RESEARCH PAPER SERIES, 2018–19              4 october 2018

The base salary for senators and members: 2018 update

Cathy Madden, Deirdre McKeown, Politics and Public Administration Section
Sue Johnson, Statistics and Mapping Section

Introduction

Senators and members receive an annual allowance by way of basic salary—$207,100 from 1 July 2018.[1] This research paper explains the legislative basis, fixing and linking mechanisms for the allowance. Adjustments to the base salary since 1968 are provided in Table 1 and Graph 1.

Constitutional and legislative basis for payment

Section 48 of the Constitution provides for the payment of Members of Parliament:

Until the Parliament otherwise provides, each senator and each member of the House of Representatives shall receive an allowance of four hundred pounds a year, to be reckoned from the day on which he takes his seat.

Since 1901, the Parliament has enacted legislation to define the parliamentary base salary for the purposes of Section 48 of the Constitution.

Subsection 14(2) of the Parliamentary Business Resources Act 2017 (PBR Act) provides that remuneration must include a determination of an annual allowance payable for the purposes of section 48 of the Constitution known as base salary.[2] Section 59 provides that salaries and allowances are to be paid out of the Consolidated Revenue Fund.

Section 61 of the PBR Act allows the Governor-General to make regulations necessary to give effect to the Act. The Parliamentary Business Resources Regulations are now in force.

Remuneration Tribunal

The Remuneration Tribunal is an independent statutory body established by the Remuneration Tribunal Act 1973. The PBR Act allows the Tribunal to inquire into and determine remuneration and allowances paid out of consolidated revenue to senators and members.[3] In 1974 Parliament disapproved the Tribunal’s determination increasing the base salary to $20,000 per annum. Since that time the Parliament has also modified determinations, postponed increases and enacted reduced allowances previously determined by the Tribunal as an example of wage restraint.[4]

The commencement of the Remuneration and Other Legislation Amendment Act 2011 restored the power of the Remuneration Tribunal to determine parliamentary remuneration. The legislation also removed the power of the Parliament to disallow parliamentary remuneration determinations made by the Tribunal.

The base salary for senators and members is $207,100 per annum from 1 July 2018

The applicable Principal Remuneration Tribunal Determination is Determination 2018/10, Members of Parliament–base salary, additional salary for parliamentary office holders, and related matters.

Parliamentary base salary—a brief history

1901–1973

At the Constitutional Convention at Sydney in 1891, Sir Samuel Griffith said:

One of the first things to be done by the parliament of the commonwealth in its first session would be to settle the salaries of ministers, and a great number of other matters of that kind. We have, therefore, given them power to deal with this subject. We did not think it necessary to make this in any sense a payment of members bill. We lay down, however, the principle that they, are to receive an annual allowance for their services, and we thought that it should start in the first instance at £500.[5]

At the Adelaide Convention, however, the draft constitution bill debated specified an amount of £400 and this was the annual allowance subsequently enacted in the Constitution.[6]

In 1907 parliamentarians made themselves liable to the payment of State income taxes.[7] Tax concessions for electorate expenses were allowed from 1925.[8] In 1907 the Parliament also enacted the Parliamentary Allowances Act 1907, raising the base salary from £400 to £600.

Between 1901 and the establishment of the Remuneration Tribunal in 1973, Parliament adjusted allowances following decisions of executive government or as the result of recommendations from committees of inquiry.[9] In 1971 Justice Kerr noted that during this time there was ‘no fixed pattern of approach’ to the timing and method of reviewing base salaries—a process that invariably attracted criticism.[10] The Kerr Inquiry suggested the establishment of a ‘Salaries Tribunal … authorised by legislation to review salaries and report at regular stated intervals.’

Kerr also wrote:

Nothing … should prevent the Parliament or the Government from rejecting recommendations or from taking action not in accordance with what is recommended.[11]

Remuneration Tribunal

From its establishment in 1973, the Remuneration Tribunal, using a range of evidence and indicators, determined the base salary with reference to second division officers of the Commonwealth Public Service.[12] Adjustments were then made by applying National Wage Case decisions. In 1979 the Government legislated to remove the Tribunal’s determination that these adjustments be automatic.[13]

In 1987 the Tribunal convened a conference for interested parties to examine parliamentarians’ base salary.[14] An independent review was consequently conducted for the Tribunal in 1988. The resulting report recommended increases based on work value and community pay standards. The review strongly recommended that there be no linkage between the base salary and Australian Public Service (APS) salaries.[15] Increases determined by the Tribunal at that time were deferred.

