After the Budget

* Budget lockup low point: Only instant coffee, had to get my caffeine hit from Diet Coke. High point: Asked for autograph by Treasury officials. Also, a fun dinner with Robert Gottliebsen, Alan Kohler, Natasha Stott-Despoja, the Crikey crew and others. Not quite as lively as some accounts suggested, but a good time was had by all.
* One thing I missed: Got through some of the confusion on the aid budget but wasn’t able to work out if the money for Copenhagen commitments was additional new money (as promised) or old money taken from elsewhere in the aid budget. Unsurprisingly, it was old money
* A bigger thing I missed: What Possum’s Pollytics correctly calls the most important chart in the budget, a graph showing a regression of the size of economic stimulus against economic growth relative to IMF forecasts. The relationship is highly significant, and the coefficient is approximately 1. That is, each dollar of stimulus resulted in (roughly) a dollar of extra output. No doubt this will be subject to reanalysis, but it’s a striking result.

* Tony Abbott’s reply: predictably weak. Freezing public service recruitment is silly symbolism, not a serious way of cutting spending.

49 thoughts on “After the Budget

  1. If people are serious biggest savings can be found in the capital purchasing programs in the Department of Defence. Cost overruns are rampant, delays are endemic and it will never change due to the characteristics of the market – few suppliers, no clear purchasing frameworks in terms of outcomes sought and assymetry of knowledge between the suppliers and the purchasers.

    You could get some big savings there. Go small government gurus.

  2. @Doug

    With current US and Russian arms reductions, and in the absence of any comparable threat then Defence cuts may be possible, on this basis, not on the capo-anarchist basis of small government.

    While cost overruns may be rampant – claims of cost overruns are even more rampant.

  3. JQ To suggest that bureaucrats are teachers, indicates that all the government funded degrees you obtained were a waste of taxpayers money. 10% of the public sector (170,000) is surplus bureaucrats and they need to be sacked. If you can not distinguish between teachers and bureaucrats, then maybe, that indicates you are one of the latter group that should go.

    JQ said

    “It’s silly, to take just one example, to suggest that teachers are bureaucrats if they are paid with public money to work in a state school and dynamic members of the private sector if they are paid with public money to work in a church school.”

    Answer me this then JQ;

    Why does a public school student cost $11000 pa of total government money and a church school does the same job with $7000 pa per student of total government money; and the church schools with the same demographics get ‘much’ higher NAPLAN results; at 2/3s the cost to taxpayers?

    UM;

    “The actual number of people that you have in mind, the “bureaucrats”, is quite small”

    UM where is the evidence to back up that statement?

    Back tomorrow.

  4. Update, Update, Update, the latest report from Phillip Coorey confirms what many suspect that Tony Abbott & the Coalition have a real credibility problem dodging and weaving the truth about a plan to pay $10,000 to stay-at-home mums. As for the public service recruitment freeze Lyndal Curtis also put it to Abbott that ‘Simple mathematics says that 12,000 employees into $4 billion puts each employee at about $330,000’. Abbott is all bull.

  5. Good to know I am a total waste of space. Federal Public Servant. Small department reduced from 2200 in the late 70’s to 1300 now and still falling. Work in an office of 3, 1 retires, down to 2, a cut of 1/3rd, a little excessive maybe?

  6. @John
    John…which arm do you want to lose in the ideological pursuit of “cutting bureacrats”?…Have you heard about Mona Vale Hospital operating theatres? Last upgrade was when Menzies was prime minister. Seems the liberals (and their ilk in State Labor) cant do anything constructive these days but “oppose” and suggest more cuts to ” public structures”…same tired old record…until our infrastructure is on the operating table unable to be resuscitated. The great dismantlers need to stop pretending they have solutions when all they have is a plan for further destruction.

  7. Update, Update, Update, this week iron man Tony Abbott’s Report Card is a disaster as
    his own party turns against him on top of the failed budgie reply and having angered public service bureaucrats. Abbott is all bull.

