Public Disservice

When the bureaucracy serves itself, who serves the nation?

By Michael Newman

“It is hard to imagine a more stupid or dangerous way of making decisions than by putting them in the hands of people who pay no price for being wrong.” —Thomas Sowell

The Largest Litter of Fat Cats

Several months ago, The Economist published a report which claimed Australia has the most bloated bureaucracy in the world, with approximately 140 public servants per 1,000 people. Japan came in at 15th, with around 38 civil servants per 1,000 head of population. Australia has over 2.52 million civil servants (across federal, state and local governments) at a cost to the taxpayer of $232 billion in 2023–24. Japan has 3.39 million public servants with an annual wages bill of JPY 25.6 trillion (A$270 billion). Per head, Australian public servants—representing 17 percent of the working-age population—earn an average of A$93,000 versus Japan at 4.9 percent and A$76,000 respectively. Why does a country five times our population require only 34 percent more public resources to run it?

At the senior executive level, federal heads of department are raking in up to A$1 million in salaries and benefits, better than most high-profile professional AFL or NRL athletes. Their state equivalents earn over A$600,000 a year. Our public servants are among the highest paid in the world.

For comparison, in Japan, income for the highest civil service roles tops out at JPY 23.5 million (A$255,000), in line with that of a Senior Executive Service Band 1 (entry rank for a senior executive) in Canberra.

According to Australian Bureau of Statistics (ABS) data, in Prime Minister Anthony Albanese’s first term, the federal public service expanded from 250,800 to 365,400 (with the wages bill increasing by A$14 billion to A$37.3 billion, up 61 percent). States, not to be outdone, have in aggregate expanded their ranks over the same period by 17 percent to 1.939 million, with employee costs jumping 22.4 percent to A$178.3 billion in the last recorded period of 2023–24. So in three years, the bloating of Australia’s public service is costing taxpayers A$50 billion more per year—almost as much as we spend each year on defence.

In Australia, public service compensation is far superior to that found in the private sector for similarly ranked positions. Recently, Australian federal public servants got approved for their fourth pay increase in three years, amounting to a compound 15 percent hike.

Groupthink

Human Resources policy is an important factor that drives internally focused behaviours. For instance, legislation in NSW allows senior civil servants to be arbitrarily dismissed under section 41 of the Government Sector Employment Act 2013—which covers terminations not related to misconduct or unsatisfactory performance—on payment of a maximum of 38 weeks’ salary. That’s a strong incentive to toe the line.

In the Australian Public Service Commission’s State of the Service Report 2023–24, 10.5 percent of the workforce had perceived workplace harassment and bullying in the preceding 12 months. Of that, 44.2 percent claimed “interference with work tasks (e.g. withholding needed information, undermining or sabotage).” There is some irony that 14 percent of staff within the Workplace Gender Equality Authority were aware of bullying and harassment within its own ranks. Of concern, 57 percent of public sector employees who experienced bullying or harassment chose not to report incidents. Of that, 47 percent feared reprisals or retaliation, with 46 percent thinking no action would be taken. 61 percent of all APS employees who witnessed corruption identified “cronyism—preferential treatment of friends, such as appointing them to positions without proper regard to merit.”

Bloated Structures and Failing Results

Duplication and functional overlap are also a large factor in the unnecessary size of government. Why are taxpayers forking out for groups that essentially promote the same agenda—e.g. the Climate Change Authority, the Net Zero Economy Authority (NZEA), Environmental Protection Agencies (federal and state), the Clean Energy Regulator, the Australian Renewable Energy Agency (ARENA), Clean Energy Finance Corporation (CEFC), etc.? Why not consolidate them? Despite all of these supposed expert bodies, our energy system has never been so fragile.

Would it come as a surprise that ABS data shows public administration-related salaries across Australian governments have ballooned by A$20 billion over the past three years to A$83.4 billion, while staff numbers have increased by 176,000 to 849,400? Never mind. Our political class expect us to believe that running deficits for the next four decades—paid for by unrealised capital gains taxes and other anti-business levies—is prudent fiscal management.

