Under this measure, the efficiency dividend will rise from 1.25 per cent to 1.5 per cent in 2011-12 and 2012-13, before returning to 1.25 per cent for 2013-14 and 2014-15.
This measure will deliver additional savings of $465 million in the 2011-12 Budget. Together with our commitments announced during the last election, this will provide an overall saving through the efficiency dividend of $1.1 billion over the forward estimates.
These savings will help bring the budget back to surplus in 2012-13, and show the Government is determined to lead the way by tightening its own belt first.
The Government is restraining spending and building surpluses to ensure we are not adding to price pressures arising from the investment boom in the years ahead.
Failing to make tough decisions now means we will have to make much tougher decisions in the future.
Increasing the efficiency dividend will ensure the Government continues to carry out its core business more efficiently, which will deliver greater value for money for taxpayers.
We believe the public service has the capacity to adapt to these changes. It is the Governments strong expectation that agencies will be able to meet the temporary increase in the efficiency dividend without resorting to forced or compulsory redundancies.
The Government has today also released the Review of the Measures of Agency Efficiency report. The central recommendation of the Review - to apply the efficiency dividend at portfolio level will be adopted by the Government.
The Government acknowledges that some agencies have been concerned about the current efficiency dividend having an unequal effect on some agencies. Adopting this recommendation will provide portfolios with more flexibility in applying the efficiency dividend, including to smaller agencies.
The Review was commissioned following the release of the Ahead of the Game: Blueprint for Reform of Australian Government Administration report. The purpose of the Review was to investigate the current efficiency dividend mechanism and scope alternative ways of driving efficiencies in the public service.
In carrying out the Review, the Government held an extensive consultation process, with over 160 bodies invited to comment.
Findings of the review include:
- Although agencies had some concerns about the efficiency dividend they recognised it was a mechanism that is necessary to drive efficiencies.
- Agencies that participated in the Review could not identify a viable alternative to the efficiency dividend that achieved the same savings. Alternative mechanisms put forward did not receive consensus agreement, nor were they cost neutral.
- It is important to develop and promote a long term efficiency agenda for the Australian Government.
The Review of the Measures of Agency Efficiencycan be found on Finance website.