Beyond the blunt instrument: the efficiency dividend and its alternatives

The efficiency dividend has been chipping away at public service budgets for 20 years. This paper examines the problems it causes and puts forward alternatives. While initially the dividend may have helped reduce excess spending, its effects are now eroding the ability of government agencies to provide core services.  In the 2010 election campaign, Shadow Treasurer Joe Hockey announced that a Coalition government would increase the efficiency dividend to 2% if elected as part of a plan to deliver a budget surplus ‘twice as big as Labor’s’. There are reports that the government is also considering an increase in the dividend. The efficiency dividend is an easy way for governments to hide overspending and bring budgets back into surplus, according to the paper. However, this short-term electoral advantage occurs at the expense of essential public services which improve our individual and community well-being over the longer term. There are better ways to promote efficiency within the public service which don’t compromise the role of public sector agencies or risk reducing the quality of service delivery