A re-elected Albanese government says it would find a further $6.4bn in savings by continuing to slash the federal government’s use of consultants and labour hire firms and ensuring public servants do more core work themselves.
The savings were announced as part of Labor’s policy costings by the treasurer, Jim Chalmers, who also downplayed a warning from global rating agency S&P that big spending election commitments could put Australia’s treasured AAA debt rating at risk.
“If the ratings agencies are worried about spending and if they’re worried about off-budget funds, we’ve demonstrated we found the room for our election commitments,” Chalmers said. “The budget is stronger at the end of the campaign than it was at the beginning.”
The finance minister, Katy Gallagher, said the $6.4bn in savings would not affect the quality of services provided by the federal public service or reduce the number of staff employed.
“We’ve managed in our first term to find about $5.3bn in savings in those areas,” Gallagher said. “So this is really a continuation of that effort and we have no doubt that we will be able to deliver those savings without impacting importantly on the services and the programs that the APS provides.”
Earlier this month, Gallagher told Guardian Australia that further reductions in the use of consultants would coincide with a renewed push to improve the capability of the public service.
“I think there is greater opportunity to make departments rely on themselves,” Gallagher said. “On big, important questions, we should be building a workforce that answers those itself.”
Labor says its crackdown on external labour would save $800m in 2025-26, before increasing to $1.6bn in 2026-27 and $2bn in the following two financial years. This would require the government to continue slashing its reliance on consultants over several years.
A re-elected Labor government would also claw back $760m by increasing the cost of student visa applications to $2,000 (up from $1,600) from 1 July. This would take the total new savings to more than $7bn. These changes alone are not enough to cover Labor’s promised 18m extra bulk-billed GP visits a year.
Beyond the additional savings, there were few surprises in Labor’s policy costings given it handed down a budget days before the election campaign was called.
Labor’s plan for a 24/7 nationwide health advice and after-hours GP telehealth service backed by Medicare – already announced on the campaign trail – will cost $204.5m. Just $16.5m of Labor’s promised $1bn mental health package will be delivered next financial year.
‘Spending will be crucial’
Earlier on Monday, the New York-based S&P Global Ratings warned the budget was “already regressing to moderate deficits as public spending hits postwar highs, global trade tensions intensify, and growth slows”.
“How the elected government funds its campaign pledges and rising spending will be crucial for maintaining the rating,” the agency said.
While Labor and the Coalition trade blows on which side is more profligate, S&P pointed to spending commitments by all parties on cost of living, health, education, energy and housing.
“The final design, costings, and funding arrangements of election commitments will be subject to negotiations,” S&P said.
“These commitments, however, will need to be funded at a time when the government is grappling with rising international trade tensions, economic uncertainty, and fast-growing structural spending in areas such as the National Disability Insurance Scheme, defence, health, aged care, and interest on government debt.”
Australia can boast of being one of just nine countries to be rated AAA by all three major credit rating agencies.
Chalmers said he took S&P Global’s views “very seriously” and sought to assure it, and other ratings agencies, that Labor had “engineered the biggest positive turnaround in a budget of any parliamentary term ever”.
“Peter Dutton proposed what poses an unacceptable risk to household budgets, to the national budget, to our economy, and also to our AAA credit rating as well,” Chalmers said.
“In uncertain times, in volatile times, we don’t need a volatile leader like Peter Dutton, who lashes out when he’s under pressure. We need to see the stability, the responsibility that only Anthony Albanese can provide, which I think is highlighted by the costings that we release today.”
• This article was amended on 29 April 2025. An earlier version said that Labor’s crackdown on external labour would save $1.6m in 2026-27 and $2m in the following two financial years. This should have said $1.6bn and $2bn respectively.
