Federal Labour spend at seven-year low

Article Appeared In: The Australian - www.australianit.news.com.au
Author: Jennifer Foreshew
Date: August 11th 2009

FEDERAL government technology labour hire contracts are down by more than 35 per cent from July last year to May this year as the effects of the Gershon review and the global financial crisis continue, a study finds.

The second Peoplebank Intermedium Federal ICT Labour Hire Index, released today, shows a reduction in tech spending over the past 24 months has resulted in the biggest falls in hi-tech labour spending in more than seven years.

The index is calculated on the number and value of tech contracts.

Peoplebank chief operating officer Peter Acheson said federal agencies had embraced the recommendations of the Gershon review to cut costs through strategies including replacing contractors with full-time personnel.

Some agencies were also keeping IT spending to business-as-usual, and had deferred new projects. This, coupled with the economic uncertainty, had put downward pressure on both demand and contractor rates. This contrasts with the national market, where a rise in demand for technology contractors in June rose by about 5 per cent for the quarter.

In 2007-08, the federal government let contracts volume was 4188 contracts to the value of $626 million, with the average contract value being $149,480.

In 2008-09, the volume dropped to 3651 contracts, with a value of $444 million, and the average contract value was $121,541. In May, the index recorded a 54 per cent fall since the 2006-07 peak.

In the June quarter of 2008-09, technology labour contracts were down by 63 per cent compared with the same period in 2007-08.

The number of contracts reported has almost halved from 1040 in the June quarter of 2007-08 to 544 in the June quarter of 2008-09.

The study shows there was a drop in the number of 12-month contracts being offered, compared with three to six-month contracts.

The findings support observations by Peoplebank, the country’s largest technology recruiter, of contractor rate reductions on average of up to 20 per cent as of June 30, compared with the same period last year.

There was evidence in this year’s federal budget of continuing growth in permanent public service staff numbers over 2009-10, the report says. “In 2009-10, we are not expecting there will be a big jump in hiring,” Mr Acheson said. “We think from 2010-11 is when you will start to see a spike in the hiring because of some of the well-known projects like the national broadband network and the Department of Defence white paper and capability plan.”

Tim Conway, research head and principal consultant at government technology researcher Intermedium, said the major government projects including infrastructure spending, the NBN and Defence white paper and capability plan would collectively generate more than $13.8 billion in technology activity — half of which would come to market by 2013.

That suggested a boom market for hi-tech skills in the medium term, he said.

“The issue might well be if the economy turns up that the public sector will revert to this old practice of getting people any way they can over long contracts basically to run their business-as-usual activities because they are the least competitive employer,” he said.