9 June 2016

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

Contents

Introduction

Constitutional and legislative basis for payment

Remuneration Tribunal

Parliamentary base salary—a brief history

1901–1973
Remuneration Tribunal
Reference Salary—under the PEO Classification
2011–present

Percentage increases in the base salary from 1996

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

 

Introduction

Senators and members receive an annual allowance by way of basic salary—$199,040 from 1 January 2016.[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.

Information on the base salary of state and territory members of parliament is available in a companion Research paper, Parliamentary remuneration and entitlements: 2016 update.

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.

The Remuneration and Allowances Act 1990 defines a parliamentary allowance which is consistent with the arrangements whereby the Remuneration Tribunal determines the remuneration of parliamentarians.[2] Section 8 provides that salaries and allowances are to be paid out of the Consolidated Revenue Fund.

Section 8A of the Remuneration and Allowances Act 1990 allows the Governor-General to make regulations necessary to give effect to the Act. Remuneration and Allowances Regulations 2005 are now in force.

Remuneration Tribunal

The Remuneration Tribunal is an independent statutory body established by the Remuneration Tribunal Act 1973. This legislation allows the Tribunal to inquire into and determine allowances paid out of consolidated revenue to senators and members.[3] The Tribunal’s Report 1999/01 states that ‘the Government can choose to accept or reject the Tribunal’s advice on these matters …’.[4] In 1974 Parliament disapproved the Tribunal’s determination increasing the base salary to $20,000 per annum. In the decades since then Parliament has also modified determinations, postponed increases and enacted reduced allowances previously determined by the Tribunal as an example of wage restraint.[5]

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

The base salary for senators and members is $199,040 per annum from 1 January 2016 The applicable Principal Remuneration Tribunal Determination is Determination 2016/10, Members of Parliament–base salary, additional salary for parliamentary office holders, and related matters. The applicable regulations are Remuneration and Allowances Regulations 2005, SLI 2005 No. 308

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.[6]

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.[7]

In 1907 parliamentarians made themselves liable to the payment of State income taxes.[8] Tax concessions for electorate expenses were allowed from 1925.[9] 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.[10] 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.[11] 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.[12]

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.[13] 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.[14]

In 1987 the Tribunal convened a conference for interested parties to examine parliamentarians’ salaries.[15] 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.[16] 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.[17] The Government accepted this recommendation and introduced the Remuneration and Allowances Regulations 2005 to create the link. The Regulations provide 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.[18]

2011–present

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 MPs’ entitlements.[19] 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.[20] 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.^[21] The Tribunal also issued a Statement outlining its recommendations and next steps.^[22] 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 the first Determination setting the base salary of $185,000 for Members of Parliament to take effect from 15 March 2012.[23]

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.[24]

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.[25]

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 includes parliamentarians and office holders as well as other principal executive offices.[26] Determination 2014/10 Members of Parliament–base salary, additional salary for parliamentary office holders, and related matters gives effect to this decision.[27]

In May 2015 the Tribunal deferred the determining of an annual adjustment until later in the year.[28] On 9 December the Tribunal determined that all offices in its jurisdiction would receive a 2.0 per cent increase.[29]

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

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 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 is at its highest level in 37 years.

The freeze on MPs’ pay for a year (beginning 1 July 2014) reduces the gap with average weekly earnings. There was no increase in MPs’ base salary in 2015.

