Efficiency dividends to squeeze Government IT shops

The Federal Government has announced plans to save $465 million in the May 2010 budget with larger cuts to agencies' operating costs in the next two years.

Executive on tight rope

Finance Minister Penny Wong today told the AAP that Australia's 'efficiency dividend' -- the ratio of agencies' reduction of running costs to budget -- would rise from 1.25 percent to 1.5 percent in 2011/12 and 2012/13.

The efficiency dividend would return to 1.25 percent for 2013/14 and 2014/15, she said.

Wong also released results of the Government's Measures of Agency Efficiency review, announcing plans to accept its central recommendation that the efficiency dividend be applied at a portfolio, rather than agency, level.

The move was expected to introduce flexibility by bringing together all of a Minister's departments, agencies, bureaus, commissions and other smaller executive organisations.

But it may also mean higher than usual cuts to major major agencies of portfolios, in order to give smaller agencies room to move during the next two financial years.

The review noted difficulties several agencies faced when in managing less flexible budgets due to whole-of-government efficiency measures for IT and Communications.

It also reinforced the “Vision” statement recently issued by the Department of Finance, while hinting at the emergence of 'super-agencies' with a recommendation to rationalise the total number of Government agencies.

The review proposed the development of a “road-map for standardising common processes and making greater use of shared services models across the Australian Government”.

Such a roadmap was expected "to take advantage of scale, focusing on business processes and systems, rather than organisational structures”.