Canberra’s public sector wage bill surged last financial year, despite efforts by the Labor government to bring spending growth under control.
Wages and salaries paid by the Commonwealth government rose 7.2 per cent in 2025/26, the Australian Bureau of Statistics reported on Thursday.
It came as the public sector headcount grew by one per cent, to 389,200, meaning average wages rose by roughly 6.1 per cent.
The blowout added an extra $2.9 billion to the $41 billion wages bill at a time when Treasurer Jim Chalmers and Finance Minister Katy Gallagher are searching for savings ahead of the mid-year budget update in December.
Economists and business leaders have blamed high government spending for contributing to inflation and the Reserve Bank’s decision to lift interest rates for a fifth time in 2026.
State and territory government jobs grew by 2.8 per cent, faster than Commonwealth jobs.
Canberra’s wages bill outpaced the state and territories, which only grew by 6.6 per cent.
Commonwealth public service wages outpaced private sector wages over the same period.
The rate of growth was significantly down from the year prior, when it increased by 9.5 per cent.
The government has been struggling to bring down rapid growth in public service costs, which has ballooned in size as Labor has sought to cut reliance on external consultants.
Senator Gallagher has been dismayed by the lack of progress from agencies in squashing spending on consultants, as a string of budget blowouts has been revealed in recent departmental annual reports.
“I have not seen the shift in spend on consultants that I would have liked to have seen, commensurate with the investments that we’ve made in the public service,” she told reporters on Wednesday.
The Department of Climate Change, Energy, Environment and Water revealed it spent $258 million on consultants in 2025/26, up from $220 million the year prior.
The government has been mired in negotiations for a new public sector pay deal, after unions overwhelmingly rejected its initial offer of nine per cent over three years.
The Community and Public Sector Union, which represents the largest share of public servants covered by bargaining, has urged the government’s negotiators to come back to the table with a better offer, as well as improved workplace flexibility and AI protections.
“The CPSU will keep pushing for clear human oversight and accountability, and firm protections against AI being used for surveillance, performance assessment, recruitment or promotion,” CPSU national secretary Rebecca Fawcett said.
Unions are asking for increases of up to eight per cent per year in the case of tax office workers.
Agencies have to finance the pay rise from within their existing budgets, which are indexed to inflation each year.
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