Public sector pay

Nine Entertainment Co Limited media publications presented their findings after concluding analysis on executive pay in the public sector. It makes for interesting reading, especially given the ravages of the COVID-19 pandemic on the other public servants and the wider workforce as a whole.

The analysis found that more than twenty-five senior public officials were paid more than $1 million last year. The analysis also compared Australian officials in well-known departments to their overseas counterparts. For example, one Australian police commissioner’s pay was compared to counterparts in America, New Zealand and Canada, and was found to be better paid than all of them.

It would appear that Australian public sector officials are well paid compared to some of their international peers. However, they are still a long way from the top level. In Singapore, a cabinet minister has an annual salary of SGD$1.1 million and the prime minister receives twice that, over $2 million a year (see HERE).

RBA governor Philip Lowe has called for federal and state governments to increase the pay of public servants in the hope of encouraging the private sector to do the same.

Most commentators have failed to recognise the pay dynamics of a mostly closed system. Pity, considering many educated commentators would, at some time, become aware of closed systems, given René Descartes’ discourse on it over 400 years ago.  By design, Australian public sector systems get the best graduates by paying top dollar. Initial promotions also see reasonable increases for the lower level above graduate level. This tapers off as they get into middle ranks. When they eventually become jaded with the government machine, they find they are stuck in a relatively closed system, and cannot find similar jobs in the private sector with their skillset (see HERE). A large proportion remain confined to the public sector, falling behind private sector counterparts with similar years of experience.

So, Australia benefits, to an extent, by a public service that is able to attract and mostly retain top quality people at relatively low career earnings costs by getting them in early, even if a good proportion of them may rather end up preferring to be elsewhere.

Many of these public servants have also enjoyed consistent incentive payments as part of their total remuneration. The government announced a review into “performance bonus arrangements” for senior executives in the Commonwealth public sector, with a stated aim of exercising restraint to “the furthest extent possible in keeping with community expectations”.

Predictably, members in the opposition Labor party signalled their outrage, with labels of “Morrison’s Millionaire Factory” being bandied about. However, it is probably best to keep things in perspective, especially when public sector senior executives are generally receiving much less in pay for responsibilities over larger budgets and high numbers of staff than CEOs are in the private sector. According to the analysis, the average realised pay of ASX100 CEO is $4.5 million a year.

The article can be found HERE.

© Guerdon Associates 2024
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