  8. John, it seems like Tony Abbott is totally wrong about Australia’s future prospects for the Lowy Institute’s annual survey results show a vast majority of Australians, 86 per cent, are optimistic about Australia’s economic performance over the next five years.

  9. @Uncle Milton
    says

    “High point: Asked for autograph by Treasury officials”

    I knew, just knew, that Treasury has been overrun by socialists.”

    On the contrary – I dare say Treasury officials are so sick of who they have been working for ten years under UknowWho before Rudd, thats why they asked for JQs autograph. Anyway I thought you had been permanently banned Uncle Milton…some time ago? Im happy to have some socialism back in Treasury and the greed is good mob kicked out.

  10. The graph is supportive of the value of the stimuli. Timing and detail I imagine would have also have been important determinants of their effectiveness. Also, some Federal systems, for example, the United States had their federal government stimulus blunted by their state governments implementing contractionary policies. I haven’t seen the data but some have claimed that many US state governments used the federal governments stimulus largesse as a chance to withdraw expenditures and, hence, fix up their balance sheets.

    It is a pity that the government doesn’t seem to have sold that the result we escaped a recession was directly attributable to the stimulus.

    As far as JQ’s autograph goes, why wouldn’t they want his autograph? After all, they are economists in Treasury and regardless of whether their political views coincide with JQ’s, he is, after all, widely recognised as one of Australia’s most accomplished economists – much to the chagrin of those who despise ‘fairness’. And, being economists they may have also thought getting his autograph, without cost and in the circumstances, was simply an investment they couldn’t resist.

  11. I fully agree Freelander…JQ shows admirable objectivity in running this blog and keeping the discussion open…despite trolls, antagonists and downright lunatics. For that alone he deserves the Order of Australia in my opinion.

  12. The problem with natural attrition is that those who actually do the work go whilst those who manage and cost a lot stay in their jobs. The SES has become bloated but this is unlikely to change anytime soon as the people who decide who stays and who goes are ….the SES. It would be a great doctoral thesis to compare the cost of the CES with the cost of the current system where there are not only providers such as the CES was but now there are also many bureaucrats who don’t add value but do add to the cost.

    Unfortunately the systems set up by the Howard government across the board means that the public servants who used to perform the tasks are now ensuring that others do the work “accountably and with transparency”. This adds to business red tape and costs to government and the taxpayer. It is probably too late to unscramble this omelette. It is not too late to decentralise decision making to empower local communities – however this is a risk and the current government is unlikely to take this step until it is too late.

  13. @Jill Rush

    Yes. You are perfectly correct.

    The SES is particularly bloated. A great example of that is the Productivity Commission which, when John Howard got in was a lot larger (then called the Industry Commission) and had as well as its SES band ones, two FACs (band twos) and no Head of Office. Now if you look in their last annual report, the organisation is smaller, certainly as far as those below SES are concerned, but has in addition to two FACs, two other band twos whose functions, and what they are needed for is entirely unclear, probably to the staff themselves, as well a Head of Office and a Deputy Chairman. And of course the SES’s salaries have been extremely inflated and they have gotten in the habit of giving themselves huge performance bonuses (with no prospect of three strikes and you’re out stopping that practice).

    Their remuneration really makes it sound as if they have some value other than occupying large tracts of floor space, but such speculation would be entirely baseless. But at least these ‘management’ SES have some some nominal responsibilities. Commissioners on the other hand… There have been very valuable contributions from Commissioners and some excellent Commissioners in the past, but if you look in that organisation and wider through the public service, and subject the current appointments to close scrutiny, you will find that under the Howard regime those sorts of positions have been stack with well connected and not suitably qualified ‘mates’ who find their public position provides them with a very considerable stipend. Unfortunately, if one manages to get into that sort of position and is either incapable of making any effective contribution or simply decides you cannot be bothered doing so, you are almost never removed, in fact, you almost never receive sanction of any kind. With far to many of the Howard government appointees, they are so incapable of positive contribution that staff must hope they don’t even make an attempt, as any attempt would involve staff in even more work dissuading them from what could become either an embarrassment or a disaster or both.

