Treasurer Jim Chalmers is set to unveil nearly $1 billion in additional savings and reprioritisations across the Australian Public Service in the mid-year economic and fiscal outlook (MYEFO), as the government aims to control the expected deficit.
Finance and Public Service Minister Katy Gallagher announced that an extra $400 million will be saved next fiscal year by reducing the use of contractors and labour hire, along with non-wage expenses such as travel, hospitality, and property. This is part of $20 billion in total savings to be shaved off the budget's bottom line.
The new savings bring the total non-wage APS savings under the government's election commitment to $6.8 billion over four years from 2025-26. Gallagher stated, 'Responsible budgeting means stronger, more reliable services. Delivering savings isn't just good fiscal management, it's about guaranteeing that the services our communities depend on remain strong and sustainable.'
The MYEFO will also include $574 million in reprioritisations within the Defence portfolio, even as Australia increases military spending with an extra $70 billion over the next decade, including for the AUKUS submarine deal. The government needs to find $25 billion to cover additional spending on veterans, natural disasters, and the aged pension.
Chalmers noted the 'hard yards' required to accommodate commitments and budget pressures, but declined to confirm a larger deficit. He emphasised economic responsibility, stating the update will show considerable spending restraint to make room for priorities in housing, mental health, infrastructure, and skills training.
The government has already delivered $5.3 billion in savings from reduced external labour spending and converted 11,800 external labour jobs into APS roles. Defence Minister Richard Marles recently announced a departmental overhaul, including a new Defence Delivery Agency to manage major acquisitions, which may lead to redundancies from July 2027.
