Should the public sector be cut?

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By Leith van Onselen

Earlier this week, the president of the Business Council of Australia (BCA) called for a “hard cap” on the size of Government, which comes as the incumbent federal Labor Government faces pressure to cut the bureaucracy of more than 900 agencies and bodies.

It’s an interesting topic. As noted previously, the ongoing slump in stamp duty and GST receipts – both of which are a major source of tax revenue for the states and territories – as well as sliding company tax and capital gains tax receipts at the federal level, have forced Australia’s governments to make cut backs to government expenditure and public sector jobs. In fact, the latest quarterly ABS employment report showed that “public administration and safety” – a proxy for the public sector bureaucracy – shed nearly -19,000 jobs (-2.6%) in the year to February 2013, which was on of the biggest retrenchments of any industry in Australia (see below chart).

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While the level of public sector retrenchment has been significant over the past year, one could easily argue that further job cuts are required in order to restore public sector employment to historical norms. To illustrate, the next charts plot the proportion of the population working in “public administration and safety” against the population in each state and territory in order to see how public sector employment has changed over time:

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As you can see, the bureaucracy has grown significantly since the late-1990s, from around 2.5% of Australia’s population in 1998 to around 3% currently.

The increase in the public sector workforce could be explained by the surge in taxation revenue following the property boom, which significantly increased stamp duty receipts, as well as the introduction of the GST in 2000, which is redistributed from the Commonwealth to the states and territories. Increasing mining royalties have also played a role in Western Australia, Queensland, and New South Wales, whereas the joint mining and property booms increased personal, capital gains and company taxes federally. The large boost in tax revenues allowed Australia’s governments to grow the public service whilst still maintaining healthy finances.

However, with stamp duties and GST revenue no longer growing as expected, as well as lower company tax and capital gains receipts (amongst other things), the state, territory, and federal governments are now being forced to cut back on expenditure and jobs in an attempt to restore their budgets to surplus and protect their credit ratings.

A back-of-the-envelope calculation suggests that the public service head count would need to be cut by around -100,000 nationally in order to shrink the public service back to its average level since 1984 (2.7% of the population), although the cuts would not be uniform across jurisdictions:

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Having worked as an economist in both the federal and Victorian bureaucracies, my personal view is that Australia has too many public sector agencies and too much duplication across federal and state levels, and there is significant scope to streamline operations and trim back office staff without adversely affecting (or even expanding) front-line service delivery (e.g. nurses, teachers, social workers, etc).

What do you think? Is the public service in Australia too big, requiring trimming? Or would such actions adversely affect the delivery of essential services?

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Comments

  1. Mmmmm….. cut the public servants and increase welfare?
    It is not as though many public servants would get a job in the real world….

    • ain’t that the truth

      most i know are unqualified for their roles and yet they are on something like 3 times what people who do the same job in the real world get

      go figure

      p

      • most i know are unqualified for their roles and yet they are on something like 3 times what people who do the same job in the real world get

        For example ?

    • Then they better re-train so they can. Welfare for able bodied folk needs to be dramatically curtailed. So time to wise up and get real for the Public Service beaurocrats.

    • LOL!

      Let me see. When Qantas was head to toe with Ansett which airline staffed by former public servants survived? Which airline that now has very few former public servants and lots of private enterprise types is now looking more and more like Ansett?

      Over the years there have been tens of thousands of public servants made redundant in all States and Territories. You’d think that there ought to be a few stories out there of those incompetents starving in poverty in the ‘real world’ wouldn’t you. Haven’t heard any myself. Most are doing quite well in the private sector, thanks very much.

      No need to increase welfare – ex public servants managed to get new jobs before the welfare qualifying period ended. Safe there fellas.

      Worked for twenty years in the public sector, then went out on contract, and in the past four years on hourly contract. Never made so much money in my life since I left the public service, and haven’t worked harder at all. (Never got a separation package either, so I am bitter and twisted about that).

  2. “Having worked as an economist in both the federal and Victorian bureaucracies, my personal view is that Australia has too many public sector agencies and too much duplication across federal and state levels, and there is significant scope to streamline operations and trim back office staff without adversely affecting (or even expanding) front-line service delivery (e.g. nurses, teachers, social workers, etc)”

    + 1 Billion.

    My experience with the beaurocratic world is they spend inordinate ammounts of time, effort and other peoples money placing regulatory and compliance obstacles in front of the good folk actually tasked with delivering and wanting to REALLY improve the very services taxpayers are paying over the top for. For the purpose of justify their beaurocratic existance!

    Get out the chainsaw to the PS and let some old fashioned commonsense prevail. Initially it will be messy, emotional and highly political as the vested, mostly Union, interests bleat and wail. So be it but FFS do it.We cannot afford this burden any longer.

  3. One of my better suggestions when I worked in Canberra was that there should be a Grant paying organisation that adminstrates most of the small grants. It would work in a similar way to Centrelink which does almost all of the payments to individuals as a sort of one-stop shop.
    Currently there are dozen of agencies that paid out grants and therefore require large and complex system to adminstrate the payment and monitioring of the grants. It would also assist in the reduction of fraud.

  4. Very interesting post. Interesting to see that the ideological argument in favour of ‘small government’ has not exactly led to that outcome.

    However, I’m not sure if numbers and average level of employment are the key consideration here. Surely we need to be asking questions about what we expect governments to be achieving and whether current deployment of public sector resources actually matches those expectations. Obviously people will have very different views on this issue.

    One possible question is whether the growing power of the Federal government over traditionally State responsibilities is leading to a lot of duplication (e.g. in education bureacracy, health, transport planning, etc.). Maybe greater decentralisation would have the bonus of a less expensive public sector.

    • Would decentralisation be less expensive? An interesting question. On the face of it there are many “no-brainer” cases for federal centralisation eg.
      • Driving licenses.
      • Professional competence standards in medicine & Allied Health
      However, where criminal law is concerned, though you might agree stealing a car should carry the same penalty range in any state, it could well be seen as wasteful to pile legislation concerning safety when handling crocodiles onto the books…
      Of course, your real barrier will the self interest of state politicians.

    • Yes.

      The first question is: What do we want our public sector to achieve?

      Second question is: How do we go about it? (ie using public servants or contractors or consultants).

      Only then can we ask the question being posed here today.

      I can’t think of any of my private sector clients referring to their previous levels of employment in deciding how many people they need to employ for future work. Rather, they look at the amount of work they think will be coming in, then tailor their workforce to suit. Seems logical to me.

    • Many Europeans and those living outside Australia see barriers to efficiency and effectiveness due to state governments (a colonial anachronism), and resistance to change. No surprise when in the 30s 40s the premiers of NSW and Victoria were more important and powerful than the PM.

      State school certificates, driving licences, transport regulations, trains, police, state tourism bodies, state education bodies, housing bodies, infrastructure planning etc. etc.

      Unfortunately, would not be confident Australian governments, through COAG, will be able to make timely changes and would need the likes of a Hawke/Keating type government to take on a plan and see it through…..

    • “Surely we need to be asking questions about what we expect governments to be achieving and whether current deployment of public sector resources actually matches those expectations. Obviously people will have very different views on this issue.”

      Perhaps we should be asking is; what exactly do we want to afford and then prioritise needs through value for money. After that, people need to be able to be a lot more self reliant and fund their lifestyle themselves rather than relying on Govt to provide.