Incompetence Without Consequence

Monetary economist Milton Friedman once said we should “judge government programs on their results rather than their intentions.” Victoria is a good indicator of how bureaucratic incompetence has led to its status as our most indebted state. Many projects have seen sizeable blowouts. The Suburban Rail Loop, initially budgeted for A$50 billion, is expected to come in at over A$200 billion according to the Parliamentary Budget Office. Similarly, in Victoria the North East Link has overrun A$16 billion and the West Gate Tunnel blown out by A$4 billion.

Infrastructure Australia’s 2025 Annual Performance Statement revealed that almost one-third of government projects had cost increases of up to 50 percent, and another one-fifth blew out by over 50 percent.

Ask why the 2022 federal election promise to build 30,000 new affordable homes under the $10 billion Housing Affordability Future Fund has not constructed even one? If the Albanese government has confidence it can create a market to build 1.2 million homes by 2029, could onerous state and federal regulations be why almost 2,800 construction companies have gone into administration this year alone, at a rate more than double the 2024 figure?

Recently, the Australian Energy Market Operator (AEMO) admitted that it underestimated the costs of transmission by up to 55 percent. While renewable energy rent seekers and apparatchiks preach AEMO statements as the gospel of truth, why is faith continually put in their predictive powers? If transmission is to be curtailed, the bigger question is how are renewable energy zones going to secure finance to build infrastructure that cannot connect to the grid? Let us not even touch the preposterous pivot to promote consumer energy resources (CER) to gaslight the public that they have transmission issues comfortably covered. The only guarantee is that the taxpayer will be forced to foot the festering problem.

Why haven’t heads rolled for these unmitigated failures? Where is the accountability? In the private sector, a Chief Executive Officer would have the good sense to tender his or her resignation before being fired by the board for such mismanagement. Rarely do public servants bear responsibility for such poor outcomes. Only public inquiries tend to bring downfalls. That is one of the rare times that public servants become openly expendable.

Gaming the System

The plan to retrench 3,000 Victorian public servants is less than one percent of that workforce, therefore unlikely to put any meaningful dent in the deficit. Maybe Premier Jacinta Allan needs to pick up the phone to Argentinian President Javier Milei who has already slashed 10 percent of the public service, halved the number of departments from eighteen to nine which has led to expenditure savings of 31 percent and enabled the country’s first budget surplus in 123 years.

Australian government bureaucracies rarely downsize. If one looks at the forward estimates in the budget papers, employee expenses tend to be a straight-line percentage budget item. If revenues rise, there is a strong correlation to hire more public sector employees, regardless of whether roles are required or not. As one example, the CEO of one state trade office was allocated twelve staff when a competent executive assistant would have sufficed.

Australian governments regularly restructure through a method known internally as Machinery of Government (MoG). The federal government even commissioned a cartoon character known as a ‘MoG cat’ such is the frequency. An Australian National Audit Office (ANAO) report from 2016 highlighted that there had been 200 MoGs over the preceding twenty-year period. So inefficient have the processes been that the Auditor General reported that ten federal departments took between 203 to 371 days to finalise staff transfers and appropriations. Additional costs for MoGs per department averaged an extra $14.7 million. If government departments are constantly in a state of flux, is it any wonder already low productivity keeps declining?

Culture Wars, Bureaucratic Edition

Do not be fooled. MoGs often involve shrewd gaming techniques. Before one state election, the then opposition made comments that it wanted to trim headcount in one particular agency. Assessing the polls and presented with this likely outcome, the department embarked on a considerable hiring spree to expand the pre-election headcount within the agency in order to make it harder to purge. Then, in what might be euphemistically called creative accounting, the executives stripped out the sizable administration team that was working for the agency in question and stuck it under the department budget. All told, the true post-MoG net staff number in the agency—thanks to the numerical trickery—was higher than before the restructuring. Optically the department was able to mislead the incoming minister that the size of the cuts was steeper than it really was. This also raises questions of poor ethics. Many new hires who had joined in good faith became pawns that served a sinister purpose—the assured survival of the incumbent executives.