    One can probably get a good idea of the calibre of Howard appointees by considering that faithful party stalwart, Godwin Grech, who one imagines, had everything gone to plan would have found himself vastly elevated in the SES following another change of government.

    Fortunately there are still people of integrity left in the SES, people who could earn more elsewhere but are motivated to contribute to the good of the country, but the increasing politicization of the public service sees politicians like Abbott trying to drag those remaining into the political arena by ‘verballing’ them so they are compelled to defend themselves.

    A problem with excess baggage in an organisation is that they do not simply add to cost. Rarely are those appointed at a high level, for no apparent reason or purpose, happy to sit in their offices and read the dailies. No, they feel they must justify their existence by doing something. And not only does that something, in the case of the SES and appointees, cost the taxpayer a lot more money, but inevitably they also interfere with those who were doing important work.

    The consequence is that excess baggage not only adds to cost, but always diminishes effectiveness.

  14. @Jarrah

    “Full data” set is simply cataleptic nonsense. All the catalepers demonstrate is that if you introduce sufficient noise in the form of lots of irrelevant data from economies that are not developed and are, therefore, not comparable to the other economies, you can make any statistics ‘insignificant’. They hardly needed to do that to demonstrate this principle.

    Nelson demonstrated a similar principle at the battle of Trafalgar.

    Perhaps, Nelson was the archetype for the neoliberal ‘researcher’.

  15. In case you are unaware of this example from the history of science…
    Horatio Nelson was famous for researching the conjecture that his superior was signalling orders not to his liking.

  16. While we are smacking the previous government’s bottom for its stacking of various public institutions with – ahem – more congenial staff – at the board level, its effect upon the ABC is quite apparent now. Where a perception of left wing bias in the news and political analysis was a debatable point, the quality of the news and political analysis, in terms of research and line of question for example, was substantially higher in my opinion. The news feed on the ABC website is useless now, for it provides bugger-all depth in terms of fact, but even worse, bugger-all relevance to this generation of Aussie, at least. It is like taking a bite into the old Show’s fairy floss as a kid, only to find that there is nothing there.

    Now I don’t know the reasons for changes to their news production, or whether it is the upstream new sources they now rely upon that are changing from inane to entirely vacuous. The decisions of adopting so much outside news sourcing are no doubt partly budget driven. However, there has been (to me) an observable shift towards a more right wing spin upon the in-house news stories, and (to me) that is just as frustrating as a perceived left wing bias. The ABC should be scrupulously clean in their reporting of political news and stories that are indirectly of a political nature; the level of factual analysis and reporting of the results objectively needs to be lifted back towards what the ABC has shown in the past could be achieved. I don’t care whether a given journalist is Green, Labor, Liberal or CNP life member; if they ask fair but probing questions and do the legwork on researching subject matter, then I’ll be rapt with their performance (and that of the team behind a full news/analysis production).

    The ABC should be able to rise above board stacking, and that means the government shouldn’t place the ABC in such a position in the first place. Government’s should not be able to stack – diversity of opinions matters. Supplying a decent triennial budget commitment and funding for the ABC would help too, of course.

    Of course, if we follow the Tony G model of sacking the whole government and law apparatus, everything will be all right.

  17. @Donald Oats

    Yes. The Howard government did a remarkable job of stacking ‘our’ ABC which is now, top to bottom, over-represented with neoliberals and murdoch media mouthpieces. Even Media Watch has been neutered with its present chump happy to focus on trivia instead of anything that might pique that American media emperor. Lateline has even employed an extreme neoliberal nutcase who is also an editor of the WSJ. If ‘our’ ABC is now part of the Murdoch media empire, why do we, as taxpayers, still have to pay for it?

    The bias now displayed is bad enough, but the new staff they have employed are also incompetent, and their frequent gaffs are somewhat grating.

  18. I tried valiantly to watch “underbelly” last week only too find the commercial breaks almost matched the content making a one hour show almost two hours….it was infuriating to the point of hair pulling exasperation…the ABC had been my last refuge Don and Freelander against the instrusive commericals of the commericals. (If I wanted to watch a 24 hour shopping channel, I would select that but instead it was foisted upon me).