      The constant reliance on entitlement demands of the Public Purse needs a severe reality check. The first stop in this argument is usually “middle class welfare”. Rubbish. Middle to higher income earners more than contribute their fair share already.

      • Middle to higher income earners more than contribute their fair share already.

        You are confused. The income of these people is what they TAKE from society. Their contribution is the usefulness of their work.

        Many high income earners take a lot of money and do a lot of damage in their roles. Their contribution to society is worse than 1000 dole recipients.

      • Perhaps we should be asking is; what exactly do we want to afford and then prioritise needs through value for money. After that, people need to be able to be a lot more self reliant and fund their lifestyle themselves rather than relying on Govt to provide.

        The constant reliance on entitlement demands of the Public Purse needs a severe reality check. The first stop in this argument is usually “middle class welfare”. Rubbish. Middle to higher income earners more than contribute their fair share already.

        So in one breath you argue people need to become a lot more self reliant, yet in the next you argue the entitlements targeted at those most capable of being self-reliant should remain ?

        The share contributed by middle and high income earners has been dropping for decades, while their payments and benefits (or “entitlements”, if you prefer) have been increasing. They haven’t had it so good in living memory.

  5. My wife is a public servant facing a cutback in July as her role is jointly funded by both state and Fed gov, most PS are now on short term contracts dependant upon funding, she works on the coalface dealing with the homeless and is burning out.
    The whole state/federal local government arrangement is inefficent, with duplication, empire building and money spent on crap yet other areas starved of funding that need it.
    Defence is another area that gets me going. The army now has more senior ranks (above Col) ratio to enlisted men than at any time of its existence, not to mention the plethora or defence department civillians, however the real unseen issue is the contractors, the Sercos, the Veolias, the Obeid run water company AWH, that suck the bejus out of the public purse.

    It comes back to the Swiss system of cantonisation with regions being rewarded for efficency rather than just parastic useing of services

    The Law is another example as well as Transport,imagine just one department of transport.

    • The fact that private contractors are making a killing out of the public sector seems to be an argument for increasing the size of the public sector rather than reducing it. The more the private contractors out there, the more it is going to cost.

      But don’t do it yet!

      (Admission: I too, from time to time make a killing out of the public sector because they got rid of their own specialists – so I can charge what I like – tough, I didn’t make the rules).

  6. Interesting stuff. I don’t think a hard limit is a good idea, since the size of government depends on the size of the economy to which it is compared. In a recession, automatic stabilisers will mean government gets bigger as a share of GDP.

    There is also a measurement problem. Do we measure the size of tax take? This size of spend? The number of direct employees? What about all the contractors and consultants employed by government?

    What about government assets? If a State government owns a utility it will seem bigger than in another State where the utility is private. But this difference is inconsequential in isolation.

    I agree with many of the other comments that the three layers of government, and the duplication and interaction between them, generates costs that could be so easily avoided.

    However, since there are vested interests inside all these bureaucracies I imagine this is one of those things that will never happen.

    • “I agree with many of the other comments that the three layers of government, and the duplication and interaction between them, generates costs that could be so easily avoided.
      However, since there are vested interests inside all these bureaucracies I imagine this is one of those things that will never happen.”

      It will also never happen because it would be immediately pointed out that such an approach would constitute central planning…..comrade.

    • I don’t accept that there are automatic stabilizers.

      Why did we see an increasing share of public sector jobs during the boom-times ?

      Maybe you can argue that the pathetic mentality behind stimulus spending in a recession means that the public sector doesnt suffer whilst everyone else is forced to tighten their belts, but the opposite certainly doesn’t happen during good times.

      • Mark HeydonMEMBER

        I thought automatic stabilisers referred to the increase in welfare payments as well as reduction in tax receipts as people lose jobs in economic downturns. As far as I am aware it has nothing at all to do with stimulus spending or public sector employment.

    • Good points Rumples. It’s difficult to see how to reform the thing productively.

      Also this has all now gone one so long that it is almost incurable. As an example take a situation in Qld Health that I’m familiar with. During the budget cuts contract staff were the ones who got the chop. These were the ones doing the actual work. In this case the supervisors who did the sacking sit around all day doing virtually nothing. They’re now lining up the next lot of ‘workers’ to fire in the next round.
      The thing is rotten from the top down.

    • Mark HeydonMEMBER

      It is also difficult to define just what public sector employment is. Are GPs working in a local practice who receive 90% of their income from Medicare payments public sector employees? What about IT contractors who receive 100% of their income from a government department?
      What about the garbage contractors who are all paid for by council rates?

  7. I registered a company 10 years ago and obtained ABN in one or two days. When I registered another company in November last year it took 3 weeks to get ABN and the ABR says that it may take up to 28 days. My wife deals with Medicare and Workcover and noticed similar trends.

    From our experience the number of people employed by public service is inversely proportional to the service time measured in days.

    • thomickersMEMBER

      haha

      Centrelink/DVA expects to receive a Centrelink Schedule (retirement income stream statement to help assess a retiree’s age pension) within a maximum of 6 weeks from date of request.

      We fax it to them within the next 5 mins…they call us and say… “WoW! your quick!”

  8. “one could easily argue that further job cuts are required in order to restore public sector employment to historical norms”

    I notice that the graphs begin some years after neo-liberalism and the notion of small government became all the rage. This could potentially distort our idea of what constitutes historical norms. I have some difficulty with the notion that the public sector is larger per head of workforce today than in say, the Keynesian era that pre-dated the starting point for those graphs.

    I have only ever worked at the coalface of public service delivery, never in the bureaucracy. All I have seen in 15 years is tight budgets and staff struggling with workloads – I have not once seen any fat that needs trimming. If there really are as many back office pencil pushers as suggested, perhaps instead of axing them they could be redeployed to the front line.

  9. Duplication between state and federal agencies is the obvious target. At least the NDIS is a national scheme, and hopefully the NIIS. This might at least lead to more harmonisation and rationalisation of Workers Compensation and CTP across Australia, for example. Unfortunately, there’s too much attachment to states and history, which is just an expensive waste of resources.

    • Is there a single shred of evidence that the great Whitlam takeover of State responsibilities has produced anything productive?

  10. Government needs to be lean, modern and efficient. Shools, Hospitals, Roads and Transport should be all they focus on.
    Sir Humphrey Appleby would love todays Government and consider it a job well done.

  11. I think it does go back to what we want/expect from government.

    Someone to tell us what we can and can’t do all the time= big public service (and that includes the people who say we need xyz after an incident)

    Better health care/policing/teachers= reasonable public service (they are all on the public service payroll)

    You cannot keep announcing/expecting new govt initiatives and expect to cut the public service numbers. I am interested to see what the Coalition do once in power

    • Actually I am beginning to think that the company tax rate should be zero to actually encourage something. Board based land tax and GST to 20% and ditch the rest.

      • +100

        I have argued this repeatedly.

        Tax revenue is captured anyway when company profits are distributed as income.

        Taxing company profit that the company re-invests and does NOT distribute as profit, is the ultimate ignorant and destructive spite tax. It is a tax on what is pretty nearly the only source of economic growth in the long term.

  12. How does 3% compare with other countries? I’m not sure but I think I’ve seen much higher numbers.

    • I wonder if public servants on temp contracts are still officially classified as public servants?

