In a foreword to the museum's annual report tabled in the Senate, Mr Morton said although only a small percentage of the museum's vast collection was on display at any given time, its existing exhibition space was inadequate to properly showcase Australia's heritage.

''While we recognise that it is possible to exhibit only a small percentage of the museum's collection at any one time, we are nonetheless aware that our available exhibition area is small by Australian, let alone world standards,'' he said.

He said the museum's council had endorsed a property plan in July last year that outlined ''how spaces within the existing museum footprint could be reconfigured to maximise space for exhibition galleries''.

The museum had also applied to extend its current administration wing to house staff who were currently occupying potential exhibition space.

Mr Morton recently announced that he would not be seeking another term as director, once his current term expires next year.

His position has not yet been advertised, but Mr Morton indicated he would stand aside should a replacement be found before the end of his contract.

In the Senate on Tuesday evening, Liberal senator Gary Humphries accused the Federal Government of ''rampant cost-cutting'' when it came to the many national institutions housed in Canberra.

''Bodies such as the National Library, the National Museum, Questacon, the National Gallery of Australia, the Australian War Memorial and others have had to cope with very severe cuts to the size of their programs,'' he said.

''All of those institutions have had to reduce the scope or the scale of what they do.''

He said the cuts showed ''a measure of disdain shown by the Labor Party towards the Canberra community''.

''I am concerned about the way in which cost-cutting and the avoidance of expenditure in this city is taking a toll on the quality of life and fabric of the city,'' he said.