The Australian experience of public sector reform

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Australian public administration in perspective

JR Nethercote*

In the final quarter of the twentieth century, Australian governments, Commonwealth (national) and state, underwent extensive restructuring, a process which still continues. This restructuring has encompassed organisation, public personnel management, public sector workplace relations, remuneration and employment conditions, and management and operational practices. It has involved shedding or partial shedding of some major government business enterprises in transport, communications and banking, for instance.

Reform has included new and revamped revenue systems. It has embraced parliamentary and public scrutiny of administration. There has been significant change in relationships between government and citizens, including establishment of Ombudsman posts in all jurisdictions. There has been an overhaul of the workings of the federation itself. Relationships between government, business and private, not-for-profit organisations have been significantly recast. The latter, in the welfare field, are recovering a major role in provision of services lost as the welfare state, operated as well as financed by government, grew during the twentieth century.

Australian government as it has been restructured and remoulded is the subject of this book. It provides an account of Australian government administration as it stands at the start of the twenty-first century and Australia's second century as a nation and as a federation. It is an important story in itself, and important as a study in successful, sustained modernisation of government administration in the light of domestic change in the nation, in the nation's situation in the world, and changes in the technologies of office and daily life.

It is, moreover, an opportune time to survey contemporary Australian government administration. The processes of development are unfinished but the late 1990s nevertheless saw major consolidations of the changes under way in the previous two or three decades. At the national level these included new financial and audit legislation, a new Public Service Act, and other legislation covering government corporations and companies. Comparable legislative renewal and innovation may be found in all other Australian government jurisdictions, the six states and two self-governing territories, which constitute the federation.

Restructuring of Australian governments in the late twentieth century has been diverse, extensive and comprehensive. It has also had diverse origins, domestic, demographic, technological and international in character. Changes in the economic and financial contexts of government have included especially the phenomena covered by the term ‘globalisation’. This reinforced a view, particularly after the floating of the Australian dollar in 1983, that while the Australian economy would be more open, Australian businesses themselves would have greater opportunities on the world scene. National boundaries were no longer seen as the barriers they had once been perceived to be.

Other factors of considerable significance were social and demographic developments such as increasing female participation in the workforce, adaptations necessary to facilitate integration of people who had come to Australia as part of the post-war migration programmes, comparable endeavours to include the Aboriginal people in the mainstream life of the nation, increasing levels of educational achievement, and progressive ageing of the population.

Dramatic advances in the technologies of the office and of modern life brought major change in the internal workings of administration and in the ways it related to the public.

Of central significance to the course of change in Australia, but reflecting comparable evolution in many industrial, urbanised nations, has been a major reconceptualisation of the role of government from that which marked the federation in its formative decades, and the middle years of the century, the years of the two world wars and the Great Depression.

From the late nineteenth century the governments of the Australian states and, from 1901, that of the new Commonwealth, followed active, interventionist philosophies. The centrepiece was the protective tariff. It served the dual purposes of providing the finance for many government services as well as being the major policy instrument for fostering manufacturing industry in Australia and, thus, employment. Public enterprise was likewise important, evident at state level in banking, ownership and management of railways, ports and often buses and trams. The Commonwealth on its establishment inherited the posts and telegraphs system. Its next foray into business was establishment of a bank which, as well as administering the currency, also provided trading and savings bank services, the former in competition with private banks.

Another key form of intervention was national and state workplace relations systems based on judicially-based, third party conciliation and arbitration. A particular rationale for this distinctively Antipodean approach was a pursuit of ‘equity’ and ‘fairness’ in the wages system, additional to (and sometimes notwithstanding) economic and business considerations.

The active, interventionist approach to government’s role in economy and society was also evident in the workings of the public sector itself. Public sector management was heavily influenced by the reform movements of the era, especially elimination of patronage and various corrupt practices (in tendering, for instance), introduction of competitive recruitment, and by scientific management in design of jobs, allocation of work, and organisation of staff. These techniques were justified in terms of efficiency, economy and equity ('equity', comparable treatment of staff doing comparable work, was also reinforced by egalitarian views). Several Australian public services including, from 1920, the Commonwealth, established internal structures for handling workplace relations mirroring the national conciliation and arbitration system.

The two world wars had a major influence on public administration particularly through the preference given to war veterans in public employment, more generous in the case of those from the First World War, and this, combined with the absence of recruitment programs tailored to attract university graduates to public service, gave the hierarchies which flowed from scientific management philosophies a noticeably regimental character.

