Government spending on advisers soars GOVERNMENT spending on consultants, highly paid brains for hire, grew at almost twice the rate of inflation last year, helping to prop up an industry suffering from a slump in demand from energy and resource firms. Despite the pretence of belt-tightening, federal and state government spent more than $660 million on private consultants last year, a 3.8 per cent rise from a year earlier, according to a report released today by Source Information Services. "While the government has cost-cutting firmly on its agenda, the consulting spend has thus far not been on the block," the report says, suggesting a lack of business confidence was hobbling demand from the private sector. "Despite the nation's political and economic problems, public sector spending, surprisingly, held up well," it says. Neither major political party promised to cut spending on consultants in the lead-up to last month's federal election. Spending by energy and resource firms, the country's largest market for consultants, stagnated at $US936 million, owing to lower commodity prices and weaker Chinese demand for Australian mineral exports. Consultants hope miners will call on their services to help them slash costs. "Underlying all of this is the need to restructure their business to be more efficient, so they'll be looking to consultants to help them do this," said Brett Coulston, general manager at Expense Reduction Analysts. The rollout of complex new global financial regulations and intense competition among retailers are boosting demand for consultants elsewhere. Spending by financial service firms, the second biggest buyers, jumped 5.6 per cent to $US773m last year while retail spending rose 10 per cent to $US179m. "The downturn in the financial service sector has been less severe than elsewhere; demand for consulting has been fuelled by an avalanche of regulatory change and this has offset declining demand for other services," John Somerville, an advisory leader at KPMG, said. The report says: "Brands like Zara and Topshop are posing a significant challenge to the dominance of local incumbents, forcing them to modernise and become much more competitive." The total consulting market in Australia grew 4 per cent to $4.2bn. BJ Richards, a senior analyst at Source, said: "Even in a lagging economy, Australian consultants enjoy a far better market than is found in much of the rest of the world. "Many of the clients we spoke with made the point that despite the slump in the mining sector and the general talk of economic doom, overall conditions in Australia really aren't so bad," she said. Companies and governments hire firms such as PwC, McKinsey and Boston Consulting to help them analyse problems and provide alternative advice.