After revealing he would match Labor's $8.5 billion plan to boost Medicare, Opposition Leader Peter Dutton said his pledge would be funded by axing tens of thousands of jobs in the public service.
But senior minister Murray Watt said this would send Australia backwards.
"People have Medicare claims to be processed, people have veterans claims to be processed - national security needs to be dealt with, immigration applications need to be dealt with," he told reporters in Canberra on Tuesday.
"Someone's got to do that work and it's either going to be public servants or high-price consultants.
"We'll go back to the past, where the coalition outsourced enormous quantities of government work, at enormous expense to taxpayers, to line the pockets of the big consulting firms."
Almost $21 billion was spent on an external workforce of 53,000 employees during the final year of Scott Morrison's coalition government.
Cuts to the public service would also increase lines and waiting lists, Prime Minister Anthony Albanese said.
"We'll go back to the queues of veterans ... not getting the support that they were entitled to," he told reporters in Sydney.
Tax avoidance countermeasures could be weakened under cuts to the Australian Taxation Office, while claim backlogs would balloon, the Australian Council of Trade Unions said.
"Job cuts mean service cuts to all Australians," its president Michele O'Neil said.
The coalition has not specified how many of the government's additional 36,000 public servant jobs are on the chopping block but Deputy Opposition Leader Sussan Ley assured there would not be cuts to frontline services.
"We know that everywhere in this Albanese government there is waste," she told reporters in Queensland.
"Does anyone anywhere feel that the service delivery from the commonwealth government is improving? I haven't spoken to anyone who does."
Services Australia's latest quarterly data shows Labor's decision to hire more staff had significantly reduced processing times for the aged pension, parental leave and Medicare enrolments.
The Greens hope to boost these numbers by hiring extra Centrelink staff to reduce average welfare phone waiting times to under five minutes, abolish for-profit service providers and establish a commonwealth employment service with thousands more public servants.
With an election on the horizon, polling shows a tight race between the coalition and Labor, and the possibility of a hung parliament.
As Mr Dutton gains ground, the prime minister's personal popularity has plummeted, providing ample tinder for a public grilling when he fronted the ABC's Q+A program on Monday evening.
"You have to understand we're a broken community now, we are hurting - you're our prime minister, you're our leader, there was hate speech and nothing was done," a Jewish mother of four said.
Mr Albanese reaffirmed that he had called out hate and anti-Semitism in all forms consistently.
He further called for people to come together when asked about rising Islamophobia.
"A woman shouldn't be attacked in the street for wearing a hijab and that quite unfortunately occurs far too often," Mr Albanese said.
On Indigenous policy, the prime minister walked back his commitment to a truth-telling commission and treaty - the other two parts of the Uluru statement.
The referendum to enshrine an Indigenous voice in the constitution - a key component of the Uluru statement - failed and the decision had to be respected, Mr Albanese said.
But pollster Roy Morgan has given Labor a light on the hill, putting it ahead 51-49 on a two-party preferred basis after the Reserve Bank cut interest rates.
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