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The federal departments of Human Services and Social Services could be merged into a mega department as part of the Coalition's review of government spending.
On Tuesday, Social Services Minister Kevin Andrews said he was considering the merger of the departments, which between them employ an estimated 40,000 staff.
He told ABC TV the government was looking at a "whole range of options" in terms of the arrangements for public service departments.
Mr Andrews said there were certain things that could be "brought together" between the Department of Social Services and Human Services, which administers Centrelink, Medicare and other government payments.
Human Services is already the largest agency in the Australian Public Service.
"There would be savings in terms of computers and IT systems and backup office functions. Any prudent government will consider the options," he said.
When asked if a restructure would result in job losses, the Social Services Minister replied: "This is not about redundancies ... this is about how we have the most efficient and effective form of government."
The government is currently conducting an across-the-board review of government spending through its commission of audit.
The first phase of the review, led by Business Council of Australia president Tony Shepherd, is due by the end of January. The second phase is due by the end of March to inform the federal budget, which is due in May.
On Tuesday, acting Prime Minister Warren Truss said the government would have to make some "unpopular" budget decisions because of the level of debt it inherited from Labor.
"I expect that people will find some of the tough decisions that have to be made uncomfortable," he told ABC TV.
Mr Andrews said the government had "no particular plans" in terms of making welfare cuts in the budget. But, given Australia's ageing population, he added: "we need to continue to be prudent about looking at the future".
