was it 7,000 down to about 4,000 in a few years ?
Assuming you mean the total staff of the Civil Aviation Authority, no there was never anything like 3000 FSOs.
The Flight Service national placement exercise in 1990 listed 618 total.
They were got rid of, the low level airspace went to ATC who got paid around a third more and had to increase their staff level and consoles to cope with the workload by creating low level ATC sectors.
I'm not sure much in the way of $ was saved.
Edit:
The cost to Australia was enormous, with hundreds of flight service officers giving a duplicated low level full position service – while at the same time, air traffic controllers with a duplicated radio network were giving a service
There was little duplication of "radio networks". ATC had their communication outlets for their CTA, Flight Service had the outlets for the Flight Information Areas (FIA), which made up their sectors.
When the low level airspace was transferred to ATC, those FIA outlets were also transferred. They had to be, for ATC to provide the services.