Efficiency dividend

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An efficiency dividend is an annual reduction in resources available to an organization.[1] It is usually applied as a percentage of operational (running) costs.

It has been used by the Australian Government on Australian Public Service departments and agencies since 1987. Some departments and agencies have been exempted.[2]


A 1.25% efficiency dividend was introduced by the Bob Hawke Government in 1987-88. It was reduced to 1% from 1994-95 to 2004-2005 then increased to 1.25% from 2005-06. For 2008-09 a one-off 2% efficiency dividend on top of the ongoing efficiency dividend was applied. In 2011-12 it was 1.5% and in 2012-13 another extra one-off 2.5% was applied.[3]


Proponents of the efficiency dividend argue that it improves the cost effectiveness of the public sector, allows managerial flexibility in the allocation of resources, and is a good way to generate savings in the cost of public sector administration.[4] Critics have described the efficiency dividend as a blunt instrument,[5] a false economy,[6] and lazy budgeting. [7] Smaller agencies have also highlighted the difficulty in finding such savings.[8]


  1. ^ "efficiency dividend". www.businessdictionary.com. WebFinance Inc. Retrieved 5 January 2015. 
  2. ^ "Agencies exempt from the boosted efficiency dividend". The Canberra Times. Fairfax Media. 29 November 2011. Retrieved 5 January 2015. 
  3. ^ Horne, Nicholas. "The Commonwealth efficiency dividend: an overview". www.aph.gov.au. Retrieved 5 January 2015. 
  4. ^ "REPORT 413: The Efficiency Dividend: Size does matter". www.aph.gov.au. Commonwealth of Australia. Retrieved 5 January 2015. 
  5. ^ Stone, Christopher (1 July 2014). "In government, small isn't always efficient". The Canberra Times. Fairfax Media. Retrieved 5 January 2015. 
  6. ^ Hutchens, Gareth (2 January 2015). "Why this obsession with cutting public service jobs?". The Canberra Times. Fairfax Media. Retrieved 5 January 2015. 
  7. ^ J, Samuel. "The Government's efficiency dividend". catallaxyfiles.com. Retrieved 5 January 2015. 
  8. ^ "Australian Public Service Commission Submission to the Joint Committee of Public Accounts and Audit: Inquiry into the effects of the ongoing efficiency dividend on smaller public sector agencies" (PDF). www.aph.gov.au. Retrieved 7 January 2015.