With the Remuneration and Allowances Act 1990, the Government removed the Tribunal’s power to determine base salaries and allowed a phased increase to the allowance over three years. The legislation also provided a link with Senior Executive Service (SES) Band 1 salaries in the APS—in contrast to the recommendation in the 1988 review. Adjustments to the base salary were made by means of national wage case decisions and, from 1992, agreements between the Government and public sector unions.

Legislation enacted in 1994 ensured that the base salary was equivalent to the minimum APS SES Band 2 salary level. The then Workplace Relations Act 1996 enabled SES salaries to be set through individual Australian Workplace Agreements (AWAs), thereby removing the standard against which the base salary was determined. With the expiry of the final APS Enterprise Agreement at the end of 1996, the mechanism by which adjustments were made to the base salary ceased.

Legislative changes to the APS in 1999, among other matters, amended the Remuneration and Allowances Act 1990 and the Remuneration Tribunal Act 1973.

Reference salary—under the PEO Classification

In Report 1999/01 the Tribunal recommended that the base salary be linked to a reference salary under the Principal Executive Office (PEO) Classification Structure.[16] The Government accepted this recommendation and introduced the Remuneration and Allowances Regulations 2005 to create the link. The Regulations provided for the reference salary to be 100 per cent of the rate determined by the Remuneration Tribunal for Band A of the PEO Classification.

The Remuneration Tribunal’s amending Determination 2008/10 increased Reference Salary A in the PEO Classification by 4.3 per cent to $132,530 from 1 July 2008. Consequently, for the purposes of the base salary in 2008–09, the Remuneration and Allowances Regulations reduced Reference Salary A by 4.3 per cent.

On 26 May 2008, the Rudd Government introduced the Remuneration and Allowances Amendment Regulations 2008 (No. 1) amending the Remuneration and Allowances Regulations 2005 to freeze the base salary at $127,060 per annum. Rather than 100 per cent of Reference Salary A, Regulation 5 described the percentage as:

Regulation 5 Remuneration and allowances of Senators and Members of the House of Representatives

(2) For the financial year commencing on 1 July 2008, and for each subsequent financial year:

(a) the percentage is the percentage of the reference salary which, when applied to the reference salary, reduces the reference salary by the amount (in whole dollars) by which the reference salary was increased by the Remuneration Tribunal for the financial year commencing on 1 July 2008

For the purpose of calculating the base salary, Regulation 5 had the effect of reducing Reference Salary A in the PEO Classification by the percentage necessary to arrive at the rate payable at 30 June 2008, that is, $127,060.

On 20 June 2011 the Remuneration Tribunal released Determination 2011/11 Principal Executive Office (PEO) Classification Structure and Terms and Conditions which set Reference Salary A at $146, 380. On the basis described above, that is Reference Salary A less $5470, the parliamentary base salary increased to $140,910 with effect from 1 July 2011.

Under the Remuneration Tribunal Act 1973, the Tribunal had wide scope to consider factors when reviewing the PEO Classification. The Tribunal indicated that these factors included: key economic indicators; other specific indicators such as the Wage Price Index; salary outcomes in the public (and to a lesser degree) private sector; the principles of wage determination and decisions of the Australian Industrial Relations Commission.[17]

2009–2016

In 2009 an Australian National Audit Office (ANAO) report, Administration of parliamentarians’ entitlements by the Department of Finance and Deregulation, highlighted shortcomings in the management of Members of Parliaments’ (MPs) entitlements.[18] In September 2009, in response to the ANAO report, the Government set up a committee to review parliamentary entitlements, chaired by former senior public servant, Barbara Belcher.

In 2011 the Government accepted the recommendation of the Report of the committee for the review of parliamentary entitlements to restore the power of the Remuneration Tribunal to determine parliamentary base salary.[19] The legislation, the Remuneration and other Legislation Amendment Bill 2011, also removed the power of the Parliament to disallow parliamentary remuneration determinations made by the Tribunal. The Bill passed both Houses on 23 June 2011 and received assent on 25 July 2011, commencing on 8 August 2011.

