The Abbott government has rejected a plan to merge the Bureau of Statistics with the Australian Institute of Health and Welfare, part of a suite of measures put forward by the bureau to help it find savings to upgrade its aged computer systems.
A related proposal to axe the 2016 census is still under consideration.
The merger would have brought together the institute's $53 million budget and the bureau's $312 million budget. It would have reunited the institute with its former director David Kalisch who left to head the bureau in December.
Staff at the Canberra-based institute resisted the move, believing that the cultures and roles of the two institutions were incompatible.
Codenamed "Operation Archer", the bureau's rescue package would have also cancelled every second census, meaning it would take place only once a decade as happens in the United Kingdom and the United States. The saving of $440 million per cancelled census would be used to update computer systems half a century old.
The government is expected to decide the fate of the 2016 census before the budget in May.
Demographers have condemned the idea saying without the census the bureau will have no accurate way of measuring the population and make up of small local government areas.
The bureau believes it will be able to use other means to prepare reasonable estimates of state populations every three months and broad regional populations every year.
Adding weight to its push to be freed of the need to conduct the 2016 census is an internal assessment that preparations are running behind time and over budget.
The bureau has assessed the status of the census as "red" meaning it will not be able to deliver a census of the scope that had been planned on time or within the budget.
Options considered include scaling back the scope of the census.
The bureau is required by the Census and Statistics Act to conduct a census every five years and so is not able to cancel the 2016 census without an amendment to the act which would need to be approved by the Senate.