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Here comes the meat axe

johnboy 21 April 2011 21

In the sort of news best delivered the afternoon before a five day weekend our Labor emembers are jointly announcing a massive hike in the widely despised lazy policy tool of the efficiency dividend from 1.25% to 1.5% for the next two years.

The Gillard Government today released the ‘Review of the Measures of Agency Efficiency report’ and announced a temporary quarter per cent increase in the efficiency dividend from 1.25 per cent to 1.5 per cent for two years.

Under this measure, the efficiency dividend will rise from 1.25 per cent to 1.5 per cent in 2011-12 and 2012-13, and return to 1.25 per cent for 2013-14 and 2014-15.

Federal Labor representatives for the ACT, Senator Kate Lundy, Dr Andrew Leigh and Gai Brodtmann, welcomed the release of the Review which was commissioned following Labor’s comprehensive report into government administration.

The central recommendation of the Review – to apply the efficiency dividend at portfolio level – will be adopted by the Government.

But fear not, they finish up with this bromide:

The ACT economy is the best performing economy in the country and we will continue to work with ACT Government to deliver for the people in Canberra.

Yippee.


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21 Responses to Here comes the meat axe
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NFI NFI 12:35 pm 27 Apr 11

chimeralaw said :

I think the public service has become too expensive. The private sector can adjust to the business cycles through (unfortunately) retrenchment and when they finally replace that position, they can adjust the wages based on their needs. They do not have to pay a specific salary. But the APS keeps on getting more money. Eg, an APS6 wage has gone from $50k in 1999 to nearly $80k in 2011. That is over a 62 % growth in twelve years. Private sector salaries have definitely not gone up 62% in that time.

Most IT salaries have not really moved all that much since 1999.

Endless pay rises above the CPI with no chance whatsoever to adjust the salaries to reflect business cycles will eventually be the downfall of the APS and consequently, the ACT in general.

ahhh no. You can’t compare nominal salaries a decade apart!! My guess is the real wage has increased by not much – certainly in line with private sector wage growth. As for increases above CPI – maybe in the good old days but not now! My EBA has no indexation, and any increase we get must be offset by ‘productivity gains’ (read: cuts to other entitlements, longer hours, less training etc).

As for your plan to ‘adjust salaries to reflect business cycles’ – you realise that this will amplify the effects of the business cycle? right? Not sure if the RBA/Treasury would be a fan of this idea…

Bluey Bluey 10:37 am 27 Apr 11

chimeralaw said :

I think the public service has become too expensive. The private sector can adjust to the business cycles through (unfortunately) retrenchment and when they finally replace that position, they can adjust the wages based on their needs. They do not have to pay a specific salary. But the APS keeps on getting more money. Eg, an APS6 wage has gone from $50k in 1999 to nearly $80k in 2011. That is over a 62 % growth in twelve years. Private sector salaries have definitely not gone up 62% in that time.

Most IT salaries have not really moved all that much since 1999.

Endless pay rises above the CPI with no chance whatsoever to adjust the salaries to reflect business cycles will eventually be the downfall of the APS and consequently, the ACT in general.

On this note. Why are there no APS1s and 2s any more? Why is an entry level brain-dead-do-nothing APS have to be a 4? 60k a year!

Bring back the 1 and 2 level and pay people for what they actually do. No wonder theres barely any big private industry around here.

Lazy I Lazy I 7:03 pm 25 Apr 11

You call that a meat axe? this is a meat axe!

http://www.sbs.com.au/news/article/1519946/ford-cuts-240-jobs-toyota-scales-back

Seriously, if any lanyards are fretting over this they should give the staff at Toyota or Ford a call and compare notes (don’t forget to dial 0 to get out).

chimeralaw chimeralaw 10:23 am 24 Apr 11

I think the public service has become too expensive. The private sector can adjust to the business cycles through (unfortunately) retrenchment and when they finally replace that position, they can adjust the wages based on their needs. They do not have to pay a specific salary. But the APS keeps on getting more money. Eg, an APS6 wage has gone from $50k in 1999 to nearly $80k in 2011. That is over a 62 % growth in twelve years. Private sector salaries have definitely not gone up 62% in that time. Most IT salaries have not really moved all that much since 1999.

Endless pay rises above the CPI with no chance whatsoever to adjust the salaries to reflect business cycles will eventually be the downfall of the APS and consequently, the ACT in general.

puggy puggy 10:08 pm 23 Apr 11

urchin said :

i do agree it’s lazy governance.