Table 1: Base salary compared with average wages 1968–2016

		Base salary ($ per annum)		Male total average wages ($ per annum) (b)		Ratio allowance to average wages
Year	Date of effect	Current prices	Real prices  (2014 dollars) (a)	Current prices	Real prices (2014 dollars) (a)
1968	1.12.68	9 500	109 353	3 525	40 572	2.7
1973	1.4.73	14 500	134 697	5 256	48 823	2.8
1975	1.3.1975	20 000	138 431	6 987	48 359	2.9
1975	15.5.1975	20 720	138 876	7 597	50 918	2.7
1975	9.9.1975	20 000	133 208	7 659	51 014	2.6
1976	1.6.1976	21 250	127 140	8 739	52 284	2.4
1977	1.6.1977	24 369	128 392	9 656	50 876	2.5
1978	1.7.1978	25 692	125 382	10 637	51 908	2.4
1979	1.7.1979	26 720	119 900	11 606	52 081	2.3
1979	23.11.1979	27 575	117 277	12 091	51 424	2.3
1980	1.7.1980	28 816	116 474	13 139	53 109	2.2
1980	1.8.1980	30 026	121 365	13 139	53 109	2.3
1981	1.7.1981	36 000	134 239	14 771	55 080	2.4
1981	1.7.1981	33 013	123 101	14 771	55 080	2.2
1982	1.7.1982	36 000	121 029	17 201	57 828	2.1
1982	1 10 1982	38 500	125 066	17 602	57 181	2.2
1983	6.10.1983	40 156	119 453	18 875	56 147	2.1
1984	1.5.1984	41 802	121 951	20 011	58 380	2.1
1985	1.7.1985	42 889	117 060	21 018	57 365	2.0
1986	1.7.1986	45 543	114 561	22 796	57 341	2.0
1986	10.3.1987	46 065	107 688	23 176	54 180	2.0
1987	1.7.1987	47 815	110 078	23 828	54 856	2.0
1988	1.7.1988	49 180	105 642	25 350	54 455	1.9
1989	1.1.1989	55 000	113 760	27 483	56 845	2.0
1990	16.11.1989	55 000	105 516	28 156	54 016	2.0
1990	1.7.1990	58 300	108 126	29 339	54 414	2.0
1991	1.1.1991	61 798	110 922	30 533	54 804	2.0
1991	1.7.1991	64 768	116 253	30 001	53 850	2.2
1991	15.8.1991	66 387	118 556	30 001	53 577	2.2
1992	17.12.1992	67 715	119 318	31 258	55 078	2.2
1993	11.3.1993	68 663	119 990	31 868	55 690	2.2
1994	1.1.1994	68 663	118 814	32 619	56 443	2.1
1994	10.3.1994	69 693	120 008	32 619	56 168	2.1
1994	15.12.1994	74 460	125 562	33 620	56 693	2.2
1995	12.1.1995	75 949	128 073	33 990	57 318	2.2
1995	6.4.1995	77 438	128 537	34 115	56 627	2.3
1995	13.7.1995	78 987	129 285	34 240	56 044	2.3
1996	7.3.1996	80 251	128 377	34 949	55 909	2.3
1996	17.10.1996	81 856	129 575	35 507	56 207	2.3
1999	7.12.1999	85 500	131 034	38 657	59 244	2.2
2000	1.7.2000	92 000	138 786	39 522	59 621	2.3
2001	1.7.2001	95 600	135 893	41 034	58 329	2.3
2002	1.7.2002	98 800	136 592	42 963	59 397	2.3
2003	1.7.2003	102 760	138 451	45 310	61 047	2.3
2004	1.7.2004	106 770	140 285	46 248	60 765	2.3
2005	1.7.2005	111 150	142 503	48 907	62 703	2.3
2006	1.7.2006	118 950	146 645	51 045	62 930	2.3
2007	1.7.2007	127 060	153 428	53 861	65 038	2.4
2008	1.7.2008	127 060	146 896	55 738	64 439	2.3
2009	1.10.2009	131 040	147 944	60 623	68 443	2.2
2010	1.8.2010	136 040	150 382	61 702	68 208	2.2
2011	1.7.2011	140 910	150 427	64 471	68 826	2.2
2012	15.3.2012	185 000	196 111	66 995	71 018	2.8
2012	1.7.2012	190 550	200 988	67 000	70 670	2.8
2013	1.7.2013	195 130	201 014	70 754	72 888	2.8
2014	1.7.2014	195 130	195 130	71 171	71 171	2.7
2016	1.1.2016	199 040	199 040	71 693	71 693	2.8
Annual average percentage change
1968 to 2016		1.1	1.0	1.1	1.0
1970 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 2016 (c)		0.7	-1.3	0.4	-1.5

(a) adjusted for inflation with the Consumer Price Index (CPI) to December 2015 prices
(b) average weekly wages annualised; male average wage is used as the measure as it provides a long term, relatively consistent time series on average earnings data back to 1968
(c) wages growth to November 2015 and MPs’ base salary to 1 January 2016
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, March 2016, cat. no. 6401.0. Average weekly earnings, Australia, November 2015, cat. no. 6302.0.
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 January 2016, 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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