Budget 2016: No respite from hard times for public service

Although the Coalition says it can foresee a time when there is little left to cut from the Australia Public Service, that time keeps getting further away.

In the meantime, the government will look to reap savings of nearly $2 billion by walking away from its pledge to ease off on the efficiency dividend cuts from next year.

There will be little hiring the Coalition remains committed to its low-wage increase policy and redundancy payouts will be harder to get.

The efficiency dividend, an across-the-board cut imposed on agencies' operating budgets, will remain at 2.5 per cent in 2017-18, dropping to 2 per cent in 2018-19.

But by 2019-20, the government anticipates little meat will be left on the bone and the planned reduction in the dividend that year, to 1.5 per cent, reflects the belief that there will be "diminishing scope for new efficiencies as Australian government agencies become leaner".

Finance Minister Mathias Cormann says $500 million of the extra efficiency dividend due in the next four years will be spent improving the Commonwealth's productivity and innovation.

"This new re-investment pool will support more transformational efficiency initiatives, such as automation of public services and business re-engineering," the budget papers say.

The sweeping "functional and efficiency reviews" of government operations have yielded savings of $2.7 billion so far, and another eight outfits, including three prestigious "central agencies" are due to face the blowtorch iin 2016-17

The departments of the Prime Minister and Cabinet, Finance, Treasury, Immigration, the Australian Bureau of Statistics, Federal Police, Bureau of Meteorology and the Murray Darling Basin Authority can all expect a visit from the reviewers before June 2017.

The cross-government "shared services" experiment is showing promising signs, yielding savings of about $40 million so far, and Senator Cormann says he is keen to see more backroom operations moved to the small number of shared services operations.

"The government is committed to putting an increased focus on leveraging economies of scale, standardisation and performance," Senator Cormann said.

The policy of abolishing and merging micro-agencies and small government bodies will continue with another 34 on the chopping block, due to join the 139 outfits that have already been culled.

The Department of Human Services is set for a headcount cut of 810, attributed to "difficulties associated with recruitment, machinery of government changes and impact of 2016-17 Budget measure".

About 300 public servants will be cut from the Immigration Department and about 344 from Social Services.

The government also wants to cut down on payouts to departing employees. The budget papers reveal that only about one-third of the 7000 public servants who left between July 2015 and March 2016 went with redundancy payments, compared with 42 per cent of the 22,000 departures in the previous two years.

One clear public service winner is the Australian Taxation Office, which will reverse years of declining numbers and grow by about 580 as a 1300-strong taskforce is formed to try to improve the ATO's performance on tax avoidance by multinationals.