As the twentieth century advanced, the national public service, shaped by these ideas and circumstances, had to handle not only the early tasks acquired at federation- defence, customs and excise, posts and telegraphs-but new responsibilities as the work of government expanded, in the field of industry itself, development of international markets for Australian commodities and goods, transport (shipping and later civil aviation), welfare payments and services, and even greater activity in the workings of the labour market. Much publicly-funded infrastructure were promoted under a general rubric of 'development' and 'national development', terms which were frequently found in the names of government departments and agencies.

From the late 1950s activist, interventionist government, whether in the form of the tariff, centralised industrial relations, a managed exchange rate for the currency or public enterprise came under challenge. The critique was initially based on economic grounds but revitalised libertarian philosophies increasingly added weight.

Confidence in the use of market approaches was slowly restored. By the early 1960s the Commonwealth had recognised a role for government in promoting competitiveness when it introduced trade practices legislation, the direct forerunner of the role now played by the Australian Competition and Consumer Commission. Another sign of a different role for government was signalled by the successive changes of name of the historical overseer of protection, the Tariff Board, to Industries Assistance Commission, thence Industry Commission, and now the Productivity Commission.

These macro-political developments provided not only the context for change in government administration during the last decades of the twentieth century but also constituted the sources of many ideas applied in the overhaul of administration. A new circumstance, both facilitating and compelling change, was the revolution in office technology and communications symbolised by decline and demise of the typewriter and increasing use of word processors, the internet and e-mail.

Deregulation is an example of the impact of a general shift in opinion with extensive implications for the public sector. It was not only an idea which applied to a whole raft of public policy regimes; it was also a concept which had direct relevance to the internal management and workings of public administration in terms of financial and personnel systems. Moves to attune government organisations to the particular circumstances of their operations inevitably challenged standardised, scientific management-style practices implemented through centrally-promulgated regulations.

The consequence of these shifts in the macro-political climate as applied to government organisations and operations has been emergence of a public administration which, whilst still carrying many of the distinguishing features whose origins are to be found in previous reform programmes, is discernibly different from its past during most of the twentieth century. These former features include the continuing, indeed enhanced and revitalised, centrality of merit as the paramount value in public personnel management. Another such feature is the 'apolitical' character of public service within a structure of responsible government and ministerial control of administration. The conduct of officials continues to be governed by the principle that neither an individual (nor a private organisation employing such an individual) should gain an advantage, financial or otherwise, from holding, or having held, public office.

These continuities with the past, however, may be contrasted with the differences. Conventional public services whose practices derived from that of Whitehall in the midnineteenth century developed on the basis of career service, with tenure until retiring age subject to satisfactory conduct. The framework of a career service essentially remains, but tenure has been replaced by contracts and a range of procedures for voluntary and involuntary redundancy where the workforce exceeds what is needed for current and foreseeable requirements. In Australia, several public services have for practical purposes abandoned the idea of a unified pay structure (even if they seek to retain a form of common grading structure).

Integral to these changes has been a greater focus on remuneration in terms of costs to the employer, leaving employees greater scope to structure remuneration in forms convenient to their personal situation-reduced salary in exchange for increased superannuation benefit or reduced hours (or both) is an example.

Clearly defined chief and senior executive cadres are a very visible component of the public service emerging from the twentieth century. Historically, Australian public services generally had a common personnel structure from recruitment grades to the top levels. Even at the highest levels distinctions were largely confined to methods of appointment (by the Government), pay (identifiable parliamentary appropriation), certain entitlements (class of travel, for example), and discipline. The pervasive egalitarianism of this system has given way explicitly to development of a separately defined senior executive cadre, still mostly drawn from the mainstream public sector workforce, with individually negotiated terms of employment.

A new department/agency-based management structure lies behind emergence of public services whose unity is expressed in terms of statutorily prescribed 'values' and 'codes of conduct' and where uniformity of employment, pay and conditions has been abandoned. Management powers are now essentially vested in the department or designated agency (often expressly in the hands of the chief executive officer, even if in fact mostly delegated). There is no longer an overarching administrative authority such as, most usually, a public service board, with comprehensive powers over recruitment, establishments, pay and conditions of employment, or discipline including dismissal. Public service commissioners, where they remain, have a largely professional rather than an employment or management role, and are most visible in training and staff development activities, and articulation and promotion of ethical standards.

