NSW’s controversial wages cap to be axed in September

The Sydney Morning Herald, 3 July 2023

The state’s controversial wages cap will be axed in September, ending a decade-long ceiling on pay rises for public sector workers and paving the way for the Labor government to overhaul industrial relations in NSW.

In an interview to mark 100 days in office, Premier Chris Minns revealed the regulation that limits pay rises – including for teachers, nurses and paramedics – will expire within weeks, six months after Labor won on a platform of scrapping the wages cap.

The end of the cap, which Labor has insisted will not put the budget under extra pressure because pay rises will be funded through productivity improvements, means the government will need to develop a new bargaining system to deliver wage increases to 400,000 workers.

Powerful union boss and Labor heavyweight Gerard Hayes, who heads up the Health Services Union, has been the most outspoken critic of delays in axing the wages cap, arguing it should have been the No.1 priority of the newly elected Minns government.

However, Minns said he was deliberate in his course of action because he did not want the issue of pay for public sector workers to be “hijacked by the opposition” – a risk if Labor pursued legislation to change wages policy.

“They could have effectively kicked essential workers and said, ‘they are not worth it’,” Minns told the Herald in an interview. “It [legislation] wasn’t required and the course of least resistance for a government that’s got a lot on its agenda is something that I am always going to preference.

“I’d rather just get the box ticked, in this case to [get the] pay out the door, than have to go around begging crossbench opposition MPs to support what I think would be pretty self-evident and sensible.”

The government has offered public sector workers a one-off 4 per cent pay rise plus 0.5 per cent superannuation, at a cost of $618 million. NSW Treasurer Daniel Mookhey has said he would detail how that increase will be funded in September’s delayed budget.

The former Fair Work Commission deputy president Anna Booth and former Industrial Relations Commission president Roger Boland have also been appointed to produce a new framework to replace the wages cap.

During the election campaign, the Coalition was highly critical of Labor’s policy, arguing the budget would take a hit to the tune of billions of dollars if the cap was scrapped.

Employee expenses account for a significant amount of the state’s budget, and are expected to reach $41.2 billion this year, rising to $45.9 billion in 2025-26.

Minns said he acknowledged that the new pay offer was not in line with inflation but “it is significantly different to the previous government”.

“Our fundamental belief about services in NSW has to do with human capital, and our single biggest expense, and our most important investment, is removing the wages cap,” Minns said.

Minns also said the government was finalising its gambling reform package, acknowledging that overhauling poker machines was a “big part” of the March election campaign.
“We are not too far away from announcing the next steps, we want to make sure we get it right because it’s a really tricky area of policy,” Minns said.

The Herald revealed last month that Labor’s promise of a cashless gaming trial – a key pillar of its gambling platform at the March election – would be delayed. Minns had committed to a trial on 500 machines in clubs and pubs beginning on July 1.

The premier said housing and education would remain the focus for the government in the coming months, including reforms to rental affordability and accessibility and investing in teachers.

“To put it in perspective, two-thirds of new positions for teachers in NSW are in public education, but only one-third of graduates from universities are going into public schools,” Minns said. “We’re not going to turn around school results and build up the education of the next generation unless we invest in teachers.”
Minns said the overriding challenge for his government remained budget pressures, including inheriting significant debt on the back of rising interest rates.

“That does temper the things that you want to do for the state because no incoming government has had to deal with that level of interest payments, servicing debt as well as it being a real ceiling on things that we want to invest in,” Minns said.

“No one has got elected in the Labor Party in NSW to run austerity budgets for their professional life, we’re involved in public life to make a difference.”