On 15 December 2011 the Remuneration Tribunal issued its initial report on the work value assessment of parliamentary remuneration.[20] The Tribunal also issued a Statement outlining its recommendations and next steps.[21] The main recommendations included:

on the basis of a work assessment of parliamentarians, that parliamentary base salary should be set at $185,000

On 13 March 2012 the Tribunal issued a Determination setting the base salary of $185,000 for MPs to take effect from 15 March 2012.[22]

On 19 June 2012 the Tribunal issued Determination 2012/15: Members of Parliament – Base salary, entitlements and related matters which increased MPs’ base salary by 3 per cent to $190,550 from 1 July 2012.[23]

On 18 June 2013, the Tribunal issued Determination 2013/13: Members of Parliament – Base salary, additional salary for Parliamentary office holders and related matters which increased the base salary by 2.4 per cent to $195,130 from 1 July 2013.[24]

In its 2014 Annual review of Remuneration for Holders of Public Office, the Remuneration Tribunal determined that there would be no annual adjustment to remuneration for offices in its jurisdiction from 1 July 2014 for one year. This included parliamentarians and office holders as well as other principal executive offices.[25] Determination 2014/10 Members of Parliament–base salary, additional salary for parliamentary office holders, and related matters gave effect to this decision.[26]

In May 2015 the Tribunal deferred the determining of an annual adjustment until later in the year.[27] On 9 December the Tribunal determined that all offices in its jurisdiction would receive a 2.0 per cent increase, effective 1 January 2016.[28]

2016–

Following the 2016 review of an independent parliamentary entitlements system the Government commenced a major overhaul of the remuneration and entitlements framework.

The Independent Parliamentary Expenses Authority Act 2017 established the Independent Parliamentary Expenses Authority (IPEA) with effect from 1 July 2017. IPEA has the role of advising, monitoring, reporting, auditing and processing functions relating to the work expenses, travel expenses and travel allowances of members of parliament, certain travel expenses of former members of parliament and the travel expenses and travel allowances of staff employed under the Members of Parliament (Staff) Act 1984.

The Parliamentary Business Resources Act 2017 (PBR Act) and the Parliamentary Business Resources (Consequential and Transitional Provisions) Act 2017 (PBR (CTP) Act) received Royal Assent on 19 May 2017 and commenced 1 January 2018. The PBR Act establishes the new parliamentary work expenses framework. It is a principles-based framework to cover parliamentarians' work expenses, requiring that the dominant purpose be parliamentary business for any expense claimed and an overriding principle of value-for-money for the Commonwealth.

The PBR Act and the PBR (CTP) Act replaced the Parliamentary Entitlements Act 1990 and related legislation.

On 22 June 2017 the Remuneration Tribunal announced its decision to increase remuneration by two per cent for public offices in its jurisdiction, with effect from 1 July 2017. This included the base salary of MPs. In its June 2017 Statement, 2017 Review of remuneration for holders of public office, the Remuneration Tribunal stated that this ‘represents an increase of 1.6 per cent per annum over the 18 months since the last general increase decided by the Tribunal, effective from 1 January 2016’.[29] 

Remuneration Tribunal Determination 2017/12 stated that the base salary of an MP would increase from $199,040 to $203,030 per annum from 1 July 2017.

On 23 June 2018 the Tribunal announced an increase of two per cent for public offices in its jurisdiction, with effect from 1 July 2018. The base salary of an MP increased to $207,100.[30]

Percentage increases in the base salary from 1996

Since 1996, the base salary has increased by the following (in actual dollars):

•        7 March 1996—1.6 per cent

•        17 October 1996—1.2 per cent

•        7 December 1999—4.45 per cent, the first stage of a 9.95 per cent two-stage increase

•        1 July 2000—5.5 per cent, the second stage of the 9.95 per cent increase

•        1 July 2000—2.2 per cent by virtue of an adjustment to the PEO Classification Structure

