Finance Minister Penny Wong.

Penny Wong. Photo: Alex Ellinghausen

The federal bureaucracy will tighten its belt even further as a result of extra spending cuts outlined this morning.

However, the latest crackdown will exclude the Defence Department, which has again received a reprieve.

Finance Minister Penny Wong and Public Service Minister Gary Gray announced the government would strip another $550 million from its agencies over the current four-year budget cycle, on top of the 4 per cent efficiency dividend that public servants are presently struggling to meet.

The pair said the latest cuts "would not come from targeting jobs". However, some Australian Public Service workplaces are likely to have few alternatives left but to shed more staff.

The government has already increased the dividend - an annual cut to agencies' operating budgets - from 1.5 to 4 per cent this financial year, in a bid to save an extra $500 million a year. That decision is expected to contribute to the loss of about 4200 public service jobs in 2012-13.

War on paper, travel

The ministers said the latest savings would be achieved by eliminating wasteful spending and cracking down on inefficiencies.

"The government has looked carefully at the spending of departments and agencies. From this financial year, departments will be required to find savings through a new targeted savings arrangement that reduces expenditure in non-staffing areas," they said.

The proposed savings include:

  • Almost $30 million a year through across-the-board reductions in air-travel spending, including restrictions on business-class flights.
  • Over $60 million in 2012-13 by cutting public servants' reliance on external consultants and contractors.
  • $2 million a year through advertising jobs online rather than in other media.
  • Cutting printing costs by about 5 per cent by increasingly publishing online only, saving about $6 million a year.

The bureaucracy would also consider buying more services on a whole-of-government basis, to leverage the Commonwealth's purchasing power.

The government's decision will make it considerably harder for agencies to meet the dividend without retrenching staff.

When Senator Wong announced the one-off extra efficiency dividend last year, she suggested the bureaucracy avoid redundancies by instead trimming their travel, advertising, printing, entertainment and training costs, and by using fewer consultants.

Today's announcement means agencies can no longer count many of these cuts towards their dividend targets.

Union fears

The Community and Public Sector Union said the latest decision would undermine the bureaucracy's ability to serve the public.

Assistant national secretary Louise Persse said: "While the government's saying this won't affect jobs, we've seen a lot of cuts to federal public service budgets in recent years. We are concerned about the cumulative effects of those."

However, when asked whether Labor's approach to the public service was similar to the Liberals', Ms Persse said the government remained the lesser evil.

"The federal Coalition is talking about $50 billion to $70 billion worth of savings. So there is a question of degree [of difference] here," she said.

"We haven’t seen any clarity from [Opposition Leader] Tony Abbott about how he's going to achieve those savings without traumatic impacts on public services and jobs."

Senator Wong said the government's approach to cutting spending differed vastly from the Coalition's, citing Queensland Premier Campbell Newman's recent efforts to retrench about 14,000 public sector staff.

"When Labor approaches the task of budgeting, we do that in accordance with Labor values. Labor targets efficiencies; the Coalition slashes jobs. And you see that approach very clearly when look to Premier Newman in Queensland."

'Smoke and mirrors'

Meanwhile, the Coalition has dismissed today's announcement as unbelievable and lacking substantive detail.

Shadow finance minister Andrew Robb said the spending were "more smoke and mirrors" before the release of the mid-year budget review later this year.

"They drop out a few minor items about reduced advertising and printing costs, but then in the fine print we see that the lion’s share of the $550 million does not even exist," he said.

"It is part of a consistent pattern of behaviour based on deception, identical to the behaviour that led up this year's budget and their manufactured surplus."

Mr Robb said it was insufficient to make "some vague comments about moving to online publishing".

"People are awake up to them. Look at their track record: they talk about savings but, since coming to office, their spending has outstripped revenue by $173 billion ..." he said.

"They talk about cutting advertising now, after they have already spent $70 million on advertising the carbon tax, including a campaign in which they weren’t even game to mention the words carbon tax."

Labor has announced, in total, more than $13 billion in public-sector savings since it won office in 2007. However, many of these savings are yet to be achieved, as they are scheduled to be implemented in coming years.

Senator Wong and Mr Gray said the latest cuts would apply to neither the Defence Department nor the parliamentary departments, "reflecting the importance of the chamber departments in the functioning of the Federal Parliament".

twitter This reporter is on Twitter: @MarkusMannheim