Senate Finance and Public Administration Legislation Committee, , 6:30:12 to 7:09:17
The committee examines Average Staffing Level (ASL) modeling, the funding of public service wages, and the impact of inflation on government expenditure.
Topics: Public service staffing, Workplace relations, Government spending
Speakers: Hon Katy Gallagher, James Paterson, Barbara Pocock, Andrew Danks, Unknown Speaker, Dr Subho Banerjee, Gareth Sebar, Karen Grogan, Speaker 28
>> It's in relation to the six monthly updates in uh for PWC. um in you you're monitoring PWC uh given all their transgressions until the 30th of June 2027. That monitoring requires that they give you a six-monthly update that includes advice on any breaches uh to um our code of conduct and the outcome of any finalized investigations. In October last year, I asked whether the first update was due and Mr. Mr. Danks advised it was due around 31 December 2025. Um I then asked if you'd make that report public. You took it on notice and you've recently said I understand that that it would be publicly released. I've got that right. Has the first six monthly update then been published?
>> Andrew Danksacking Deputy Secretary Commercial Group uh PWC sent their six monthly report to us I want to say mid >> mid January for the the period of 31 December. Uh we we have reviewed it. We've gone back and asked some clarification questions. Um our intention is to uh send a brief up to the minister for her to note the report and then PWC would publish it on their website. Senator,
>> you won't publish it on your website. It will go on PWC's website. Oh,
>> I think it would go on PWC's website because it's PWC's report against its actions. Um I'm sure there's no harm publishing on our website. It's simply PWC's work. There's no analysis from us on our views on it because it is a factual sating of where they are.
>> Can you give us any estimate of when we might expect to be able to read that?
>> I would imagine in the next two to four weeks.
>> Thank you. Has PWC advised you on the outcome of any finalized investigations? Did that report include reference to
>> I'll take that on notice. I don't I don't believe it they did clarify the status of existing investigations in that report. They just noted that there are investigations still ongoing
>> underway. No you from memory no finalized investigations but
>> not that I'm aware of Senator but I'm happy to take that on notice and clarify.
>> Thank you. Um have they reported any breaches to your knowledge of their own
>> Uh Gareth Sarah acting first assistant secretary commercial group. Um yes, the report does contain information about uh a number of circumstances where they have uh PWC staff um have been uh identified as breaching the either the um supplier code of conduct or their own internal processes.
>> And does the report document steps taken in relation to those breaches?
>> Uh it does.
>> Yes.
So here we have a company that is an entity that is required to report six monthly to you. They are showing evidence of breaches of their own code and the public sector code. We've got reviews, investigations underway through the AFP, the ATO, the tax practitioners board and yet here they are back in the fold doing consulting work to the public sector minister. What are your concerns having heard that information?
>> Sorry. Sorry. I was just trying to chase off an answer for Senator Paterson.
>> The PWC are are required to give you a six-monthly report which outlines any transgressions they have made. They have indicated there we've just heard that there have been errors um transgressions in relation to their own code of conduct and possibly public sector as well.
>> Could I just clarify Senator? So they're not currently doing any work for the Commonwealth apart from the ones we mentioned last estimates. So there's been no new contracts issued to PWC since the pause was lifted. The eight serious misconduct was against their own code of conduct.
>> Okay. None in relation to the Comwalth
>> No.
>> Okay. Thank you. That answers my question. Thank you.
>> Um sorry, can I just go back to Senator Paterson? He asked me on um correspondence I had. Uh I replied to the president of the AFPA on the 11th of the 12th 25. Um and I've just read his letter to to me as well. Um so I I provided him with the answer I've provided you. Basically I said that uh the government has not issued any direction to entities to cut budgets by 5% and we have no the government does not intend to cut budgets by 5% in my info or the budget. So, that's essentially what I sent back to him. And in terms of um
>> Are you able to table that letter?
