Big government gets in the way and must be reduced

Jacinta Allan is starting to get the picture. Profligate spending on public servants undermines the real economy and comes with long-term pain for voters. A $4bn cut to spending in Victoria, announced on Thursday, is a welcome start but not the end of the story. Jim Chalmers take note; there is no time like the present to correct course and heed the advice of the experts.

The warnings have been coming thick and fast. This month it was confirmed that the size of the federal public service had jumped by 24.7 per cent under the Albanese government to almost 200,000 workers.

Data released by the Australian Public Service Commission shows a 13,671 rise, equivalent to 7.4 per cent, in public service numbers in the past financial year. These numbers are feeding into a bigger deficit, which widened to $32.9bn this financial year in the four months to October 31, up from $10bn for the full 2025 financial year.

On Thursday, the Parliamentary Budget Office said national gross debt – the total amount of government debt before considering a government’s financial assets – is expected to continuously increase from 51.9 per cent of GDP in 2024-25 to 57.5 per cent by 2028-29. The increase is due to higher spending driven partly by higher public sector wages. There was a 9.5 per cent jump in the federal public sector’s wages and salary bill in financial year 2025 to $40bn. A bigger public sector has made it more difficult for the private sector, the productive heart of the economy, to thrive.

Outside the public sector there are growing signs of economic distress among small business and regional enterprise. The OECD has warned that a decade of fiscal consolidation will be needed to stabilise debt levels. This will inevitably involve a leaner and more productive public service. The Treasurer says federal departments have been asked to “reprioritise their spending”.

Victorian Premier Allan was correct when she said “families are watching every dollar they spend, and they expect the government to do the same”. The reality for households has been one of going backwards. As Judith Sloan noted on Thursday, the key measure of GDP per capita – a proxy of living standards – has been negative or zero for most of the past two years. Ms Allan has been forced by reality to address government spending in her state, where the interest bill on borrowings will soon hit $1m an hour.

Victoria plans to cut more than 1000 public service positions to deliver an estimated $4bn in savings. It follows a review by former National Australia Bank executive Helen Silver that found the state public sector workforce had become “top-heavy”, making it harder to get decisions.

It said Victoria’s more than 500 public entities and 3400 boards and committees were costly and unwieldy, and recommended savings of $484m over four years through a reduction in staffing by 332 full-time equivalent positions.

The Allan government reduced the potential savings by $1bn by rejecting recommendations to merge and cut 78 of Victoria’s 500 public entities. The government will cut just 29. The government has also not detailed its plan to cut up to 90 per cent of the state’s 90 advisory committees. Ms Allan said the plan was to make sure “our public service is laser-focused on Victorians – good schools, good healthcare, safe communities and real help with the cost of living”.

For long-suffering Victorian taxpayers, the proof inevitably will be in the delivery. But the message from the Silver review is valid for all jurisdictions. It is that big government is less efficient and hinders rather than assists. The Silver remedy is: “Doing fewer things and doing them better; making sure that public spending is invested well.” Amen to that.