Agencies return to labour hire as APS rebuild falters

By Margaret Hale · 2026-07-07

The pledge and the price tag

The Albanese government came to office in 2022 promising to rebuild Australian Public Service capability and claw back $6.4 billion from non-wage expenses. The numbers emerging from that rebuild now tell a more complicated story.

The 2023-24 Audit of Employment found that total APS expenditure on consultants, contractors and labour hire reached $5.972 billion in FY 2023-24, comprising $3.961 billion on contractors, $1.475 billion on labour hire and $536 million on consultants.^[1] That equates to one dollar in every $16 of departmental expenses, and it makes the scale of the remaining task plain.

Where the rebuild stalled

The government's own accounting acknowledges some genuine movement. Since the October 2022 Budget, the Albanese government has converted over 13,000 external labour roles to public service positions, with a further 1,400 conversions flagged since the 2025-26 Budget.^[2] Finance Minister Senator Katy Gallagher put the case plainly in a March 2026 radio interview, saying: "So, of the new jobs, about 75 per cent of those are conversions from expensive labour hire into permanent public service jobs ... they had 54 000 external labour hire workers for the public service."^[7]

The evidence of agencies reverting to old habits continues to accumulate. The Community and Public Sector Union estimated in its pre-budget submission that more than one-third of agencies had failed or only partially met their targets to reduce use of contractors, consultants and labour hire under the APS Strategic Commissioning Framework.^[5] CPSU National Secretary Melissa Donnelly said: "We're losing trained and trusted public sector workers in the name of budget savings, while big consulting and labour hire firms are still cashing in."^[5]

PM&C: contracts extended, headcount short

The Department of the Prime Minister and Cabinet offers perhaps the most telling illustration. Its half-yearly report to 31 December 2025 recorded 160 active labour-hire contracts and disclosed that 112 of them had been extended during the first half of 2025-26.^[3] At the same time, PM&C's actual Average Staffing Level sat at 1,061, against a budgeted ASL of 1,102, a shortfall of 41 positions.

PM&C reported 160 active labour-hire contracts as at 31 December 2025 and extended 112 of them in H1 2025-26, while its actual ASL of 1,061 lagged its budgeted ASL of 1,102. The department was simultaneously below its own staffing target and extending the external arrangements that insourcing was supposed to replace, an awkward position for a government that has made APS capability a centrepiece of its public administration agenda.

DSS and the detail in FOI disclosures

Freedom of Information releases from the Department of Social Services add granular texture to the aggregate figures. DSS engaged DDP Consulting Pty Ltd to provide two project managers under a labour-hire arrangement running from 1 April 2025 to 30 June 2027, at a total cost of $662,640.^[4] DSS also engaged Hudson Global Resources (Aust) Pty Ltd for after-hours media and content writers from 1 July 2025 to 31 December 2025 at $142,230.80.^[4]

Individual contracts of this scale are unremarkable in isolation; cumulatively, they illustrate the pattern the Strategic Commissioning Framework was designed to interrupt. Project managers and media writers are not specialist functions requiring transient external expertise; they are, by almost any definition, the kind of enduring operational capacity the APS should be building inside its own workforce.

Political contest and the comparison that keeps surfacing

Opposition Leader Peter Dutton sought to reframe the debate in his Budget Reply in May 2024, saying: "It's worth pointing out that in the final year of the Morrison government, the public service was revealed to have spent $20.8 billion on external contractors and consultants."^[6] The figure gestures at a truth neither side is entirely comfortable with: structural reliance on external labour did not begin in 2022 and will not be resolved by a single term's worth of conversion targets.

Donnelly was less interested in the historical comparison. "Reports of agencies preparing for cuts or staffing freezes are alarming when the APS rebuild remains incomplete," she said, pointing to a risk that budget pressures in 2025-26 could actively reverse what modest progress the Framework had achieved.^[5]

What the 2026-27 trajectory reveals

The 2026-27 Budget Papers note the further 1,400 APS role conversions since the 2025-26 Budget, a figure the government has presented as evidence of continued momentum.^[2] Senate estimates committees are expected to probe the gap between that headline and the agency-level disclosures showing extensions and new engagements continuing in parallel. The Audit of Employment series will produce its next update against a backdrop in which the CPSU's one-third failure rate, PM&C's 112 extensions, and DSS's $804,870 in fresh labour-hire arrangements all sit on the public record as at December 2025.

Margaret Hale

Margaret Hale covers politics and policy for Bushletter. She brings a literary sensibility to business and political commentary.