Treasurer Jim Chalmers is set to announce nearly $1 billion in savings and reprioritizations across the Australian Public Service (APS) in his upcoming mid-year budget update. This move is part of the Albanese government’s strategy to manage the anticipated budget deficit effectively.
Finance and Public Service Minister Katy Gallagher has indicated that an additional $400 million will be saved in the next fiscal year. This will be achieved by cutting down on the use of contractors and labour hire, as well as reducing non-wage expenses such as travel, hospitality, and property. This is part of a broader effort to trim $20 billion from the budget’s bottom line.
Strategic Savings and Reprioritizations
The government aims to deliver $6.8 billion in non-wage APS savings over four years, starting from 2025-26, as part of its election commitment. This includes more than $500 million in savings from the Defence sector.
“Responsible budgeting means stronger, more reliable services,” Senator Gallagher stated. “Delivering savings isn’t just good fiscal management; it’s about ensuring that the services our communities depend on remain robust and sustainable, while also addressing the significant spending pressures we face.”
The budget update will also feature $574 million in “reprioritisations” within the Defence portfolio. This comes as Australia plans to increase military spending by an additional $70 billion over the next decade, including investments in the AUKUS submarine deal.
Addressing Economic Pressures
The government is tasked with finding $25 billion to accommodate additional spending in areas such as support for veterans, natural disasters, and the aged pension. This will be detailed in the mid-year economic and fiscal outlook (MYEFO) to be released this week.
Dr. Chalmers emphasized the challenges faced by the government’s Expenditure Review Committee, noting the need to balance commitments without significantly increasing the deficit. “This midyear budget update will be defined by economic responsibility,” he told Sky on Sunday.
“We’ve got commitments to deliver in housing, mental health, infrastructure, and fast-tracking skills for tradies. [We’ll] show considerable spending restraint to make room for those pressures,” he added.
By the Numbers: Key Savings Initiatives
- $1.8 billion from gradually returning social security deeming rates to pre-pandemic settings
- $882 million from advocacy reforms and strengthened program integrity at the Department of Veterans Affairs
- $425 million in uncommitted funds from the Hydrogen Headstart program, to be reinvested in low and zero emissions technology
- $286 million from additional Child Care Subsidy integrity activities
The government reports having already achieved $5.3 billion in savings by reducing spending on external labour and converting 11,800 external labour jobs into APS roles during its first term.
Implications and Future Outlook
The announcement comes as the Albanese government navigates a complex economic landscape, marked by global uncertainties and domestic pressures. The strategic savings and reprioritizations are designed to provide a buffer against these challenges while maintaining essential public services.
Looking ahead, the government’s ability to manage fiscal pressures while delivering on key commitments will be crucial. The upcoming MYEFO will provide further insights into how these strategies will unfold in the coming months.
As the government continues to refine its fiscal policies, stakeholders across various sectors will be closely monitoring the impact of these budgetary adjustments on Australia’s economic health and public service delivery.
