Cuts to public sector spending underpin Coalition’s forecast budget improvement

The Coalition has said it would improve the budget bottom line over the next four years by roughly a billion dollars, by driving down spending on the public service.

Treasurer Josh Frydenberg says an increased “efficiency dividend” placed on public service agencies would raise more than $2 billion.

An efficiency dividend is a mechanism, introduced by the Hawke Labor government in 1987, that cuts public sector budgets by a certain percentage each year.

Currently the efficiency dividend is 1.5 per cent, but if the Coalition were re-elected it would increase that to 2 per cent for the next three years.

Mr Frydenberg says the efficiency dividend will cover the cost of every policy the Coalition has announced during the campaign, and leave the budget better off.

“What we are doing is offsetting that spending with an increase in the efficiency dividend by half a per cent, which will raise more than $2.3 billion,” he said 

“The annual departmental bill across the Commonwealth is about $327 billion. What we’re saying is it will be reduced to about $324 billion, as a result of this additional measure.”

The Coalition has submitted all of its policies for costing by the Parliamentary Budget Office, while Labor intends to release its costings on Thursday.

Labor has pointed to cracking down on multinational tax avoidance and reviewing spending on previous government programs as the way it would pay for its policies.

Prime Minister Scott Morrison was asked what agencies would be forced to tighten their belts and whether, given his praise for the public service over the way it helped Australians during the pandemic, it was a “mean spirited” way of rewarding people for their hard work.

“This is responsible budgetary management. We’ve made commitments in this election and we ensure that we pay for them,” he said.

“That’s how you manage your budget, you live within your means.”

Finance Minister Simon Birmingham said the Coalition forecast there would be a $104 billion improvement to the budget bottom line over the next four years if the government were re-elected.

He said there was a range of ways the public sector could cut costs that would have “no impact on the deliver of services” Australians relied on, like Medicare and the NDIS.