Tony Abbott and Dr Ian Watt, Secretary of the Department of the Prime Minister and Cabinet.

Tony Abbott and Dr Ian Watt, Secretary of the Department of the Prime Minister and Cabinet. Photo: Alex Ellinghausen

Australia's top bureaucrat has warned public servants to prepare for a decade of hardship.

The Department of the Prime Minister and Cabinet's head, Ian Watt, urged staff to reassess their work immediately and find ways to save money, rather than wait for the government's commission of audit to do it for them.

We, as bureaucrats, cannot and should not simply wait for the commission to do our thinking for us. 

PM&C secretary Ian Watt

Speaking at the Institute of Public Administration Australia's national conference on Wednesday, he said one "can't have a discussion in Canberra among public servants these days without talking about the fiscal environment".

"We know we have a challenge of a very tight fiscal environment in the [Australian Public Service] and it's probably getting tighter.

"In my view, the fiscal environment will be tight for at least a decade."

Dr Watt said the bureaucracy had faced similar challenges during John Howard's first term as prime minister.

"We came through the last one fairly well and I see no reason why we won't do that in this case as well. But we do need to embrace opportunities to be more effective and a smarter public service.

"And a more stringent fiscal situation is a powerful signal for us to do so, and incidentally we have received that signal now from both sides of politics."

Last month, the new government appointed a commission of audit, headed by former Business Council of Australia president Tony Shepherd, to find ways to cut public spending.

The commission will publish its interim report before the end of January.

Howard, Dr Watt said public servants could not afford to wait until then.

"We, as bureaucrats, cannot and should not simply wait for the commission to do our thinking for us. We should already be adjusting priorities to meet the tightening fiscal environment, which is going to to stay tight, and the new government and thinking about the major changes that might come.

"I'm sure you are. If you're not, I suggest you do.

"We should not only be assessing the way we work, but also what we're working on. We should be reviewing our critical functions and looking at what we can and should stop doing."

Dr Watt also said public servants' advice would be subjected increasingly to competition from outside sources, such as consultants, thinktanks and lobby groups.