Perceived corruption in the public service may have wiped $72 billion from Australia's economy, as its standing in international government integrity rankings slipped over the last four years, a new report says.
The economic hit would translate to 4 per cent of the country's latest GDP figures, as Australia lost several points and slid six places in Transparency International's ratings of perceived corrupt behaviour in the bureaucracy, the Australia Institute analysis said.
Its findings, released Thursday, came as a public service commission report found 5 per cent of surveyed public servants, or nearly 5,000 government staff, witnessed corruption in their agencies last year and the number of bureaucrats reporting cronyism, nepotism and other misconduct grew.
Using analysis showing that each point nations lost in their Corruption Perceptions Index scores was associated with a $486 per capita fall in GDP,the Australia Institute said perceived corrupt behaviour may have sapped economic growth that would have been achieved if Australia had kept its 2012 rating.
It used the findings to renew calls for a federal anti-corruption agency, a body the public service commission has previously said would cost too much, was likely to over-reach in its powers, and risked being ineffective.
Australia Institute research director and report co-author Rod Campbell said corruption increased business costs and worsened inequality.
"A federal ICAC with teeth is needed to increase public trust and tackle the perception of corruption in Australia," he said.
"The perception of corruption is on the rise, the number of public servants who have witnessed corrupt behaviour is on the rise and public trust in federal parliament is at an all-time low.
"As well as the obvious democratic cost, corruption and the perception of corruption also costs our economy."
Using analysis by consultants PricewaterhouseCoopers finding a relationship between wealth per person and the Corruption Perception Index, the think tank's report said Australia's recent drop in the rating may have translated to a $2,916 GDP per capita fall.
ANU Crawford School of Public Policy researcher and Transnational Institute on Corruption interim director Grant Walton said the CPI was limited by focusing only on the public sector, when privatisation had changed where corruption occurred.
It was also based on perceptions, which could grow with rising debate about corruption.
"We have to be careful if we're using the CPI, to understand its limitations," he said.
The World Economic Forum estimates corruption costs 5 per cent of global GDP, while PwC found lower levels of perceived corruption were found in countries with higher wealth per person.
Corruption limited competition, favoured contractors who offered bribes rather than the best product, and gave advantage to projects offering personal rather than public benefit, Mr Campbell and co-author Hannah Aulby said in the Australia Institute report.
The Australian Public Service Commission said public sector leaders had "zero tolerance" of corruption and the public sector was aware of its economic and social cost.
Australia ranked seventh in Transparency International's index in 2012, but slid to 13th in 2016 as its score for perceived government integrity fell six points to 79.
The latest public service commission State of the Service report showed the rate of public servants witnessing corrupt behaviour had risen since a survey in 2013-14 that found 2.6 per cent had witnessed it in their workplaces.
Do you know more? Send confidential tips to email@example.com
Of staff saying they had seen corruption, 64 per cent reported cronyism in their agency, while nepotism (26 per cent) was another common complaint among public servants.
More than a fifth had witnessed "green-lighting", when colleagues made official decisions that improperly favoured a person or company, or disadvantaged another.
A report released last month, led by former Prime Minister and Cabinet department secretary Terry Moran, found most Australians wanted a federal anti-corruption commission however a parliamentary committee stopped short of recommending one in September.
Follow Doug Dingwall on Twitter.