Government Cuts Public Sector Costs by $1.5b, Boosts Frontline Workforce

New Zealand’s public service is undergoing a major transformation, with frontline roles increasing and contractor and consultant spending slashed by nearly $1 billion, according to Public Service Minister Judith Collins. The latest figures highlight a renewed government focus on efficiency, accountability, and value for money in the delivery of public services.

Major Savings and Spending Reductions

Since taking office, the Government has achieved $915 million in savings from reduced contractor and consultant expenditure across government agencies—more than double the initial savings target of $400 million. The new fiscal controls will cap total spending on contractors and consultants at $1.25 billion across the public sector.

“We committed to ensuring taxpayers get better value for money from their public service, and that every dollar is used in the best way possible,” said Minister Collins.

She said the savings form part of a broader push to restore discipline to public spending and refocus government resources on the services that directly impact New Zealanders.

Leaner Bureaucracy, Stronger Frontline

Alongside reduced external spending, the size of the public service workforce has decreased by nearly 5% since the Government took office, falling to 62,654 full-time equivalents (FTEs) as of 30 June 2025.

While overall numbers have declined, the balance of roles has shifted significantly:

• Frontline positions grew by 6.9% (1,883 FTEs) in the past two years.

• Back-office roles—including policy analysts, clerical, administrative, and management positions—fell by 6.5% (2,345 FTEs) over the same period.

“The emphasis has shifted following Government direction to prioritise savings in back-office functions while protecting and improving frontline services,” Collins said.

The data shows that while head office departments have been trimmed, roles directly related to service delivery—such as teachers, nurses, police officers, corrections staff, and community support workers—have been preserved and, in many cases, expanded.

Restructuring and Redundancy Costs

The rebalancing of the workforce has not come without challenges. Over the past year, 1,533 redundancies were recorded across the public service, with redundancy payments totalling $80.4 million.

Collins said these costs must be viewed in the context of the ongoing $1.5 billion in annual savings the changes will generate.

“Redundancy costs need to be seen in the context of overall savings,” she said. “These changes are about delivering better value for money and ensuring the public service is focused on delivering the services New Zealanders need and which make a difference in their lives.”

Building a More Accountable Public Sector

The reforms reflect a growing push within government to enhance efficiency, transparency, and performance management across the public service. Departments have been directed to ensure resources are channelled toward essential functions and measurable outcomes.

Analysts note that the Government’s approach mirrors similar reforms implemented in other OECD countries, where rising public expenditure and administrative complexity have prompted structural adjustments aimed at boosting productivity.

Collins said the shift would not compromise the quality of services New Zealanders receive but would instead streamline the way those services are delivered.

“Today’s results are a sign that our approach is working,” she said. “We’re moving from a culture of bureaucracy to one of delivery, where people see the benefit of their taxes reflected in tangible outcomes.”

Looking Ahead: A Focus on Frontline Impact

The Minister signalled that the Government will continue to review spending across departments, ensuring efficiency gains are sustained while protecting critical frontline functions. Departments are also being encouraged to reduce reliance on consultants by strengthening in-house expertise and using technology to improve service delivery.

Officials within the Ministry of Finance estimate that ongoing savings from reduced contractor and consultant use, combined with tighter workforce management, will contribute to stronger fiscal resilience and a more agile public sector capable of adapting to future challenges.

Public Reaction and Broader Context

The reforms have been met with mixed reactions. Public sector unions have expressed concern about job losses and the pace of change, while business and taxpayer groups have welcomed the Government’s commitment to curbing bureaucracy and focusing resources where they have the most impact.

Independent economists have noted that the shift toward a “smaller, smarter” public service is consistent with the Government’s broader fiscal strategy, which seeks to contain public spending while maintaining service quality.

“This is not about cutting for the sake of cutting,” Collins said. “It’s about rebuilding a public service that’s efficient, focused, and dedicated to delivering real results for New Zealanders.”

The Public Service Commission will continue to monitor workforce trends and spending levels to ensure agencies remain within the new spending limits and staffing priorities.