Sluggish wage growth has dealt rank-and-file public servants real pay cuts in the past decade, new figures show, but experts say budget constraints are likely to dampen any rebound.
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Public service pay rises have not kept pace with inflation for non-senior executive staff since 2012, as Coalition government efforts to suppress wage increases muted growth in the middle of the decade.
The meagre pay increases for most Commonwealth public servants is echoed in Australian Bureau of Statistics data showing that workers in the ACT are experiencing the slowest wage gains in the country.
In the year to November 12, total payroll wages in the ACT grew by just 2.4 per cent, well below the national average of 3.6 per cent and a fraction of inflation, which rebounded to 7.3 per cent that month.
This is consistent with Wage Price Index figures that show the size of pay packets in the private sector are growing much more quickly than for workers in the public sector.
Figures from the public service commission also reveal wage rises for non-senior executive public servants outpaced inflation in only four of the past 10 years. Between 2014 and 2016, pay increases slowed dramatically under Abbott- and Turnbull-era restrictions on bargaining including caps on wage rises.
Over the decade, wages rose 18.7 percentage points for low- and mid-ranked public servants compared to 19.8 growth for the consumer price index.
The Community and Public Sector Union's national secretary Melissa Donnelly said the next round of bargaining was a chance for the Labor government to re-establish the Commonwealth as a model employer.
"The steps that the Albanese Labor government has taken since its election are encouraging, but there is a lot of work to be done to rebuild the APS and genuinely negotiating a decent pay rise is vital to doing that," she said.
"This government was elected on the platform of getting wages moving. But to achieve wage growth across the country and have any credibility in the asks the government is making of other employers, there must be a substantial increase in APS pay first."
Public Service Minister Katy Gallagher said the government would re-engage in genuine bargaining as a model employer, and was working on a new, longer term bargaining policy.
Pay rises won't lift inflation: Treasurer
In the three months to March last year the wage price index in the public sector increased by 2.1 per cent but in the private sector it rose to 2.4 per cent. Six months later, public sector wages were just 2.4 per cent higher than a year earlier, compared with 3.4 per cent higher for workers in private industry.
At the last election the Labor Party campaigned hard on the tepid increase in wages over the previous decade and promised action to increase pay packets.
Treasurer Jim Chalmers said the government was delivering on its commitment, including by backing a 4.6 per cent increase in the minimum wage in October and a 0.5 percentage point bump in the Superannuation Guarantee to 10.5 per cent last July.
Dr Chalmers said the government's policies were already starting to deliver results, pointing to a 3.1 per cent rise in the Wage Price Index in the year to September, its fastest pace since early 2013.
"Our economic plan is all about getting wages growing again, and it's already starting to work," the Treasurer said.
"We are starting to see the beginnings of strong and sustainable wages growth."
Dr Chalmers flagged that the unemployment rate was likely to edge higher as tough economic conditions, particularly downbeat global growth prospects and higher interest rates, bear down on activity.
But the labour market is expected to remain tight, adding to upward pressure on wages.
However, the Treasurer rejected concerns rising pay could add fuel to inflation.
"We don't have an inflation challenge...because wages are too high, we have an inflation problem because of a war in Ukraine, pressure on global supply chains and other challenges ignored for too long," he said.
"We said we'd get wages moving again in responsible ways and we are."
No rapid change ahead
The Albanese government is preparing for a new round of pay negotiations with federal public servants, and is expected to unveil new workplace bargaining rules in the first half of 2023.
It announced an interim 3 per cent wage rise for public servants in October - a figure well behind high inflation levels.
Industrial relations experts have said while the Coalition's bargaining rules for the public service had constrained wage increases, reforms promised by the Albanese government could take several bargaining rounds to reduce disparities in pay across the bureaucracy.
The government has promised to move away from agency-based bargaining in favour of a service-wide approach, with agency-specific requirements being addressed at the agency level.
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Australian National University expert in labour law Cameron Roles said the reform would be one of the most significant in Australian Public Service bargaining over the last 25 years.
"In my view the government is likely to offer larger pay increases than its predecessor," he said.
"These are likely to be fairly modest given the fiscal budgetary constraints it faces. I also believe that the government will be more accommodating to trade unions than its predecessor - bargaining for core terms and conditions across the service has long been an objective sought by the Community and Public Sector Union and, frankly, many others with public service experience.
"I also suspect the government may be open to making changes to some core APS conditions which have been stagnant for many years, due to previous iterations of government policy not allowing them to be changed."
ANU public policy professor Andrew Podger, a former public service commissioner, said the stagnation in wages would change only if service-wide bargaining allowed consideration of wage rises in the occupation groups that the public service employed.
The government had not signalled that it would relax controls on administrative expenses or scrap annual cuts to budgets, known as "efficiency dividends", he said.
"I suspect that the government will not allow a major expansion of pay to come in because they will not allow the budgets to be freed up that far."
UNSW expert in public sector employment relations Michael O'Donnell said there were signs of change under the Labor government after the public service commission late last year encouraged agency heads to enter into genuine and early consultation with unions and employees as part of their role as "model" employers.
"This is a significant departure from the approach of previous Liberal-National governments from 1996 to 2022 who used legislation to reduce the influence of public sector trade unions by restricting their access to APS workplaces and tightening the ability of unions to engage in lawful industrial action," Professor O'Donnell said.
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