  13. The public sector should, for the most part, be eliminated altogether. There are very few areas where services could not be provided for by the private sector. And who is going to seriously argue that the public sector is going to deliver these services more efficiently than can be achieved in private markets ? Where is the example ? None exist. There is absolutely NO reason why the State should continue to fund schools, hospitals, communication & information services where the private sector can deliver a superior product, and has a genuine motivation to continuosly drive cost efficiencies. The complete inability of the public sector to derive these productivity gains flows through to greater and greater tax imposts on the people who actually fund these inefficient operations that they don’t even use to begin with. It is a vicious feedback loop that is creating increasing welfare dependency and destroying developed economies. The era of big Government is over, and it cannot come a moment too soon.

      • Where is the example of the public sector delivering services more efficiently and cost-effectively than the private sector ? Name it. Does our country have the infinite ability to pay higher taxes, increase debt, sell out the future generation so that we can all have plasma TVs, ipads, Foxtel, able bodied workers collecting welfare, and houses we can’t afford ? Ask yourself the question – what are the alternatives ? There are none. It is pretty sad that those pointing out the madness of our current situation are derided as lunatics. The policies of the left will destroy us, and those who will be most hurt are the ones the left are supposed to be concerned for.

      • Where is the example of the purely private market delivering the level of services we expect as a civillised society at all, let alone more efficiently?

      • The government never allows the market to function.

        North Korea is a prime example.

        At the other end, you have semi-free markets like Hong Kong and Singapore.. much more prosperous than North Korea, I’m sure you’ll agree.

      • You never go full retard…

        The government never allows the market to function.

        North Korea is a prime example.

        The belies any sense of rational thought. How this concludes North Koreas actions are the rational outome of all government intervention is bizarre.

        If you truely believe this, you are the Dunning-Kruger effect in full display

        At the other end, you have semi-free markets like Hong Kong and Singapore

        Singapore’s markets aren’t particuarly free, it has may facets of government intervention.

        What it does have is policies that reward labour, and equitable opportunity for labour to advance itself via skills and training.

      • Ahh….government never allows the market to function so logically, we can’t point to the example I was wanting because until governments are eliminated, this free-market utopia won’t exist.

        Elimination of government is like the elimination forever of the capitalist – it ain’t gonna happen.

      • “you have semi-free markets like Hong Kong and Singapore”

        Hong Kong and Singapore don’t even come close to being semi free markets, especially Singapore.

        Unless semi free markets means:

        – repressed real wages and consumption (forced saving) by the state.
        – huge public ownership of corporations
        – controlled exchange rates

        Hong Kong and Singapore are much closer to North Korea, than to some non-existent laissez-faire utopia.

      • Who is going to provide services to 100% of the market as the Govt. is required to do?

        The private sector has the luxury of choosing to ignore the ‘too hard’ basket of customers and only serve the ones from which they can earn a juicy profit. Govt. doesn’t have that choice (nor should it)

      • The fallacy in your initial proposition is paving this road to hell. People have developed the altogether unrealistic expectation that it is Govt that must provide services to them to begin with. This is not about abolishing the services available to people, it is about changing the way they are delivered. In a way that reflects their true cost, and the true potential market. Govt is effectively creating a market for itself, which is sustained on an ever increasing share of taxes. This is unsustainable.

      • 1.The first example of “the public sector delivering services more efficiently and cost-effectively than the private sector” are all natural monopolies: water supply, electricity, clean air, roads, etc. infrastructures.

        2.Second example: every sector in the economy, where there is asymmetric market information like health care etc.

        3.Next example is education and fundamental research, which is too expensive for private sector profiteering. Without fundamental science there is no applied science, which is much easier for commercialization.

        4.Supporting national industries – you know better how much some sectors are supported by the taxpayers.

        5.Collective goods and services. They are much cheaper when delivered by the government (everywhere in the world).

        6.Eliminating negative externalities. This is a crucial government role and task. If their is no regulations, we all would die poisoned by the “best corporate practices”.

        7…. it is time for my Friday drink. If you want to learn more, read the students books of Joseph Stieglitz. His last book “The Price of Inequality” says everything about the bad government, but his other books say everything about what a good government is.

        Happy reading.

      • Where is the example of the public sector delivering services more efficiently and cost-effectively than the private sector

        Some medical services. It has been found that the private sector does whatever earns the most money, not what is best for the patient.

    • hahaha what about defence and tax collection? my mistake… there would be no tax collection in your utopia.

      • The police and military are to be excepted – someone has to keep the peasants in order.

      • No, I never said that. More competitive company tax rates, flat personal income taxes and introduction of land tax. Enough to fund defence and the most basic of administrative public sector functions required, and as others rightly point out, run without the influence of cronyism – be that from the private sector or via Union influence.

      • Most functional roles and provision of services and technology can be contracted to the private sector. Why would a customs officer or tech worker need to be a government employee ?

      • Why not? There is a business model there. Just sell passports and visas to the highest bidder – cost of production would be negligible.

        What about veterans affairs? Surely that could turn a profit somewhere in the private sector as well?

      • No, you are confusing yourself. This is about efficient and more cost efficient delivery of a service/product by the private sector. Outsourcing by a reduced Govt bureaucracy to the private sector. I am not arguing to allow the private sector to extract a new source of profit from a specific monopoly service and product such as issuing a passport.

      • Sorry, I must be confusing myself.

        I think the confusion came when you said “The public sector should, for the most part, be eliminated altogether. There are very few areas where services could not be provided for by the private sector”.

        I will improve my comprehension skills.

      • Looney reckons; “Most functional roles and provision of services and technology can be contracted to the private sector.” Guess a mate of mine who went from a $65k public service job as a tech to a $120k job contracting (and doing less work), while being re-billed to the dear taxer at twice that rate, is efficient. You go with that mate.

      • No, you are not thinking this through. You don’t outsource to the private sector to increase the cost of providing those services. You contract out to the private sector where they can deliver the same service for LESS. What they choose to pay their staff relative to the public sector is a separate issue. What matters is the cost in total to the public in the provision of a service.

      • You don’t outsource to the private sector to increase the cost of providing those services.

        Indeed, but that’s what actually happens out in the real world, as opposed to Libertarian Opposites World.

    • Another case of theory meeting practical and realising, oh shit, your theories are wrong.

      Ever worked in corporate world loonyright? And I don’t mean one company, or JPMorgan or the Squid (no offense Leith) or a small business. I mean big business = bureaucracy.

      They are not the Ayn Rand paragon of epic individualism and perfect competition and effiecency. I could name dozens off top of my head – multi billion dollar revenue companies – that would make a Yes Minister episode descend into farce. Nobody could believe it – think, large Italian eyewear company here….cough.

      Come on mate, lets get into the real world for a bit.

      Yes, public service – because it has a democratic capture through the nexus of voters/politicians/business (hello!)/unions/vested interests etc etc will never be a cool, stark, efficient streamlined outfit (unless you’re Swiss…lets not go there as that would COMPLETELY ruin your argument).

      And a lot of PS is wasteful. A hell of a lot – defence being the most wasteful by far. Usually because of corporate contract overruns. Oh wait, there goes the “business is always better” theory. Actually a lot of defence HAS to be wasteful – idle inventory (bullets sitting on pallets for years on end, constant replacement of perfectly servicable equipment), waste of time training for wars that usually never come etc etc…

      Yes, Business, generally speaking, can do a lot of things a lot better than PS ever could. The profit motive really works in terms of innovation, ideas, efficiency and letting the cream rise to the top. That is unquestionable fact – capitalism works.

