Where to for public sector reform?

As top departmental heads rolled in the wake of the election of the Marshall Liberal Government, the question was asked: ‘What next for the public service?’

Debate over the size and shape of South Australia’s public sector is a perennial issue in political and business circles and the SA Centre for Economic Studies added its perspective with the recent publication of Economic Issues #50 entitled To ignore reform is to ignore opportunity: Creating a more effective and sustainable public sector.

As the title suggests, we recommended a series of reform measures ranging from the size of State Parliament and ministries to the roles and responsibilities of key departments.

But first, given the emotive tone of debate over the public sector, what is the situation in South Australia? Some statistics tell part of the story. Our analysis found that:

  • There is one public sector employee in South Australia for every 16.4 persons in the State whereas the national average is 1:19.5 persons,
  • General Government full-time equivalent employment was 6,500, or 8.5%, more in 2017 than had been budgeted for in 2013-14 for the 2017 year, with recruiting more than offsetting redundancies in the intervening years,
  • The public sector’s share of total employment in SA is the highest of the six States at 12.8%, compared with a national average of 10.4%,
  • Public sector average total weekly earnings over the past decade have been 15.7% greater than private sector earnings on average, and
  • South Australia has one Member of Parliament for every 24,756 electors compared with representation levels twice that number in the eastern States.

Put simply, South Australia stands out as having a large State government sector in comparison with other States and similar market economies overseas.

We believe the associated costs, both direct and indirect, are a drag on the business sector and the broader South Australian economy

Eschewing a one-dimensional ‘big government-small government’ discussion, we looked in more detail at how South Australia’s public sector compares with other States in terms of employment, earnings, and spending and revenues. We also scrutinised performance; analysing policy and administrative outcomes with case studies on public and vocational education, and child protection.

We also reviewed the role of local government in delivering human services, and the potential for a greater role by local government in the future.

Our analysis was premised on the view that a high-performing public sector can be a force for change, assisting growth in the private sector, the broader economy, employment and living standards.

However, we found the State’s public sector to be wanting.

Our assessment is that on a broad number of fronts:

  • The processes of policy making, analysis and review are poor in terms of inputs and policies generated,
  • In many instances there is little substantive cost benefit analysis applied prior to policies being implemented,
  • The management of implementation appears poor, as witnessed by the issues at TAFESA, Oakden, child protection and Transforming Health, and
  • There is little or no analysis after implementation of the costs and benefits against the original plans.

Our recommendations canvassed the full breadth of the political and public sectors. We proposed:

  • Reducing the size of the Ministry and both chambers of State Parliament,
  • Significant reform of the key departments of Premier and Cabinet, Treasury and Finance, and State Development,
  • Rebalancing the relative shares of public and private sector employment, and
  • Reviewing the potential of local government to deliver services and its relationship with the State Government.

The debate over public sector reform will continue. We believe its time for bold thinking and decisive reform to arrest SA’s economic decline relative to other States and to avoid the likelihood of stagnant living standards in the State.

A more comprehensive discussion of these issues can be found in Economic Issues #50 and downloaded here.

¹ All comments in italics are taken from Economic Issues #50, February 2018.

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