This model of central management is essentially still evolving. It has, in a decade and a half, undergone several changes already (though none of a major character). Accepted non-institutional mechanisms for handling government-wide matters without materially diminishing agency autonomy have not been established. Likewise, the question of independent public appraisal of efficiency and effectiveness, either of organisations or of government-wide policies and practices, may need shortly to be addressed. Under current structures, appraisals may be performed by agencies themselves (which would not be independent), the Public Service Commissioner, the Auditor-General, or an ad hoc inquiry (possibly by a royal commission). The desirability and viability of more systematic or comprehensive approaches remains an open question.

Transition to department (agency) based management is partly a consequence of change in the value attaching to the concept of a unified public service (first set out in the Northcote-Trevelyan report of 1853). But there are other reasons, basically of a practical nature, for the change. One is found in the costs entailed in the quest for a unified service, in contrast to the benefits. Another, perhaps more compelling factor, is the growth of agencies to a size where they can be reasonably expected to maintain and exercise an autonomous management capability subject to a pre-determined expenditure budget extending two or three years ahead. In Australia this latter situation was promoted by extensive departmental and organisational amalgamations which characterised machinery of government decision-making at the end of the 1980s and the early 1990s. Central agency arrangements are, in part, a function of the general configuration of the organisational machinery of government and as the latter has changed, so too has the form and style of central capability.

General personnel management including organisational practices warrant special mention. As already observed, for half a century after the First World War the general culture of administration was heavily affected by war veterans who had special entitlements and preferences in the public services. The veteran impact was felt in various forms from overt persistence of hierarchy to application of a merit principle heavily influenced by seniority considerations. There was a hostility to university graduates and to women except in auxiliary posts. More constructively, the veteran influence was evident in the growth of training as an active component of personnel management after the Second World War, reflecting its widespread use in the defence services. By the late 1950s, mainly because of the veteran influence, Australian public services were seen generally as administratively strong but weak in policy development and review.

The veteran era was succeeded by an era dominated by university graduates in which women have steadily if slowly won a place in the middle and senior ranges of the public sector workforce, increasingly moving into chief executive ranks of government authorities and, if only infrequently, departments.

The rise of graduates in public administration combined with supplementation, supercession and replacement of the old tools of administration-the typewriter, the telephone, the telex and the postal service-with the photocopier, the facsimile, the personal computer and e-mail, to create the circumstances of modern administration. Tasks which previously took months can now be done in days if not hours. Computer competency is a vital skill in modern government, a qualifier for consideration for recruitment or promotion rather than a yardstick of merit.

Scientific management has given way to business management as the inspiration for new thinking on operations. In addition to business-style remuneration on a performance basis, and the use of various forms of performance appraisal and evaluation, public service organisations have sought to restructure work by concentrating on 'core' functions on a 'managing for results' basis. Supporting activities have been 'out-sourced' to contractors on a relatively major scale. This has included ownership and maintenance of property (combined with sale and leaseback), computing services, legal services and even performance of many routine aspects of the personnel system. It has also included policy work of various kinds as the growing role of consultancy organisations with public sector clienteles demonstrates.

A significant part of the new system of public administration has been redrawing the boundaries between management and labour unions. Particularly during the years of full employment, unions secured a prominent role not only in workplace relations but also personnel management, conspicuously as members of tripartite committees deciding appeals against promotion decisions.

Changes in the 1990s have generally altered the union role so that it now focuses on identifiable grievances rather than participating in essentially management decisions. Except where the provisions of the Public Service Act are involved, the union role in the public service is now more similar to that in the private sector. In the Commonwealth, public service workplace relations themselves come under the national Workplace Relations Act.

These extensive developments and changes in the conduct of administration have been accompanied by comparable change in the key relationships of administration with ministers, parliament and the public. Ministers themselves reflect similar demographic changes which have had so marked an impact on the social composition of public services. They are now more likely to have had a university education than their counterparts of a generation ago; they are also younger and less likely even to want to remain in parliament until conventional retirement age; as in the public service, women are slowly winning a presence in parliament and also rising to ministerial positions. The private offices of ministers now contain a significant capacity for policy analysis and development and are much more than departmental outposts.

Parliaments have likewise enhanced their capacities, more in practice for scrutiny of administration than for legislating. Parliamentarians themselves have larger staffs, again with capacity, albeit restricted, for policy analysis and appraisal. Parliaments as institutions have similarly acquired policy capacities, mainly in the form of research services attached to libraries (themselves major resources) and to some limited extent in the secretariats of committees.

