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Public Service Commissioner John Lloyd says pay offers in line with inflation

Australia's Public Service Commissioner John Lloyd suggests recent controversial pay offers for federal bureaucrats are fair because they are about in line with the current inflation rate.

Australia's historical inflation rate runs at about three per cent a year but was expected to halve in the coming year.

Mr Lloyd told a Senate estimates hearing the low inflation environment meant the pay offers would not leave public servants lagging behind increases to the cost of living.

At the hearing late on Monday night, Liberal senator Cory Bernardi put forward figures showing inflation had slowed considerably.

The latest annual inflation rate of 1.7 per cent was expected to drop further, with the Reserve Bank forecasting 1.25 per cent inflation in the year to June this year and the National Australia Bank predicting 1.2 per cent in the year to December 2015.

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Mr Lloyd agreed with Senator Bernardi that recent pay offers, which many public servants thought were low, needed to be put within the context of falling inflation. 

If the nation's inflation rate drops as low as 1.2 per cent and stays there for some time, it would mean Australian Defence Force members - many of whom were outraged when they received a 1.5 per cent a year increase - would come out ahead in the coming few years.

By these standards, the Community and Public Sector Union's hopes for a four per cent a year increase would be far ahead of inflation.

Mr Lloyd described the CPSU's perspective on pay was "high for the current environment".

Liberal senator and Employment Minister Eric Abetz said no economic forecasters had a "four in front" of their predicted inflation rates for the next three years.

Senator Bernardi said it was important to use forward-looking data during debates over enterprise bargaining rather than solely relying on historical figures. 

The CPSU has argued cuts to conditions - such as taking away leave days - and longer working weeks proposed in new agreements would leave staff in government departments much worse off.

On Tuesday morning, opposition workplace relations spokesman Brendan O'Connor said that because of this, recent pay offers were unreasonable.

"Cutting conditions of employment, cutting the real rate of wages for those workers is not a reasonable offer," Mr O'Connor said.

Labor senator Penny Wong slammed what she said was a lack of "proper process" after it was revealed Senator Abetz called Mr Lloyd to offer him the job last year.   

"It seems there is a lot of captain's pick going on inside this government," Senator Wong said.  

"There was no ad, no interview, no formal short list, he just picked up the phone to John Lloyd and asked him if he wanted the job, asked him if he was interested.

"Remember this is a statutory appointment, it pays around $650,000 a year and remember also Mr Lloyd isn't any ordinary appointment.

"He is a former member of the H. R. Nicholls Society, he is a former director of the [free market think tank Institute of Public Affairs] and he is quite upfront about the fact he is a former member of the Liberal Party."

The H. R. Nicholls Society believes workplace relations should be minimal. Mr Lloyd told the hearing he resigned his Liberal Party membership before becoming red tape commissioner in Victoria.

During the hearing, Mr Lloyd was asked whether he still held the same views he expressed in a 2009 submission about the reform of Australian government administration.

His submission said any move to introduce rigidities into public service employment would inevitably result in mediocre outcomes.

These rigidities included monolithic classification structures, centrally mandated caps on pay increases, limits on agency level agreement negotiation agendas, common terms and expiry dates for agreements and mandating relationships with unions and their delegates.

He took the question on notice.

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