From the AFR:
The Abbott government is set to blow a hole in its budget plans by rethinking an election promise to axe 12,000 federal public servants.
The decision was made after the new government was informed that funding and program cuts implemented by the previous Labor government, which it adopted, will lead to the loss of almost 14,500 public sector jobs over the next four years.
…The setback has budget implications on two fronts. The government must find hundreds of millions of dollars to top up the budgets of departments that will have to pay voluntary redundancies for the 14,500 people who leave over the next four years.
Under program changes and the efficiency dividends imposed across the public sector by Labor and adopted by the Coalition, provision was made to fund just 800 voluntary redundancies.
…The government said it was forced to rethink the policy after the Department of Finance tallied the impact across all departments of the so-called efficiency dividends and policy changes Labor imposed in recent budgets as it sought to return to surplus.
The Finance Department advised the government that departments overwhelmingly achieved the enforced savings by shedding workers, by offering redundancies rather than adopting specific reforms.
One could probably put this is the Labor “booby trap” category but, jeez, whocouldanode that efficiency dividends meant lower head count?
In terms of macroeconomics, it’s a wise move by the Coalition. Greater fiscal drag next year is not going to help an economy struggling to grow at all.
