Victoria budget: Public sector wages tipped to soar

Victoria’s public sector wages bill is forecast to jump 16 per cent over the budget forward estimates.

Victorian Treasurer Tim Pallas hands down the budget at Parliament House in Melbourne. Picture: AAP

Victoria’s public sector wages bill is forecast to jump 16 per cent over the budget forward estimates, increasing by $2 billion this financial year before rising by $4.6bn to $33.1bn by 2023.

The government will cut almost $2bn from the state public sector over the next four years, including $1.77bn in new “whole of government efficiencies” announced yesterday by Treasurer Tim Pallas.

Annual wages growth in ­Victoria is predicted to increase to 3 ­per cent next financial year, outstripping the national growth rate of 2.75 per cent forecast in the federal budget. By 2021, the Victorian and national annual wage growth rates are predicted to increase to 3.25 per cent and 3.5 per cent in the subsequent two years.

 

Mr Pallas said he expected the cuts could be achieved without job reductions and any redundancies would be a “last resort”.

A further $200 million will be saved through cuts to spending on consultancies and labour hire, as flagged before last year’s state election.

The Andrews government will face looming industrial battles with unions, with new enterprise agreements due to be negotiated with paramedics, police and the Community and Public Sector representing 40,000 public ­servants.

 

The state budget papers showed government employees expenses, including superannuation, were forecast to grow from $26.52bn last year to $28.57bn in July. Employee expenses are forecast to grow further to $29.7bn by July next year to $31.2bn a year later and $33.1bn by July 2023.

Four out of five of this year’s public sector wage forecasts are higher than predicted last year, with the wages bill for the 2020-21 financial year now expected to be $500m higher than 12 months ago.

Treasury forecasts the wages price index will grow to 3 per cent next financial year, 3.25 per cent in 2020-21 and 3.5 per cent in the subsequent two financial years.

 

CPSU Victorian secretary Karen Batt said the Treasury wage forecasts “over the forward years augurs well for bargaining next year and beyond”.

Last year’s state budget saw the public sector wages bill jump by 11.2 per cent and the government blowing out previous forecasts by $1.5bn to fund pay rises and more staff ahead of the state election.

Mr Pallas yesterday defended the public sector wages expenditure, noting funding for extra ­nurses, more paramedics and an increased number of police.

Treasury said Victorian wages growth had been “below trend” over the current economic cycle, consistent with national and international movements.

 

Employee expenses, including superannuation, are forecast to grow by 4.1 per cent next ­financial year and by an average of 3.7 per cent over the forward ­estimates.

Treasury said the growth ­reflected increases in the public sector workforce, including in ­hospitals and schools, and pay rises flowing from enterprise agreements, but the opposition’s Treasury spokeswoman, Louise Staley, said public sector wages had “blown out by 42 per cent under the Andrews government but critically with no real increase in frontline ­services”.

Despite unions accepting the government assurance that public sector spending cuts would not result in redundancies, acting Greens Treasury spokesman Sam Hibbins said the budget was “built on the back of cuts to public sector jobs and wages.”

“Nearly $2bn will be ripped out of the public sector,’’ he said. “Instead of raising revenue from the super profits of banks and property developers, the Labor government has gone after public sector jobs and wages.”

Victorian Chamber of Commerce and Industry chief executive Mark Stone called for recurrent government spending to be kept in check.

“Business wants to see the government commit to keeping public sector wage growth in line with the private sector,” Mr Stone said.