NSW government cuts $450 million in contactor and consulting spend
The big end of the Australian consulting industry has been copping a hard time from the federal government’s crack-down on advisory spend, but state-level cut-backs are also having an impact.
The Australian Labor Party swept into power in 2022 with plans to slash the federal government’s advisory expenditure, claiming $4 billion worth of savings to date, which has had a material impact on the bottom lines of big consulting.
Less well documented, Australia’s state leaders have also been in on the cost-cutting act, with the NSW Labor government now boasting of an almost half-a-billion-dollar reduction on outsourcing over its past twelve months in office.
According to finance minister Courtney Houssos, the government has slashed its contractor and advisory bill by $450 million since being re-elected back in 2023, with a sizeable chunk of that being deprived from the pockets of the Big Four. Previously, the quartet were pulling in close to $100 million in annual state contracts, despite earlier alarms over procurement shortcomings.
According to the released figures, the ‘consultancy’ component of the savings amounted to $72 million spanning all government agencies, a drop from $130 million to $58 million over the past two financial years. As per industry publication the Mandarin, citing ABS data, local public sector employment also rose by 17,200 positions to almost 558,000 employees during that same period.
Digging deeper into the available data, the Mandarin pegs the corresponding NSW public sector wage costs to have increased from $48.44 billion to $52.35 billion – an overall differential in favour, but roughly about the same price as the $450 million in touted savings, but with the added benefit of bringing longer-term skills and capabilities back in-house through permanent positions.
“Delivering on these savings required a forensic approach to the state’s accounts and a culture shift which prioritises harnessing the expertise and knowledge within the existing public service,” Houssos stated in reference to the release. “Instead of wasting money, we’re bolstering the public service’s capacity, (but) given the scale of the problem we inherited, there is still much work to do.”
Despite the evidence of longer-term overall gains, the NSW public sector vs private advisory political battle is playing out against a broader federal backdrop, which in a local election year following on from a US cycle marked by ‘Doge’ and the promise to dramatically cut government spending may prove a difficult position for the incumbent government to articulate and defend.
