Govt not mulling public service job cuts

25 Sep 2012, 8:31 pm   -   Source: AAP
Finance Minister Penny Wong says the government won't be looking for job cuts in the public service. (AAP)

Finance Minister Penny Wong says the government won't be looking for job cuts in the public service. (AAP)

Finance Minister Penny Wong insists the government won't be looking for job cuts in the public service as it seeks to make budget savings.

The federal government is cracking down on waste in the public service in its endeavour to bring the budget back to surplus this financial year, but Finance Minister Penny Wong insists it won't be cutting jobs in the sector.

The government has forecast a $1.5 billion surplus in 2012/13, but Treasurer Wayne Swan warned on Monday that substantially lower commodity prices will significantly hit budget revenues, which means the government will have to find more savings.

The government is looking for $550 million worth of savings across 2012/13 and the forward estimates by limiting public servant business class travel, cutting back on the use of consultants, moving recruitment advertising online and publishing more on the net.

"Our approach is one that targets non-staffing efficiencies," Ms Wong told reporters in Canberra on Tuesday.

"We don't slash jobs, we don't focus on slashing jobs in the way the coalition does."

Shadow environment minster Greg Hunt said if the government was serious about cutting advertising costs, it should stop the taxpayer-funded carbon tax campaign.

"The government is spending $70 million on advertising the carbon tax including a television campaign which failed to even mention the carbon tax," Mr Hunt said in a statement.

The government's urgency to return a surplus by making further swingeing budget cuts has added to the case for further reductions in interest rates by the Reserve Bank of Australia (RBA) to support growth in a still uncertain global environment.

In its six-monthly financial stability review released on Tuesday, the central bank warned the eurozone's problems would continue to pose "heightened risks" to global stability ahead.

International Monetary Fund (IMF) chief Christine Lagarde agrees, telling a Washington think-tank on Monday that Europe remains the "epicentre of the crisis".

She also warned the IMF was likely to lower its growth estimates for the global economy when they were published in October.

Despite this backdrop, the RBA said the Australian banking system had remained relatively strong, with pressures in international wholesale funding markets having eased since last year.

"While the Australian banks have little direct asset exposure to the most troubled euro area countries, they remain exposed to swings in global financial market sentiment associated with the problems in Europe," the RBA said.

However, the banks should be more resilient to such episodes, particularly with around half of the banks funding now coming from customer deposits.

But it does warn that in a competitive environment where demand for credit is likely to remain moderate demand banks must "resist the pressure to ease lending standards to gain market share in the pursuit of unrealistic profit expectations".

Commonwealth Securities chief economist Craig James said the RBA was effectively saying that if there was any policy easing to be done to boost economic growth, "it is by us".

"The door certainly remains open to a further rate cut," Mr James said.

"We favour a move in November but can't rule out some stimulus being delivered next week."

Financial markets are pricing in a 60 per cent chance of a cut in the cash rate to 3.25 per cent from 3.5 per cent at next Tuesday's monthly central bank board meeting.

Treasurer Wayne Swan later welcomed Ms Lagarde's comments about the critical imperative for leaders to take action on reforms to tackle weak or negative growth in their economies.

"While acknowledging recent steps in the right direction from US, European and Japanese central banks, Ms Lagarde delivered a sobering warning about the consequences of inaction," he said in a statement.

"Despite our economic fundamentals being amongst the strongest in the world, no country - including Australia - is immune from global instability."

Mr Swan said lower commodity prices made it much harder to deliver a surplus this year, but the government remained committed to doing so because it was the best defence at a time of global uncertainty.

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