IBM revealed Tuesday that it would relocate the jobs to India in order to secure an 18-month extension to its five-year contract to develop and manage applications for the carrier.
A spokesperson for the Minister for Communications, Information Technology and the Arts, Daryl Williams, supported Telstra's decision to proceed with the contract late yesterday even though Costello had made it clear he was unhappy with the move during a radio interview earlier in the day.
Speaking to ABC Radio, Costello told Telstra to make every effort to ensure the software development jobs were retained in Australia for Australian workers.
The Treasurer is reported to have said that Telstra should "look at that situation very carefully" and have "a very good reason to show that they can't find adequate Australian employment opportunities and Australians to fill them".
However, Williams' spokesperson defended Telstra's decision to use offshore software developers.
"As Telstra operates in a global environment it must remain competitive to allow it to keep offering high quality services to Australian consumers and businesses," she said.
The spokesperson added that the decision was a commercial matter for Telstra and that offshore outsourcing could be positive for Australia.
"Australia has much to gain from selective outsourcing of ICT services overseas, both from enhanced productivity and as a provider of high-end services," she said.
Telstra is in the midst of a cost-cutting exercise announced last year aimed at halving its IT budget over the next few years.
IBM corporate affairs spokesperson, Caspian Smith, said that sending the jobs to India had been necessary to compete with rival IT companies using offshore labour vying for the multi-million dollar contract.
Smith added that IBM would retrain and redeploy as many of the employees affected by the decision as possible.
"IBM to retain & employ as many Jobs....."I don't think so. There would be no point in taking the work offshore if they did! As for Dazza Williams office saying it's necessary to be competitive..Rubbish. What they really mean is T(H)elstra will be able to INCREASE it's profits..period. They don't give a damn about their customers.