What’s Driving Retention Challenges in Australia’s Public Sector

Australia’s public sector has experienced a year of cautious stability amid broader efforts to manage costs and align with shifting government priorities. While headcount growth has varied across local, state, and federal levels, state governments remain the dominant employer, accounting for approximately 77% of public sector employment, according to ABS data. Commonwealth and local governments follow with 15% and 8% respectively.

Budgetary constraints are shaping workforce trends, with nearly half of public sector clients anticipating a decrease in available funds. In recruitment, state government roles have seen more activity, while federal entities show a shift from temporary roles to permanent staffing. The Australian Public Service Commission reports a 12.7% increase in permanent roles, alongside a decline in non-ongoing positions.

Turnover in the public sector is primarily driven by job insecurity, limited career advancement, and salary concerns. However, retention strategies that emphasise flexible work, job purpose, and community impact are helping employers maintain engagement. Sectors such as healthcare, social assistance, professional and technical services, and education continue to see growth, while agencies like the ATO, NDIA, and Department of Defence are expected to expand hiring.

Despite recruitment demand, the public sector faces significant structural challenges, including staff shortages and slow hiring processes. However, new approaches in flexibility, technology adoption, and cross-department collaboration are creating opportunities for improvement.

“Eighty-one percent of managers reported that they lost candidates due to the long recruitment processes.”

Nicole Consterdine, Recruitment Consultant at people2people, spoke with Chelsea Dale, Major Accounts Manager, about the changes and opportunities shaping Australia’s public sector employment landscape.

Dale noted varying trends between government levels: “Some government entities are increasing headcount more than others.” While recruitment has been strongest at the state level, federal agencies are shifting towards more permanent hires. “Non-ongoing roles decreased from 20.5%, whereas ongoing… roles increased by about 12.7% from the year before,” she said.

Turnover remains a challenge, driven by cost-of-living pressures and job insecurity. Dale outlined the top reasons for employee departures: “Lack of job security, lack of career progression, low salary, and lack of employee benefits.” To counter this, she recommends reinforcing the value of public sector roles, highlighting work-life balance, flexibility, and a sense of purpose.

Public trust and political shifts have also influenced direction and hiring. “We’d all be aware of all the elections… so what that means is different directions depending on who is elected,” Dale commented. This uncertainty adds complexity to an already slow hiring process. “Eighty-one percent of managers reported that they lost candidates due to the long recruitment processes… 85% spent up to two months filling a perm role,” she added. To address this, Dale advises ensuring approvals are finalised before recruitment begins and recommends streamlined interviews with all decision-makers present.

Skills shortages further challenge public sector operations. “The top skill shortages are in operational and delivery, policy, data, governance, and project work,” said Dale. Regional and specialised roles also remain difficult to fill due to limited talent pools and geographical constraints.

However, opportunities are emerging. Flexibility is a standout area. “We’re seeing that the teams can be based in different states, not just all in one location,” Dale said. This distributed approach supports diversity and inclusivity. That said, New South Wales government has taken a different stance, with a push to return to office-based work, which may influence future attraction and retention.

Cross-department collaboration is another growing trend. “We’re seeing more openness to team members transferring between departments,” she noted. This not only enhances career development but also helps retain skilled staff.

Technology continues to reshape government operations. AI, data privacy, and service delivery improvements are top of mind. Agencies are investing in internal process streamlining, which could accelerate hiring and free up staff to focus on higher-value tasks.

Sustainability is also gaining traction in public sector partnerships. Dale cited people2people’s own initiative: “We track our carbon emissions… and we’ve actually planted over five thousand trees in Australia so far.” Such alignment with environmental goals can strengthen agency-partner relationships and appeal to value-driven candidates.

Practical Takeaways for Public Sector Employers

• Streamline recruitment by securing role approvals in advance and consolidating interview stages to minimise delays.

• Emphasise non-monetary benefits—flexibility, purpose, and job security—to enhance retention amid cost-of-living concerns.

• Expand remote work policies to build diverse, cross-state teams and support inclusivity.

• Encourage interdepartmental transfers and project pool models to retain talent and support career growth.

• Invest in technology that supports digital trust and efficiency, reducing administrative load and improving employee engagement.



• Align with sustainability initiatives to enhance organisational reputation and attract value-focused employees.