Katy Gallagher’s department has asked APS departments and agencies to find savings in their budgets. Photo: Michelle Kroll.
Federal government agencies are being ordered to slash their costs by up to 5 per cent in an effort to rein in public sector spending, which the Opposition has long said is out of control.
The new annual budget cut directive is in addition to the current 1 per cent efficiency dividend, which is already aimed at reducing departmental operating expenses.
The Finance Department has written to all Australian Public Service department heads demanding details of how they will find the savings.
Finance and Public Service Minister Katy Gallagher has confirmed the request of agencies for a “reprioritisation” of their budgets, but said the government was not looking to reduce the APS’s average staffing levels.
“We need to ensure that we’ve got resources available to meet all of the pressures that are coming the way of the public service,” Senator Gallagher said in parliament.
On Wednesday morning (26 November), Treasurer Jim Chalmers said the move was not about slashing APS jobs.
“We are not asking departments to cut their staff or to cut their budgets by 5 per cent,” he told ABC radio.
“What we’re asking them to do is to identify areas of spending that are lower priority so we can redirect them if we want to.”
Yet across the APS, agencies are laying off non-permanent contractors in considerable numbers, reducing project and service spending, and imposing hiring freezes on non-essential roles.
Treasury, the Department of Home Affairs, and CSIRO are among those already planning or already in the process of significant layoffs.
Beyond cutting projects, voluntary redundancies and natural attrition are the likely next steps, but it could get nastier after that across numerous APS agencies.
One senior government contact told Region that more job losses are inevitable and the budget exercise won’t be just about spending less on services.
The Community and Public Sector Union has expressed alarm at the impending budget cuts, first reported in The Australian Financial Review.
CPSU national secretary Melissa Donnelly said the reports were “extremely concerning”, particularly when Labor was elected on a promise of rebuilding the APS and investing in public services, not on budget cuts.
She said the government’s stated support for the public service must be matched by what it actually delivers.
“While the government has made progress repairing the damage done to public sector capacity following years of outsourcing, privatisation and cuts, there is significantly more to do,” Ms Donnelly said.
“The job of addressing the use of contractors and consultants to do core public sector work is far from complete.
“AusTender data from 2024-25 reveals the Federal Government was still spending $270 million, or 46 per cent more, on consultancy contracts and $870 million, or 59 per cent more, on temporary personnel services contracts than it had been five years previously.
“We know that there are still substantial savings to be made insourcing public sector work from private, for-profit providers.
“This is where government must direct its attention.
“Arbitrary budget cuts across the public service hurt public services and inevitably result in job losses.
“The impact of this is always felt by the thousands of Australians who rely on public services every day.”
ACT Liberal Senate candidate Nick Tyrrell issued a statement describing the austerity measures as a “belated attempt to rein in spending” and trying to “stuff Labor’s spending genie back into the bottle” after years of unchecked expenditure.
“If only Minister Gallagher had kept her eye on the budget ball instead of letting the genie grant endless spending wishes, we wouldn’t be in this mess,” Mr Tyrrell said.
“After three and a half years of granting every spending wish, at least now there’s a belated realisation that it’s hurting the economy by crowding out the private sector, and hurting families by fueling inflation and interest rates.
“Labor has finally realised the public is paying attention to their out-of-control spending, and it’s our future selves and children who are going to have to pay for it.
“This is a problem created by a Labor government which is big on announcements, short on detail and delivery.
“It is all well and good for the Minister for Finance to belatedly try to put the spending genie back in the bottle, but the real question is whether she can drive this overdue and necessary budget repair project.”