In nearly all parliaments committees have become a, if not the, major forum for parliamentary endeavour. Plenary sessions of the various houses are now essentially important as forums for the party battle, particularly at question time. The business of administration figures only sparingly in plenary proceedings, even in consideration of legislation. Government administration, by contrast, is the focus of committee work, including in consideration of legislation.

One of the earliest reforms to Australian government in the late twentieth century was adoption of administrative review of decisions on the merits combined with a simplification of avenues for judicial review of decisions. All jurisdictions established Ombudsmen. Several established tribunals to review specified decisions on the merits. Many agencies independently developed their own procedures for review and handling of complaints. In recent years, there have been several initiatives to broaden citizen opportunity to secure improved service by adoption of citizen's charters. Citizen access to administrative proceedings was also under-written by freedom of information laws.

Public opportunities to contribute to policy formation have undergone major change. The traditional royal commissions and public inquiries, if used much less frequently, remain significant instruments for investigations and policy development. Private organisations, however, are more actively organised to represent views on policy and administration to ministers, parliamentarians and officials. Whereas in the past they mainly came from business, they now cover most fields of policy from health and welfare to consumer and environmental protection. In some of the latter cases they are funded (at least in part) by government. Formal procedures for consultation (in preparing the annual budget, for instance) combine with informal consultations throughout the year. For agencies with national networks, there are also locally-focussed consultative arrangements.

In addition to their review and investigatory functions, public inquiries and royal commissions have an important general role in providing pointers to future tasks for government administration in an era where change and development are explicitly recognised as being permanent preoccupations of ministers and senior officials.

In Australia, at national level, recent investigations have focussed on a range of issues which will figure prominently on the public agenda during the next decade and beyond. A Treasury report on intergenerational change has highlighted implications of an ageing population for the financing of government services, especially on health, aged care and pensions. It is also a reminder of the progressive recognition that human services, so much focussed on children and young people for most of the twentieth century, must now also address the needs of citizens as and after they leave the workforce. The length of retirement is now considerably extended, a consequence of longer life expectancy and (often) earlier retirement.

In the post-deregulation era the purpose of continuing government activity in industry is increased competition with consequential enhancements in productivity and efficiency, and the maintenance of integrity in the marketplace. Recent interventions by the Reserve Bank of Australia and the Australian Competition and Consumer Commission in the workings of the credit card market illustrate government's role in promoting productivity, strengthening competition and protecting the consumer position.

Government's increasingly explicit role in activities of a consumer or citizen protection character will be very prominent in the next few years when the royal commission into Australia's biggest corporate collapse, the insurance giant HIH, reports. Some of the implications of that collapse are already under review in a study of the various prudential and similar bodies within the Treasury portfolio. This review should shed important light on the performance of prudential responsibility in the deregulated financial system of the past two decades.

Lawful and orderly conduct of business is the subject of the Cole royal commission into the building and construction industry which reported in March 2003. The report has proposed a new national authority to oversee the workings of the industry, the purpose again being two-fold-enhanced productivity through effective competition and elimination of corrupt practices, and consumer protection.

A major source of government work in the next few years has ensued from the terrorist attacks on the World Trade Centre in New York and the Pentagon in Washington, DC on 11 September 2001 and the bomb in Bali in October 2002. Internal security of this type has been a growing function of governments in the last century but the recent attacks have given added new poignancy and significance to an ancient responsibility.

Ensuring that government has adequate means to address its continuing as well as new responsibilities is a complex task, combining attention to staff, finances, equipment, methods and locations of operations. In many respects it is a task which must be addressed iteratively and pragmatically by a range of departments and agencies. But it is also a task which needs to be viewed directly and strategically.

Several Australian governments, including the Commonwealth, together with the New Zealand government, in combination with a number of universities, have recently established the Australia and New Zealand School of Government (ANZSOG) to provide high level graduate education for staff with marked potential for the most senior posts in administration, as well as development programs for those already at very senior levels. ANZSOG, which commenced operations in mid-2003, represents a considerable strengthening of the means whereby Australian governments prepare themselves for administration in the twenty-first century.

* During the past thirty years John Nethercote held a variety of posts with the Public Service Board, the Royal Commission on Australian Government Administration, the Public Service Commission of Canada, and several public and parliamentary inquiries. He edited the Canberra bulletin of public administration from 1980 until 2000 and has been a joint editor of several books on government administration.