Public servants’ pay to be linked to private sector wages

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Commonwealth public sector workers will only get pay rises in line with the private sector and senior staff will face a wide-ranging review of bonuses worth millions of dollars paid to top executives at government agencies during the coronavirus pandemic.

The removal of the 2 per cent wage increase cap on all Commonwealth public servants would also mean public sector wages can rise above this figure when private sector growth is above this level.

Assistant Minister to the Prime Minister and Cabinet Ben Morton says the public service wage increase cap will be removed to bring pay rises in line with the private sector.Credit:Dominic Lorrimer

Wage growth is tipped on both federal government and Reserve Bank figures to remain subdued for years, and the federal budget papers expected wages to increase at a slower pace than inflation for 2020-21, which would mean a real wage cut.

"This will ensure that wage increases for Commonwealth public sector employees will be in step with their fellow Australians," Assistant Minister to the Prime Minister and Cabinet Ben Morton said.

"By removing the existing 2 per cent cap, the wages of Australian Government employees can grow as private sector wages grow – even when private sector wages growth exceeds 2 per cent, but importantly it won't be able to exceed it, even when it dips below 2 per cent."

The latest RBA figures forecast wages to rise by 1.25 per cent in the year to the December 2020 quarter and the same again in 2021. Wages are then expected to grow 1.75 per cent in 2022.

A new review of senior executives bonuses will be conducted by the Secretary of the Department of Prime Minister and Cabinet, the Australian Public Service Commissioner and the Secretary of the Department of Finance. They will look into existing bonuses to come up with a consistent approach across all agencies.

A recent analysis of annual reports from 142 principal government entities, which includes departments, statutory authorities and government businesses, shows a quarter paid bonuses worth a collective $12.8 million at the same time as ordinary public servants faced a pay freeze.

The revelations followed the resignation of Australia Post chief executive Christine Holgate, one of the country's highest paid public servants, following criticisms of her decision to spend $20,000 on Cartier watches for senior staff members.

Mr Morton said it was an appropriate step and was in addition to already-imposed freezes on regular bureaucrats for six months.

"It is the expectation of the government that where agencies have access to bonus arrangements they should exercise restraint to the furthest extent possible in keeping with community expectations," Mr Morton said.

Current arrangements among department and agencies will remain in place, but will be renegotiated in line with these new rules when they finish.

"Unions, businesses and the wider community have long argued that public sector wages should reflect wage movement in the private sector," he said, adding the decision would also mean Commonwealth wages would not be used as a reason to restrain private sector growth.

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