Can Dutton be trusted to efficiently manage the public service?

Opposition Leader Peter Dutton has doubled down on his commitment to wind back increases in the size of the Australian Public Service (APS) under the Albanese government. Among the political hyperbole and Trumpian allusions, there are areas where legitimate savings could be made.

The government, too, will be forced to consider some changes if it is to live within the forward estimates which require promised wage increases to be offset by efficiency measures. Accordingly, the scope for major net savings under a Dutton government may be limited.

Dutton’s commitment

Dutton’s Insiders interview followed his lecture at the Menzies Research Centre. In the interview, Dutton referred to the possibility of $24 billion of savings over the four-year forward estimates — $6 billion a year — from reversing the growth in APS employees over the past three years.

While the growth figure of 36,000 employees underlying this suggestion is broadly correct, Table A1 (below) in the latest State of the Service Report (SOSR) shows the number of ongoing employees increased from 133,976 in June 2021 to 170,186 in June 2024, though this was offset by a reduction of around 4,000 in non-ongoing employees. It is more than a little heroic to assume a total reversal starting in the first year of the forward estimates.

The 36,000 figure has also been used by Nationals leader David Littleproud and shadow finance minister Jane Hume.

Recently, Dutton has been careful not to make a specific promise about how many public service jobs would go or the dollar savings involved. His expenditure review committee would decide where savings can be found.

He did allude, nonetheless, to Trumpian options, referring to advertisements for cultural diversity and inclusion adviser positions, change managers and internal communications specialists, stating that “such positions, as I say, do nothing to improve the lives. They are not frontline services that can make a difference to people’s lives.”

Putting APS growth into context

The growth of the APS is not nearly as dramatic or costly as the opposition claims, nor is it concentrated in Canberra. Table 9 in the SOSR shows the APS headcount is lower now as a percentage of the Australian population than it was in 2008 (0.68% compared to 0.75%) and lower as a percentage of the Australian workforce (1.36% compared to 1.52%).

Table A5 (below) shows that the proportion of public servants in Canberra decreased between 2015 and 2014, from 38.1% to 36.9%.

This is consistent with the government’s claims that it has given priority to improved services to the public, such as through the NDIS, Veterans’ Affairs and Centrelink.

Some of the most recent growth has also been offset by reduced use of consultants, contractors and labour hire, though we are yet to see an update of the APSC/Finance Department Employment Audit, which revealed a workforce of some 54,000 private sector employees engaged by Commonwealth agencies in 2021-22.

It is very likely that aggregate administrative expenses — including APS wages and onward costs, such as the costs of contracted work, travel, rent etc — have increased over the past three years, particularly given wage increases as well. Services to the public have also improved, but whether those are commensurate with the increased costs is not entirely clear.

Labor also committed to efficiency savings

The Australian Financial Review has drawn attention to the latest forward estimates, which reveal no growth in the public service wages bill from 2025-26 to 2027-28, despite the enterprise bargaining agreement to increase wages suggesting a “$7.4 billion black hole”. The opposition this week claimed the “black hole” is more like $11 billion, citing Parliamentary Budget Office (PBO) figures suggesting a cut of around 20,000 public servants is required to meet the forward estimates.

Finance and Public Service Minister Katy Gallagher responded that the government has used the exact same method the Liberals used while in government in calculating the forward estimates, also stating that the efficiency dividend still applying is “largely a good thing”.

In other words, Labor is assuming that wage increases will be offset by efficiency measures over the next three years. That will require some effort — the PBO figures of around 20,000 over three years are probably of the right order though some efficiency measures may not involve staff savings (e.g. further reductions in the use of contractors, and savings in travel and rent).

And it must make Dutton’s promise of substantial savings off the forward estimates that much more difficult.

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Legitimate savings options, Labor’s commitments

A rigorous review of administrative expenses, including the costs of the APS, would surely include the following.

• The APS classification profile has become too top-heavy over the past 20 years, including far too much growth of deputy secretary positions. Tighter control of the SES is way overdue.
• Remuneration in the APS remains a mess, with the latest APSC Remuneration Report revealing extraordinary variations in pay, particularly among the SES. Remuneration of secretaries and other statutory officers — well above most international practice — has also been attracting justified attention recently. A wholesale change in the membership of the Remuneration Tribunal and a review of its methodology is much needed.
• There should be more emphasis on skills and capability and less on diversity. “Diversity” is not in itself an appropriate objective. A strong business case exists to maximise the talent pool the APS draws upon, but care is needed to not compromise the merit principle in pursuit of equity.
• No doubt investment in technology can achieve productivity gains, but experience shows how going too far too quickly leads to waste and service disruption.

If Dutton pursues serious program savings, there will be associated APS savings.

Legitimate concerns about Dutton’s intentions

Dutton’s populist rhetoric about the public service and his Canberra bashing raises legitimate concerns about the risk of returning to the ideological preference for the private sector over the public sector, with its associated additional costs and conflicts of interest.

Most important is the absence of any clear commitment not to return to the politicisation evident under Morrison that contributed to robodebt. The Albanese government has sadly dropped the ball on this and has not introduced legislation to promote merit-based appointments, leaving open opportunities for politically based appointments and terminations.

Can we trust either side of politics on this?

This piece was originally published in The Mandarin.

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