Public servants would face having their jobs moved into the bush when agencies merge and departments would publish their decisions about relocating under changes recommended in a parliamentary inquiry.
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A review pushed by the Coalition has urged the government to relocate public service jobs from major cities as part of a wholesale investment in the regions, saying it would bring agencies closer to people living there and ease crowding.
But the inquiry report, tabled in parliament on Thursday, said agency relocations should not stop them from performing their work and must be a good fit for their new home towns.
The marathon 12-month inquiry into decentralisation heard from more than 300 people, travelled around Australia's regions and received 200 written submissions, most of them from local regional councils and some eyeing particular agencies.
Former Nationals leader Barnaby Joyce, whose troubled project to relocate the pesticides authority from Canberra to Armidale later grew into a large-scale decentralisation push, announced last June a House of Representatives committee would hold a "genuine" inquiry into the policy amid criticisms it was a Coalition-controlled exercise.
The inquiry's committee chair and Victorian Nationals MP Damian Drum said there was "a very strong sense" in regional Australia that governments should be "more aggressive" in decentralising government agencies when appropriate.
"We also heard evidence that even when the positives associated with moving an agency far outweigh the perceived negatives, there will always be an element of 'push-back' from public servants who would much prefer to stay in their current location," he said.
"Australia now has nearly 50 years of history of various forms of decentralisation. We have many examples of successful relocations of both government agencies and private companies – too many to name."
The inquiry stopped short of recommending the government force agencies to relocate, as the Coalition did in moving the Australian Pesticides and Veterinary Medicines Authority, but recommended agencies "assess the possibility for relocation whenever appropriate".
Agencies moving top-ranking senior executive service jobs into regional towns should escape caps on those positions in the bush, and departments deciding whether to move would publish the reasons for their decision under recommendations.
The report said new or newly-merged agencies, or those terminating a lease, should consider moving to regional towns.
It called for a permanent committee in Federal Parliament to look at decentralisation and said the government should produce a white paper on its plans for developing the regions.
The report's push for agencies to consider relocating came with warnings that moves may have no net benefit, particularly when jobs were simply shifted from one town to another. It said decentralisation could also hurt towns lacking the right infrastructure to host agencies.
"There is another risk of a town becoming dependent on the Commonwealth agency or service as its main economic driver," it said.
"This makes a town vulnerable to machinery of government changes, or policy changes, which could relocate the agency away from the town."
The percentage of federal public servants in regional areas has remained steady over the last decade, rising from about 13 per cent in 2007 to 14 per cent last year.
Former Nationals deputy leader Fiona Nash last year announced the Coalition would expand its decentralisation push, and portfolio ministers had to report to cabinet which of their agencies were suitable for regional moves by August and business cases were due in December.
The federal budget disappointed Mr Joyce, who lost his Nationals leadership earlier this year, by naming few relocations for public service jobs. He called the Coalition's decentralisation decisions a "silly game" where the policy was technically, but not legitimately, being pursued.
