Labor’s public sector wages policy blows almost $9 billion budget black hole

NSW Labor’s plan to scrap the public sector wages cap would blow an almost $9 billion black hole in the state’s budget, according to analysis from NSW Treasury.

Chris Minns will be forced to cut infrastructure projects or increase taxes to make up the shortfall given he has repeatedly said that public sector wages should keep up with inflation, otherwise they would amount to a pay cut.

Treasury analysis shows that if wage rises were in line with the current inflation forecast in the Half-Yearly Review it would blow an $8.6 billion black hole in Labor’s budget.

If NSW Labor used the latest ABS CPI indicator, it would cost $11.1 billion over four years.

Premier Dominic Perrottet said removing the wages cap and aligning wages with inflation would have disastrous consequences for the entire state.

“Our long-term economic plan will continue to provide record investments in road and rail projects that generate jobs and help future-proof our state,” Mr Perrottet said.

“The Liberal and Nationals have funded the biggest infrastructure program in NSW history because of hard fought financial management.”

Labor leader Chris Minns told media a fortnight ago: “It's really important to know that the system that we're bringing in New South Wales is to scrap the wages cap.”

“NSW Labor are putting our record infrastructure pipeline at risk because they have multi-billion-dollar budget black hole,” Mr Perrottet said.

“NSW Labor will need to cut metros, motorways and our cost of living relief measures to pay for their public sector wage increase.

“The NSW Labor plan to unleash public sector wages is a recipe for economic disaster that will stall our economy and take NSW backwards.”

Treasurer Matt Kean said Labor’s Daniel Mookhey had ruled out increasing borrowings and raising taxes which begged the question of how Labor would pay for its wages policy.

“As Treasurer I know the damage a multi-billion-dollar black hole would do to the budget, the economy and the opportunities for future generations – and it’s a price not worth paying,” Mr Kean said.

“If Labor is true to its word then it will have submitted its policy of CPI wage increases to the Parliamentary Budget Office and it should come clean on how it plans to fund the billions of dollars it will cost.

“If Labor has back-flipped on its promise, then it needs to be truthful and explain why. If it hasn’t, it needs to explain exactly which projects and services will be cut to meet the $8.6 billion shortfall.”

NSW public sector workers have experienced real wages growth over the past decade. The current 3 per cent cap plus an additional 0.5 per cent for productivity measures is far more generous than Labor-run Victoria.