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BRYCE WILKINSON: Public sector bloat - lagging performance

Over thirteen thousand more full-time equivalent workers joined the public service from 2017 to 2022 – a 28% increase.

It contrasts sharply with Australia’s modest increase.

The value of this expansion is questionable given the increasingly troubling outcomes in such major areas as crime, health, education, public infrastructure and welfare.

Yesterday the New Zealand Initiative released a policy note “Public Sector Bloat; The Evidence”.

It benchmarks New Zealand’s public service employment against the historical record back to 1913. It also uses contemporary international benchmarks, notably Australia, the UK, and some high-performing Southeast Asian countries.

The pay, scale and focus of top layers of management and what appear to be bloated comms teams serving those managers are also a concern.

Journalists report frustration about undue delay, obfuscation, and concealment of information.

The Controller and Auditor-General’s reports identify cases of ill-justified spending with poor accountability.

International estimates of New Zealand’s public sector efficiency, performance and effectiveness also indicate that, while we score very well in some important respects, we have a real problem. Australia outperforms us on many efficiency and scale measures.

The problem of sub-optimal performance is not new. Over 20 years ago, international comparative studies put New Zealand in the bottom quadrant of member countries of the OECD for public sector performance. Australia was in the top quadrant.

A 2019 international study assessed the public sector productivity of 36 OECD members. It estimated that the most productive could achieve much the same public sector-related outputs as New Zealand with between 28% and 49% fewer inputs.

The potential cost is huge. Central government employs one worker in six. Its (Total Crown) operating spending directs two dollars in five of GDP. Its capital spending directs some of the rest. Add to that a daunting amount of poor-quality directive regulation, for example the RMA.

In 2021, the World Bank ranked 23 of 209 countries ahead of New Zealand for government effectiveness. Singapore took top place with Switzerland second. Australia was 16th.

That is a lot of countries we should be able to learn from.

Those in charge of the public service, including ministers, need to step up. Inefficiency is harmful. Why is the Productivity Commission not flat out on the issue of government performance?

Read the report here

Listen to Mike Hosking interview Bryce about the report here

A Senior Fellow at The New Zealand Initiative, Bryce holds a PhD in economics from the University of Canterbury and was a Harkness Fellow at Harvard University.

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