The Australian Public Service Commission’s chief negotiator, Peter Riordan, has vigorously defended the government’s sub-percentage-point improvement on its previous pay increase offer, saying optimistic Treasury and Reserve Bank of Australia (RBA) inflation forecasts influenced the number.
In a sublime bit of timing, it came as the nation’s federal politicians tucked into a meaty 4% annual increase in their own pay, courtesy of the Remuneration Tribunal that annually benchmarks pay for both elected representatives and the APS Senior Executive Service.
Speaking to The Mandarin on Tuesday following the release of the new pay offer, which crawled forward just 0.7% to 11.2% over three years against the Community and Public Service Union’s claim of 20% over the same period, Riordan talked up the progress made through the new centralised bargaining mechanism that he said allowed him to make a case for an increase over the initial offer.
“We’ve looked at all the economic indicators, we’ve made some judgments about what’s likely to occur over the next couple of years, we’ve looked closely at forecasts from Treasury and the Reserve Bank, and we’ve arrived at an outcome which I think is a pretty good outcome for APS employees — 11.2% over three years,” Riordan told The Mandarin.
Fair and reasonable
However, Riordan tempered the second hearing of employees’ demands by saying that even though the initial increase figure was rejected, the APSC “thought the first offer of 10.5% over three years was fair and reasonable based on economic indicators and based on what’s happening with wages generally”.
The latest offer still leaves a yawning gap of 8.8% between employer and employee positions, which is huge given the opening round was 10.5% versus a claim of 20%, a net difference of 9.5%.
The big gamble, for union members and the APSC alike, is the underlying assumptions about inflation that Treasury and the central bank have been trying to pull back without triggering a recession or labour shedding.
Unfortunately for Riordan, incoming RBA governor Michele Bullock made an early-evening speech on climate change gently questioning previous inflation estimates.
“The bank sets monetary policy according to a flexible inflation target of between 2-3%. To consider the implications of climate change for monetary policy, the bank needs to understand how the physical effects of a changing climate and the transition to a lower emissions economy will affect inflation and its determinants,” Bullock said.
“Many of the physical and transition impacts of climate change affect the supply side of the economy. While monetary policy works primarily by influencing the level of demand and expectations of inflation, supply-side developments also need to be considered.
“As well as short-term effects on supply, climate change may also have an impact on longer run concepts like potential output and the neutral real interest rate, which can help to inform assessments on the appropriate stance of monetary policy,” Bullock said.
That includes productivity, which is important, and was specifically raised by outgoing RBA governor Philip Lowe when he was asked about the CPSU’s claim of APS bargaining claim of 20%.
“If productivity growth is zero, it carries implications for wages, doesn’t it? If productivity growth returns to 1.5%, we can all have bigger pay rises,” Lowe told The Mandarin in April.
“If we’re going to have much higher aggregate wage [not offset by productivity] growth, we’ll have higher inflation and we’ll have higher interest rates.”
Inflationary climate
The short form of Bullock’s speech is that climate change effects could generally smash supply and drive prices up. This could materially change the dynamic between the Australian Public Service, the APSC and the government on pay expectations.
It could also make Canberra far less liveable and affordable, and that’s a potentially massive problem for APS labour supply under the current Canberra-centric model. There is no doubt that flexible work as usual will broaden the APS footprint to places outside of the Canberra fishbowl; nor is there doubt APS refugees may return to the fold if they can service a mortgage. But there is a disparity.
A major self-selection issue is that if APS salaries are systemically out of whack, in many regards, the only people able and willing to invest in an APS career may be second-generation public servants with intergenerational assets behind them. That’s not exactly a capability uplift. Similarly, there are clear issues attracting, let alone retaining, APS staff.
When the question of whether was APS pricing itself out of the market was put to Riordan directly, he answered: “Hopefully not”.
