More public service redundancies factored in through MYEFO

Treasury estimates and projections show the amount set aside for separations and redundancies in the APS will go from $55 million this financial year and $54 million in 2020-21, to $72 million in 2021-22 - a 33 per cent increase - followed by $62 million in 2022-23.

The increase in redundancy provisions came three days after the federal government unveiled its plans to reform the public service.

In its response to the Thodey review, the government ruled out removing the cap on public service staffing and rejected a plan to move bureaucrats to a set of common pay scales and work conditions.

Prime Minister Scott Morrison has launched the biggest changes to the machinery of government in more than 30 years, including reducing the number of departments from 18 to 14 and removing five department secretaries.

When announcing the changes, Mr Morrison insisted they were not about making savings but improving the efficiency and effectiveness of the APS.

But Labor's public service spokeswoman, ACT Senator Katy Gallagher, said the government's agenda was to reduce the public service, not nurture it.

"The record of this government on the public sector is terrible," the Labor senator said. "They have seen the public service as a cash cow and ... an institution to reduce, not invest in."

"They [are] all about reducing the institution as it exists, cutting jobs, using the savings to bolster and dress over their economic mismanagement."

There seems little prospect of significant pay rises for public servants.

In its mid-year budget update, the government indicated that it will not let up in its pressure on public service wages.

Treasury expects the APS wages and salary bill to reach $21.36 billion this financial year, before dropping to $21.35 billion in 2020-21.

Spending on wages will increase by less than 1 per cent in 2021-22 to $21.54 billion, and rise just a further 0.6 per cent in 2022-23 to $21.69 billion.

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Unions ACT secretary Alex White said the government's austerity would have a serious impact on the Canberra economy.

"With the public sector comprising a third of Canberra's workforce, the APS wage cap has a significant impact on jobs and economic growth in Canberra," he said. "Even the Reserve Bank governor is calling for the federal government to lift its economically reckless wages cap."

The continued austerity comes amid almost stagnant wages across the community.

Treasury expects the gap between salaries and inflation to narrow over the next two years as unemployment remains stuck at or above 5 per cent - well above the level of 4.5 per cent the Reserve Bank of Australia considers to be full employment.