News & Current Affairs
07 January 2015
by Markus Mannheim
Government running costs to reach record high
Treasurer Joe Hockey and Finance Minister Mathias Cormann release the mid-year budget review last month.
The Abbott government will become the most expensive to run on record, despite its catchphrase policy of "smaller government" and an austerity drive that will shed more than 16,500 public sector jobs.
Departmental expenses – money used to manage government programs – are forecast to soar to an historic high after the 2016 election, reaching more than $70 billion a year.
Even after accounting for inflation, the amount eclipses the previous high in 2005-06, when the Howard government spent billions on a revamp of defence administration.
However, Finance Minister Mathias Cormann, who is tasked with reining in the bureaucracy's costs, says the rising expenses are "overwhelmingly related to the roll-out of the national disability insurance scheme".
He said if it were not for the Coalition's crackdown on waste, the costs would be far worse.
"Importantly, if we had not pursued and achieved a real reduction in departmental expenses across government since the last election, those increases related to the roll-out of the NDIS would have occurred from a higher departmental expenditure base and locked in a higher expenditure growth trajectory moving forward," Senator Cormann said.
"Instead, the trajectory starts from a lower base and will remain lower than it would have been without our savings efforts so far."
Departmental expenses – which include running costs such as wages, office rents, and goods and services from contractors – are regarded within the bureaucracy as the most accurate measure of the size of government, but have only been reported since 2000-01.
Former public service commissioner Andrew Podger, now a public policy professor at the Australian National University, said the expenses were a better indicator of efficiency than the size of the workforce because they included costs racked up by private contractors as well as public servants.
"There have been a lot of experiments in efficiency over the years – outsourcing was one, another is shared services to try to take advantage of economies of scale ..." he said.
"We had a period of decentralising government bodies and now we appear to be moving back to centralising a lot of work back into departments.
"But you can't say one method is more efficient or cheaper than another: it should be decided on a case-by-case basis for each program."
Real running costs grew rapidly under the Howard government. Labor, meanwhile, managed to restrain its operating expenses despite its massive spending projects to counter the global financial crisis.
Last month, as part of the Coalition's "smaller and more rational government" agenda, Senator Cormann detailed plans to abolish or amalgamate about 250 government bodies, though most were small committees.
He also released a paper outlining the Coalition's philosophy on the role of the public sector.
"As a principle, government bodies should not be given preference as service delivery agents, where others are more capable of providing the same service ..." the minister wrote.
"Greater competition will result in better value for money in the efficient delivery of functions and will help provide more agile service delivery to the public."
NDIS costs 'highly volatile'
The NDIS, a popular policy supported by both main parties, gives disabled people greater control over the care they receive.
However, the scheme's costs are high: it will make up almost one-sixth of the Commonwealth's departmental expenses by 2017-18.
The national commission of audit, led by businessman Tony Shepherd, warned the government last year that demand for the "ambitious" scheme was uncertain and its costs could prove "highly volatile".
It recommended a slower roll-out and questioned whether the government needed to set up a separate agency to run the scheme, saying there was "no reason why a number of ... functions cannot be undertaken by [existing disability service] providers".