      Yes, PS, generally speaking is no alternative to capitalism. It is about delivering the outcomes that business cannot do profitably (or dont want to do profitably), and SHOULD NOT be done profitability. i.e defence, legal system, healthcare (emergency care as a minimum), basic education services, infrastructure and a few more things.

      Your core argument – which I agree with completely is this – just like when business becomes big business, public sector becomes big public sector, the weight of bureaucracy crushes the rest of the system. The key difference being, there is no mechanism – save depression – for the PS to be cut, unlike big business, where this weight crushing becomes reduced revenue=reduced share price=some action or no action, company fails.

      So let’s not go to extremes – unless you want to become a Swiss civil servant (who have pride in being a public servant and do a good a job as their private sector counterpart, or like a Finnish school teacher who is paid a commensurate wage).

      Public sector is required. I dont want our health care system to end up like the crony capitalist US system. We already have a crony capitalist education system (private schools and private tertiary education is effectively just a big suck on the public teat) that is failing the nation.

      Lets calmly put the Atlas Shrugged novellas down and step away. Look up and smell the roses. Not all business is perfect, not all public sector are looters.

      Having said that, yes, I would like to see government cut down in size dramatically. Cut defence spending by 30-50%, eliminate State Governments entirely. We could do both within 12 months and have massive productivity gains without even touching the cutting of welfare for single mothers or other moochers/looters.

      /rant

      • I was once like loonyright Lef-tee (I was a missile tip right winger at one stage)

        I still am an idealistic anarchic libertarian.

        But I only do that in the privacy of my dreams, dreams of possibly a better world in the future.

        When I’m awake I realise the world is not made up of Death Eaters and John Galts.

        …..(sorry I was watching HP-OOTP last night)

      • That was a good assessment above, Chris. I would demur somewhat with THIS in the long run:

        “…not all public sector are looters…”

        The trend is always in that direction as sure as the force of gravity. Yes, we did for decades have a genuine culture of “serving the public” in the public sector. Back then, you generally accepted slightly lower pay and perks than working in the private sector, in exchange for the job security.

        Furthermore, back then, no-one would have DREAMED of creating the McJobs and the Kafka-esque functions that mark many public service positions today.

        Sorry, but this is now WAY out of hand and there is simply no shame any more. Because this is what it is – shameful.

        I was blown away by the wisdom of what Lee Kuan Yew did with the public service in Singapore – imposed “3 year tenures” for the staff. Brilliant. The whole CULTURE is different under those conditions. Pay is high and the 3 year tenures are highly sought after. Staff numbers are low and the workload is demanding. Standards are very high and dismissal not difficult in the case of under-performance.

        The kind of stuff that gets perpetrated by civil servants in much of the decadent west today, would see Singaporeans sacked and possibly even jailed. I refer to the routine “cooking” of “studies” and things like that. Often, I would add, with the aid of private sector consultants whose crime is “knowing what side their bread is buttered on”. I will post a little joke further down this thread.

        Note this: regardless of how times change, has any part of any public service ever produced the assessment that it is time to shut that department down? No matter how obvious it should be to an “expert”, which these people are supposed to be?

      • If you understand the meaning of the word cronyism, then you wouldn’t be blaming the private sector for failures and cost blowouts in education and health.

        And just what else is supposed to happen when the govenrment hands over a cozy contract creating a monopoly provider in a heavily licensed and regulated industry ?

        We need to cut ALL levels of government spending by 50%.

        I won’t accept that we are supposed to lie down and accept 900 bureacracies ordering us about on everything including what light bulbs to use, how to handle mobile phones whilst driving and how we must maintain our lawns and then what % of our income goes to Canberra, how much duties, levies and fees we owe when we import goods or build a house.

      • 16% of all federal governmetn spending is the old aged pension.

        Do you suggest the oldies get half this amount? or that the youngest half get back in the workforce?

        Superannuation gets around $30 billion a year in tax breaks that would otherwise be received by government if taxed at marginal income tax rates.

        Do you suggest we up the tax, or limit contributions?

      • We have to raise the retirement age. Our health system tax dollars are keeping these people mobile and able for far longer than they used to be at higher age cohorts. In fact health system cost is always disproportionately elderly, and this gets steadily worse as better and better interventions are devised for conditions that used to be killers. I don’t say cut this, I say raise the retirement age. Many of these older people keep working anyway, and use their entitlement as an income top-up.

        Anyone who is unable to work is already being provided for – in large numbers – regardless of their age, so this is irrelevant to this argument.

      • Respectfully Chris, you are conflating issues here. There is nothing I have said that is fundamentally inconsistent with your argument. I have worked in BIG organisations, and yes I recognise that people don’t suddenly shed their foibles when they move from the private to public sector, nor that large private sector organisations are immune from creeping bureaucracy and inefficiency. The entire point is that in the public sector there is no incentive for that situation to be corrected, particularly when the inefficiency can be subsidised through the tax system. But that is unsustainable. A large, inefficient private business cannot sustain its inefficiencies in the long-run. It has a genuine incentive to address them. I have never argued that defence should be privatised, but it needs to be more efficient. The public service we DO require SHOULD be run on a model of Swiss efficiency. The public service we don’t require can be provided for by the private sector. Switzerland can only afford universal health care because of its overarching economic and political framework, and the efficiency and in its economy that results largely from its cultural identity. Yes, let us become Switzerland, but there is much consolidation of our inefficiency and legacy cultural issues to be addressed first.

      • Good arguments from the free-marketeers here both above and below.

        Roger Douglas in NZ was never permitted to go anything like as far as he wanted to with reforms. I recall an argument from him that over a couple of decades, a solo mum who has 3 kids and exists on a benefit in a State house, was costing the taxpayer around $100,000 per year (and this was in about 1980 dollars…..)

        He presented a convincing argument that if she was simply “given the money”, and paid her and her kids own way for housing, health and education, going by readily available prices charged in the markets for these things, she would be able to live very much higher than she did when provided with everything “in kind” by the State.

        For this he was roundly condemned as a heartless right-winger; I have never quite been able to fathom the mental processes of people who think and argue that way.

      • The public service we DO require SHOULD be run on a model of Swiss efficiency.

        It always makes me laugh when the Libertarians point at Switzerland as some free-market haven. Nearly as much as when the gun nuts go on about how “every adult male has a gun”.

        One thing I learned living in Switzerland is that “efficient” and “fast” are not synonyms. It took two *years* for my tax returns to be processed, for example.

        There’s at least as much bureaucracy and nanny-stating in Switzerland as there is here.

      • A friend who lived for a while in Switzerland told me they even had laws prohibiting people doing washing on Sunday.

      • “Usually because of corporate contract overruns.” Ummm governments pay for these contracts? A contractor can only get away with what the government lets them get away with.

        You say that some big businesses are not run efficiently. The difference is my taxes aren’t been wasted when that business wastes money, but it is with inefficient government services.

        I also dispute that businesses can’t provide security (police) + national defence: http://youtu.be/XSeYEz67Se4

        If the government doesn’t provide healthcare, schooling etc. non-profit organisations and charities can provide these services.