All politics is local
The hardline stance by the APSC and the big gap between positions is problematic for finance and public service minister Katy Gallagher because it could undermine the belief that Labor will deliver federal public servants a decent bump after almost a decade of the APS being used as an exemplar by the previous government for cracking down on unions and allegedly soft employment and performance conditions.
Gallagher has previously said she expects a degree of conflict as part of the negotiation process the be inevitable, a thinly veiled nod to her own previous days on CPSU picket lines as an organiser.
Riordan told The Mandarin that ground had been made in the latest round of negotiations.
“We did make a fair bit of progress through this centralised bargaining process as soon as we were calling it as a consequence of that I was able to return to government and put forward arguments that the pay offer should be included,” Riordan said.
However, Riordan tempered the second hearing of employees’ demands by saying that even though the initial increase figure was rejected, the APSC “thought the first offer of 10.5% over three years was fair and reasonable based on economic indicators and based on what’s happening with wages generally.”
The latest offer still leaves a yawning gap of 8.8% between employer and employee positions, which is huge, given the opening round was 10.5% versus a claim of 20%, a net difference of 9.5%.
Productive conversations
Coming back to productivity that should push wages north, Riordan is outwardly optimistic, although with a tightly limited scope.
“I think the package we’ve put forward will start to improve productivity. We’ve made some gains around uniformity. If you think about the disruption that occurs during machinery of government changes, creating greater commonality that diminishes that disruption.
“We’ve also got broad support to move to the same accrual method for annual leave across the [APS]. At the moment, there are four or five different ways of calculating people’s annual leave entitlement. And we’ve also done something similar in relation to the accumulation of personal and carer’s leave.
“Those things go to system changes … they do impact and help productivity as well,” Riordan said.
If those measures sound marginal and tangential to productivity growth, it’s because they are. Possibly the biggest challenge for the CPSU and broader services is that the APSC is almost running dead on spurring productivity, possibly because the natural end state there could be lower APS employee numbers, but on more money, an unpalatable outcome for both parties.
It’s a nice job if you already have money
Riordan’s big sell for joining the APS is that it’s simply a great place to work, and there is reward beyond remuneration in service.
“I ‘m also of the view that if you can create an environment where people are reasonably comfortable within employment conditions, they got the flexibility they need to do their jobs well, they’ve been fairly remunerated, that also helps boost morale and that has a flow-on impact in terms of their work output as well,” Riordan said.
“We think we’ve got the tools in place to ensure that we have a pretty good offering, and working in a public service brings with a lot of intrinsic benefits about working for people working for the Australian community, helping those people in need, delivering strong outcomes protecting the country from overseas threats, whether they are cyber-physical.
“Those sort of things going to the employee value proposition that can be offered by the Australian Public Service … I think we’ve got a really good proposition that we put to employees today,” Riordan said.
The war will be over by Christmas
The CPSU has played a straight bat to the offer and, as is normal process, will let its members dissect and digest the offer before voting on it. That process will take around four weeks.
“After five months of intense negotiations, strong member campaigning, and clear direction from members on your priority issues, your CPSU bargaining team has worked hard at the bargaining table to negotiate on the issues that matter most to members,” the union said in communications to members.
“We are now at the point that there is a package of pay and conditions for members to consider.”
Specific wins the CPSU is calling out to members include parental leave that will include “18 weeks’ paid leave for the birth parent (with no qualifying period) [and] a move towards 18 weeks’ for the non-birth parent over the life of the agreement”, the CPSU said.
Paid parental leave will also be able to be used flexibly by both parents, including part days, and blocks, and can be taken at half pay and will apply to adoption and fostering.
There has also been a win on casual loadings being raised from 20% to 25% to pull them in line with other basic awards.
In terms of time frames, Riordan said he expected to “come back together” around the third of the fourth week of September.
Asked if he thought the deal would make it over the line by Christmas, Riordan was frank.
“I think if we haven’t got it over the line, that’s going to be a problem.”
No pressure.
READ MORE:
Lowball revised APS pay offer from APSC set to ignite more strikes
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