The number of IT contractors hired by the federal government has reached the highest level in eight years as departments spend big on new systems and capabilities.
The Department of Finance's annual trends report released on Tuesday found the government spent $5.6 billion on ICT last financial year, which was an annual increase of 6.8 per cent.
According to the report, around 70 per cent of this money was spent on "business as usual" operations with the rest spent on new investments and capabilities.
But the number of IT staff internally employed staff fell to 15,400 last year, which was the lowest number since 2008/09 and 2400 staff fewer than the peak of 2011-12.
"In 2014-15, Government spend on ICT personnel was $2.2 billion or 40 per cent of total government ICT spend," the report said.
Non-ongoing workers now account for at least one-tenth of the federal public service with ranks swelling by 22 per cent in 2014-15, according to the latest APS State of Service report.
Almost a quarter of APS employees younger than 25 are contractors, while 18.2 per cent of those older than 55 are employed on a non-ongoing basis.
David Smith, director of the Professional Australia union representing IT workers, said the government's approach to contractors was leading to "significantly higher costs".
"There is a clear trend towards greater use of contractors after significant efforts to bring such skills back in-house, including work on more competitive pay structures," he said.
Mr Smith said a reliance on technology contractors existed across the entire bureaucracy.
"A government serious about both in-house expertise and value for money should be reviewing the current approach to contracting out of effectively business as usual functions," he said.
"This in turn will make us a smarter customer for the infrastructure projects that fall outside business as usual."
The trends report noted the proportion of APS level 1-3 workers fell from 9 per cent to 4 per cent last year. The proportion of APS 4 workers increased from 9 per cent to 11 per cent.
"This suggests the increased in skill and experience required in ICT roles," the report said.
Peter Acheson, chief executive of IT recruitment firm PeopleBank, said he was not surprised to see increasing contractor numbers given the demand for flexibility and project-focused work.
"The government sector, in particular, is restricted by a variety of employee requirements, including pre-employment integrity checks, security clearances, and citizenship requirements," he said.
"This makes their potential pool of candidates even smaller, further heightening the level of competitiveness with other organisations in attracting skilled workers."
Mr Acheson said some government departments were willing to offer higher salaries to contractors to compete given the demand for talent.
"We're seeing more and more that the government is needing to improve their offering in these areas to ensure they are attracting and retaining the best talent in the industry," he said.
"According to our latest salary and employment index, we've seen IT contractor rates in the ACT increase by approximately 10 per cent in the last three months, which would partly explain the almost 7 per cent increase in spend by the government in this area."