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

Hannah Sparks 6 November 2020 21
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.”


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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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21 Responses to Public sector wage freeze ends, private businesses will struggle to compete
Ann Chaplin Ann Chaplin 1:07 pm 04 Nov 20

I’m curious, do many private sector firms pay desk based workers $110k per annum when those workers don’t have a degree? That always surprised me about the public service.

HiddenDragon HiddenDragon 7:41 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.

Bec Kelly Bec Kelly 7:03 pm 03 Nov 20

“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.

I think there needs to be some fact checking here. There is no 2% per year guaranteed pay increase. Each enterprise agreement for each department has different terms.

    Kris Milne Kris Milne 7:50 pm 03 Nov 20

    Hey Bec, thank you for the feedback and also the honest approach. You are exactly right with your assumptions and spot on. The quote should state that "on average across all departments, historically we have seen 2 percent YOY". This was not placed in the article however I will have rectified immediately. Thank you again!

Mark Whithear Mark Whithear 6:28 pm 03 Nov 20

Not so long ago the public sector was paid less to offset the job security. Now they are the highest paid & most secure. It’s driving business to its knees.!

    Alison Brittliff Alison Brittliff 8:33 pm 03 Nov 20

    Mark Whithear really! I know people who are forever private sector or who have have crossed over being paid way more

    Mark Whithear Mark Whithear 8:59 pm 03 Nov 20

    there are a few senior execs but for the most part small to medium biz can’t compete. Public service wages are way too high. Perhaps u would like some examples of young university students giving up their study to loaf in the public service

    Laura Frame Laura Frame 10:56 pm 03 Nov 20

    Mark Whithear yes. Give the examples.

    Andrea Kerr Andrea Kerr 7:13 am 05 Nov 20

    Mark Whithear there are now more private sector employees employed in Defence than there are public servants. These contractors earn far more than public servants and most left the public service to come back the next day as a contractor. Many contractors have had the same role for many years with most contracts now multi year as APS numbers are capped and work increases.

Anura Samara Anura Samara 4:58 pm 03 Nov 20

“Guaranteed 2% every year”! Yeah right.

Russell Nankervis Russell Nankervis 4:38 pm 03 Nov 20

Pay people what they are worth. It isn't like the APS are paid more than private anyway

    Vincent Parrett Vincent Parrett 4:43 pm 03 Nov 20

    Russell Nankervis when you take super into account they often are in my experience.. very difficult for small businesses in CBR to compete with the PS for people.

    Julie Maynard Julie Maynard 5:08 pm 03 Nov 20

    Russell Nankervis in my experience, the APS are paid more and have better benefits. I’ve worked in private and non-profits too - now back in the APS for a more stable career and pay.

    Nick Savino Nick Savino 6:07 pm 03 Nov 20

    Russell Nankervis plus on average public service wage cost index always out perform private sector

    David Jackson David Jackson 6:10 pm 03 Nov 20

    Russell Nankervis obviously haven’t worked in private enterprise with a ridiculous quote like this

    Jessica De Angelis Jessica De Angelis 6:29 pm 03 Nov 20

    David Jackson have you worked in the public service? Plenty of private jobs depending on the field/specialty pay same or higher than the public service. So not an entirely ridiculous quote... Pay people what they are worth is really the key message :)

    Russell Nankervis Russell Nankervis 6:36 pm 03 Nov 20

    I've never had a public service job

    Jason Duarte Jason Duarte 9:53 pm 03 Nov 20

    On average APS now paid more than private sector equivalent roles and have far higher super and conditions

    Nick James Nick James 10:40 pm 03 Nov 20

    Jason Duarte yep, it used to be that APS employees had better super, better job security (not at the mercy of the business cycle like the private sector), better benefits like shorter work weeks and additional holidays to compensate for lower salaries. Now the salaries are as high or higher than the private sector, plus all the other benefits are retained. Department heads (and others) are paid more than the PM.

    David Jackson David Jackson 7:42 am 04 Nov 20

    Jessica De Angelis what their worth is reasonable not pay more. The problem with the public sector is the person who does the least gets paid the same as the person that actually works. Don’t get me started on the ridiculous entitlements that the public sector get.

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