Federal Agencies Abandoned Outsourcing Targets
Fourteen Australian federal agencies scrapped reduction targets for the 2025-26 fiscal year after failing to meet goals.
Updated on Oct. 13, 2026 in Employment
Live Poll
Do you trust that federal agencies are using taxpayer funds efficiently by prioritizing external contractors?
In the 2025-26 fiscal year, 14 federal agencies chose to discontinue outsourcing reduction targets following their failure to achieve them in 2024-25. The government has also decided to scrap all mandatory reduction targets for agencies beginning in the 2026-27 period.
Why it matters
The government cited complexity in target tracking as the reason for abandoning these goals. This policy shift follows a period where agencies reclassified public service jobs as non-core work to bypass existing outsourcing restrictions.
Combined contractor and consultancy contracts for 14 agencies rose 35 per cent to $100.5 million in 2025-26, compared to $74.2 million in 2023-24. Additionally, consultant contract commitments grew by 42 per cent, reaching $344.2 million in 2024-25.
The players
AUSTRAC
The Australian Transaction Reports and Analysis Centre is the national financial intelligence agency responsible for preventing money laundering and terrorism financing.
Australian Submarine Agency
The Australian Submarine Agency is a federal organisation established to manage the delivery and sustainment of the nation's nuclear-powered submarine programme.
The details
AUSTRAC committed $60.9 million to labour hire and consultancy in 2025-26, while the Australian Submarine Agency directed $20.3 million toward similar external support. These figures reflect an broader trend where agencies reclassified roles as non-core work to circumvent established staffing limits.
Timeline
Combined contractor contracts totalled $74.2 million in 2023-24.
Agencies failed to meet outsourcing reduction targets during 2024-25.
Agencies opted out of setting new reduction targets in 2025-26.
Mandatory reduction targets are set to be scrapped starting in 2026-27.
An APS-wide progress report is scheduled for release in November 2026.
Macro View
This shift in agency outsourcing practices marks a departure from previous attempts to control public sector labour costs through centralised targets. The current trajectory mirrors historical cycles where government efforts to limit external hiring have been superseded by the operational demand for specialised advisory services.
The abandonment of these targets suggests that federal spending on external advisers will remain a significant portion of the public budget. Taxpayers may see continued reliance on consultancy firms for core functions rather than internal public service staff.
The takeaway
The government's decision to scrap targets highlights the ongoing challenge of balancing specialised workforce needs with internal staffing limits. Readers should monitor future budget papers to see if the increased reliance on consultancies affects overall department service efficiency.
What happens next
A comprehensive report on APS-wide progress regarding these contracts is scheduled for release in the State of the Service Report in November 2026.
Further reading
Learn more about local labour trends in the Employment section.
Source note: This article includes information reported by The Canberra Times.
Live Poll
Do you trust that federal agencies are using taxpayer funds efficiently by prioritizing external contractors?
