Australia to Deepen Civil Services Cut as Budget Deficit Widens

Australia will deepen cuts to the civil service as agencies are axed in the search for savings after the government said the budget deficit would be larger than expected.

The number of public sector workers will be reduced to a level last seen in 2007-2008 as the duplication of services among departments is streamlined, Finance Minister Mathias Cormann said in an interview on Sky News. The government will scrap 175 agencies as part of spending cuts to be announced Dec. 15 when it releases the mid-year economic and fiscal outlook, the Australian newspaper reported today.

Australia is facing a wider deficit than previously estimated as trade declines and commodity prices slump, Treasurer Joe Hockey said yesterday. Iron ore, which Cormann said accounts for 20 percent of export income, tumbled almost 50 percent this year and fell to a five-year low last month.

“What is happening with commodity prices is challenging,” Cormann said. “The overwhelming objective here is to ensure that we streamline the operation of the public service. If you reduce the number of government bodies, there will be an impact on jobs.”

The nation’s employers added 42,700 jobs in November, the most in more than two years and almost three times economists’ forecasts, government data showed this week. The jobless rate was 6.3 percent, up from 5.8 percent a year earlier.

Australia announced cuts to foreign aid, welfare and the public service in May when it forecast a A$29.8 billion deficit for the 12 months through June 2015. That will widen to A$37 billion, according to the median estimate of 13 economists surveyed by Bloomberg News.

Before it's here, it's on the Bloomberg Terminal.