•        1 July 2001—3.9 per cent

•        1 July 2002—3.35 per cent

•        1 July 2003—4 per cent

•        1 July 2004—3.9 per cent

•        1 July 2005—4.1 per cent and

•        1 July 2006—7.01 per cent

•        1 July 2007—6.8 per cent

•        1 October 2009—3.1 per cent

•        1 August 2010—3.8 per cent

•        1 July 2011—3.6 per cent

•        15 March 2012—31.3 per cent

•        1 July 2012—3.0 per cent

•        1 July 2013—2.4 per cent

•        1 July 2014—0 per cent

•        1 January 2016—2.0 per cent

•        1 July 2017—2.0 per cent

•        1 July 2018—2.0 per cent

Increases in the parliamentary base salary compared with average wages from 1968

During the 1980s the MPs’ base salary failed to keep up with inflation resulting in a decline in value in real terms. This was in contrast to the average which kept ahead of inflation and grew, in real terms, at an annual average rate of 0.3 per cent.

As a result the base salary, which had been almost three times the average wage in 1975, was only twice the average wage in 1991. During the 1990s MPs were given increases to their base salary which allowed some catch up with average wages. However, despite this by 2011 the base salary was still only 2.2 times the average wage.

In March 2012 MPs received an increase to their base salary of 31.3 per cent. This resulted in a significant increase in the value of the salary relative to average wages. At 2.8 times the average annual wage it was at its highest level in 37 years.

The freeze on MPs’ pay for a year (beginning 1 July 2014) reduced the gap with average weekly earnings. There was no increase in MPs’ base salary in 2015. Since then, the ratio has fluctuated between 2.7 and 2.8.

Table 1: Base salary compared with average wages 1968–2018

Annual allowance
($ per annum)

Male total average wages
($ per annum) (b)

Ratio - allowance to average wages

Year

Date of effect

Current prices

Real prices
(June 2018 dollars) (a)

Current prices

Real prices
(June 2018 dollars) (a)

