A 1 per cent increase on the 2.5 per cent the government has budgeted for public sector wage increases in Tasmania this year will cost the budget almost $500 million over the forward estimates, Premier Jeremy Rockliff says.
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There are 16 state service wage agreements up for negotiation by the end of this year.
Under questioned from Labor crossbencher David O'Byrne in budget estimates on Monday, Mr Rockliff said the government would negotiate wage increases in good faith and would attempt to avoid industrial action.
"There's no need for industrial action," he said.
"We'll work with unions. I value state service employees, sitting down in good faith is exactly what I intend to do.
Mr Rockliff said the government recognised the increased cost of living pressures on Tasmanian households.
"We are committed to delivering a fair, reasonable and affordable pay rise for our hard-working state service employees," he said.
"We're also committed to delivering a sustainable budget and we cannot agree to a wage increase that we cannot afford or cannot offset the savings."
Mr Rockliff said the 2.5 per cent wage indexation in the budget was not an allocation for the purpose of developing the budget and was not a wages policy.
"A 1 per cent increase above that 2.5 per cent will cost $497 million across the budget period so there is a balancing act here," he said.
Mr O'Byrne later said that the budgeted 2.5 per cent pay rise was a pay cut in real terms.
"Today, the Premier deliberately refused to guarantee wage increases that keep up with the cost of living," he said.
"The Premier wants to walk away from the 2.5 per cent wage increase in his government's budget by claiming it's not his government's wage policy, while simultaneously failing to guarantee a real wage increase.
"This will cost the government more than simply paying fair wages and conditions."
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