>> Uh yeah, I don't I I don't think I'll see if we can get a paper copy sent out for you. I don't have it. >> Um and just in relation to counterterrorism funding, um since the 2223 March budget, national security funding over the Ford estimates has increased by 87.2 2 billion or 32.9% including 10.3 billion for counterterrorism related activities. >> Okay. Well, I've got someone bringing up those letter. Thank you. >> Well, just my response because I think you've got the other one, don't you? >> Yeah. Okay.
>> Um Okay. Another topic I wanted to discuss. Um the yesterday the PBO confirmed that uh the government will have to reduce the public service numbers by 22 and a half thousand or possibly more because they hadn't updated their modeling for my Epho or if the government doesn't reduce uh the ASL by that amount they will have to find new funding or reduce wages. So what is the the finance's response to the PBO
finance's response. I mean that's for the PBO to explain um their analysis and how that works. We not involved in the work that they have done around that. Senator,
>> but is it right or is it wrong?
>> Well, we would not I we don't have a comment on I don't have a comment on the work that they have done around that.
>> Is the government going to reduce the ASL by 22 and a half thousand or more?
uh Senator Finance does not have an speculate on a view of what might happen in the future in this instance because it really depends upon a whole lot of it it depends upon the nature of government's decisions and their decisions that haven't been made
>> but the government will have to make decisions about this because there has not been a sufficient provision for these people's wages and expenses and if it would be to provided for then the government would have to demonstrate where that money came from.
>> we report in exactly the same way as you reported. There has been no change in the way that we report uh you know entitlements and provisions for wages. Um I don't like I don't know what the PBO you know they have they stand by their numbers. um ours are reported in line with um every other way it's been reported over the years through the budget process.
>> But Minister, you've publicly said you think that public service is about the >> 213,000 excluding um defense personnel. So if you don't plan to reduce the ASL, how will you pay for these people's
Uh well, you'll see all the decisions of the budget uh of the government um in the budget in May.
>> Well, it's not just the PBO. Um many others who watch budgets closely like Chris Richardson, a very respected independent budget observer, has said it would appear the wage pressure is beating the budget forecast, and that was always the likely outcome. Is Mr.
comments from him. Senator Paterson,
>> he also says, "If your wage bill isn't changing, but wages are going up, then jobs have to go down. Follow the money." That's quite a large cut in public service numbers. That was on the 26th of November in the financial review. Is he
>> I'm telling you that we account for uh the ASL in in the same way that you accounted for it when you were in government. Um, I do find your interest in uh public sector employment, considering you wanted to sack 41,000 public servants interesting this side of the election. The other side of the election, you wanted to sack 41,000. Uh, we've rebuilt the public service. Um, we think the size of the public service is roughly the right size with some ons and offs as you would expect in some places depending on the nature of the work being done or the programs that might be finishing. Uh but roughly I think the the APS is about the right size.
>> Well, you made much of the fact that you didn't intend to reduce the APS, but you haven't provided to pay them. So, for example, in 2526, according to the AFR, your public service wages bill reverses from 30.5 billion to 29.6 billion uh in one financial year, that is the next financial year. Um, do you have a plan to make up for that shortfall or will you have to let people go?
>> Well, um, decisions well, you know, any updates to to the budget will be provided in the budget in May.
>> It's running pretty close. The the budget's in May. The financial year starts in July. The next financial year, it doesn't have sufficient wages
employers you currently employ. I'm not accepting that, but any updates based on government decisions will be reflected in the budget in May.
>> Right. So, public servants have to wait till budget night to know if you can pay
>> I think public servants know um that this government cares about public servants and
>> they may well
>> that the opposition doesn't care at all. in fact worse than doesn't care at all wants to sack uh all of them from this town [clears throat] and then continue on. Uh so you know interesting concern uh but I think the public service knows that this government uh has built capability has invested in them has paid them properly which your government also didn't do um and any further decisions will be reflected in the budget in May. I'm sure
they're really grateful for your care, but I reckon they value even more their actual pay and not knowing until budget night whether or not you
>> you're concerned about their pay now. >> I wish you had bought that concern when you were in government so we didn't have to fix it up when we came to government.
