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

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, Jim Chalmers, and 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. Related: Guardian Essential poll: only a quarter of older Australians believe climate change can be prevented Sign up: AU Breaking News email The Coalition has accused the government of breaking its promise not to cut the public sector, after an election campaign in which the opposition pledged to slash the federal workforce by 41,000 positions over five years. The Coalition’s policy was designed to achieve budget savings worth $17.2bn. Chalmers said on Wednesday that department and agency bosses were being asked to find potential savings from lower-priority spending, so the money could be redirected. “That’s not just been something we’ve done on this occasion,” he told ABC radio. “We’ve done it in the lead-up to our first four budgets. We’re doing it in the lead-up to our fifth. “We are not asking departments to cut their staff or to cut their budgets by 5%. What we’re asking them to do is to identify areas of spending that is lower priority so we can redirect it if we want to.” 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 Peter Dutton. “We’re not asking departments to make those big job cuts that our political opponents took to the last election,” he said. 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.”