By Nigel McBride, CEO of Business SA
An insurance company has recently recycled the “elephant in the room” metaphor in its advertising campaign.
Of course, “elephant in the room” refers to human behavior when something that’s completely obvious is intentionally and irrationally ignored, because to acknowledge it, or to openly talk about it, is deeply uncomfortable or confronting.
Following last week’s State budget, the only organisation that again raised our State’s very own “elephant in the room” was Business SA.
We read in the Budget papers that this coming financial year the State Public Sector “employee expenses” (payroll and related costs) will be up to an eye-watering $8.3 billion per annum!
Business SA is not anti-public sector; indeed, we highly value the role that an effective and efficient State Public Sector can play.
The problem is that the comparative size and cost of South Australia’s State Public Sector has become destructively out of step with other Australian states.
At June 2016, our public sector employees represented 15.7% of all our full-time employment in South Australia. To put that in perspective, the average across all states (including SA’s figure) was 12.4% with Victoria at 11.1%.
More specifically, If South Australia even had the national average of State public sector employees as a percentage of full time employed, the State Government would save about $1.2 billion per annum.
Reflecting on the latest State Budget, this would allow the $1.16 billion in payroll tax to be abolished outright, creating the incentive for thousands of businesses to create additional jobs and for major employers to move operations here. Alternatively, those savings could put jobs and economic transformation programs on overdrive.
Realistically, that level of saving is highly unlikely in the medium term. But even a very modest 5% efficiency dividend on staff levels could see over $400 million dollars per annum made available to help drive the jobs, exports and economic objectives set out in the Budget.
But even this level of modest reform has continued to elude this Government.
The 2014/15 State Budget outlined public service job cuts in the order of 4,000 full-time equivalents (FTEs) after a similar promise was made in 2010 which failed to materialise. There were 81,161 FTEs in the State Public Sector as at 30 June 2014 and last week’s Budget estimated there will be 81,388 FTEs as at June 30 2017.
As the unions have gone quiet, we are also concerned about what’s happened to the public sector wage constraint within the 1.5% per annum cap the Government has committed to.
And the average weekly earnings of public servants has already been found to be 36% higher than the private sector in SA.
A struggling small business in this State could be forgiven for concluding that the elephant isn’t in the room, it’s on their back.