The Hon. Rob Lucas MLC

The Hon

Rob Lucas MLC

Treasurer

Media Releases

Wage cost blowouts pressure budget

Tuesday, 3 October 2006

The Rann Government’s dismal record on wage cost blowouts is placing extraordinary pressure on the budget bottom line, Shadow Treasurer Rob Lucas said today.

“In fact, over the last four budgets, actual wage cost increases have blown out by more than 100% at a cost to the budget bottom line of hundreds of millions of dollars,” Mr Lucas said.

Budget papers show:

Budgeted Wage Cost Actual Wage Cost
Increases (%) Increases (%)
2002-03 2.9 7.9
2003-04 4.7 10.5
2004-05 3.2 8.9
2005-06 4.2 8.8

“These blowouts in wage costs are due to a combination of unbudgeted increases in public service numbers (7750 full-time equivalent) and wage increases higher than budgeted,” Mr Lucas said.

“The only reason why the budget has been able to stay in balance has been the rivers of gold revenue windfall – from the GST and property taxes – that has camouflaged wage cost blowouts.

“For example, Treasurer Foley in his first four budgets has underestimated revenue on average by $571 million per annum. However, the unbudgeted revenue windfalls cannot continue forever and will not be able forever to camouflage undisciplined financial management by Mr Rann and Mr Foley.

“Treasury provides a warning in the budget papers about the cost to the bottom line of even a blowout in wage costs smaller than the blowouts so far under the Rann Government:

“If public sector wage outcomes are 1.0 per cent per annum above allowances in the forward estimates for forthcoming enterprise agreements the budget impact would be approximately $169 million in 2009-10.”
Page 7.7, Budget Paper 3

“The warning signs are on the horizon, and Mr Foley in particular will have to do a lot more than simply talking tough at budget time and finally insist on some financial discipline on the spending side of the budget.

“The warnings are clear – unbudgeted revenue windfalls cannot prop up wage cost blowouts and capital works cost blowouts forever.”
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