        Chris you are smart enough to understand that government has a tendency to grow continuously. Take a look around the world and tell me this is wrong.

      • Private enterprise is far more efficient than government. It can allocate limited resources to dead end pursuits far more efficiently. One might argue that they create large amounts of irreversible damage to the world in the most efficient way possible!

        I like to think of the world as a giant dynamic system. An aircraft is an example of a dynamic system. Ideally you want a passive design that handles all the bumps and turbulence and different flight conditions without any sensors or computer equipment. But if you want to get better performance out of your aircraft you need to make it more unstable or at least less stable because stability and performance are inversely related. But without a control system your aircraft will flip out and crash. If it is only slightly unstable a very talented pilot might be able to fly it, but too far and it will beyond any human ability. So you need a control system in place to sit between the pilot and the aircraft to harness that performance.

        Our aircraft/economy has not been designed well enough to function without a control system. We’ll get better at flying it over time, but not before we crash into the ground.

        Ideologies are a luxury that no one who has ever made a decision between competing interests can afford to entertain.

        Here is an interesting article on how a likely future US collapse would compare to the collapse of the Soviet Union with respect to the citizens:

        http://www.resilience.org/stories/2006-12-04/closing-collapse-gap-ussr-was-better-prepared-collapse-us

      • The aircraft analogy is inappropriate for an economy comprised of individual PEOPLE.

        You said an aircraft that is too “unstable” will crash. Are you trying to say an economy that is too flexible (free market) will crash and never recover? Because that is completely untrue. I don’t dispute recessions will occur but these are corrective in nature. Just like the stock market rising too much inevitably leads to a correction or crash, the economy adjusts in the same way. However, after the correction or crash the market recovers and the market clears.

        I agree the US will collapse one day but it is not because of free markets but because of government indebtedness.

      • Actually, the aircraft analogy is completely appropriate insofar as it is a dynamic system like any other, and we seek to get a particular result from this dynamic system. The entire universe and any subset you wish to create within it follows the rules of dynamic systems.

        My PhD thesis was on the development of predictive control systems. That is, a control system that uses the dynamic model of the system to predict the future behaviour of the system and control it such to meet not just your current objectives, but all future objectives over time.

        I had to fly this thing on this weird experimental UAV and used to get quite upset that all the fine theories that people wrote in papers completely ignored all the issues that one has to deal with in the real world.

        One of those is constraints on the system, which are mathematically quite nasty. Real systems have hard constraints. If I fly into the ground then my plane crashes. If I hit a dynamic constraint (try to make the aircraft do something it just can’t do), then it can go out of control and hit some other hard constraint (the ground).

        In your perfect free market world, there are no hard constraints. In the real world there are. In the free market, resources are not allocated according to their true value. True long term risks to the system are ignored. There are a great many hard constraints to human civilisation and the free market relies on humans to accurately assigning value to dealing with these. History has shown that collectively, we are remarkably bad at doing this.

        So no, I am not saying that it will crash unrecoverably, just that it probably will.

      • Basically you think that models and other controls can be used to predict the market? This has been tried and time after time the models have been wrong. One only has to look at Australian Treasury modelling and other economic predictions based on models to see the flaws.

        True value is determined by the market and if there is mispricing then it will correct over time.

        A lot of the risks you talk about are unquantifiable and are even unknown. How you can incorporate this into a model that determines prices is impossible.

        I accept that the economy goes through booms and busts but I don’t think anyone agrees that a mathematical model with limited information is better at predicting prices than the millions of people and their aggregate knowledge.

      • Predictive control systems is an unusual topic for an Aussie engineer to undertake. It’s kinda hard but having said that it is still way easier then predicting and controlling an economy.

        The biggest difference is that physical forces are presumed to always behave in a known manner, (i.e. this set of inputs equals this result ALWAYS) In something like an economy identical inputs can produce vastly different results because of how the human participants interpret the events.

        The whole economic control system will likely go pear shaped when actors within the system learn to predict how your control system will react. They will then create “events” so that they can profit from the predictable correction your control system provides. The more predictable the likely correction, the more that money will be bet against the system, therefore the stronger the control forces will need to become.

        It is like suggesting that the RBA can really control exchange rates by their purchases, reality is they cant, because the system is much bigger and wealthier than the RBA, this leaves the RBA with its most effective tool being the jawbone. But even that tool is only effective if you dont over use it!

      • Nogen,

        Seeing some of the replies saying “It can’t be done”, I feel some degree of sympathy for you. One hundred or so years ago, there were similar people saying one could not model electrical systems – and advancing the exact same reasons.

        Given that Galileo and Newton, upon whom the subsequent electrical engineers slowly built their knowledge, preceded Adam Smith by 100-150 years, it is not surprising that there is doubt today that economists will be able to do what engineers and scientists already have done in the physical sciences.

        Despite the doubters, I believe that economists will be able to do what engineers have done, and within a similar time frame from the establishment of economics as a serious study by Adam Smith, as engineers did from the time of Galileo and Newton.

      • emess, please acknowledge that economics is a social science that studies the interactions between people. This is extremely different from the natural sciences where variables are mostly known, can be measured and controlled experiments can be conducted.

        Economics modelling tries to capture human behaviour mathematically. Unfortunately humans are not a constant, at times illogical, and the variables are dynamic.

      • Capitalist.

        I am more than happy to acknowledge the fact that economics has a high degree of the social sciences attached to it. Why that should make economic modelling impossible escapes me.

        The key point that those who think economic modelling is impossible or impractical miss, is that economic modelling does not have to get down to the individual person, any more than electrical power systems modelling has to get down to the individual electron level in order to be useful and practical. In fact, if I may be so bold, one can more easily predict what a given human being will do than your average electron. Yet even without knowing the activities of the average electron in a circuit, it is more than feasible to control power networks with millions of control points.

        For example, so called ‘circuit breakers’ in stock exchanges/computer trading algorithms are actually limited models in their own right. Does one have to know what every trader had for lunch to know about the ‘claret run’ on a Friday?

        The hint is, one does not have to develop a universal model straight away. One can develop models which work and can be proven as practical for parts of systems – even if the understanding of the individual personal decision is unavailable. Once enough parts of the system can be modelled (even without full understanding), those parts can be initially co-ordinated, then integrated.

        I could go on, but it is clear to me that even given the limitations posed by our knowledge of human behaviour, we can model parts of our economy and put in controls (such as said circuit breakers) much more than we do at the moment.

        For example, when one looks at the rise in economic indicators pre GFC, it pretty much looked like a classical case of system instability to anyone with even a nodding acquaintance with the phenomenon. Whether one wishes to do anything about it is one thing, but to say that one cannot is absurd.

      • I never said predictive control was suitable for everything. It is one tool in my toolbox, but it doesn’t make everything a

        nail. But since you raise the topic, let me just explore it for a moment.

        Control systems are designed on the system models for which they are being designed. If the design model is different to the

        actual model then the performance will degrade and in the worst case become unstable. Predictive control is more dependent on

        a model than conventional types of control. It gives you better performance than conventional control and allows you to

        handle hard and soft constraints but at the cost of model dependence.

        Control system engineers study robustness, which is how modelling errors or unmodelled external inputs (like wind for an

        aircraft) will affect the performance. There is often a direct tradeoff between performance and robustness and they build

        features into the algorithms specifically for this.

