The Centre for Future Work has released new research estimating the negative impacts on wages and spending power of the Victoria government’s proposed 2% cap on wage increases for the state’s large public sector workforce.  The wage cap would artificially suppress total state public sector compensation by over $3 billion over the coming four years – compared to normal compensation patterns.  It would short-circuit a badly-needed recovery in wage growth that is just taking hold in Victoria’s broader labour market.  The wages cap would damage consumer spending, exert a chilling impact on private sector wage settlements, and do particular damage to regional communities which depend especially strongly on public sector jobs and incomes. 

CPSU Victoria Secretary Karen Batt said plans to tighten spending on state government services would have serious economic and social consequences for Victorians.  

“Victoria has been Australia’s economic and social success story. Strong investment in infrastructure and services is a key part of the economic model that has made this state the envy of the country.

“Through targeted and judicious spending, the State Government has not only created direct jobs, especially in regional areas, it has also provided the social and economic framework to support growth.

“It is alarming that the Andrews Government wants to replace this virtuous circle of investment and expansion with a vicious cycle of austerity and contraction.

“Instead of planning for a growing state, the government is now planning for a slowing state.

“Given the State Budget is in good shape, there is simply no reason for the Victorian Government to suddenly start aping the failed budget strategies of other jurisdictions.

“The Victorian Government needs to re-find its courage, and go back to the policy frameworks which have served it well.”