The Albanese government has seen a significant reversal in the use of external contractors across federal departments, with new data showing a return to costly hiring practices that were previously reduced. According to figures released by the Department of Finance, spending on contractors and consultants rose by 15% in the last financial year, reaching $2.3 billion, after a period of decline under the previous government's caps.
Spending Surge Across Key Departments
The Department of Home Affairs recorded the highest increase, with contractor expenditure jumping 25% to $340 million. The Department of Defence also saw a 20% rise to $280 million, while the Department of Health increased spending by 18% to $190 million. These figures come from the annual report on government procurement, which tracks spending on external labour and advisory services.
A Finance spokesperson stated, "The increase reflects the need for specialist skills and surge capacity to deliver priority projects, including in cybersecurity and digital transformation." However, critics argue that this undermines efforts to build in-house capability and control costs.
Comparison with Previous Government
Under the former Coalition government, contractor spending peaked at $2.8 billion in 2019-20 before being capped and reduced to $2 billion by 2022-23. The Albanese government initially maintained these lower levels but has now reversed the trend. The Australian Public Service Commissioner, Gordon de Brouwer, noted in a recent report that "the reliance on contractors can lead to higher long-term costs and a loss of institutional knowledge."
The Community and Public Sector Union (CPSU) condemned the increase. National Secretary Melissa Donnelly said, "This is a waste of taxpayer money. The government should be investing in permanent public servants, not expensive contractors." She added that contractors often cost 30-40% more than equivalent APS employees.
Impact on Public Service Capability
The shift has raised concerns about the erosion of public service expertise. A recent review by the Australian National Audit Office found that departments with high contractor usage often struggle to retain skilled staff and face challenges in project continuity. The review highlighted that 40% of major IT projects experienced delays or cost overruns partly due to reliance on external staff.
In response, the government has announced a new framework to monitor contractor use, requiring departments to justify any engagement over $1 million. Finance Minister Katy Gallagher said, "We are committed to ensuring value for money. This framework will provide greater transparency and accountability."
Political Reactions
Opposition finance spokesperson Jane Hume criticised the government, saying, "Labor promised to cut waste and reduce reliance on consultants, but instead they are spending more than ever. This shows a lack of fiscal discipline." The Greens also called for a legislated cap on contractor spending, with spokesperson Nick McKim stating, "The public service should be built from within, not outsourced to the highest bidder."
The government defends the spending, arguing that some projects require specialised skills not available internally. A spokesperson from the Department of Prime Minister and Cabinet said, "We are investing in critical areas like cybersecurity and data analytics where external expertise is essential."
Looking Ahead
The trend is expected to continue, with budget papers forecasting a further 10% increase in contractor spending next year. The government has committed to a review of procurement practices, due to report by mid-2025. Meanwhile, the CPSU is pushing for a mandatory target to reduce contractor use by 20% over the next two years.
As the debate continues, taxpayers are left footing a growing bill for external advice and services, with no clear end in sight to the cycle of contractor dependency.