That’s the bit that everyone is annoyed about, not the actual cut. The idea of a relatively fixed “efficiency dividend” every year, for ever and ever is stupid. We’re not in the business of producing y widgets for $x input, so how do you measure real efficiency gains? Yes, departments have outputs, but it’s so indirect.

urchin urchin 4:53 pm 23 Apr 11

vg said :

urchin said :

vg said :

Why doesn’t the government have the balls to call it what it is. Its an annual budget cut.

“a 0.25% across the board budget cut. however will we survive?”

When a department’s budget runs in the billions you might be able to understand what it means $ wise

yes, it will mean 0.25% less money. for every dollar they get they will have to cut 0.25 cents. for *two* whole years! oh my goodness. however will we survive. it’s the end of the world and we should treat it as such.

You don’t really keep up with federal government finances, do you? That’s on top of the ‘efficiency dividend’ they already fulfill.

But do tell, what else did your Cert II in Finance tell you?

??? what’s your point? it’s a 0.25% budget cut. that’s it. nothing more, nothing less. yes, on top of the existing “efficiency dividend” it comes to a whopping 1.5%… oh. my. god.

seems to me another symptom of how out of touch with reality some people in canberra are… look at the cuts being made in other countries and be glad you are only being asked to find another 0.25% to cut.

i don’t agree with the way the cut is being made (completely arbitrary) but seriously, let’s keep a little perspective here. I would rather see much deeper & more targeted cuts.

Ian Ian 12:19 pm 23 Apr 11

symba said :

. The govt should actually look at the cuts on a dept by dept basis, but that would actually take time.

I have a lot of sympathy for this view, although on the other hand, isn’t that the sort of thing the govt pays executives to do. If they can’t figure out a sensible program for cost takeout, I’d ask what the hell are they getting the executive salaries for? (and in doing so, have identified instant savings).

Wonder which agency will be the first to pull the usual budget cut stunt of getting rid of something cheap but high public profile, to embarass the govt into restoring the funds?

urchin urchin 10:38 am 23 Apr 11

puggy said :

urchin said :

oh my goodness. a 0.25% across the board budget cut. however will we survive?

Uh…this is an increase in the yearly reductions (or “increased efficiency), for perpetuity, that is on top of the coming budget cuts. My place is rumoured to be coping a 20% cut.

well if you are copping a 20% cut the 0.25% “efficiency dividend” is just a drop in the bucket. 1/80th of the overall cut. again, tempest-teapot.

i do agree it’s lazy governance. what they should do is decide on priorities and make sure the priorities have sufficient funding to do their job properly and eliminate sections that they do not feel are priorities.

but as others have pointed out, that would require thought and effort so it ain’t gonna happen.

symba symba 9:25 am 23 Apr 11

Actually most small agencies run very close to the bone, especially the cultural sector. An extra 0.25% does have to result in loss of positions by not backfilling behind someone that leaves. As cost such as power and rent continue to increase. Giving the cuts decision to portfolio agencies will not result in any change in allocation. The govt should actually look at the cuts on a dept by dept basis, but that would actually take time.

puggy puggy 1:12 am 23 Apr 11

urchin said :

oh my goodness. a 0.25% across the board budget cut. however will we survive?

Uh…this is an increase in the yearly reductions (or “increased efficiency), for perpetuity, that is on top of the coming budget cuts. My place is rumoured to be coping a 20% cut.

vg vg 11:34 pm 22 Apr 11

urchin said :

vg said :

Why doesn’t the government have the balls to call it what it is. Its an annual budget cut.

“a 0.25% across the board budget cut. however will we survive?”

When a department’s budget runs in the billions you might be able to understand what it means $ wise

yes, it will mean 0.25% less money. for every dollar they get they will have to cut 0.25 cents. for *two* whole years! oh my goodness. however will we survive. it’s the end of the world and we should treat it as such.

You don’t really keep up with federal government finances, do you? That’s on top of the ‘efficiency dividend’ they already fulfill.

But do tell, what else did your Cert II in Finance tell you?

urchin urchin 8:47 pm 22 Apr 11

vg said :

Why doesn’t the government have the balls to call it what it is. Its an annual budget cut.

“a 0.25% across the board budget cut. however will we survive?”

When a department’s budget runs in the billions you might be able to understand what it means $ wise

yes, it will mean 0.25% less money. for every dollar they get they will have to cut 0.25 cents. for *two* whole years! oh my goodness. however will we survive. it’s the end of the world and we should treat it as such.

