Another year, another federal budget. This time, right before we head to a federal election. Once again, Treasurer Jim Chalmers handed down the 25/26 federal budget which some may say might be the last time for the Labor government pending on what happens post the Australian people heading to the polls. Last time we reported on the budget, we were still in the middle of high interest rates from the Reserve Bank, fast forward to now and we’ve had some relief with a cash rate drop.  

Let’s get into exactly what the budget means for the tech and digital hiring market as well as what our experts, here at Talent, have to say about it. 

The economy  

Wages grew 0.7% in the December quarter, the slowest quarterly rate since March 2022, bringing annual wages growth to 3.2%. Unemployment remained flat at 4.1% in February.  

Chalmers said the Australian economy had “turned a corner”, highlighting 0.6% GDP growth in the December quarter. 

Contingent workforce  

The government will further cut spending on consultants, contractors and labour hire that supplement the public service, reducing its outsourcing spend by a further $720 million over the forward estimates. 

Finance Minister Katy Gallagher says a key federal agency will get a boost to its permanent workforce in, as the Albanese government pledges to convert more labour-hire workers into employees and drive savings from reduced outsourcing to $4.7 billion.  

The government plans to reduce spending on public service contractors and consultants by $2.1 billion. This follows previous reductions, totaling $4 billion since 2022–2023, aiming to decrease reliance on external labor. These cuts may affect contingent workers engaged in government projects.​ 

Robert Ning, Managing Director, Talent Canberra, said “While the use of labour hire/contractor usage for front-line services is expected to continue to decline, the demand for specialist skills such as ICT/Digital/Cyber remains very high.  In the coming years, the APS will face increasing pressure on technology delivery and legacy ICT sustainment due to a wave of retirements in these domains. Talent anticipates that demand for skilled technology contractors will remain steady as the APS implements its recently released Data, Digital, and Cyber Workforce Plan.” 

Job switchers 

The government will ban non-compete clauses for workers earning less than $175,000, meaning they will be free to move to a competing business or start their own. Non-compete clauses in contracts affecting up to 3 million workers will be banned for low- and middle-income earners, making it easier for people to join rival firms. The government says this could boost their wages by up to 4 per cent, or $2500 per worker annually. 

Anthony Whyte, Managing Director, Talent Adelaide said, “Abolition of ‘non-compete’ clauses for most workers – The proposed elimination of non-compete clauses for the majority of Australian workers could significantly reduce the demand for employment lawyers. However, how will this change affect employers and employees in the future?” 

Simon Yeung, Managing Director, Talent Melbourne said, “This is a huge win for employees. Anyone earning less than this shouldn’t have been restricted in the first place. It opens more opportunities for them for career development which is a good thing for the tech sector. In saying that, given the scarcity of certain skillsets in the tech field, my advice to employers is that they need really to look after their staff. Culture, EVP, benefits, DEI, need to take a top focus. At the end of the day, if businesses don’t want to lose these team members to competitors, they need to have a competitive edge outside of salary/equity. In terms of how this is going to affect the tech hiring market, I feel there is going to be a potential slight increase with candidates coming onto the market who may be looking for more opportunities. The question is though, how often was this non-compete clause policed anyway?”  

Temporary migrants 

Chalmers is forecasting that overseas migration will drop by 75,000 in the next financial year.  

Net overseas migration is forecast to drop from 335,000 this year to 260,000 next year and then 225,000 the year after. 

Public service workforce  

The size of the public service will expand by another 4200 as Labor delivers “new and expanded government services, policy and regulatory responses.” 

The budget papers estimate there will be 213,349 public servants next financial year, up from 209,150 at the time of the 2024-25 budget. 

Next year there will be 48,000 more public servants than in 2018-19. 

1700 positions will be added, predominantly at the Australian Taxation Office and the Australian Securities and Investments Commission. 

Anthony Whyte, Managing Director, Talent Adelaide, said, “While these savings appear notable, the Coalition has criticized the effectiveness of adding 36,000 public servants, arguing that it has not markedly improved public services. Notably, the reasons for employing external consultants and contractors are often overlooked. These resources provide specialised expertise, cost efficiency, flexibility, a focus on deliverables, strategic insights, and an outside perspective, making them valuable for specific projects or when specialised skills or advice are needed.” 

Artificial Intelligence 

There wasn’t much in the budget for AI however the last couple of years have seen quite a bit of investment in this space. Last year we saw $39.9 million go towards the safe and responsible adoption of AI and the 2023 budget saw $102.2 million over five years set aside to support businesses integrate quantum and AI into their operations.  

We’re still likely to see investment in this space depending on how the election goes. 

Final thoughts  

Anthony Whyte, Managing Director, Talent Adelaide, shared his overall thoughts, “The budget released is clearly aimed at winning over voters, as Labour recognises that many Australians are facing financial hardships. This explains their focus on providing relief for the cost of living. Despite the alarming debt situation, there is little to no investment in technology, which underscores the short-sightedness of this budget.” 

Robert Ning, Managing Director, Talent Canberra, said, “Overall, not as good for technology in government as the previous two budgets, however that was to be expected.  With the Election due to be called shortly, the focus of this budget was around relieving Cost of Living pressures.  Cheaper medicines, energy rebates, bulk billing and HECS Debt reductions leading the charge.”