Labor’s mini-budget continues politician’s obsession with a surplus. In their race to the bottom, Swan announced a temporary increase to the efficiency dividend from 1.5% to 4%.

CPD’s Public Service Reseach Director, James Whelan unpacks this political manouvering and reveals the real consequences of starving our Australian Public Service.

The shaky rationale for increasing the efficiency dividend has received widespread criticism from economists and other commentators. This is not an intelligent or evidence-based strategy to motivate innovation, economy and creativity but a blunt instrument that can reduce or compromise agencies’ outputs. After 20 years, few agencies have further room for further cuts without reducing their core functions. Government reviews of the mechanism in 1994 and 2008 found that it places significant stresses on agencies and recommended alternative measures be investigated.

Treasurer Swan this week justified the increase in the efficiency dividend by invoking the bipartisan obsession with a rapid return from a modest deficit to modest surplus. This is now widely recognised as an unhealthy fetish. Australia has a remarkably low level of public debt and a low level of public sector investment. A survey conducted by Essential Media just this month found that more than 70 per cent of Australians support deferring the return to surplus in order to maintain public services. Other surveys during the last 20 years have found strong support for increasing public sector spending, even if it means increasing taxes.

Read the full article on ABC’s The Drum here.