The Albanese government has asked federal departments to identify savings of up to 5% of their budgets, a move that could strip as much as $5.6 billion from the public service in a single year. While ministers insist the exercise is not a directive to cut jobs, public sector experts warn the scale is comparable to some of the largest cost-reduction efforts seen in Canberra since the late 1980s.
The request comes as departmental spending has climbed sharply over the past four years, rising 38% to reach $111 billion this financial year. Finance Minister Katy Gallagher has asked agencies to pinpoint “lower-priority spending” that could be redirected to other policy needs, on top of the existing 1% annual efficiency dividend already in place.
Treasurer Jim Chalmers said departments were not being ordered to trim 5% from staffing or operational budgets, but rather to reprioritise spending. However, former senior finance officials cautioned that cuts of this size often translate into reduced headcounts, either through natural attrition or targeted redundancies. A blanket 5% reduction applied to the current public service workforce of 193,500 would equate to almost 10,000 roles.
The government argues the savings are necessary amid ongoing budget pressures, including rising public sector wages, growing departmental expenses and the soaring cost of the National Disability Insurance Scheme, now the single largest strain on the federal budget. Although Labor has delivered two budget surpluses, it is forecasting a decade of deficits and gross debt exceeding $1 trillion next year.
Union leaders warned that across-the-board cuts risk undermining public service capability at a time when the government is trying to reduce reliance on external consultants. Critics also noted the political sensitivity, given Labor had campaigned against large-scale job cuts proposed by the opposition during the last federal election.
Departments are expected to present their identified savings as the government prepares its next budget cycle.