    Alas the slow but steady shift towards commercialism by the board stacking of the ABC is showing…lost its sincerity….adopted the swirly slick fast moving (epilepsy inducing) graphics of the infortainment world of the commercials, “branded” its own logo, moved to segment times that are a set up for ads later….But instead promotes its own shows over and over… for now…until direct digital downloads from Rupe are finally allowed. Wont be long.

    So that when its coming of age as a true commercial station is allowed…. its really important, according to the doctrine of the Murdoch empire, that we all get to know more about what happens in outer Turkmenistan than Australia; that the programmming implies and employs and a distinctly vapid pro market conservatism (like the commercials) and avoids controversial commentary.

    God forbid, questioning politics or economics not welcome in Rupesville unless you are questioning a US democrat. Just be good little kiddies and watch the ads.

    Its so obvious – I agree…but isnt it strange…its still better (for now) than the rubbish on other channels…even if the ABC is heading in the same direction…and when the ABC finally comes of age as a “mature” private sector business minded citizen…Television will have become obsolete (wonder why?) and Ill be here just after my dinner every night. Poor JQ!.

  19. Tony G, you have to admit, you have pulled the ten percent figure from your arse. Unless you can point to some actual jobs, some actual programs, that are a waste and should be the target of cuts, please just give it a rest.

    I’m not disagreeing there’s waste and mismanagement in the Federal bureaucracy and lots of make-work, however the suggestion that this is unique to public servants is so far from the truth that I wonder where you’ve ever worked in any decent sized organisation anywhere. Any organisation over a certain size, particularly where the employees are divorced from the goals of the company, has bureaucratic processes.

    I trust this government and this Minister for Finance to deal with PS waste, as ineffectively as may be, far more than the previous lot.

  20. “you have pulled the ten percent figure from your arse. Unless you can point to some actual jobs, some actual programs, that are a waste and should be the target of cuts, please just give it a rest.”

    Uncles Milton above reckons
    “10% of them are surplus to what is really needed” not me so leave my arse alone. (for the record the actual number is probably closer to 25% and it is up to you Wilful to prove otherwise).

    Uncle Milton also reckons the average public sector employee costs about $100k giving us an annual cost of about $170 billion.

  21. Wilful, as per the dated above linked figures here we estimate that there are about 1.7 million public sector employees in Australia and as per table 27.19 here the total public sector is about 33% of gdp or $330 billion.

    So if we use Uncle Miltons figures above, we could easily save $17 billion pa by culling 10% of the TOTAL public service;170,000 bureaucrats.

    “can point to some actual jobs, some actual programs, that are a waste and should be the target of cuts”?

    Doh… for starters abolishing the states and local government would entail the shutting down of heaps of waste in the form of replicated bureaucracies and chambers. (this type of cull would effect much more than a 10% cut).

  22. @Jarrah

    The IMF splits predictions into G20 advanced economies (which Australia is) and G20 emerging economies. The Treasury report rightly compares our economy with other advanced G20 economies. The only debate should be is if China should have been included but from the look of the graphs the exclusion of China won’t make a difference. China was probably included as it’s mentioned a fair bit in speil following the graph.

  23. A couple of observations.

    According to the most recent ABS figures there were around 1.7 million workers in the public sector in Australia in 2007, but these are not all bureaucrats unless you count nurses, teachers, bus drivers, garbage collectors etc as bureaucrats. The federal government employs about 230,000 out of those 1.7 million.

    Abolishing states and local governments would require a referendum, and I feel confident in predicting that such a referendum would probably get the lowest yes vote in Australian history – I can imagine the no campaign – ” Do you want Canberra to be responsible for collecting the garbage?”

    On the size of the stimulus, the chart in the Budget paper appears to refer to the stimulus in the 2009 year, and the stimulus in Australia was more timely than in the United States, i.e. it does not include the effects of spending in 2010.

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