Public service cuts lead to outsourcing and poor service delivery, report says

Research by the Australia Institute’s Centre for Future Work has warned against reductions in public servant numbers following proposals to cut public service staff by the Coalition.

Staffing shortfalls in Australian Public Service (APS) organisations Services Australia and Department of Veteran Affairs led to increased wait times for essential services and an over-reliance on external contractors, the report found.

“The Morrison government spent more than $20 billion on consultants and contractors in one year,” Lisa Heap, senior researcher at The Australia Institute’s Centre for Future Work, said.

“Reducing the size of the public service leads to longer waiting times and problems for Australians accessing essential support.“

In 2023, Services Australia “reported staffing shortfalls resulting in a significant backlog in claims processing and an average call wait time of 30 minutes,” the report said.

To address this, Services Australia 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.

Similarly, the Department of Veteran Affairs had a backlog of 42,000 unprocessed claims in May 2022. The backlog was cleared in early 2024, following the employment of an additional 500 DVA employees, the Australia Institute said.

“The examples of Services Australia and the DVA illustrate how keeping the number of APS employees artificially low, to meet the arbitrarily determined ASL cap, undermined the capacity of essential public services and disguised the actual resources required for effective service provision,” the report said.

The Australia Institute also argued that the overuse of external consultants threatens to compromise accountability and independence in public service.

“[The] engagement of more consultants raises questions about whether the government of the day can be provided with full, frank and fearless advice, where that advice has been formulated by consulting companies with commercial interests that may not accord with the public interest,” the report said.

It also found that 63 per cent of APS employees are located outside of Canberra, and the number located in the ACT has been decreasing over time. This contrasts claims made by the opposition.

“There are 36,000 additional places that have been put on,” opposition leader Peter Dutton said in an interview with ABC Insiders.

“I don’t think any Australian can say that their lives are easier in terms of their interactions with government agencies because of 36,000 new public servants being employed in Canberra.”

AAP FactCheck found that only 7,464 Canberra-based public servants were added between June 2022 and June 2024, according to the latest available APS figures.

This reflects similar comments in the Senate estimates hearing this week, with Jacqui Curtis, chief operating officer of the ATO, informing the Senate Economics Legislation Committee that the ATO had reduced the number of its staff in Canberra in recent years.

“Ninety per cent of our staff are actually located outside of Canberra,” Curtis said.

“As far as the investments in the task forces and other measures, we have seen an increase in our staffing levels of 1,100 since the 2022-23 budget.”

Alison Stott, deputy commissioner of the ATO, added: “The largest proportional growth has been in regional areas of Gosford, 21 per cent of that site has grown by 82 people. Townsville has grown by 17 per cent, which is 50 people.”

The APS workforce has decreased as a proportion of the Australian workforce in comparison to 2008 levels, according to the Australia Institute.

In 2008, APS workers made up 1.52 per cent of the labour force. APS staffing caps introduced in 2016 by Tony Abbott led this proportion to fall to 1.28 per cent in 2020. In 2024, this figure went up slightly to 1.36 per cent.

The report argued that imposing artificial staffing caps on the public service simply leads to contractors being hired to fulfil essential functions at a greater hourly rate.

“A reduction in the ASL may hide the fact that more work is being carried out by contractors, consultants or labour hire workers who are not counted in the ASL,” the Australia Institute said.

“This occurred under the previous government. In one year (2021-2022), the Morrison Government spent $20.8 billion on consultants and labour hire agency staff. This equated to 53,911 workers (on a full-time equivalent basis), which effectively increased the size of the public service workforce by 37 per cent.”

Heap said: “Promising to reduce the size of the public service is a cheap political stunt.

“Sacking public servants doesn’t save the country a cent.”