Labor’s consultant cuts to save the budget $6.4bn

Cutting down public spending on consultants, contractors, and labour hire will save the budget $6.4 billion over the next four years, Labor says.

Government agencies would be directed to cut costs by reducing their spending on external consultants, travel, hospitality, advertising, property and legal services, Labor said in a statement on Monday (28 April).

As the election looms, Labor contrasted their cost-cutting approach with the Coalition’s plan to shrink the public service by 41,000 positions over the next five years, with projected savings of $10 billion.

“They want to sack tens of thousands of people providing essential services,” Treasurer Jim Chalmers said, The Australian Financial Review reported.

“What we’re talking about is not about winding back people, not about winding back their pay, not about winding back programs, but finding savings in other areas.”

The current fiscal position is $1 billion stronger than it was in the 2025 pre-election economic and fiscal outlook, Labor said. However, credit rating agency S&P Global said the government’s growing investment into “off-budget” spending items had obscured their true fiscal position.

Debt-funded election splurges could risk Australia’s coveted AAA credit rating, a status only held by a handful of countries, S&P Global warned.

“We believe an overt focus on the central government’s preferred fiscal metric, the ‘underlying cash balance’, coupled with a proliferation of ‘off budget’ spending programs, that are excluded from this metric, is increasingly obfuscating Australia’s fiscal position and borrowing needs,” S&P analysts Anthony Walker and Martin Foo said.

“The ‘AAA’ rating on Australia may be at risk if election promises result in larger, structural deficits, and debt and interest expenses rising more than we expect.”

In a Monday press conference, Chalmers argued that the spending commitments made by the Labor Party had been “more than offset” by improvements in the budget.

Prime Minister Anthony Albanese also brushed off S&P Global’s warning on Monday night, telling ABC’s 7:30 program that “the triple A credit rating is there”.

Both major parties have announced a swathe of spending commitments in the lead-up to the election. Sweeteners such as Labor’s “top-up” tax cuts would cost the budget $17 billion, while the Coalition’s halving of the fuel excise would cost $6 billion. Both parties have also pledged $8.5 billion to boost bulk billing rates.

Accompanying these spending commitments, the major parties have proposed drastically different approaches to cost-saving and the role of the public service. While the Labor government has pledged to cut spending on external consultants, the Liberal Party has proposed to shrink the public service workforce.

Peter Dutton also said he would slash spending by cutting the government’s $20 billion Rewiring the Nation Fund, which aims to upgrade grid electricity infrastructure and support the net-zero transition, the $10 billion Housing Australia Future Fund, which funds social and affordable housing, and the $14 billion production tax credits for green hydrogen.

The Liberal Party also vowed to “cut government waste” on its website, promising that “a Dutton coalition government will halt the growth of the Canberra-based public service”.

In contrast, Labor has committed $10.9 million over two years to create an in-house consulting capability and is trying to shave $3 billion off outsourcing expenses by 2026–27, the Financial Review reported.

A 2023 finance department audit found that the Coalition’s use of a “shadow” workforce of 53,900 full-time equivalent staff had cost the government $21 billion.

“Labor will continue the work needed to rebuild the public service after inheriting one that was hollowed out after a decade of the Liberals’ outsourcing, underinvestment and undervaluing of the work that public servants do and the services they deliver,” Labor said in a press release.