6 November 2020

Public sector wage freeze ends, private businesses will struggle to compete

| Hannah Sparks
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Effective People's Kris Milne and CPSU national secretary Melissa Donnelly

CPSU national secretary Melissa Donnelly and Effective People’s Kris Milne. Photos: File.

Australian public servants have welcomed the end of a six-month wage freeze, but could the decision add pressure to private sector businesses already doing it tough and how will the ACT economy benefit, if at all?

According to Kris Milne, account executive at Canberra recruitment agency Effective People, private sector businesses will have to find ways to compete with the 2 per cent pay increase most commonwealth public servants will soon receive.

“When the private sector heard about the public sector freeze, many private sector businesses followed suit. So the end to the wage freeze in the public sector is going to be a great thing for employees generally because the private sector has to become more competitive now,” Mr Milne said.

“The private sector may also look at contracting and hiring casual employees to garner some interest.”

READ ALSO Canberra returns to COVID-free territory again as active case recovers

However, Canberra Business Chamber chief executive officer Graham Catt observed that many private sector businesses were still struggling through the pandemic; in particular, tourism operators and hospitality venues, and the wage competition would put additional pressure on employers.

Mr Milne says even those struggling will have to find a way to compete or the government will need to step-in.

“Tourism is null and void, it doesn’t exist right now and operators are going to have a slow burn to get back to where they were. The government is going to need to look at how to boost tourism. Internationally or nationally, they’ve got to start reopening the borders,” Mr Milne said.

He added that competitive wages in the private sector could be of interest to public servants if they lost confidence in the public sector during the pay freeze.

“The Australian Public Service is appealing because it’s stable and because of its pay policy – which guarantees a 2 per cent increase year-on-year – so people have that assurance that as they progress they are going to get that higher level income. Confidence has definitely taken a hit since the wage freeze,” Mr Milne said.

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The decision to freeze public service wages in April was made in a bid to share the economic burden of COVID-19.

Assistant Minister Ben Morton, who oversees the public service, thanked employees across the Australian Government “for their understanding of the deferral of their wage increases” after announcing that the six-month freeze wouldn’t be extended.

A 2 per cent wage increase for many public servants can surely only be a good thing for the economy. However, Canberra Business Chamber’s Mr Catt says the wage rises will only benefit the ACT economy if public servants spend locally.

“It would be a good thing if those wage rises flow back to our local businesses, but it’s very difficult to quantify how much will flow through,” Mr Catt said. “In fact, there is more data now than we previously had to show higher income earners will save their money rather than spend during times of risk [such as COVID-19].”

“We really need those public servants who do receive a pay increase to think about supporting local businesses and the ACT economy.”

While the Community and Public Sector Union (CPSU) welcomed the government’s decision not to further extend the wage freeze, it condemned the freeze from the very beginning, saying it came at a time when the economy needed a boost and it only helped to save 0.058 per cent from the government’s budget line.

CPSU national secretary Melissa Donnelly said the decision also failed to recognise the “invaluable contribution and dedication of APS employees during the pandemic, drought, and bushfires”.

“The wage freeze was bad economic policy. It didn’t help anyone. Our community needs stimulus and cutting wages just won’t help,” Ms Donnelly said.

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HiddenDragon7:41 pm 03 Nov 20

“It would be a good thing if those wage rises flow back to our local businesses, but it’s very difficult to quantify how much will flow through,” Mr Catt said. “In fact, there is more data now than we previously had to show higher income earners will save their money rather than spend during times of risk [such as COVID-19].”

In a virus-affected economy, public sector pay rises are the new trickle-down economics.

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