Big cuts: Treasurer Joe Hockey and Prime Minister Tony Abbott arrive to hand down the budget in the House of Representatives.

Big cuts: Treasurer Joe Hockey and Prime Minister Tony Abbott arrive to hand down the budget in the House of Representatives. Photo: Alex Ellinghausen

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

A projected 16,500 public servants will be cut nationally in the next three years – a massive 7336 full-time-equivalent civilian government workers in the first year alone – in a budget that leaves Canberra with no financial surprises to inject activity into the ACT economy.

Illustration: David Pope

Illustration: David Pope

The three years of cuts would translate to 6500 in the ACT if the reductions were proportional across the public service.

The budget aims to reduce the existing deficit from $49.9 billion to $29.8 billion by next year and then $2.8 billion by 2017-18.

The blunt instrument known as the efficiency dividend will almost double overnight from 1.25 per cent to 2.5 per cent – 0.25 per cent of this increase comes from the Coalition and the rest of the hike is a hangover from Labor – and remain in place for three years.  

Treasurer Joe Hockey struck at Canberra more than anywhere else when he pushed his government’s agenda for smaller government by saying he wanted fewer public servants "interfering" in people's lives.

"We have been at pains to reduce government expenditure without hurting the economy," Mr Hockey said.

A "smaller, less interfering government won’t need as many public servants" and the 16,500 staff cuts would not compromise public services, he said. 

He touted a budget that pledged to reduce Australia's debt from $667 billion to $389 billion in 10 years, helped in some way by slashing the foreign aid budget to save $7.9 billion over five years.

Community and Public Sector Union national secretary Nadine Flood said Mr Hockey's headline job loss figure was not counting the "massive wave of privatisation it is about to unleash". 

Ms Flood said 16,500 was triple the jobs lost under Labor and it was a joke for the government to blame its predecessor. 

"I think our [original] 25,000 figure might look conservative in a few years," she said.

Canberra's slim rewards include $26.8 million for relocation and fit-out of the Department of Social Services, which will stay in Tuggeranong – an announcement that will allay fears the large department would move out of the struggling town centre. 

Apart from this and $60 million across four years for the Department of Parliamentary Services, there is little good news.

Some ACT pastoral leases are set to be sold as the Commonwealth reduces non-defence land holdings worth $22.5 million nationwide. 

The Australian National University will lose $6.4 million as the Commonwealth axes funding for the HC Coombs Policy Forum. 

There will be a scoping study on government ownership of assets such as defence housing, the ASIC registry and the Royal Australian Mint in Deakin.

The public service jobs cuts figure of 16,500 is 4500 more than the Abbott government pledged in the lead up to the election and is 2000 on top of the 14,500 the Coalition says Labor was going to cut.

The Australian Taxation Office, which lost 900 people in 2013-14, will be the hardest hit by staff reductions, which will reach 2329 by June 2018.

The ATO loses 2100 jobs in the coming financial year, with the budget bringing some reductions forward, and another 1700 in the following years.

Civilian staff numbers at Defence will be reduced by 1200 and another 300 "service providers" will go by 2017-18 to save $606 million within four years – a much softer approach than what was recommended in the Commission of Audit.

The Bureau of Meteorology receives its own special efficiency dividend, to recover $10 million over four years. 

The budget contained no figure for public servant job losses in Canberra, which is home to 39 per cent of the bureaucracy, meaning there would 6500 job cuts if the reductions were proportional. But this will likely be exceeded because redundancies are being targeted at managers, most of whom are located in Canberra.

In line with information put out by the government earlier this week, the government will abolish more than 230 bureaucratic programs and 70 government bodies.

The increased efficiency across the forward projections will save another $590 million and there is no clear answer as to where the dividend affects job losses in the bureaucracy.

- with Markus Mannheim