The efficiency dividend: size does matter

Industrial efficiency Australia

The federal government's efficiency dividend, introduced in 1987-88, trims the public funding component of agencies' budgets by 1.25% per annum. For 2008-09 only, the federal government increased the efficiency dividend by an extra 2%. This report recommends relief for small agencies from the dividend.

The report expresses concern that budget pressures exacerbated by the efficiency dividend have inadvertently restricted agencies that are independent of executive government, including the courts, the Australian National Audit Office, and the parliamentary epartments. Major cultural institutions like the Australian War Memorial, National Gallery of Australia and National Library are being compromised in their capacity to properly fulfil their growth mandate.

To address these concerns the committee made a number of recommendations, including:

• the provision of additional safeguards in the Budget process to reinforce the independence of the Auditor-General, parliamentary departments and the courts from the Executive;

• the development of a new funding model for cultural agencies that takes into account their growth mandate; and

• that the first $50 million of public sector agencies’ appropriations should be exempt from the efficiency dividend (excluding departments of state).

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