A BLOWOUT in state public servant numbers over the past decade is threatening to inhibit the State’s economic recovery and Tasmania’s overall financial position.

A new report published by the Institute of Public Affairs (IPA) paints a worrying picture for Tasmania. And while Treasurer Michael Aird promised to cut public sector employment as part of the Government’s response to the global financial crisis, there is little evidence of any reduction in numbers.

Despite the Budget promise, the Government has reported that at the end of the September, total public service staffing numbers had been reduced by only 296 full-time equivalent positions.

The IPA report points to all State Governments, including Tasmanians, going on a ’spending spree’ since they got their hands on the GST revenue in 2000. The Institute says the number of Tasmanian public servants has grown by more than 25 percent since that time and last year. But it says frontline services such as health, education and policing have not benefited from the boost in public sector numbers.

Instead, the biggest growth has been in ‘administration’.

The State’s peak employer organisation, the Tasmanian Chamber of Commerce and Industry (TCCI) says the IPA report should sound warning bells for Tasmania.

The IPA conducted the TCCI’s comprehensive review of state taxation and these latest findings represent and extension of the conclusions reached in the initial report.

TCCI chief economist Richard Dowling said rising public sector salary costs had a serious impact on the State Budget position and also spilled over, imposing wage pressures on the private sector under a re-regulated industrial system.

“Tasmania’s public sector wages bill now consumes around half the total State Budget, or some $2 billion each year and this will continue to rise, severely inhibiting the Government’s capacity to aid our economic recovery,” Mr Dowling said.

“Business has no problem supporting a growth in front line services such as health, education, police, roads and other infrastructure. But simply employing ‘administrators’ is unsustainable.

“On one hand using GST revenue to increase the number of public servants has certainly reduced Tasmania’s unemployment level, but it means we have missed the opportunity to use the revenue windfall to improve essential services.

“Unless the State Government takes urgent and promised action to reduce the cost burden of the public sector, we will not get the full benefit of the economic recovery.”

Mr Dowling said the IPA findings found no clear evidence that bigger bureaucracies resulted in better service delivery.

“Instead of using the GST revenue to improve infrastructure and services and enact tax reform to boost economic growth, Tasmania has squandered it on building a bloated bureaucracy,” he said.

“Like the other states, Tasmania has spent as it wished and then turned to Canberra seeking more funds for hospital, schools and roads. This has resulted in a Commonwealth - State ‘blame game’ which Prime Minister Kevin Rudd has committed to end.

“His first response must be to get the states to take responsibility for their public service hiring spree.

“The global financial crisis means that we must now ‘carry the can’ for this decade of profligacy.

“The Tasmanian Government must demonstrate that it is serious about reining in its burgeoning public sector costs by confirming the promised cut in staff numbers and outlining its strategy to further reduce the size of the Tasmanian bureaucracy to a more sustainable level.”

Initial savings pleasing

Mr Dowling said the State Government’s budget management strategies report showed that while some progress had been made, the biggest fiscal challenges still lay ahead.

“It is pleasing that the Treasurer has demonstrated his ongoing commitment to achieving the required Budget savings targets, but he will require the full support of the community and his cabinet colleagues to complete the job successfully.

“To date only $25 million of the required $116.5 million in savings in 2009-10 have been definitely achieved and it is absolutely critical that the fiscal targets are realised both this year and in the forward estimates.

“If the Government fully meets its 2009-10 savings targets, only 15 per cent of the job is achieved.

“There is almost $800 million of required savings across the forward estimates, so there is no capacity to take the foot off the pedal and shirk the challenge. Any additional revenue should be used to further repair the Budget or fund taxation relief,” Mr Dowling said.