Prime Minister Scott Morrison has triggered the alarm at the Community and Public Sector Union in handing responsibility for the bureaucracy to a defender of its strict wage policy and growing spend on contractors.

However Senator Cormann marked his entry to the portfolio on Monday praising the public service, and committing to modernise it.

Union national secretary Nadine Flood said Mr Morrison's reshuffle following the Liberal party's disastrous civil war last week had shown little promise he would abandon the Coalition's approach to the bureaucracy.

The Prime Minister has elevated the public service portfolio in giving it to Senator Cormann on Sunday in a change that could signal a growing focus on federal agencies during a major review led by former Telstra chief executive David Thodey.

Ms Flood supported Mr Morrison's move to lift decisions about the Australian Public Service's workplaces into the government's highest ranks but warned of "dire consequences" if it brought on more cuts.

"It’s deeply worrying to see the APS in a combined portfolio with Finance, the ministry charged with finding cuts and savings," she said.

"Minister Mathias Cormann must focus on public services and policy capacity rather than further hamstringing the government with yet more short-sighted cuts or further privatisation and outsourcing."

The previous Labor government tied the Finance portfolio to oversight of the public service by creating a performance framework that covered all Commonwealth agencies.

Senator Cormann as Finance Minister is already responsible for connecting parts of the performance framework, including duties of officials, governance reporting by Commonwealth agencies, systems for risk control, procurement policy, independent auditing, and collaboration between agencies.

It is understood Mr Thodey's review of the public service will continue under the Morrison government despite being championed previously by Malcolm Turnbull.

Senator Cormann on Monday said the government had an outstanding public service.

“Our commitment is to continue to modernise the federal public service to ensure it is as effective, productive and as responsive to the needs of the Australian community as possible," he said.

Senator Cormann takes on the portfolio from Kelly O'Dwyer as Labor escalates its attacks on the Coalition's ballooning spend on outsourcing and sharpens its critique of the government's approach to the public service.

He has long defended federal outsourcing, saying the appropriate use of consultants and other contractors kept the overall cost of government administration low, when agencies needed to access relevant skills temporarily, or the expertise was more efficiently obtained in the private sector.

Senator Cormann has directed efforts to reshape the federal bureaucracy as Finance Minister and credited the government's controversial public sector workplace bargaining policy as creating "responsible and appropriate wage control".

He embarked on a "rationalisation phase" of his "smaller government agenda" which saw dozens of mostly smaller agencies and government bodies merged or abolished.

The incoming Public Service Minister has also previously backed functional and efficiency reviews established in May 2014 expected to cut $3.2 billion from social services and $1.5 billion from health between the 2014-15 financial year and 2020-21. He said they helped the government remove waste, maximise efficient and effective public administration and ensured taxpayer resources weren't wasted.

In budget papers last year he promised to continue making the public service "more flexible, less top-heavy and deployed more widely outside Canberra".

The union wrote to Senator Cormann in April asking him to remove the widely-criticised cap on staffing levels at government agencies but this year's budget did not return control over staff numbers to agency bosses.