JavaScript disabled. Please enable JavaScript to use My News, My Clippings, My Comments and user settings.

If you have trouble accessing our login form below, you can go to our login page.

If you have trouble accessing our login form below, you can go to our login page.

Budget to cut 16,500 public service jobs

Video settings

Please Log in to update your video settings

Video will begin in 5 seconds.

Video settings

Please Log in to update your video settings

Budget 2014: ideologically conservative

This is a budget that cuts the role of government and gives a big role to the market, says Peter Hartcher.

PT0M0S 620 349

The federal bureaucracy is poised for its greatest loss of staff since the early years of the Howard government.

However, the Abbott government's first budget will hit the public service more softly than the Coalition's rhetoric had suggested, and its staffing cuts are less harsh than those tipped in its mid-year budget review in December.

The Tax Office will lose the largest number of staff in 2014-15.

The Tax Office will lose the largest number of staff in 2014-15. Photo: Michel O'Sullivan

Civilian government agencies will shed 7336 full-time-equivalent jobs over the coming year, offset by the recruitment of an extra 2744 military personnel.

Finance Minister Mathias Cormann and Public Service Minister Eric Abetz said the cuts would continue in later years, and they expected the public service to shed about 16,500 jobs by July 2017. In opposition, the Coalition had pledged to cut only 12,000 jobs over two years.

''Around 14,500 of these reductions are the result of Labor's secret, unfunded, across-the-board cuts, which they initiated just before the last election,'' the ministers said.

A month before the 2013 election, the Rudd government revealed plans for deep spending cuts across the public service, via a higher ''efficiency dividend'' – a 2.25 per cent cut to agencies' administrative budgets.

The Coalition's recent independent Commission of Audit strongly criticised this dividend, describing it as ''a particularly blunt instrument to achieve budgetary savings''.

''Rather than make explicit and often difficult decisions about what government should do and the extent of public sector resourcing, an efficiency dividend reduces funding to both areas of high priority and areas of low priority ...'' the commission found.

However, the government has ignored this advice and increased the dividend even further to 2.5 per cent for the next three years.

Despite stepping up these across-the-board cuts, the Coalition can claim to be a tad less harsh than Labor, at least in the short term: it has set aside an extra $144 million to pay staff wages next financial year compared with the amount in the Rudd government's last budget update.

The Tax Office will lose the largest number of staff in 2014-15. It is expected to shed more than 2300 full-time jobs, about one in three of the projected losses.

Several portfolios will bear most of the pain: treasury, health, industry and foreign affairs agencies are expected to lose about 10 per cent of their workforces.

The government will also specifically target publicists and communications specialists, saying it will save more than $5 million a year by "moving to more efficient practices for public affairs and internal communications".

There are a few surprise winners: the bureaucracy's largest employer – the giant Department of Human Services, which includes Centrelink and Medicare – will gain staff in the coming year.

Mr Cormann and Mr Abetz said the department would be busy implementing the government's welfare reforms, such as expanding the work-for-the-dole scheme.

The Defence Department and the Defence Materiel Organisation were also tipped to shed thousands of civilian employees, but will together lose just over 400 full-time jobs.

The two ministers also pointed out they had funded the redundancies caused by "Labor's largely indiscriminate cuts": separation payouts will reach a record $273 million by the end of June, as a result of most government workplaces retrenching staff this year.

However, very few redundancies have been funded in the years beyond. The government has allocated less than $50 million a year for payouts in the budget's outlying years, about the same amount set aside by Labor.

Related Coverage

Budget 2014: ideologically conservative (Thumbnail) Budget 2014: ideologically conservative

This is a budget that cuts the role of government and gives a big role to the market, says Peter Hartcher.

Joe Hockey Federal Budget 2014: News, analysis and comment

Follow Australia’s best coverage of the 2014 federal budget with Fairfax Media’s leading economic, political and business reporters, commentators and analysts.

Federal budget 2014: At a glance

Federal Budget 2014: The budget at a glance

Federal budget 2014: Winners and losers

Those who gain and those who feel the pain of Treasurer Joe Hockey's budget

Federal Budget: corporate Australia a winner

There aren’t many winners out of Joe Hockey’s first budget, but business is one of them.

Federal budget 2014: Will the pain be worth it for Tony Abbott?

Joe Hockey gets a 10 for courage, an eight for fiscal responsibility and a three for keeping commitments in a high-risk budget that will test the discipline, cohesion and salesmanship of the entire Abbott government.

Federal Budget 2014: Tough and unfair, it's business as usual

I give Joe Hockey's first budgetary exam a distinction on management of the macro economy, a credit on micro-economic reform and a fail on fairness.

Federal budget reveals new public service building for Tuggeranong

Tuggeranong has emerged as the ACT's only winner from Tuesday's federal budget with the Department of Social Services receiving $26.8 million towards a new office.

Federal budget puts Canberra on the razor’s edge with 16,500 public service jobs cut

The Abbott government’s first budget will hit the federal bureaucracy with its biggest staff cut since the 1990s.

Federal Budget 2014: News, analysis and comment

Follow Australia’s best coverage of the 2014 federal budget with Fairfax Media’s leading economic, political and business reporters, commentators and analysts.

Featured advertisers

Special offers

Credit card, savings and loan rates by Mozo

Executive Style