        The first time I flew my algorithm I discovered that my models weren’t of sufficient quality and it flew like a dog. I went

        away and improved some aspects of the model accuracy and included some algorithmic features to make it more robust.

        An economic model is no different to any others. Capitalist and China-bob, you both make the incorrect assumption of “we

        currently cannot model it therefore, it cannot be modelled”. Everything can be modelled. Even the irrational is rational.

      • There are two types of models, white box and black box. A white box model includes understanding everything from first principles. A controller based on a perfect white box model of the economy cannot be gamed because it will know people will play games and adjust the control response accordingly. And when they try and game that, it will adjust again.

        A black box model is a generic model that is created algorithmically from elementary components. A neural network is an example of such a model. The model can take the shape of any system in existence since it will train itself to produce the right outputs for any set of inputs. A controller based on a black box model can also not be gamed because when the system outputs don’t match the expected outputs, the model will be adjusted until they do.

        None of these things are achieveable right now. But they are certainly possible.

        The point I was making (which was apparently missed) is the existence of hard constraints. Booms and busts might happen, and the process of booms and busts might yield better performance than a constant steady state. But if I return to the aircraft analogy, there is nothing wrong with an aircraft losing control every now and then, you might be able to recover just fine, provided you don’t hit the ground first. There is a saying I saw once in aviation… “speed is life, but altitude is life insurance”.

      • It keeps eating my comments so this is intended for Capitalist and China-bob…

        I never said predictive control was suitable for everything. It is one tool in my toolbox, but it doesn’t make everything a

        nail. But since you raise the topic, let me just explore it for a moment.

        Control systems are designed on the system models for which they are being designed. If the design model is different to the

        actual model then the performance will degrade and in the worst case become unstable. Predictive control is more dependent on

        a model than conventional types of control. It gives you better performance than conventional control and allows you to

        handle hard and soft constraints but at the cost of model dependence.

        Control system engineers study robustness, which is how modelling errors or unmodelled external inputs (like wind for an

        aircraft) will affect the performance. There is often a direct tradeoff between performance and robustness and they build

        features into the algorithms specifically for this.

        The first time I flew my algorithm I discovered that my models weren’t of sufficient quality and it flew like a dog. I went

        away and improved some aspects of the model accuracy and included some algorithmic features to make it more robust.

        An economic model is no different to any others. Capitalist and China-bob, you both make the incorrect assumption of “we

        currently cannot model it therefore, it cannot be modelled”. Everything can be modelled. Even the irrational is rational.

        There are two types of models, white-box and black-box. A white-box model includes understanding everything from first

        principles. A controller based on a perfect white-box model of the economy cannot be gamed because it will know people will

        play games and adjust the control response accordingly. And when they try and game that, it will adjust again.

        A black-box model is a generic model that is created algorithmically from elementary components. A neural network is an

        example of such a model. The model can take the shap of any system in existence since it will train itself to produce the

        right outputs for any set of inputs. A controller based on a black box model can also not be gamed because when the system

        outputs don’t match the expected outputs, the model will be adjusted until they do.

        None of these things are achieveable right now. But they are certainly possible.

        The point I was making (which was apparently missed) is the existence of hard constraints. Booms and busts might happen, and the process of booms and busts might yield better performance than a constant steady state. But if I return to the aircraft analogy, there is nothing wrong with an aircraft losing control every now and then, you might be able to recover just fine, provided you don’t hit the ground first. There is a saying I saw once in aviation… “speed is life, but altitude is life insurance”.

      • My objection to trying to control an economy is far more fundamental it involves answering questions like,
        should it even be attempted?
        if so to achieve what end?
        what is the desired “controlled” state?

        wrt physical objects we can define a set of bounds within which the system must be constrained to prevent damage occurring. we might have a narrower set of softer limits where we describe the system as “desirably controlled” there might even be a further subset of optimal points (global Maximum/Minimum). In an economy we must ask if these states even exist.

        Most control theory involves finding an optimal operating point and mechanisms to transition between states, in a desirable fashion, in response to systemic changes. Over-damped or critically-damped transition responses are usually desired but there are certainly cases when a faster under-damped response with a little system ringing is better. Most control experts want to avoid building systems where the step response can result in transient excursions that grow in magnitude.

        Frankly if I were trying to model the long term “desired state” of an economy, the model would be a chaos oscillator, something like a Lorentz circuit. So the ideal control system would be one that guided the economy into a state of bounded chaotic oscillation. Curiously this chaotic state is indistinguishable from the natural business cycles that exist when an economic system runs open-loop. ooops…

      • Our economy already has controls if you live in any state where any law exists that can be enforced. So unless you advocate for complete lawlessness, the question of should it be attempted is yes.

        Now the real meat is “to what end”…

        My objective is simply survival of the species. I derive everything from that one point.

        The desired controlled state is that which maximises the chances of the objective being satisfied given any future external or internal interactions.

        Knowledge and technology advancement are the inputs into overcoming unknown future inputs. This necessitates the largest sustainable population supporting the largest number of specialists. Any economic system that leads this to collapse at the cost of billions of lives, unrecoverable environmental damage, global instability, loss of “once off” resources, and results in excessive wastage of resources for hedonic purposes, will be suboptimal. Any system which cannot appropriate the bulk of resources to effectively manage external risks is also suboptimal. Any system that will ignore investments that will not offer returns within one lifetime is suboptimal.

        Capitalism’s greatest strength is the way it can harness human nature. This is also its biggest weakness. An optimum solution is one that both harness’s the strength of the underlying system, but also manages its weaknesses.

      • Being a converts to Minsky, I can simply exclaim
        “stability is destabilizing”

        BTW Schumpeter first proved that stability is definitely a sub optimal state wrt manufacturing, industrial and entrepreneurial businesses. Minsky proved that it is also suboptimal wrt Finance, Investment and government as well as the greater economy.

  14. You could easily sack 100000 people in middle management in the public service without affecting any services, in fact things would probably be done quicker and more efficiently.

      • Yes, but as has been pointed out above by someone else, the big business that works in this way goes bust – unless crony capitalism keeps it going (bailouts etc). But in the public sector, the inefficiency seems to self-multiply forever.

    • No no, it should be cut by 10,000,000 squillion! And if there aren’t that many to cut, then employ some so that they can be cut.

  15. You can see the post-GFC austerity effects in chart #2, particularly in the new LNP govt states.

    Prepare for 10% FTE cuts, wage feezes and hiring freezes across the board in the CPS.

    This equates to approx 15,000 permanent FTEs lost and most of the 15,000 temp contracts.

    Its actually fairly comprable to the recent Qld PS cuts but it will obviously effect Canberra predominatly where ~60k CPS jobs are concentrated.

  16. Stephen Morris

    Good old BCA, echoing articles from The Economist (“Taming Leviathan, March 2011) two years after they first appear.

    At the risk of sounding like someone from another planet, may I suggest that they haven’t even begun to ask the right questions. To suggest that governments in general are too big is as inane as suggesting that companies in general are too big.

    For those prepared to think RIGHT outside the square this might be interesting. (It contains a few links to further discussion.)

      • Now that was a really interesting comment, Stephen. Could I suggest to mods that it might merit a slot as a post on MB?

