It will be a useful paper to revisit this year when we see yet another round of public service job cuts. If ever there was a false economy, it would be the imposition of regular compulsory redundancies in government departments and agencies. The number of job cuts in recent years has become so bad there is serious concern among current and former top-ranking public servants, and those who understand how the machinery of government works, that the public service's ability to do its job has been impaired. The concern stretches across the political divide, and to think-tanks on the left and right. The government's own Commission of Audit, chaired by former Business Council head Tony Shepherd, has even made public its concerns.

Remember that a "false economy" occurs when you try to save money in the short term but your actions end up costing you more money in the long term. The federal government's "efficiency dividend" is a perfect example of one. The efficiency dividend refers to the decision by government to reduce the budgets of federal public sector organisations by a certain percentage every year, usually 1.25 per cent, to encourage efficiency improvements. It forces public sector bodies to do the same amount of work with fewer resources, and by forcing them to do so it is believed the government's budget bottom line will benefit. That's why the government argues that public service job losses resulting from EDs are not cuts at all but merely a "dividend" from increased efficiency.

The concept was introduced by the Hawke government in 1987 and it has been the blunt instrument of choice for every government since. They have all used them as savings measures. It featured prominently in the Abbott government's budget too, where the rate of the efficiency dividend was increased to 2.5 per cent. EDs are politically attractive because everyone hates public service workers and cutting their budgets seems to help balance the budget by removing public sector waste. They also require zero mental effort to design and they have no adverse effects on voters (or none that voters can see easily or immediately). But they're not as efficient as they seem because they can end up costing the government much more money in the long run.

Late last year, a former assistant commissioner of the Australian Tax Office, John Passant, warned in a letter to The Australian Financial Review that repeated efficiency dividends had seriously hurt the ATO's ability to collect tax. This is at a time when the government is making a big song and dance about cracking down on tax evasion by multinational companies and its related efforts to repair the budget. "Treasurer Joe Hockey's announcement that 10 multinationals have ATO auditors embedded in them is a joke," Mr Passant wrote in November. "Only 10? Are the other hundreds of multinationals squeaky clean? Further, that doesn't address the fact that for the last decade the international area of the ATO has been destroyed and its expertise wrecked, lost or dispersed. With 2200 staff cuts so far in the past 12 months (and an extra 2500 planned for the end of 2017), more of that international and audit experience has been or will be lost. Putting a few auditors into 10 multinationals isn't going to change that. It is a smokescreen to cover the destruction of international expertise and capacity in the ATO." That's a serious charge from someone who knows what he is talking about.