>> Minister, these people work very hard for the money that they earn. [laughter] And I Well, you think that's funny. So,
someone beside you. >> I think you saying that's funny. >> I think you saying that is funny. Well,
I
>> you care about their pay when you were going to sack 41,000 of them, including everyone every new job in
>> C. Independent PBO says you have a plan to sack at least 22 and a half thousand of them based on your own budget and Chris Richardson agrees. >> So, >> either it's possible that you have a secret plan to um find the money for it, but that will require significantly higher government spending which hasn't been accounted for in the budget. Any
further decisions will be reflected in the budget in May.
>> Well, nervous wait for public service until budget night till they find out whether or not you're going to pay them or not.
>> Not as nervous as they were last year when you were threatening to sack them
>> Ah, okay. Um, uh, Senator. Okay. All right. I'll continue then. Um,
>> I heard this is where the show was at, so I thought coming up.
>> You're right about that. Um, all right. I've anticipate what you're going to say about this, but I'm going to persist anyway. Page 35 of my EFO, and I quote, "Inflation remains substantially below its peak in both headline and underlying terms." >> And later on page 42, headline inflation is expected to about 3 and 3/4 of a percent in 2526. Obviously, the ABS's >> Thanks, Senator. Um uh obviously the ABS has upgraded their inflation to 3.8% and the RBA's projections uh and myo assumptions now don't line up >> um but in any case don't have inflation coming down to within the target ban for another year. >> Do you stand by the inflation assump assumptions in the budget?
>> Well um the inflation forecasts will be updated in the budget in May. Um these uh forecasts are put together by Treasury uh and reflected as it were um for the Mayo um you know release which is in 17th of December. >> Uh so yes, I stand by the forecast of Treasury.
>> Um
>> they're not political forecasts. They're
>> I'm not suggesting they are. I'm
suggesting they're out of date. >> Yes, I stand by the work of Treasury.
>> I'm not implying that they're political. I'm suggesting they're out of date because we have new data since May.
Well, you know, every economic for update updates the forecasts. That's why they're called forecasts.
>> Yes. And there are implications which flow from those updated forecasts which
I want to explore with you. >> I understand that. But you know as at my EPO that was they were the Treasury forecast. They will be updated in May.
So um what are the implications for expenditure of a higher rate of inflation than you anticipated than in
>> well um in some senses well we'll continue the approach we've taken since coming to government. When we came to government inflation was I think the the quarter the March quarter was 6.1. It peaked at 7.8 in the December quarter that year. Um, so we've been dealing with inflation in every budget since we came to government. We've made a lot of progress. There's more work to do and you'll see decisions aligned with that.
>> That wasn't my question. My question was what are the implications of higher inflation for expenditure in the budget
>> in terms of this budget or the decisions
we take? In terms of any budget, what are the implications for expenditure of higher inflation?
>> well, it's one of the considerations we take into account when considering uh all the decisions we have to make. We are mindful of it. >> It is a it is a priority. I think the treasurer has said that.
>> Yep. That's not the question. Does it have implications for payments?
>> Yes.
>> Yep. And what what are the implications for payments?
>> It feeds in through well >> I mean it'll feed higher inflation will feed into uh the indexation arrangements for on the payment side of the budget. Yes.
>> Thank you. So expenditure will be higher than you anticipated in my EO because inflation is higher than you
>> there are a range of impacts. They will be reflected in the budget. There are I mean there
>> well I'm asking you to take me through what the impacts are as the minister for finance.
they have we've gone well indexation arrangements and there's probably you know impacts on that not only on the payments side through social services and all of that but through other arrangements we have including with non-government organizations. So there are yeah there are a range of impacts and they'll be reflected in the budget.
So it implies that spending will be higher than otherwise all else being
that ignores other decisions that might be taken. That's why being equal in a sense I it's almost impossible to answer because it's interrelated decisions and a whole range of them if not thousands of them that make up the budget in May.
