Just when everyone thought the advertising boom and strong economy meant newspaper finances were in great shape, The Australian has decided to embark on a forced redundancy program – its first in more than a decade.

Hacks were shocked earlier this week when HR boss Deborah Jones had a coffee with Melbourne-based motoring writer Neil McDonald and fired him on the spot. Our tips box received an email saying he wasn’t even given the alternative of returning to Sydney, where he hails from. McDonald stoicly returned to the office after the coffee, put out his motoring page and then left, never to return.

Rumours are spreading that Jones let slip that this was the first in a wider program of redundancies. Apparently the budget at The Australian was blown out by the cost of covering the Asian tsunami, and the warning bells were sounded when Jones recently issued an edict that all entertainment expenses had to be pre-approved.

It looks like editor-in-chief Chris Mitchell’s hiring spending spree is over. Bags of News Corp cash were spent in recent times hiring the likes of Brad Norrington from the SMH, Bob Carr’s biographer Andrew West, and Tony Koch and Sean Parnell from The Courier-Mail. And more recently, there was the large pay rise to keep former spook and new associate editor Cameron Stewart, after a bidding war with The Age.