period, or an increase of 211%.

Overall Morrison’s government is spending a higher proportion of its budget hiring consultants than any government previously. A worrying trend for old public service hands such as Keating who said that “what the government is doing by outsourcing much of the government is taking away valuable experience from the next generation of public servants.”

This is before considering the continued ‘‘gigifying’’ of the APS with the growing use of labour-hire contracts to get around staff caps and APS award rates.

Mike Keating also addressed the other elephant in the room: that what matters most is not really how much money the government spends, but how well it spends it.

“I think the present government doesn’t really assess program performance. It basically tries or has tried, to balance the budget by underfunding many government services, even if that comes at a cost to program performance.

‘‘In past governments, contained within portfolio budget statements were performance measures for each program. For example, things like healthcare had measures about the performance of health outcomes compared to costs. A labour market program would be measured on how many people you got back into a job with regard to the difficulty of them finding a job.

‘‘As a result, we could compare how effective a program was compared to its costs and make funding decisions based on that.”

We can consider the performance measures for the billions spent in pork barrelling operations as revealed by The Australia Institute’s recent report which revealed that:

 “$3.9 billion has been spent by grants programs with ministerial discretion since 2013. $2.8 billion, or 71%, has been allocated to projects in Coalition seats. Funding has clearly favoured marginal seats at the expense of safe Labor seats and, in some cases, safe Coalition seats. In per capita terms, marginal Coalition seats have received $184 per person in national grants, while safe Labor seats received just $39 per person.”

In 2007 Kevin Rudd sealed his election win by turning the tables on the Coalition’s reputation for fiscal probity. As Howard threw billions of dollars at his reelection promises, Rudd proclaiming: ‘‘This sort of reckless spending must stop.’’

Five elections on, his words remain the formula for good government, even if in Australia it is more like a mirage.





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