>> So the government will take decisions to cut spending in order to offset the inflation.
>> We've already said we'll have a savings package in the budget.
>> Yeah. Well, thank you. So um it'll be necessary for the government to make savings in order to offset the increase in expenditure due to higher rates of inflation.
>> Well, we have um found savings in every We will continue to look for savings uh
>> Um has the department done work to find options to restrain spending in given
you would expect the Minister for Finance heading into a budget process would be working with her department on uh the expenditure side of the budget, you know, like it's I don't know. I know it didn't happen uh under your government. I don't think it had an approach like this, but we have it as a a standard part of our budget process is that I'm responsible and lead the work on looking for savings across
>> I don't think you're the first government that has a savings process.
>> Well, we didn't see much ev evidence of it in your last few budgets. That's all I'm saying. We made it
>> during the global pandemic.
>> We've made it a feature of our budgets. Every single one of them, we've found savings and that that continues. I
remember you arguing on this side of the table for higher spending during the pandemic, for more payments to people, to more bailouts for companies. So, it's a newound concern.
>> That doesn't mean you shouldn't have been looking to savings in other places.
>> Yeah. And I think you know they were um on those savings on RN last week. Uh you said there's been $14 billion of savings across your budgets. >> Is that net savings or gross savings?
Um well it's savings and rep prioritizing. So we're saving and then real essentially uh to offset new priorities.
>> So you're saying that's net of spending decisions. So you reduced you reduced expenditure by 114 billion.
>> So that's gross. >> That's a gross figure.
>> That's gross. Right. What is the net
>> Uh I don't have that available. Is it
positive or negative?
>> Uh well, I don't I just don't have that >> in front of me.
>> Right. So, if you saved $14 billion and you tout that as an achievement, obviously you should know whether it has had a net positive contribution to the budget or not. Has the savings you've made been greater than or less than the
it is $114 billion in savings and rep prioritizations. Um but we have I have not claimed um or overclaimed um that achievement that has been basically to support uh offsetting new spending and also those demanddriven programs which are not decisions of government but which have had a very significant impact on expenditure on the expenditure side of the budget since we came to government.
But if you spend every dollar that you saved, it's not a save, is it? It's just spending it on something else.
>> Well, you know, that can be the way you twist it. I I've found it finding $114 billion in savings has been a big effort. like you can try and pretend it's not a significant amount but it is very much uh a big piece of work and we will continue that approach. Yes, we've had demands for additional uh spending and investments uh and you know if you look at some of those I think even you would agree um that you know they've gone into areas that either had been neglected or are showing increased demand and you know even if you were in government you would have had to make those decisions as well whether it be in you know indexing the age pension disaster events supports for government non-government schools, defense force superenuation benefits, veterans, um carers, all of that. I mean, these are these are substantial increases in those programs, including at my Epho >> uh which had a big impact. I think there was over there was about a $30 billion maybe a bit higher in estimates variations on those demand driven programs.
>> Sure. But uh let's put aside indexation and parameter variations and uh you know on demand driven programs all of those things. Isn't it true that decisions of government cumulatively over your term amount to $142 billion? In other words, you've made a decision to spend billions of dollars more than you've saved. And so there is in fact no net save. There's a net spend.
Well, we have managed the budget responsibly and met areas of increased demand. Uh we've on estimates variation side, there have been big movements in those programs. Um
>> happy to exclude those.
>> Yeah. But but they have been a big factor. Uh and in fact in my EO they were the single biggest factor
>> but I'm not holding you responsible for that minister. I'm only holding you
responsible for decisions. Yes, there have been investments in in areas that we prioritize and I think the Australian people prioritize, you know, into healthcare, into bulk billing, into aged care, um managing some of the expenditure around the the NDIS, all you know, veterans following the Royal Commission into um veteran suicide, all of those areas uh where increased investment I think has been needed and we can argue about that. You know, you see it as wasteful spending. Even the women's health package, 18 $800 million going into getting women access to contraceptive contraception and menopause treatments for the first time in 30 years listed on the PBS. You see that as wasteful spending? I see it as a good investment. We have a disagreement.
