They rejected the claim in submissions to the industrial umpire as it arbitrates a fight over pay and conditions that has left staff without a wage rise in more than four years.

Home Affairs has told the Fair Work Commission that pay growth advocated by the Community and Public Sector Union would force it to cut more than 1900 jobs to offset the wage rises, including 1640 positions in the first year of the umpire's determination.

The department says its own proposal would require cutting 657 staff through natural attrition.

Mr Swan, treasurer in the first Rudd government and the Gillard government, denied this saying Prime Minister Malcolm Turnbull and the cabinet had power to waive or change any requirement to offset wage growth. The government could fund pay rises with savings elsewhere in the budget or underspending in other portfolios, he said.

Home Affairs could also seek approval from the finance minister or ask the government's expediture review committee to consider funding any unexpected costs, and the federal government could cover pay rises using money in the contingency reserve of the budget, Mr Swan told Fair Work.

The department has argued cuts forced by a Fair Work determination could pose a serious risk that Home Affairs could not perform its role, presenting an unacceptable exposure to threats at the border.

A spokesman said the department's reply evidence and cross-examination of the CPSU’s witnesses had established that each of the possible sources of funding referred to by Mr Swan and Dr Emerson were only speculative.

Minister for small business and trade in the former Labor government Dr Emerson said that, based on his experience on the national security committee of cabinet between 2010 and 2013, he believed it was "extremely unlikely that the committee or the Prime Minister would agree to budget savings that presented an unacceptable exposure to threats at the border".

The Home Affairs department's argument that staffing reductions would expose the nation to border threats was "itself a bulwark against the government requiring such staffing reductions", he said.

Home Affairs has told Fair Work the union's proposal would cost $613.9 million over three years, compared to $144.9 million for its own offer.

The CPSU's position would bring a "day one" cost of $364 million that would sap the department's $470 million cash reserves and leave them at "dangerously low levels", it said.

Fair Work began hearings in October more than a year after it halted industrial action by union members including strikes at Australia's international airports.

Lawyers for Home Affairs have told the Full Bench of the commission that the department's offer to staff balanced competing interests and provided flexibility while the proposed pay rise took account of economic conditions.

The Full Bench heard closing arguments earlier in April and is yet to make its determination.