Labor has slammed the Coalition's plans to fire 41,000 public servants after previous cuts to the public service resulted in billions of dollars being paid to external consulting firms.

In his budget reply on Thursday night, Peter Dutton said the Coalition would reverse a range of Labor’s public spending measures, including expanding the public service.

“Tonight, I announce that a Coalition Government will rein in key inflationary, ineffectual, and imprudent spending – which has been a hallmark of this Government,” Dutton said.

“We will reverse Labor’s increase of 41,000 Canberra-based public servants – saving $7 billion a year.”

While Australian Public Service (APS) data showed that overall public service employment increased by 41,000 from December 2021 to December 2024, fewer than 10,000 additional workers were put on in Canberra.

In response to Dutton’s calls to fire 41,000 public service workers, Labor pointed out that past efforts to shrink the public service led to ballooning outsourcing costs as consultants were brought in to conduct essential public service functions.

An audit of the APS found that the Morrison government spent $20.8 billion on consultants and labour hire staff in one year (2021–22) following cuts to the public service workforce.

“Planning to cut thousands of public servant jobs, when he wasted millions of dollars on expensive consultants as a senior Liberal minister—that's a cruel hoax,” Labor senator Brian Mitchell said.

“Claiming he supports veterans while planning to cut the jobs of the staff who provide their services—that is a cruel hoax.”

In May 2022, the Department of Veterans' Affairs had a large backlog of unprocessed claims, which was cleared in early 2024 after 500 additional DVA employees were hired.

“If you're a veteran claiming DVA supports, you'll remember what it was like under the Liberals—a backlog of 42,000 veterans' claims, some waiting more than two years to be processed. That's what happens when you hollow out the Public Service,” Labor senator Alicia Payne said.

In 2023, Services Australia reported that significant staffing shortfalls had caused a backlog of claims and high call wait times. To address this, they recruited 5,000 staff in late 2023 and early 2024, including 3,000 roles converted from outsourced positions to APS employees.

After onboarding additional staff, Medicare customer calls were answered nine minutes faster on average, paid parental leave claims were processed in four days, down from 25 days, and Medicare claims were processed in two days, down from 11 days, Services Australia said in their 2023–24 annual report.

The ATO hired 1,100 additional staff since the 2022–23 budget, mostly outside of Canberra, according to Jacqui Curtis, chief operating officer of the Tax Office. However, accounting bodies have noted ongoing issues with ATO phone wait times, which range from 20 minutes to over two hours.

“It's not just an attack on the hardworking public servants in Canberra … it's an attack on every Australian who relies on public services and the good governance of this nation,” Payne said regarding the proposed APS cuts.

In his budget reply, Dutton also said the Coalition would scrap the $20 billion Rewiring the Nation Fund which aims to build grid electricity infrastructure to underpin Australia’s net-zero transition, the $10 billion Housing Australia Future Fund which aims to build social and affordable housing, and the $14 billion production tax credits for green hydrogen.

They also pledged to roll back Labor’s $17.1 billion tax cuts for the lowest tax bracket, and instead would commit $6 billion to reduce petrol prices by 25 cents per litre for 12 months.