Labor could cut some public service budgets by as much as 5% as it looks for major savings in next year’s federal budget, but Jim Chalmers denied it would mean “big jobs cuts” for the sector.
The treasurer, alongside the finance and public service minister, Katy Gallagher, have confirmed reports in the Australian Financial Review this week that cabinet ministers and department and agency bosses have been asked to find significant budget savings.
But the government is not planning bureaucracy-wide reductions of that scale and will not change the mandatory 1% budget annual cut to all departments, known as the efficiency dividend.
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The ongoing federal budget “pressures” coincide with the release of the latest public service data on Wednesday revealing the headcount increased by almost 50,000 bureaucrats, or by 32%, to 198,529 employees between 2020 and 2025.
The Australian Public Service Commission’s annual snapshot showed a boost to staffing levels in the year to June 2025 in the National Disability Insurance Agency (35.1%), the Department of Agriculture, Fisheries and Forestry (19.1%), Services Australia (4.9%) and the Department of Defence (3.9%).
In a briefing before the report’s release, the commissioner, Gordon de Brouwer, said trust in public services had increased to 62% – its highest since Covid.
“We live in a world where expectations of the public around government are much higher than they used to be.”
But de Brouwer conceded “more is not always necessarily better”.
The bureaucracy’s size was targeted by the former opposition leader, Peter Dutton, in the lead-up to the 2025 federal election, pledging to slash the federal workforce by 41,000 positions over five years in an effort to achieve budget savings worth $17.2bn.
Chalmers said on Wednesday that department and agency bosses were being asked to find potential savings.
“We’ve sought input into ways that we can reprioritise spending in the budget. You know, there are very substantial pressures on our budget,” he said.
“Even with all the progress we’ve made, with this $200bn turnaround that we’ve helped engineer in the budget, there are still pressures.
“It shouldn’t be a surprise to anyone at a time of very substantial fiscal pressures that we are working out where is the low priority spending and how can we direct it to higher priority areas.”
Chalmers said $100bn in previous savings had been used for new Medicare spending, including increases in bulk billing, new urgent care clinics, as well as Labor’s income tax cuts.
Chalmers left open the possibility of job cuts but said they would be smaller than those proposed by the opposition under Dutton.
This week Gallagher described savings as “an exercise in discipline”.
“The budget is in deficit. We have a lot of pressures on it. We can’t just keep adding on to everything.”
Melissa Donnelly, the national secretary of the main public service union, the CPSU, warned Labor against major cuts.
“The federal government was re-elected with a promise of continuing the work of investing in the rebuilding of public services, not cuts.
“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.”
Donnelly pointed to major spending on private sector consulting firms and outsourced labour hire as areas for more savings. Labor has been working to drive down spending in these areas since its 2022 election victory.
Before the election, Labor said it would find more than $6bn in savings from the public service over the four-year forward estimates period.
“The government’s stated support for the public service must be matched by what it actually delivers,” Donnelly said.
The opposition leader, Sussan Ley, said Labor was breaking a promise to avoid cuts to the Canberra-based public servants.
“Labor promised this city that there wouldn’t be any cuts. They made that promise before the last election.
“So are they backing away from the promise? Or have things got so bad since the election that they actually have to address savings as a matter of urgency, cuts as a matter of urgency? So either they lied to you at the election or they really, really have mismanaged the budget.”
The Greens public service spokesperson, Barbara Pocock, said Labor should cut consulting spending, not public service budgets.
“Arbitrary cuts of the public sector will fuel renewed spending on big consultants and labour hire, at three times the cost. It makes no sense at all.”