      • I second that. Incidentally what Stephen is promoting is a little bit like what the US Founding Fathers possibly imagined the “sovereignty” of each of the States to be like.

        Daniel Hannan’s book, “The New Road to Serfdom: a Letter of Warning to America” spends quite a bit of time discussing the highly democratic nature of so much of government at all levels in the USA, and tells Americans to stop taking it for granted and realise how lucky they are. They ELECT judges and sherriffs and district attorneys and property assessors and dog catchers, for crying out loud….

  17. Amit it UE
    You like waiving a red flag to our herd of bulls. Record post numbers now expected…

  18. I’m afraid I’m rather prejudiced against the PS myself. Four years ago I went along to one of the Transport Centres in Brisbane to get a QLD driving license. I made the mistake of taking too much ID.
    1. An Australian passport;
    2. A UK passport
    3. A South Australian driving license.
    Unfortunately, I am cursed with having 3 middle names. The UK put them all in my passport, Canberra omitted one. Upon arrival at the desk, I was accused of having (wait for it) an ALIAS! Attempts to persuade the drone (and their manager) that having the same first & last name in 3 authoritative documents meant I was not a threat public safety went in vain. Two and a half hours followed while they rang Canberra and much yadda yadda followed. Meanwhile, as the process waxed and waned, the QLD number plates on my car were being put on and removed depending on where everyone thought the process had got to. Finally, the penny clanged home. Nonetheless, I was treated to a parting “you’ll never know how much trouble you caused us!”. I asked for the lady’s name, to be told “we don’t have to tell you”. Thus, a faceless bureaucracy can also be a nameless one.
    Idiots. Their chances of succeeding in the private sector at anything above the most menial level are zero.

    • I am afraid I have often concluded that the public sector worker I was dealing with, was an example of the government transferring people from the “unemployment” statistics (on account of unemployability), to the “public sector worker” statistics.

  19. Four really quick points (had a big spiel written but IT went ape on me).

    One: the govt does more than just provide goods in a market that ‘the’ market cannot provide. It is involved in more than just a market, it is involved in a democratic process. How many private sector firms want to be involved in that?

    Two: it sets the rules of the game. Should this be left to the market?

    Three: libertarianism is so attractive and alluring, but how realistic is it?

    Four: the govt plays a role in outsourcing consumer risk management by regulating businesses and behaviour. This can mean inefficiency but it can also mean efficiency for consumers and more trust. We are so busy, no wonder we outsource risk management to govt. The cost is incurred in the form of taxes, and on the business who passes it on to consumers. We do not get methanol laced drinks like people do in Bali. bad thing?

    • *I am a public servant and am at work right now. Don’t laugh. I have heaps to do and my supervisor is about to get angry

    • A smaller public sector is not antithetical to the democratic process. Private sector firms only benefit where people have freedom to choose and the capacity to pay, so have no incentive in the to make people less free. People will always resist attempts to constrain their instinctive right to freedom of thought and activity (that commits no violation of personal rights),, so neither Govt or the private sector can contain that basic human impulse in the long-run. Govt should be concerned with the most basic administration of property rights and other reasonable legal defences required to maintain personal freedoms. The question is not how realistic an ideal is libertarianism, but what is the realistic alternative in the long-run to our current situation ? There is none. The market can regulate risk better than Government, because ultimately it is the private participants in that market who are punished if they do not. The fact that Govts acts sometimes to prevent private markets from that punishment is a separate issue, but interrelated to the current structural problem that has been ultimately caused by wrongheaded Govt policy. No one is talking about removing regulations to allow market participants to lace their products with dangerous chemicals. That is absurd hyperbole.

      • I agree the govt could be smaller. How much? – hard to say. I also acknowledge the incredible working of spontaneous order, the discipline of the market, etc etc.. I’m across the literature and I think it is very powerful. Regs can be bad – law of unintended consequences, information and incentive problems, etc etc I even acknowledge Nassim Taleb’s work here… Its all good stuff

        but there’s no denying we like someone guiding our economy, and we like the government to be responsible instead of ourselves, because we are too busy, and pay for the service provided through our taxes and higher prices. And to be honest many of us are not equipped to handle the respoinsibility a society built on personal responsibility and liberty demands. Maybe I’m going for a positive argument, you are going more normative? I totally agree with the logic you are expressing. And it is an aspiration to work towards. But are we, as humans, good enough for it? I think not… Just like the Soviet Union needed the social and formal institutions for capitalism, so do we, and while we are more advanced than the former Soviet UNion in that respect, will we every truly be advanced enough for the arguments you make?

        On the methanol point, so you agree in good regulation then. So its just a matter of what the govt regulates and what are its incentives when it does so. I agree

      • Private sector firms only benefit where people have freedom to choose and the capacity to pay, so have no incentive in the to make people less free

        So trade unions who pushed for higher wage share and more leisure time are a welcome part of the private sector process?

      • The answer is no. The past has shown us that trade unions were necessary to provide a balance of benefits despite the wishes of despotic mill owners. Now, project trade union organisations forward in time, add in the same human weaknesses that their fellow humans the mill owners had, allow no audit of their activities and , voila, you have us.

      • So the answer is what? reverting to the mills owners sole discretion?

        Or perhaps a steady overarching, irrevocable employment policy such as full employment?

        NAIRU has delivered declining wage share and increased working hours.

      • Private sector firms only benefit where people have freedom to choose and the capacity to pay, so have no incentive in the to make people less free.

        Which is why they never seek to suppress wages to increase profits, right ? Or never impose laws that restrict how people can use their property ?

        Despite frequent examples on this (and other) sites, it still constantly blows my mind that people can watch the world in action, then conclude it actually works in the exact opposite fashion.

      • If wages are being artificially inflated, to the detriment of a firm’s ability to compete, and Govt and Unions are part of the problem, then those firms should seek to decrease their wage costs. Too much Govt is preventing the market from functioning properly. How people still fail to recognise that is even more mind blowing. And here we are.

      • drsmithyMEMBER

        If wages are being artificially inflated, to the detriment of a firm’s ability to compete, and Govt and Unions are part of the problem, then those firms should seek to decrease their wage costs.
        How is that even vaguely related to your laughable, demonstrably wrong, and completely arse-about-face assertion that private firms “have no incentive in the to make people less free” ?

        Only ~17% of the workforce is unionised, and most of those people are in not particularly highly-paid jobs like childcare and teaching.

        Too much Govt is preventing the market from functioning properly.

        The market is functioning exactly as it “should”. It seeks to minimise costs (ie: wages), maximise profits, and cares not for the human collateral damage incurred attaining that result.

        How people still fail to recognise that is even more mind blowing.

        Because most people are neither rich, nor slaves to an extremist ideology. Thus, they don’t think things like minimum requirements for holidays and workplace safety are “too much Govt”.

  20. Realistically, even 3% of the workforce is a pretty small number. The issue seems to come from when that 3% exerts disproportionate influence on the other 97%.

    What concerns me most is the rate of change in the numbers in Figure 1, with some years seeing +-60K jobs – that is bloody ridiculous. Whatever the percentage or size, the public sector should be a stable backbone. Those kind of jumps indicate a reactionary approach that can’t possibly be efficient or effective in the long term.

