Albanese govt needs to strike the right balance with public sector pay

After months of negotiations over federal public servants' pay and conditions, the Albanese government has put an offer on the table.

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The proposed APS-wide increase of 9 per cent over three years would mean APS6 employees, who earn a median salary of $107,500, would receive a total pay increase of $9675 over the three years.

Finance and Public Service Minister Katy Gallagher says the Commonwealth's offer is "fair and reasonable ... in a constrained fiscal environment." Picture by Karleen Minney.

Additional increases of up to 1.5 per cent for some employees in lower-paying agencies would be part of a potential deal that seeks to progress greater consistency of pay rates across the bureaucracy.

For public sector workers struggling with the cost of living amid rising costs of housing, groceries and other essentials, it doesn't sound like much.

But while federal bureaucrats are frustrated and dissatisfied with pay - as evidenced by the 2026 APS Employee Census, which found just 61 per cent believe they are adequately remunerated - the government needs to tread a careful line.

Voters perceive a need for prudent spending at a time of global uncertainty and the government needs to find room in a tight budget for competing priorities.

The Community and Public Sector Union, which represents the most APS employees, has come out swinging against the Commonwealth offer.

CPSU National Secretary Rebecca Fawcett says it "falls short of what public sector workers deserve," as the union pushes for 15 per cent over three years (or the consumer price index if it is higher) and a poll of members is expected to conclude the offer is "not good enough."

Some public servants are wary of the potential for higher wage costs to lead to further demands to do more with less.

The Australian Services Union, which represents Australian Taxation Office workers, says the government's offer "holds ATO employees in contempt."

Strong language is to be expected as negotiations continue and unions push for the best possible deal.

Finance and Public Service Minister Katy Gallagher - who was a CPSU organiser before entering politics - says the Commonwealth's offer is "fair and reasonable ... in a constrained fiscal environment."

Labor is under pressure to tighten its purse strings after its final budget outcome released last month showed federal government spending grew more than twice as fast as forecast last financial year and with surging global bond yields to add billions to the cost of servicing Australia's $1 trillion debt.

The government has grown the APS to an average staffing level of 195,847 - up 36,668 since winning government in 2022 - after promising to "restore" the public sector, and boosted APS pay by 11.2 per cent over three years in the last round of bargaining.

This has driven the cost of APS wages and salaries to $31 billion in 2025-26, with further increases expected if programs due to terminate are extended in future budgets.

About 40,000 public service roles are not funded in the May budget's forecasts to 2036-37.

As agencies pursue savings through redundancies and hiring freezes, some public servants are wary of the potential for higher wage costs to lead to further demands on them to do more with less.

And hanging over the pay discussions is the issue of how artificial intelligence will transform the public sector, with unions pushing for a greater say in how changes are rolled out.

There are warning signs from the staff census that morale is low. If not dealt with efficiently the pay negotiations have the potential to further erode the relationship with the government.

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