John Moulis John Moulis 3:55 pm 22 Apr 11

Public service job cuts are a win win for governments, both Labor and Liberal. Liberal governments like it because they can tell their constituents interstate that they are “cutting back on the fat cats in Canberra”. There is no political harm done in the ACT because “they all vote Labor anyway”.

Labor governments like it because they can tell their constituents interstate that they are “cutting back on the fat cats in Canberra”.

There is no political harm done in the ACT because “they all vote Labor anyway” and – because of the insanity of the last election when Gary Humphries almost lost his seat to Labor’s coalition partners The Greens – Labor is even more convinced that the Liberals are poison in this town and they (Labor) can bash us as much as they like without suffering any adverse consequences.

gentoopenguin gentoopenguin 2:02 pm 22 Apr 11

Well if they want to talk cuts, they have to also talk which programs they want to cut at the same time – particularly since Departments usually obtain the dividend through recruitment cuts and freezes. I’m all for a leaner public service but this approach is too scatter-gun to be effective. And the timing is beyond cynical.

sexynotsmart sexynotsmart 1:41 pm 22 Apr 11

I’m damn upset about this. I have very keen memories of Labor lambasting the efficiency dividend when in opposition, with ACTU and CPSU chiming in on a semi-regular basis.

Two Prime Ministers’ later and not only is it still in place, but they’re beefing it up.

Have Our Illustrious Leaders learned nothing from home insulation and school halls? Doing things on the cheap will bite you on the backside.

If you’re going to trim the Public Service, TRIM SERVICES.

vg vg 12:32 pm 22 Apr 11

Why doesn’t the government have the balls to call it what it is. Its an annual budget cut.

“a 0.25% across the board budget cut. however will we survive?”

When a department’s budget runs in the billions you might be able to understand what it means $ wise

urchin urchin 12:13 pm 22 Apr 11

LurkingMarsupial said :

I’m not sure about ‘meat axe’, but I found it somehow particularly disappointing that the two new ALP members apparently think it’s good enough to say “Reflecting the Government’s commitment to protecting jobs the efficiencies should be achieved without resorting to job cuts”. They should or will be achieved how, pray tell? (Clue: it’s not about anyone’s personal theft history/fantasy like “free pencil tuesdays”.)

are you really suggesting that gov’t departments are being run so efficiently that they cannot possibly be cut another 0.25% of their budget without resorting to firing people? firing people is not, in any event, a bad thing if the people being fired are the deadweight.

if the managers can’t figure out a way to lop 0.25% of their budget off without laying people off they should be the one to get fired. two birds, one stone.

LurkingMarsupial LurkingMarsupial 9:51 am 22 Apr 11

I’m not sure about ‘meat axe’, but I found it somehow particularly disappointing that the two new ALP members apparently think it’s good enough to say “Reflecting the Government’s commitment to protecting jobs the efficiencies should be achieved without resorting to job cuts”. They should or will be achieved how, pray tell? (Clue: it’s not about anyone’s personal theft history/fantasy like “free pencil tuesdays”.)

The Lundy/Leigh/Brodtmann quote sits poorly, as a presumably fully prepared response, with the review released by Senator Wong (http://www.finance.gov.au/publications/measures_of_agency_efficiency/docs/measures_of_agency_efficiency.pdf) which says about the 2007-08 additional 2% efficiency dividend (at page 84 of 87):

“The most common actions taken were to place tighter control on recruitment actions (51 per cent), to decrease the number of employees (44 per cent) and to reduce the amount and type of travel taken (38 per cent).”

So, it’s quite possible the additional savings will be taken by portfolios through measures other than job cuts (eg travel reductions, which would be fine by me and the polar bears etc), but ‘should’ or not, it’s hard to avoid prospect there will be (additional) job cuts, and consequently hard not to view those cuts as intended outcome, isn’t it?

But hey, the voters of Fraser and Canberra did elect ALP representatives.

Chop71 Chop71 9:18 pm 21 Apr 11

drip feed bad news

homeone homeone 8:00 pm 21 Apr 11

And the report recommendations are how surprising ….

Let’s
– Flick the efficiency dividend problem to Portfolio Agencies and let ‘their minister’ decide the cuts,
– Benchmark ‘common services’ ie financial management and payroll, and
– we all should use the same financial system.

And, of course, use ‘shared services’.

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