Public Service Running Costs Sliced
Sydney Morning Herald
Tuesday May 9, 1995
The Federal Government has relied on two main administrative measures - slicing running costs in the Public Service and overhauling indexes used to calculate grants and program costs - to cut outlays in the Budget.
The two measures provide the bulk of the $700 million net reduction on outlays achieved in the Budget, with Cabinet baulking at the political risk of cutting deep into spending programs.
The relief may be short-lived as the extra stringency imposed on departments and agencies could impact on the quality and efficiency of service delivery.
An across-the-board, 1.4 per cent reduction in the allocation for departmental and agency running costs is calculated to save the Government $162 million in the next financial year and about $600 million over the next four years.
The Finance Minister, Mr Beazley, said the measure was "the largest cut in public sector operating costs since the inception of the running costs arrangements in 1987-88".
"It means that the public service will be tightening its belt at the same time as we are reducing spending in other areas."
The new constraints mean Government departments will have to redirect their resources to trim their internal spending.
The overhauling of indexing formulas used in a wide range of Government payments is expected to yield an even bigger saving - $347 million in 1995-96 and more than $500 million the next year.
The Budget papers say the two main indexing measures used to calculate Government spending on its own programs and on grants to the States had become obsolete, forcing the Commonwealth to make higher payments than were necessary.
The indexes, used for calculating changes in labour costs, involved measures of total wage growth and movements in award rates, both of which ignored the growing importance of enterprise bargaining.
The Government will also reap a rise of about 40 per cent in dividends from Telstra and Australia Post. The two will deliver $1.27 billion to the Federal Government.
The Government aims to collect a total of $3.8 billion in combined dividends from Telstra, the Reserve Bank and the 50 per cent-owned Commonwealth Bank.
Of this, Telstra is expected to pay out $1.27 billion.
As expected, the Government held off on the mooted sale of the Yellow Pages, which is hugely profitable for Telstra.
The Government will collect $125 million from Australia Post in capital repayments for the last year, plus $75 million for the year ahead, and $50 million in 1997.
The Reserve Bank remains the Government's biggest single dividend contributor and is likely to return about $1.7 billion in 1995-96. This is based on calculations that the Government will receive about $380 million in dividends from the Commonwealth Bank for its half share for 1995-96, if the bank pays out the dividend of about 80c a share expected by banking industry analysts.
© 1995 Sydney Morning Herald
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