The Australian Made Campaign says the welfare agency's decision to take the $843,000 paper deal offshore cost the Treasury $173,000 in lost tax and other revenue.

In its submission to a Senate inquiry into government procurement, the group argues that departments should show they are getting value, not only for themselves but for the nation when they sign big contracts.

But Centrelink said on Friday that it was fully compliant with the value-for-money requirements of federal government purchasing rules.

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The AMC also says ''national pride'' should direct deals for Australian flags, uniforms and ceremonial items towards home-grown suppliers and manufacturers.

The welfare agency uses about 96 million of its ubiquitous EN270 envelopes, bought from a number of suppliers, each year to write to more than 7 million clients.

In its submission, the AMC said Australian Paper lost a contract to supply envelopes to Centrelink in 2013 by $8256, a margin of less than 1 per cent on the winning tender price of $843,744.

''Australian Paper estimates the government lost tax and excise revenue of approximately $173,760 on the production of the 240 tonnes of paper that would have gone into the envelopes had the Australian product been selected. The net 'cost' to the government was thus in the order of $165,000.

"This is not taking account of any secondary, or multiplier, effects throughout the economy resulting from the manufacturing process taking place in Australia rather than overseas.''