>> I'm not casting any judgment on the individual items. are just trying to get an understanding of the numbers because when you say on radio as you did last week, we've found $114 billion in savings across a number of budgets. I think the public will think that means you've saved $114 billion. But if you've gone and spent that and some more, you
>> We have.
>> How have you saved it if you've gone and
>> Uh because the demands on the on the budget are greater than that. So, you know, if we hadn't found those savings, the budget wouldn't be in the position it's in now. It would have increased.
>> It would be even worse than it already
>> Yeah. Well, you know, it I'm happy to match you one for one on the budget, what we inherited to where we are now. Uh but each budget, the fact that we have found savings has allowed us to repair the budget and find room for important investments that the Australian people rely upon.
>> Yes. But you've spent more than you've saved and you're running around claiming to have saved. You haven't saved. You've
>> We have saved $114 billion. I know you don't like that.
>> And then gone and spent 142.
>> Oh, and don't get me started on the terminating measures either that that I inherited from from uh Senator Corman and others because your budget basically hinged on the final years not accounting for significant programs that are ongoing. terminating measures next
financial year.
>> Minister, >> I have not said that there's a problem with termin I have a problem with say the national legal uh part partnership terminating all the community legal services across Australia just losing their funding overnight. I have a problem with that terminating. I don't think it should be a terminating measure. $4 billion to fund that
billion. One of the reasons why you're going to have to find billions of dollars in this budget to pay public servants is because you have so many terminating measures.
>> No. And on the terminating measure front and so if we take services Australia for example. So we funded extra staff into services Australia big a big investment in staff to clear the backlog and some of the poor times that were being performed there in that. So the reason behind the terminating measure was because we wanted assurance from services Australia. One, we wanted to see how quickly you clear the backlog and also what you need going forward as your standard baseline so we don't get back to a backlog. So there are reasons there but
>> so you'll allow that measure to terminate.
>> Well, we're in you know that will form decisions of in the budget as you would expect.
>> There are hundreds of terminations
>> as you would expect. Yeah. You know what? Hundreds that each year turn up as still decisions like in health four years, Minister turn up year by year. It's a real gift. It's a real gift.
>> You can't keep blaming a government from four years ago for decisions you've made in every single budget that you've been in office. Like at some point, you have to take responsibility for your own
decision. >> I merely Well, I sit here and take responsibility. Don't worry about that, Senator. So, what are you going to do about those terminating? I >> do that every single day. But I am merely pointing out as you uh criticize our spending that significant chunks of the additional investments have had to be made because your government didn't account for them >> estimates. No, that's not correct.
>> As you just said before, exactly the
same as Matis former. No, no. You just you just pretended >> that the community in that instance, the example I gave that the community legal center works on the 30th of June and then doesn't work on the 1st of July. >> Yeah. And you're pretending you're going service. >> How ridiculous is that?
>> That you can't. >> That that is the whole crux of your problem with public service numbers is that there are terminating measures that you haven't provided ongoing funding
for. Well, where we haven't provided ongoing funding, it's either the program finishes or there is another piece of work underway to assure the government about the decisions we make in the going forward.
>> So, says every government ever. That's
>> Well, that is not that is very different to not funding the community legal sector.
>> Well, I I bet you I could give you half a dozen examples of serious things that you could not possibly allow a lapse. It was very common in the home affairs portfolio when I had that portfolio for cyber security funding to drop for
border protection funding to drop. No,
no, in your budgets. In your budget.
>> Don't get me started on the budget problems with home affairs that we inherited.
>> So, Minister, are you
>> absolutely massive?
>> Are you saying Minister
that whole department >> required a lot of work to get into shape?
>> Still there are terminating measures. We
are going to take a break here because this kind of round in circles scenario um I'm not sure anyone's really getting anywhere. Um and we will return at 4:15 with the Department of Finance again.