Public sector told to find significant savings but Jim Chalmers denies ‘big job cuts’ | Australian politics

Labor may cut some public service budgets by up to 5% as it seeks big savings in next year’s federal budget, but Jim Chalmers denied this would mean “major job cuts” for the sector.

Finance Minister Jim Chalmers and Finance and Public Service Minister Katy Gallagher this week confirmed reports in the Australian Financial Review that cabinet ministers and department and agency bosses had been asked to find significant budget savings.

But the government is not planning bureaucracy-wide reductions on this scale and will not change the mandatory 1% annual budget cut for all departments, known as the efficiency dividend.

_{Sign up: AÜ Breaking News email}

The coalition accused the government of breaking its promise not to cut the public sector after an election campaign in which the opposition promised to reduce the federal workforce by 41,000 positions over five years. The coalition’s policy is designed to achieve budget savings worth $17.2 billion.

Chalmers said on Wednesday department and agency bosses had been asked to find potential savings on lower priority spending so money could be redirected.

“This wasn’t just something we did on this occasion,” he told ABC radio.

“We did this towards our first four budgets, and we are doing this towards our fifth budget.

“We’re not asking departments to reduce their staff or reduce their budgets by 5%. What we’re asking them to do is identify lower priority areas of spending so we can redirect them if we want.”

Chalmers said $100 billion of the previous savings, including increases in bulk billing, new urgent care clinics and Labor’s income tax cuts, were used for new Medicare spending.

Chalmers left open the possibility of job cuts but said they would be smaller than what the opposition led by Peter Dutton had suggested. “We are not asking ministries to make the massive layoffs that our political opponents did in the last election,” he said.

This week Gallagher described the savings as a “discipline exercise”.

“The budget is in deficit. There’s too much pressure on us. We can’t keep adding to everything.”

Melissa Donnelly, national secretary of the main civil service union CPSU, warned Labor against major cuts.

“The federal government was re-elected on a promise to continue investing in rebuilding public services, not cuts.

“While the government has made progress in repairing the damage done to public sector capacity after years of outsourcing, privatization and cuts, there is much more to do.

Donnelly pointed to large expenditures on private sector consulting firms and hiring external labor as areas where more savings could be made. Labor has been working to reduce spending in these areas since its 2022 election victory.

Before the election, Labor said it would save more than $6 billion on public services over the four-year forward forecast period.

“The government’s support for the public service must match the service it actually provides,” Donnelly said.

Opposition leader Sussan Ley says Labor has broken its promise to prevent cuts to Canberra-based public servants.

“Labor promised this city that there would be no cuts, and he made this promise before the last election.

“So are they breaking their promise? Or have things gotten so bad since the election that they had to urgently address the austerity issue, make urgent cuts? So either they lied to you in the election or they really, really mismanaged the budget.”

Greens civil service spokeswoman Barbara Pocock said Labor should cut consultancy spending, not public service budgets.

“Arbitrary cuts to the public sector will triple new spending on big consultants and hiring workers, and that makes no sense.”