NSW budget: Wage boost for 400,000 public service staff to cost $55bn

NSW’s annual wages bill will balloon to over $55bn by 2027, after the Minns government’s first budget committed to negotiating higher pay for hundreds of thousands of essential workers.

NSW Treasurer Daniel Mookhey says paying public service workers more was ‘vital if we want to rebuild essential services to the world class standards NSW demands’. Picture: NCA NewsWire / Bianca DeMarchi

NSW’s annual wages bill will balloon to over $55bn by 2027, after the Minns government’s first budget committed to negotiating higher pay for hundreds of thousands of essential workers such as teachers, nurses and police.

Scrapping a public service wage cap imposed by the former Liberal government, Treasurer Daniel Mookhey said improving the pay for the public service was “vital if we want to rebuild essential services to the world-class standards NSW demands”.

Mr Mookhey said the $2.5bn this financial year to fund a 4.5 per cent bump to public sector pay rates – the biggest public sector pay rise in more than a decade – would affect 400,000 workers.

The budget also included a $3.6bn Essential Services Fund to underwrite further wage hikes over coming years and “share the fruits of reform with those who deliver them”, he said.

“Another decade spent holding down people’s wages will result in more inequality, a weaker economy and worse public services.”

The cost of higher pay rates for rank-and-file public employees would be partially offset by reducing the state’s reliance on ­contractors, thinning the ranks of the top-paid bureaucrats and freezing pay for MPs.

Still, employee wages including super were estimated at $49.3bn in 2023-24, or more than 40 per cent of the $120.2bn total state ­expenses.

The public service wages bill would grow by more than 4 per cent over the four years to 2026-27, the budget revealed, to reach $55.6bn, including super – or 46 per cent of all state expenses.

Last year’s budget had employee expenses growing at an annual rate of under 3 per cent over four years.

NSW Liberal leader Mark Speakman accused the government of caving to its “union mates”.

“They (Labor) promised wage rises wouldn’t cost the taxpayer ­anything, but they’ve delivered for their union mates and let the genie out the bottle,” Mr Speakman said.

The public sector wage rises had “let the genie out of the bottle”, he said, adding that the budget papers showed the government could not be sure how quickly wages could accelerate in coming years.

But Unions NSW secretary Mark Morey said “paying public sector workers enough to attract and retain them is absolutely critical to our state”.

“This is a very solid foundation to begin stemming the flow of ­essential workers interstate after 12 years of wage suppression. We won’t fix the essential ­worker shortage immediately, but we will make a dent in it,” Mr Morey said.

The budget also included more than $200m over four years to fund the Fair Work Commission’s ruling earlier this year that NSW railway workers receive bigger pay rises, including a 4.03 per cent wage increase in 2023 and a one-off payment of $4500.

As global ratings agency Moody’s warned the government would struggle to control growth in recurrent spending over coming years, NSW Public Service ­Association acting general secretary Troy Wright said the “enormous” population growth projected in the budget would drive “greater demand for public ­services”.