While the opacity of MoGs masks how poor the strategic thinking is within departments, senior public servants are very transparent about the extra efforts they go to prioritise diversity, equity and inclusion (DEI) activities. Much of this moral preening is proudly displayed on social media sites. Departmental woke virtue signalling has extended to celebrating four-hour (First Nations) yarning circles, emblazoning state logos in rainbow colours during Pride Month, and even posting pictures of pets of departmental staff on International Dog Day. Unfortunately, senior executives are not paying attention to the feedback.

Embarrassingly, despite all these internal efforts to pander to specific groups, in the 2024 NSW Public Sector People Matters Employee Survey (PMES), people identifying as non-binary, First Nations or LGBTIQA+ positively rated senior executives at 33, 49 and 46 percent respectively. Perhaps this is a sign that minorities either do not consider themselves part of the prescribed orthodoxy outlined by the departments or they cynically view senior executive attempts to sanctimoniously preach about groups that have not asked to be represented by them are just exercises in self-promotion and profiling. In the relentless pursuit of DEI, our governments continue to signal the lengths departments are going to ensure quotas for women in the workforce are met, especially at the executive level. Statistically, two-thirds of the public sector workforce across Australia have been women for some time. Executive positions filled by females in every state, territory and federal government is already more than half, with the exception of NSW which is on the cusp. Now that gender equality targets have ironically been exceeded, perhaps government departments can focus on exploring diversity of thought instead.

A System Beyond Reform?

The average tenure in the public service for federal departmental secretaries is approximately 27 years. No amount of consultation with the private sector can replace real world experience of working within it. If they were truly listening to advice from the private sector, electricity prices would be falling, per capita GDP would not be declining, business insolvencies would not be accelerating, productivity would be rising and we would not be staring down the barrel of four decades of deficits. While Treasurer Jim Chalmers has finally conceded that in order to deliver higher living standards—languishing at levels not seen since 1959—the budget trajectory is unsustainable, he has failed to recognise the system of unelected bureaucrats, out of touch with reality, continues to play a large role in exacerbating our economic woes. Tax reform is required, but not in ways that squeezes tapped-out taxpayers even more so that government departments can misallocate more money to poorly conceived ineffective programs and expand staffing levels to inefficiently facilitate the waste. The Business Council of Australia (BCA) wrote in a 2023 report that new business investment has been floundering at levels last seen during the 1990s recession. Among the causes of the investment drought, the BCA stated “uncertain economic policy, the burden of accumulated heavy regulation as well as the availability and cost of energy” were three reasons behind it. It reported that since 2021, Australian investment in the US is now larger than US investment in Australia. It is not a surprise when we rank 29th out of 38 OECD countries on tax competitiveness. Just how is a Future Made in Australia going to work with this stark backdrop?

A Modest Proposal

Perhaps a sensible solution might be to introduce private sector metrics. Senior civil servants should be moved to a remuneration structure which has a combination of much smaller base salaries and performance components to reward tangible external success with transparent accountability. If project budgets blow out or housing targets are not achieved, they do not get paid. If they succeed, taxpayers—like shareholders of a public company—will be happy to reward accordingly. Perhaps then they may listen to external advice rather than commission consultants to effectively reverse-engineer desired outcomes.

If career bureaucrats are supremely confident in their ability to deliver, they should have no problems accepting such a proposal—in much the same way the ABC should not fear adopting a subscription model given their assurances of the popularity of its content. But of course they won’t. It is too comfortable the way it is. Our political class lacks courage to change it for fear the bureaucracy may turn on them. That is exactly what public servants want them to believe—that they are impossible to restructure. Paradoxically, that is exactly what makes it possible. For an organisation that only possesses a hammer in the tool kit and sees every problem as a nail, a well-informed public will overwhelmingly back a party that seeks to tear it apart.

The solutions are simple. Failure to do anything will impoverish us before sensible remedial action can be taken. Endless handouts are a sign of abject policy failure. What we are witnessing is self-sabotage on an industrial scale.

Australians will all do well to heed the words of President Milei:

“The traditional politician asks for your vote so that they can fix your life, as if they know what you need. What I say is, I ask for your vote so that I can give you back the power to be the architect of your own life.”

Michael Newman has four decades of business experience in North Asia and served as NSW’s Senior Trade and Investment Commissioner to the region.

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