1968

1.12.1968

9 500

116 685

3 525

41 530

2.7

1973

1.4.1973

14 500

143 728

5 256

49 975

2.8

1975

1.3.1975

20 000

147 712

6 987

49 501

2.9

1975

15.5.1975

20 720

148 187

7 597

52 120

2.7

1975

9.9.1975

20 000

142 138

7 659

52 219

2.6

1976

1.6.1976

21 250

135 664

8 739

53 518

2.4

1977

1.6.1977

24 369

137 000

9 656

52 077

2.5

1978

1.7.1978

25 692

133 788

10 637

53 134

2.4

1979

1.7.1979

26 720

127 939

11 606

53 311

2.3

1979

23.11.1979

27 575

125 140

12 091

52 638

2.3

1980

1.7.1980

28 816

124 283

13 139

54 363

2.2

1980

1.8.1980

30 026

129 501

13 139

54 363

2.3

1981

1.7.1981

36 000

143 239

14 771

56 380

2.4

1981

1.7.1981

33 013

131 355

14 771

56 380

2.2

1982

1.7.1982

36 000

129 143

17 201

59 193

2.1

1982

1.10.1982

38 500

133 451

17 602

58 531

2.2

1983

6.10.1983

40 156

127 461

18 875

57 472

2.1

1984

1.5.1984

41 802

130 127

20 011

59 758

2.1

1985

1.7.1985

42 889

124 909

21 018

58 719

2.0

1986

1.7.1986

45 543

122 241

22 796

58 695

2.0

1986

10.3.1987

46 065

114 908

23 176

55 459

2.0

1987

1.7.1987

47 815

117 459

23 828

56 151

2.0

1988

1.7.1988

49 180

112 725

25 350

55 740

1.9

1989

1.1.1989

55 000

121 387

27 483

58 187

2.0

1989

16.11.1989

55 000

112 591

28 156

55 291

2.0

1990

1.7.1990

58 300

115 375

29 339

55 698

2.0

1991

1.1.1991

61 798

118 359

30 533

56 098

2.0

1991

1.7.1991

64 768

124 047

30 001

55 121

2.2

1991

15.8.1991

66 387

126 505

30 001

54 842

2.2

1992

17.12.1992

67 715

127 318

31 258

56 379

2.2

1993

11.3.1993

68 663

128 035

31 868

57 005

2.2

1994

1.1.1994

68 663

126 780

32 619

57 776

2.1

1994

10.3.1994

69 693

128 054

32 619

57 494

2.1

1994

15.12.1994

74 460

133 981

33 620

58 032

2.2

1995

12.1.1995

75 949

136 660

33 990

58 671

2.2

1995

6.4.1995

77 438

137 155

34 115

57 964

2.3

1995

13.7.1995

78 987

137 953

34 240

57 367

2.3

1996

7.3.1996

80 251

136 984

34 949

57 228

2.3

1996

17.10.1996

81 856

138 262

35 507

57 534

2.3

1999

7.12.1999

85 500

139 819

38 657

60 642

2.2

2000

1.7.2000

92 000

148 091

39 522

61 028

2.3

2001

1.7.2001

95 600

145 004

41 034

59 706

2.3

2002

1.7.2002

98 800

145 749

42 963

60 799

2.3

2003

1.7.2003

102 760

147 734

45 310

62 488

2.3

2004

1.7.2004

106 770

149 690

46 248

62 200

2.3

2005

1.7.2005

111 150

152 058

48 907

64 183

2.3

2006

1.7.2006

118 950

156 477

51 045

64 415

2.3

2007

1.7.2007

127 060

163 715

53 861

66 573

2.4

2008

1.7.2008

127 060

156 744

55 738

65 960

2.3

2009

1.10.2009

131 040

159 392

60 623

70 738

2.2

2010

1.8.2010

136 040

160 465

61 702

69 818

2.2

2011

1.7.2011

140 910

160 512

64 471

70 450

2.2

2012

15.3.2012

185 000

209 259

66 995

72 695

2.8

2012

1.7.2012

190 550

214 464

67 000

72 339

2.8

2013

1.7.2013

195 130

214 491

70 754

74 608

2.8

2014

1.7.2014

195 130

208 212

71 171

72 851

2.7

2016

1.1.2016

199 040

207 486

71 693

71 693

2.8

2017

1.7.2017

203 030

207 248

73 882

75 417

2.7

2018

1.7.2018

207 100

207 100

74 456

74 456

2.8

Average annual growth rate (c)

1968 to 2018

6.4

1.2

6.3

1.2

1968 to 1980

11.7

0.6

14.1

2.7

1980 to 1990

6.7

-1.0

7.9

0.2

1990 to 2000

5.3

2.8

3.4

1.0

2000 to 2010

4.0

0.8

4.6

1.4

2013 to 2018

1.2

-0.7

1.0

0.0

(a) adjusted for inflation using Consumer Price Index (CPI) to June 2018 prices

(b) average weekly wages annualised

(c) wages growth to Nov 2017 and MPs allowance to July 2018

Sources:

Data on MP's allowance from Commonwealth Acts and Remuneration Tribunal Reports and Determinations.

Average wages and deflators from ABS, Consumer price index, Australia, June 2018, cat. no. 6401.0 (Table 1).

Average weekly earnings, Australia, Nov 2017, cat. no. 6302.0 (Table 10C).

Real values calculated by the Parliamentary Library

Graph 1: Base salary for members of parliament and average weekly wages index—real terms

Graph 1 provides data until July 2018, but the axis labels are set to show every two years from Dec 1968

Table 1, Graph 1 and commentary on the comparison of MPs’ base salary and real wages by Sue Johnson, Statistics and Mapping Section.

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[1].               The choice of phrase to describe the allowance payable under Section 48 of the Constitution is a difficult one. ‘Basic salary’ is commonly used in an informal sense and serves to distinguish it from salaries paid to ministers and office-holders. The authors have chosen to use ‘parliamentary base salary’. Federal parliamentarians are also entitled to other benefits and allowances described in legislation. For the previous entitlements framework see C Madden and D McKeown, Parliamentary remuneration and entitlements: 2016 update, Research paper series 2015–16, Parliamentary Library, 2016. For the current framework see C Madden and D McKeown, 2018 Parliamentary remuneration and business resources: a quick guide, Research paper series 2018–19, Parliamentary Library, 2018. All hyperlinks correct as at 4 September 2018.

[2].               Parliamentary Business Resources Act 2017.

[3].               Parliamentary Business Resources Act 2017, section 45.

[4].               Remuneration Tribunal, 1982 Review, The Tribunal, Canberra, 1982, pp. 18–21 and Report 1999/01, The Tribunal, 1999, pp. 1–5.

[5].               S Griffith, Official Report of the National Australasian Convention Debates, Sydney, 2 April 1891, p. 654.

