The wages of sync: why Perrottet faces huge pressure to unlock public sector pay cap

Transport Minister David Elliott is a brawler. Even so, it was an extraordinary show of one-upmanship to offer Sydney’s commuters an entire year of free Friday travel just to spite the rail union.

The Rail, Tram and Bus Union (RBTU) this week warned it would take industrial action every Friday until June unless the government made commuting free on those days as an apology for February’s network-wide shutdown.

NSW Premier Dominic Perrottet and NSW Transport Minister David Elliott.Credit: Louise Kennerley

Burned by his transport agency’s decision to shut down the whole rail system on February 28, the reluctant Transport Minister threw the union’s offer back in its face. Forget just the next three months: he would make it the whole year as long as the unions promised no strikes, Elliott thundered.

The Transport Minister insisted he had already talked through the plan with Premier Dominic Perrottet and Treasurer Matt Kean. Elliott did not put a price on it, but it would be a costly exercise. Estimates, using reduced fare box revenue as a result of COVID-19, suggest it would cost the government $60 million.

The irony, however, is the government wanted Fare Free Fridays anyway. The plan was seen as an economic lever to entice workers back into the languishing CBD on the quietest day of the week.

Sydney’s train network was shutdown over an industrial dispute in February.Credit: Brook Mitchell

Those close to the RBTU say its union bosses do not dislike Elliott. Nonetheless, Elliott, who makes no secret of preferring his veteran affairs portfolio over transport, has been sidelined from negotiations.

That role has been handed to the more level-headed Industrial Relations Minister Damien Tudehope, who is Perrottet’s conservative warrior in the upper house and trusted elder in the right-wing of the Liberals.

Elliott, not one to shy away from a fight, said: “I don’t get sidelined, I’m happy to write myself into the script”.

In reality, leaving negotiations to Tudehope rather than the portfolio minister shows a significant escalation in how the government intends to will deal with the RBTU as well as unions more broadly. It suggests that the Perrottet government knows that it has some major confrontations ahead.

The unions have foreshadowed that they are bracing for a big battle. On the very day that the government flicked the switch on the city’s rail network amid concerns it would not be safe to run trains, NSW’s top union leader declared that 2022 would be the year of the strike unless its demand for higher wages were met.

Mark Morey, the head of Unions NSW, warned that “for as long as the wage cap ­remains in place there will be strikes. They will happen next week, next month and the month after that.”

As well as the rail workers, paramedics, nurses and midwives and teachers see the state government’s 2.5 per cent cap on annual wage increases as not only grossly unfair but also a drag on wages in the private sector.

Research by analytics firm AlphaBeta in late 2020 found that NSW’s cap on public servants’ wages growth, introduced in 2011, stifled pay increases for a host of private sector workers across the state.

Private sector workers in occupations with a high connection to the public sector - such as private school teachers and childcare workers - had wages growth one-third slower than jobs with little connection to the public sector, like retail and construction.

On top of this, the Reserve Bank governor Philip Lowe has been warning for several years that public sector pay caps are entrenching low wage growth. In 2019, he said he wanted a “return to wage growth starting with a 3”.

With the official inflation rate at 3.5 per cent, the wages cap means hundreds of thousands of frontline workers are essentially taking pay cuts. On the back of soaring fuel prices and likely interest rate rises, it is little wonder that the unions are preparing for an almighty fight.

When Kean delivers his first budget as treasurer in June, which will also be the government’s last before it heads to the polls in March next year, he will be under huge pressure to address the wages cap.

The legislation for the cap was introduced when the Coalition swept to power 11 years ago and has been held up since as the cornerstone of the government’s economic credentials. It is now hopelessly outdated.

NSW led the way in introducing a wages cap for its public sector workers, which other states followed. It has an obligation to lead again, particularly because the NSW public service is the largest employer in the country.

If it fails, a war of words over Fare Free Fridays will be nothing compared to the onslaught the unions will unleash on behalf of their furious frontline workers.

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