Budget 2025: Labor Says It Has Slashed $720 Million in Consultancy Costs

The Labor government has gradually been in-housing consultancy work to expanded government departments.

Minister for Finance, Senator Katy Gallagher at the National Press Club in Canberra, Australia on March 7, 2024. AAP Image/Mick Tsikas

A day before the federal budget, Finance Minister Katy Gallagher announced Labor had saved $720 million in private consultancy costs as part of a wider $2.1 billion in planned cuts.

The move comes as the government braces for an election battle over spending levels.

Labor has embarked on a project to bring outsourced work back within government agencies, a move credited towards achieving $4.7 billion in savings during Labor’s first term.

She argued that this approach is more efficient than the Coalition’s plan to cut public service jobs.

“It has meant we can invest in the things that matter most, like cost-of-living support, Medicare, and housing,” she said.

The opposition, however, argues that an expanded public service is wasteful.

Coalition’s Plan for Cuts

Opposition Leader Peter Dutton has vowed to cut the workforce by about 36,000.

Dutton has insisted the Australian Public Service should not exceed 200,000 employees but has not committed to a specific reduction target.

“We think that the size of the public service has blown out too far. We will see the numbers on Tuesday night to exactly just how far it has blown out,” said Coalition finance spokeswoman Jane Hume, in an interview with ABC News Breakfast.

While the Coalition says frontline roles will be protected, Labor argues that significant job cuts would inevitably impact key agencies, including defence, veterans’ affairs, and health.

“You can’t run around saying you’re going to cut 36,000 jobs and then pretend that they’re not going to come from any of those frontline service areas,” Gallagher said.

Minimal Budget Impact, Transparency Concerns

The upcoming budget is expected to show new spending, including $8.5 billion for Medicare and $1.8 billion in energy rebates.

While the government defends its hiring decisions, economists argue that the Coalition’s proposed cuts would have little effect on overall government spending.

Productivity Commission Chair Danielle Wood noted that excluding frontline workers from cuts would limit potential savings.

“In the percentage of government spending, it’s small,” she said on the Insiders: On Background podcast.

Meanwhile, the Greens are demanding greater transparency on consultancy spending.

Greens Senator Barbara Pocock criticised Labor for not breaking down external contractor costs separately, making it unclear if actual consultancy expenses have decreased.

“This tactic of hiding the actual amount being spent on consultants means that we have no way of knowing whether the government is actually spending less on consultants or not,” Pocock said.

She called for a 15 percent annual reduction in consultant spending over the next five years.