AusAID is bracing for sweeping staff cuts after Prime Minister Tony Abbott ordered it be absorbed back into the foreign affairs department.
It's understood AusAID Director General Peter Baxter has already resigned as Mr Abbott flagged the merger as part of a bid to cut "duplication and waste" across the public service.
Mr Abbott says AusAID, which administers Australia's $5 billion official aid program, will be "integrated" back into the Department of Foreign Affairs and Trade (DFAT).
The move will enable the aid and diplomatic arms of Australia's international policy agenda "to be more closely aligned", he said in a statement shortly after he was sworn in on Wednesday.
The announcement sent shockwaves through AusAID.
One senior AusAID official say the agency's roughly 1300 Canberra-based staff members will be bracing for wholesale change.
"It doesn't bode well," the official told AAP on condition of anonymity.
"I would say a lot of people are going to be out of work."
The move comes after the coalition declared it would stop the planned growth of the aid program, effectively stripping it of $4.5 billion over the forward budget estimates.
DECISION IS DEVASTATING: ACTIONAID
Anti-poverty group, ActionAid Australia says it is concerned by what the decision will mean for Australia's aid program.
“We are dismayed by this news, which comes on the back of $4 billion cuts to the aid budget and failing to nominate a dedicated Minister for International Development," Executive Director Archie Law said.
"The government’s short sighted decision to integrate AusAID into DFAT will have massive and devastating effects on Australia’s aid program and on the people living in poverty that the program supports.
“With AusAID reporting to DFAT, we will inevitably see the aid budget used to promote Australia’s national interests first and foremost. Aid programs that don’t contribute to Australia’s interests will be the first to go, and we are extremely concerned about what this will mean for the most marginalised communities in some of the world’s poorest countries. The message Tony Abbott is sending to the world’s poor is that Australia is no longer committed to ending poverty.
“AusAID has been delivering an aid program that eradicates poverty in the world’s poorest communities, while DFAT’s objective is to promote and protect Australia’s national economic and political interests.
“We want to see this government stand by its foreign policy and deliver an effective aid program. We’re calling on Tony Abbott and Julie Bishop to immediately reassess this rash decision.”
AusAID split from DFAT and became an executive agency under Labor back in July 2010.
At June last year, AusAID employed 2124 people - 1301 in Australia and 823 overseas.
Of the overseas staff, 227 were members of the public service and 596 were "locally engaged".
Mr Abbott says DFAT will also take responsibility for Australia's participation in climate change negotiations, "bringing the right expertise to bear on the management of these negotiations".
THREE DEPARTMENT HEADS SACKED UNDER ABBOTT GOVERNMENT
Three high profile public service department heads have also been sacked by the incoming Abbott government.
The departures of Andrew Metcalfe at Agriculture, Don Russell at the Industry Department and Blair Comley at Resources, Energy and Tourism have been announced today.
While announcing the moves, Mr Abbott paid tribute to the three public service departmental bosses he sacked on Wednesday.
"I take this opportunity to acknowledge three former Secretaries, Dr Don Russell, Mr Blair Comley PSM and Mr Andrew Metcalfe AO," the Prime Minister said.
"Each of these Secretaries has made a substantial contribution to public life in Australia and I wish them well for the future."
Read Prime Minister Tony Abbott's full statement below.
As part of the Machinery of Government Changes agreed by the Governor-General the Honourable Quentin Bryce AC CVO this morning, Her Excellency has made a number of appointments of Secretaries.
Ms Lisa Paul PSM AO has been appointed as the Secretary of the Department of Education. Ms Paul has been Secretary of the Department of Education, Employment and Workplace Relations and the Department of Education, Science and Training and brings a wealth of experience and knowledge to this new Department.
Dr Paul Grimes PSM has been appointed as the Secretary of the Department of Agriculture. Dr Grimes was formerly Secretary of the Department of Sustainability, Environment, Water, Population and Communities and has had a distinguished career at the State and Commonwealth levels in a number of Departments.
Ms Glenys Beauchamp PSM has been appointed as the Secretary of the Department of Industry. Ms Beauchamp has been Secretary of the Department of Regional Australia, Local Government, Arts and Sports. She has had an extensive career in the Australian Public Service at senior levels with responsibility for a number of significant government programmes.
Two new Secretaries have been appointed. Dr Gordon de Brouwer PSM has been appointed as the Secretary of the Department of the Environment and Ms Renée Leon PSM has been appointed as the Secretary of the Department of Employment.
Dr de Brouwer has most recently been an Associate Secretary in the Department of the Prime Minister and Cabinet where he has had primary responsibility for advising on Australia’s participation in the G20 process.
Ms Leon has been a Deputy Secretary in the Department of the Prime Minister and Cabinet where she headed the governance group. She was previously Chief Executive of the ACT Department of Justice and Community Safety and has held a number of senior positions in the Commonwealth Attorney-General’s Department.
I take this opportunity to acknowledge three former Secretaries, Dr Don Russell, Mr Blair Comley PSM and Mr Andrew Metcalfe AO. Each of these Secretaries has made a substantial contribution to public life in Australia and I wish them well for the future.
Dr Martin Parkinson PSM has advised the Treasurer that he will be standing down next year. He has agreed to stay on to the middle of 2014. The Government will be discussing a further appointment with him next year.
I look forward to working again with Australian Public Service.