JOURNALIST: The Finance Minister, Penny Wong. We appreciate your time on the program tonight, Penny.
WONG: Its good to be with you again.
JOURNALIST: Quick thing here. Youre talking here about an efficiency dividend from the public service. Can you explain exactly how that works?
WONG: Well Ill do my best, Ross. An efficiency dividend is essentially a percentage reduction off base funding over the years ahead of government departments. So the simple way to understand it is government spending less but doing the same things more efficiently. What we do is we apply a reduction an efficiency dividend to departmental funding.
What Ive announced today is that we will increase that to 1.5 per cent for two years and then we will return it to 1.25 per cent for the years 2013-14 and 2014-15. That saves us about just over $1 billion over the forward estimates. Its about government doing its bit to become more efficient and deliver services more efficiently.
JOURNALIST: OK, so is it left to the department heads of the various aspects of the public service to be able to find the ways themselves that they become more efficient; that they actually reduce their expenditure to deliver this efficiency dividend to the Government?
WONG: Thats absolutely right. Weve got whats called a devolved financial management framework. Thats a complicated way of saying agency and department heads have got to run their agencies and departments themselves. And they will find and they have been finding different ways to become more efficient.
Some of the examples across government are things like coordinating purchase of ICT and theres been hundreds of millions of dollars saved through that. Weve implemented savings through travel procurement arrangements, those sorts of things. So there are efficiencies to be had and this is an incentive for the public service to find greater efficiencies in how it operates and how it delivers services to the public.
JOURNALIST: And so is it a real cut to public service spending or is it in fact simply another way of saying that in totality, the public service has just got to be more efficient, its got to do things better? So is it a real cut in public service spending or is it actually a slightly more esoteric thing?
WONG: No, its a real saving because it means we will spend less on these departments in the years ahead than we previously budgeted for. Were asking them to do the same sorts of things, the same job for less departmental funding by finding efficiencies. So its a discipline, if you like, that we impose on government, impose on ourselves, to try and do a bit more with less.
We think thats the right thing to do in the current budget context because, as you outlined in your introduction, we know there is a very large investment boom in this country which will gather pace. And the Government needs to bring the budget back to surplus because surpluses are the way in which you ensure that you dont add to price pressures down the track.
JOURNALIST: Which means of course the pressure of interest rates which you know that many families are very susceptible to.
WONG: Well obviously thats a matter for the Reserve Bank. What we as a Government can do is to recognise that surpluses are the way governments can do their bit to limit inflation and to not add to price pressures down the track.
JOURNALIST: OK, one final thing here. Do you believe that this efficiency dividend with the public service can be achieved without actually reducing the head count inside the public service? Or is that simply again up to the department heads to work out where they want staff numbers to go to?
WONG: Look, our expectation is that efficiencies can be achieved without resorting to job cuts and we believe the public service has got the capacity to adapt to these changes. Its demonstrated that previously and we believe that can continue being the case.
JOURNALIST: And what about therefore the Opposition, which have said at the last election that its efficiency dividend, it would be looking for a two per cent efficiency dividend. In other words, squeezing the public service even more greatly than what youre doing, say, for the next two years?
WONG: Well you do have to be aware of the limits on what you can achieve and to make sure you dont cut into services to Australians.
The difficulty with Mr Abbotts propositions was not only his 2 per cent efficiency dividend but he also was proposing a recruitment freeze and this would have had a direct impact in terms of frontline services.
Weve taken advice and weve considered this and we think this is a tough decision. This is a decision which will impose greater efficiencies on the public service. But its one that can be achieved without resorting to job cuts and without resorting to reduction in services to Australians.
JOURNALIST: Just a final one. What about the Australian dollar? Very strong at the moment, gone through 107 US cents, in fact almost 107 and one-third US cents at the moment. Is that having an impact on your budget at the moment?
WONG: Absolutely, and you recall through the last mining boom when the Howard Government was in power, the average of the Australian dollar through that period was around about 78 cents. Its much, much higher now. Thats having an impact on the non-mining parts of the economy particularly manufacturing and other export industries and obviously thats going to have an effect on government revenues. And I think you and I have spoken before about the fact that were likely to see less revenue in 10-11. Certainly, weve got softer parts of the economy. The higher dollar is going to mean that we see less revenue to government as a result of where the exchange rate is at.
JOURNALIST: Finance Minister Penny Wong, we always appreciate your time here on the program and have a great Easter.
WONG:Yes, you too.
ENDS