I was amused to read in the Australian about moves to bring back Kevin Rudd on the basis of Wayne Swan’s performance
And his budget process is farcical. Finding savings by increasing the efficiency dividend is the last refuge of the economic scoundrel. It’s not a hard decision,” the source said.
Was this ‘source’ complaining in 2008 under Prime Minister Rudd when there was a one-off increase to the efficiency dividend?
In fact the Rudd-Gillard Governments seem to have a love affair with the efficiency dividend.
In its first Budget (2008-09 in May 2008), in its ‘Responsible Economic Management’ section, the Government
applying a one?off 2 per cent efficiency dividend to the departmental funding of most Government agencies to improve the cost effectiveness of the public sector, generating savings of $1.8 billion over five years (Budget Paper 2, 2008-09)
Then in this year’s May Budget (2011-12) there was a ‘temporary increase’ to the efficiency dividend
The Government will deliver savings of $1.1 billion over four years by increasing the rate of the efficiency dividend to 1.5 per cent in 2011?12 and 2012?13, and 1.25 per cent in 2013?14 and 2014?15, before reverting back to 1 per cent in 2015?16. (Budget Paper 2, 2011-12)
Then in this year’s MYEFO, a further one-off efficiency dividend
The Government will apply an additional one-off efficiency dividend of 2.5 per cent in 2012-13 to departmental appropriations excluding departmental capital funding. This measure will not apply to: public sector entities already exempt from the ongoing efficiency dividend, the Australian Communications and Media Authority or to specific cultural agencies; courts and tribunals; and Aboriginal and Torres Strait Islander organisations exempted by the Government. This will result in savings of $1,490.0 million over the forward estimates.
Yes, once again lazy budgeting.
Do Treasury and Finance consider that ad hoc one-off changes to the efficiency dividend are to be preferred than a predictable efficiency dividend? Should the Government disclose whether there are costs to unplanned changes to the efficiency dividend (which must make it difficult to plan an agency’s future budget?
One-off arbitrary changes to the efficiency dividend are hardly efficient.
Surely further evidence that increases to Ministerial salaries and to departmental secretary salaries are not justifiable? Surely Treasury and Finance can do better in proposing savings measures than one-off increases to the efficiency dividend?
As a result of these decisions, the efficiency dividend schedule has been:
2008-09: 2 per cent
2009-10: 1 per cent
2010-11: 1.5 per cent
2011-12: 1.5 per cent
2012-13: 4 per cent
2013-14: 1.25 per cent
2014-15: 1 per cent
This means that (in real terms) $100 in expenses in 2007-08 would fall to $88.34 in 2014-15.
The same end result could have been achieved by an efficiency dividend around 1.75 per cent per year from 2008-09 to 2014-15. Not only would this have been more predictable, allowing planning and better management of the application of the efficiency dividend, but it would also continue at the higher predictable rate beyond the forward estimates.
In conclusion, the efficiency dividend is lazy budgeting. But arbitrary one-off changes to the efficiency dividend is super-lazy budgeting.