[6].               Official Report of the National Australasian Convention Debates, First Session, Adelaide, 22nd March to 23rd April 1897, pp. 1032–34.

[7].               Commonwealth Salaries Act 1907, Act no 7 of 1907.

[8].               E Page, House of Representatives, Debates, 4 June 1947, p. 3355. An Electorate Expense Allowance, not subject to income taxation, was paid from 1952.

[9].               Including: Report of the Committee of Enquiry into the Salaries and Allowances of Members of the National Parliament (Nicholas Report), 1952; Report of the Committee of Enquiry into the Salaries and Allowances of Members of the Commonwealth Parliament (Richardson Report), 1955; Report of the Committee of Enquiry into the Salaries and Allowances of Members of the Commonwealth Parliament (Richardson Report), 1959; Salaries and Allowances of Members of the Parliament of the Commonwealth: A Report of Inquiry by Mr Justice Kerr, (Kerr Report), 1971.

[10].               Mr Justice Kerr, ibid., p. 12.

[11].               Ibid., p. 16.

[12].               With the enactment of the Public Service Reform Act 1984, the Second Division of the Commonwealth Public Service was replaced by the SES. See Public Service Reform Bill 1984, Bills Digest, 72, 1984, Parliamentary Library, Canberra, p. 2.

[13].               Remuneration and Allowances Act 1979.

[14].               Remuneration Tribunal, 1987 Review, pp. 5–12.

[15].               Cullen Egan Dell, Report on the pay and allowances for members of parliament: prepared for the Remuneration Tribunal, 1988, pp. 18–19.

[16].               The PEO classification structure provides a framework for the negotiation of the terms and conditions of PEO employment.

[17].               Remuneration Tribunal, Explanatory Memorandum: Determination 2004/15 – Principal Executive Office (PEO) Classification Structure Terms and Conditions. WPI is a product of the Australian Bureau of Statistics. The Tribunal’s Report 1999/01 highlights some of the factors given consideration by the Tribunal during earlier deliberations.

[18].               Australian National Audit Office (ANAO), Administration of parliamentarians’ entitlements by the Department of Finance and Deregulation, ANAO, 2009.

[19].               Report of the Committee for the Review of Parliamentary Entitlements (the Belcher review), April 2010, p. 12.

[20].               Remuneration Tribunal, Review of the Remuneration of Members of Parliament: Initial report, 15 December 2011.

[21].               Remuneration Tribunal, Reports, Members of Parliament, Secretaries of Departments, Specified Statutory Offices, Statement, 15 December 2011.

[22].               Remuneration Tribunal, Determination 2012/02: Members of Parliament—Base salary and related matters, 12 March 2012.

[23].               Remuneration Tribunal, Determination 2012/15: Members of Parliament—Base salary, entitlements and related matters, 19 June 2012.

[24].               Remuneration Tribunal, Determination 2013/13: Members of Parliament – Base salary, additional salary for Parliamentary office holders and related matters, 18 June 2013, accessed 13 August 2018; Remuneration Tribunal, Determination 2013/13 Members of Parliament – Salary statement of reasons, June 2013.

[25].               Remuneration Tribunal, 2014 Review of Remuneration for Holders of Public Office, Statement, 12 May 2014.

[26].               Remuneration Tribunal, Determination 2014/10: Members of Parliament—Base salary, additional salary for parliamentary office holders, and related matters, 14 May 2014.

[27].               Remuneration Tribunal, 2015 Review of Remuneration for Holders of Public Office, Statement, 31 March 2015; Remuneration Tribunal, Determination 2015/06 Members of Parliament – Base Salary, Additional Salary for Parliamentary Office Holders, and Related Matters, Reasons for Determination, The Tribunal, 11 May 2015.

[28].               Remuneration Tribunal, Determination 2015/22, Members of Parliament–Base salary, additional salary of parliamentary office holders and related matters, The Tribunal, 9 December 2015.

[29].               Remuneration Tribunal, 2017 Review of remuneration for the holders of public office, Statement, The Tribunal, 22 June 2017.

[30].               Remuneration Tribunal, Determination 2017/23 Members of Parliament, as at 1 July 2018, incorporating amending Determination 2018/06 Members of Parliament, 25 June 2018.