Federal election 2019: Coalition to cut $1.5b from public service to fund promises

The Liberal party has pledged to cut $1.5 billion in spending on the public service over the next four years, to fund promises made during the election campaign.

Treasurer Josh Frydenberg and Finance Minister Mathias Cormann made the announcement in Melbourne, saying the efficiency dividend would stay at 2 per cent over the next two years, reducing to 1.5 per cent in 2021-22 and 1 per cent the following year.

Treasurer Josh Frydenberg and Minister for Finance and the Public Service Mathias Cormann made the announcement. Picture: Alex Ellinghausen

Treasurer Josh Frydenberg and Minister for Finance and the Public Service Mathias Cormann made the announcement. Picture: Alex Ellinghausen

The extension would mean a reduction of $136 million in 2019-20, $379 million in 2020-21, jumping to $506 million in 2021 and $493 million in 2022-23.

A Coalition statement said this amount would increase to $5 billion over the medium term.

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Exemptions to the efficiency dividend will apply to agencies with average staffing levels below 200, and to the national collecting institutions, which includes the Australian War Memorial, the National Archives of Australia, National Gallery of Australia, National Library of Australia and National Museum of Australia.

Agencies such as the National Disability Insurance Agency, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority will also be excluded.

The existing exclusion for Australian Signals Directorate and the Office of National Intelligence will be extended.

The spending cut has been framed by the Coalition as a similar saving to the one promised by Labor, where the opposition has promised a $2.6 billion reduction in spending on contractors, consultants and travel.

Last week Labor committed to forgoing 0.5 per cent of the efficiency dividend from next financial year.

In a statement released with the costings Mr Frydenberg and Senator Cormann said the Coalition measure would give departmental secretaries the power to decide where cuts would be made.

"If departmental secretaries assess that these efficiencies can best be secured through reductions in expenditure on contractors, consultants and travel, because that makes sense from a value-for-money point of view, then of course that is what the Coalition would expect them to do," the statement said.

"Efficiency outcomes will be better and more sensible by letting departmental secretaries make those judgements based on value-for-money considerations."

Trade Minister Simon Birmingham told ABC television the reduced spending could come from contractors or travel and advertising spending, comparing the announcement to Labor's promise.

Mr Birmingham wouldn't concede the cuts would lead to job losses.

"It will be less than whatever the impact of Labor's cuts will be because they're proposing an even deeper range of savings when it comes to the public service," he said.

Labor's public service spokesman Jim Chalmers accused the Coalition of trying to sneak the cuts through in the campaign's dying days, while Labor's ACT representatives lined up to criticise the move.

Shadow Assistant Treasurer and member for Fenner Andrew Leigh said it was "gutless" that the Liberal party had waited until two days before the election to make the announcement when many Canberrans had already cast a pre-poll vote.

"After literally decimating the public service, the Liberals are planning massive cuts in the future," he said.

"The choice on polling day couldn't be starker - between a progressive Labor Party that will scrap the staffing cap and not proceed with the additional efficiency dividend, versus a Liberal Party that will inflict further cuts on the public service."

ACT Senate candidate Katy Gallagher accused ACT Liberal Senator Zed Seselja of hypocrisy.

"Especially when yesterday he was spreading lies about Labor's plans to manage the APS, when at the same time his party was preparing to make the APS the fall guy for their other spending promises," she said.

The main public sector union has savaged the announcement, saying it put 3000 public sector jobs at risk and was aiming to trick and confuse people.

"It beggars belief that this mob is criticising Labor for its plans to cut off the billions of dollars the Coalition has siphoned from Commonwealth agencies into the pockets of multinational companies like EY, Deloitte, PwC and KPMG," Community and Public Sector Union national secretary Nadine Flood said.

Greens ACT Senate candidate Penny Kyburz said it was an "appalling attack" on the public service.

"On the eve of the election, to make this announcement shows their continued disregard for Canberra and the hard working public servants who are struggling to fulfill their remits with ever dwindling resources," she said.