Australia’s shift away from external labour under the Albanese government is a welcome correction, but rebuilding the public service requires more than reducing consulting expenses. A capable public service is essential but the challenge is ensuring reforms deliver genuine capability rather than symbolic savings.

For decades, the Australian Public Service operated within a structural contradiction. Governments expected it to deliver increasingly complex programs while constraining its ability to build and maintain its capability. The result was a growing dependence on external labour — consultants, contractors, labour hire and outsourced providers performing work that could have been done by public servants.

By 2021–22, this externalised workforce cost the commonwealth $20.8bn. But the deeper cost was institutional: erosion of expertise, weakened stewardship, and gradual displacement of the APS from its role as a source of independent advice.

The Albanese government has reduced spending, converted contractor roles into APS positions and introduced the Strategic Commissioning Framework, which re-establishes a clear principle: core public work should be undertaken by public servants unless there is a compelling reason otherwise. The government has also lifted the staffing cap and invested in digital, cyber and data capability.

These reforms matter. They signal a shift away from the outsourcing reflex that defined the previous era. But they also highlight a deeper challenge: rebuilding capability requires a sustained strategy to develop and retain the expertise the APS needs. This is where the system remains vulnerable. The APS faces persistent difficulties attracting and retaining talent, particularly in digital and complex program design. Recruitment processes are slow, career pathways uneven, and in many areas internal capability has atrophied to the point where rebuilding requires not only new staff but stronger systems and learning cultures.

The Bureau of Meteorology’s website redevelopment illustrates the problem. The 2025 outsourcing issues echoed the troubled 2022 overhaul: outsourcing to address limited internal capabilities led to poor outcomes. The repetition suggests a persistent capability gap. When agencies lack the expertise, outsourcing becomes risky and insourcing becomes difficult.

Similar tensions appear elsewhere. The outsourcing of ATO call centre work and continued reliance on external providers for Centrelink phone lines sit uneasily with the narrative of capability rebuilding. Yet these decisions remain permissible under the new framework through exceptions for “short-term surges”, “failed recruitment” and “specialist infrastructure”. This reflects how easily external labour persists when internal capability is fragile.

Another issue is that the government tracks the fall in expenditure, but not the net cost once new APS staffing, training and capability investments are included. Without that broader picture, it is difficult to assess whether reforms deliver genuine value or simply shift spending from contractors to public servants.

The political debate reflects these tensions. The Greens argue the reforms do not go far enough and call for deeper reconstruction to restore the APS’s capability to provide independent, evidence-based advice. The Coalition emphasises efficiency and warns against bureaucratic expansion. Independents such as David Pocock and Jacqui Lambie focus on transparency, capability and the long-term health of the system.

Across these positions, a shared recognition emerges: the APS cannot continue as it has. But the preferred pathways diverge.

Labor has begun rebuilding capability through initiatives such as a new internal consulting unit, strengthened professional streams, expanded APS Academy programs and digital capability pathways. These steps are important but remain early measures without a strategy matching the scale of capability lost.

Capability is not static. It must be built, maintained and renewed. It also requires a culture that values expertise and stewardship as much as compliance.

Reducing external labour may save money, even if the net gain has not yet been fully assessed. But rebuilding and sustaining capability will determine whether the APS can meet the demands of a complex century. The real test is whether Australia can move beyond the politics of headcount and savings toward a long-term strategy for a public service capable of governing well.

Emmanuel Josserand is a professor of management at EMLV Paris and associate researcher at Sydney University Business School

Emmanuel Josserand is a professor of management at EMLV Paris and associate researcher at Sydney University Business School

Consulting (Australia)

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