Staffing constraints and shifting workforce priorities are challenging the federal government's efforts to reduce its reliance on contractors, with agency managers forced to pay higher rates for hourly contractors to meet project deadlines.
The trend was detailed in the Canberra recruitment firm HorizonOne's State of the Canberra Recruitment Market 2026 report, which highlighted the continuing demand for specialised talent.
This is despite the ACT's unemployment rate experiencing the steepest proportional increase in the nation, from 3 per cent at the end of 2024 to 4.4 per cent by May 2026.
The rise in joblessness occurred alongside a sharp contraction in advertising activity, with Jobs and Skills Australia data recording a monthly decline of 5.9 per cent in ACT job advertisements compared with a 0.9 per cent drop nationally.
The report found the government's strict insourcing agenda had coincided with a contractor boom as recruitment activity relocated across the local economy.
Although federal government advertisements fell by 18.1 per cent, workforce needs spread more widely, driving a 9.8 per cent surge in job advertisements across the non-profit and non-government sector.
Although advertisements for permanent public-sector roles dropped by 18.4 per cent and non-ongoing contracts fell by 37.9 per cent, hourly-rate contract opportunities grew by 4.3 per cent, capturing a share of just over half across all local recruitment advertising.
The shift to short-term contract engagements expanded even as internal data showed overall local job volumes fell by about one-sixth over the past year.
It occurred because agencies tasked with delivering key funded priorities faced bottlenecks. Strict average staffing level (ASL) constraints and heavy procurement hurdles meant departments had to recruit at the "snail's pace which has become standard across the APS".
The 2026-27 federal budget delivered a redistribution of ASL across different agencies, with the Australian Taxation Office increasing by 1472 positions and the new National Environmental Protection Agency by 698.
Services Australia and the National Disability Insurance Agency face reductions of 675 and 669 ASL respectively for 2026-27.
Unable to hire permanent staff quickly enough to meet project milestones, managers turned to external providers to bridge the capability gap, the report said.
At the same time, the priorities of the Canberra workforce shifted.
The report found public-sector professionals were increasingly focused on career preservation and finances due to broader cost-of-living pressures and the disruption of continuing public service changes.
It marked a departure from 2025, when challenging and impactful work was ranked as the second most important priority and job security did not even feature in the top 10.
The desire for such assignments dropped 22 per cent in importance compared to the previous year.
About half ranked excellent compensation and flexible working arrangements as top priorities.
The gap to the next-ranked factor was substantial, with opportunities for career growth lagging well behind at 38 per cent.
With job security returning to the top 10 priorities as a core requirement for Canberra professionals, local workers chose to stay in their current positions rather than risk a transition.
Internal survey data revealed a distinct cautious mentality, with half of all respondents saying they would prefer to stay with an employer for three to five years before considering a move.
Although more than 33,000 professionals remained visible as open to work on paper according to the LinkedIn Talent Pool Report June 2026, they had become highly risk-averse.
Instead of serving as an active candidate pool, these individuals became highly selective, merely exploring options and testing their market value without committing to leave their current roles unless a competing employer's value proposition was exceptional.