  21. Parkinson’s Law tells us that bureaucracies will grow at about 6% a year without any change in output, left to their own devices. This is usually achieved in practice by padding estimates of resources required for new functions or implementation of new policy. Ministers acquiesce to the estimates because it is in their interest to be spending more of our money relative to their colleagues. The Department of Finance tries to keep departments honest, but it always starts from a strong disadvantage in subject area expertise and knowledge. Departments make allowance for how much they think Finance will beat them down.

    While this has to some extent been countered in recent decades by the idea of efficiency dividends, these are not enough to offset the growth.

    We last had a significant cull in the Commonwealth government in 1996. I would say the Commonwealth should be able to manage quite easily with the same number of staff as it had then, perhaps adjusted for population growth and growth in welfare recipients due to aging of the population.

    That would be far more of a cut than the Coalition is currently contemplating.

      • I am sorry I cannot recall where it was, but I am sure I have seen an academic analysis of “Parkinson’s Law” that supported it in principle.

        I have not read up on Mancur Olsen’s “Public Choice” theories but Wendell Cox says bureaucratic self-interest is one of the things covered in them.

  22. There is a nice little joke about the government department that rang around consultancy firms doing a little test to work out which one they should use to conduct an important new study.

    They posed the following: “We are doing a little test to work out which consultancy firm we should use to conduct an important new study. The test is this: how much would your firm charge us for telling us what two plus two equals?”

    The telephonist at the first firm said; “I would give you the answer for free: it is four”.

    The telephonist at the second firm put the bureaucrat through to a managing partner, and he replied: “for $500,000, we would set up a study group consisting of the very best experts in the field, to provide you the correct answer”.

    At the third firm, the telephonist put the bureaucrat through to the senior managing partner, and he replied: “for 10 million dollars, we will make two plus two equal anything you want it to equal”.

    “You’re HIRED” was the response……

    This is how studies into, say, commuter rail “investments” are done, but that is just one example among myriads.

  23. I have posted this story before. My partner works in health on the frontline. He reports to a manager and from there upwards, it’s managers managing managers in layers of hierarchy I’ve never experienced in private sector.
    These ‘managers’ could not organise the proverbial piss-up in a brewery with a fistful of $100 notes. I’ve seen graduates perform better at the basics of decision making, time management, people management, setting objectives, streamlining process, conflict resolution..
    In over ten years, my partner has never had a job description or performance review, I could go on for hours about the inappropriate way he and his colleagues are treated for which there is absolutely zero consequence.
    So the managers go off on endless training, which makes them worse. Bottom line is that they will never fire themselves and if someone else does it, they would never survive a probationary period in the private sector.
    Perhaps more interestingly, my back of the envelope calculations are that the cost to serve each patient coming in the door for this service is somewhere around $30k per annum. At even $200 an hour before a Medicare refund, that would buy three hours of service per week which is not what the patient gets..

    • Accurate outline of the problem Aquarian. As per my post above a member of my family experiences exactly the same thing.
      It’s incurable!

  24. Here is Matt Cowgill’s take on the IPA’s article – create your own results depending on whom you decide to classify as a public sector worker. http://mattcowgill.wordpress.com/2013/04/19/how-big-is-public-sector-employment/#more-1451

    I would find very little to agree with the institute of public affairs on but they make a good point that perhaps private school teachers should be classified as public sector employees – after all, private schools would struggle to function without government grant money.

  25. I recall an amusing letter to the editor once, regarding a dispute between the teachers union and a church which operated a chain of schools.

    It went something like this. “….Of course we have a dispute here. One of the parties is a reactionary institution that refuses to be dragged into the modern world. The other is a church……”

  26. I daresay that when the Coalition gets in in September, it will employ Peter Costello to produce a report which will tell it by how much to cut the public service – which Peter Costello will have been told by Andrew Robb having consulted a shonky private sector accounting firm somewhere.

    • Yes, there is the political theatre. And the cronyism of having an ‘independent expert’ massage a model to suit one’s starting conclusion. But that does not alter the reality of the structural issues we face, and the forces that will come to bear on us eventually if we do not change course. Most honest, thinking public servants will admit that they are stewards of an inefficient and unaccountable monster. The time has come to put the beast to rest before it devours us completely.

      • So when will this day of devouring come? I keep hearing about it but it never seems to happen.

      • You are not paying appropriate attention to what is happening in the world, then. You are soaking in it right now.

      • So when will this day of devouring come? I keep hearing about it but it never seems to happen.

        It came long ago. That’s why our economy and society are in a total mess living, for the time being, on the work and savings of foreigners.
        Our education system decayed. Our productive industries are devastated. Rural communities have been destroyed.

        But who gives a RA? As long as Sydney Melbourne and Canberra are living comfortably.

  27. after reading all the thread and being late for the party, why not we implement Gina Rinehart solution.. Outsource our politicians. I am sure there people in Africa willing to be come prime minister for 2 dollars a day.

    • I am sure there are probably a hundred or so that could be fed from Gina’s daily food bill too.

  28. Since my comment above seems to have been eaten…

    For all the free market types. I would like your input on this question.

    Suppose a disaster has a 20% chance of striking the earth and wiping out all life on the planet. 20% of the people (correctly) believe this to be true and 80% of people (incorrectly) believe this to be false. Surviving the disaster is possible, but only if 80% of the world’s (randomly distributed) resources are allocated to solve the problem. There is a limited timespan before it is too late to act. How would a free market work to solve this problem?

  29. Interesting question. I’m not a free market type but I will answer anyway.

    There would be a fight over resources. Come to think about it, most of human life is about a fight over resources.

    How would a democracy act. Take a vote, the 80% would win, and the losing 20% could expend their own resources to attempt to save the planet.

    To be fair, many people are capable of seeing grey instead of black and white, and although doubting the science of doom, would agree to expend some resources to investigate or solve the possible problem.

  30. While this thread is now getting old, it’s worth pointing out that private, for-profit interests recieve very large amounts of government welfare in this country. Focussing on how best to cut the throats of those directly employed by government conveniently shifts the discussion away from this important fact. The Institute of Public Affairs – a right-wing think-tank funded by big business – has I believe because of it’s ideological disdain for government, inadvertently drawn attention to this fact that the corporate world would rather have kept out of the spotlight.

    Large sums of government money are funnelled to profit making interests – yet there is virtually no discussion on how to reign in this largesse. Hack and slash public sector jobs left, right and centre…..but don’t mention public services like the job search network, formerly the CES, now privatised and run on a for-profit basis on the back of a continuous feed of public money.

    In the interests of balance, I call for a discussion on this very topic. If we are going to permanently feed public money to profit-making institutions, why should we not consider them a kind of public sector that may need pruning back?

    Of course, this kind of government spending isn’t what the BCA was referring to when it called for a hard cap on government – I wonder how some of their members would respond to having the titty-bottle of government money yanked from their mouths?

  31. Robert Sherlock

    Great to hear some of Australia’s right wing speaking out. PhilBest and loonyright and the free market supporters have started to bring up important discussions and options that have been missing in Australia.
    I have seen not paying politicians works well in Texas, how many billions would that save Australia.
    Why do we have government departments (probably employing thousands) that sole purpose is to create different standards to other countries? I would think that if a car or toy is approved in Japan, UK or USA then it can be used in Australia. The billions spent by government and manufacturers could translate into cheaper products and lower taxes.

    There would be huge sections of the Australian Government that could be wiped out completely without any negative effects at all.