Why Centrelink, Medicare will get a $1.8 billion funding injection

Services Australia, the agency which handles Centrelink and Medicare claims, will have nearly $2 billion poured into rebuilding its capability over the next two years.

The agency had shrunk over the last decade as labour was outsourced under a Coalition-era policy, while lengthy call-wait times and a blown-out claims backlog have become a pressure point for the Albanese government.

But the government is also in the process of reforming how it views social services infrastructure, the responsible minister says.

"I think government services has been a bit of an underdog in political policy," Mr Shorten said.

"Certainly what motivated me about disability when I first got into Parliament was people with disability were treated as second class.

"I think people working in government services and using government services were treated as second class, and that's unacceptable."

Pressure has been building on the government to act, as swelling wait times collided with a broader cost-of-living crisis. The average speed of answer for a Centrelink call was 18 minutes in January 2023, but had shot up to 33 minutes in December. It's now down to about 26 minutes, the Government Services Minister says, but this is still too high.

"The people using government services are your family members, your neighbours, your work colleagues ... everyone, so it is at the centre of the game," Mr Shorten said.

"And part of the problem I think in Canberra, is the policy has been viewed as superior to implementation, whereas I actually think they're twins. You can't have one without the other."

The unlawful robodebt scandal, and the shocking stabbing of a Services Australia employee in Melbourne last year, have intensified arguments to cabinet for lifeline funding.

The federal budget papers include $1.8 billion over the three years from 2023-24 for frontline staff in Services Australia. It will comprise ongoing funding for 3000 new staff announced in November 2023, as well as an increase of about 1700 to Average Staffing Level next financial year (a full-time equivalent average of jobs).

Behind Defence, the social services portfolio will grow the most in size next year, with the National Disability Insurance Agency also receiving funding for more than 1600 places.

The government says new hires are already making a difference, with the claims backlog brought down to about 800,000, from a peak of 1.35 million. A backlog of 500,000 is considered normal.

"It's not fixed yet, no one's declaring anything other than this is the biggest investment in a budget in government services," Mr Shorten said.

"What the staff hear, what they know - and morale must be lifting - is that they've got a minister and a government who's interested in them.

"What the public know is that we recognise that it matters if you're not getting your calls answered."

Services Australia - formerly known as the Department of Human Services - shrunk over the last decade, as the Coalition sought to keep the size of the public service low, driving a dependence on outsourced labour.

It also fell by about 1800 places under Labor in May 2023, which Mr Shorten blamed on the former government for failing to provision for the jobs. Its abandoned welfare payment calculator - known as the entitlement calculator engine - was supposed to "obviate the need to have these people".

The opposition has criticised the crackdown on outsourced labour amid high demand, with government services spokesperson Paul Fletcher lashing the decision to axe a contract for 600 call centre workers in June 2023.

With public service numbers set to become a focal point of the Coalition's campaign against "waste", wait times at Services Australia will be make or break for the government.