9
June 2016
PDF version [297KB]
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.
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.
[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. See C Madden and D McKeown, Parliamentary
remuneration and entitlements, Research paper series 2015–16,
Parliamentary Library, 2016.
[3]. Remuneration
Tribunal Act 1973, subsection 7(1).
[5]. Remuneration
Tribunal, 1982 Review, pp. 18–21 and Report
1999/01, op. cit., pp. 1–5.
[6]. S
Griffith, Official Report of the National Australasian Convention Debates,
Sydney, 2 April 1891, p. 654.
[7]. Official
Report of the National Australasian Convention Debates, First Session,
Adelaide, 22nd March to 23rd April 1897, pp. 1032–34.
[9]. E Page,
House of Representatives,
Debates, 4 June 1947, p. 3355. An Electorate Expense Allowance,
not subject to income taxation, was paid from 1952.
[10]. 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.
[11]. Mr Justice
Kerr, ibid., p. 12.
[13]. 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,
no. 72, 1984, p. 2.
[15]. Remuneration
Tribunal, 1987 Review, pp. 5–12.
[16]. Cullen Egan
Dell, Report on the pay and allowances for members of parliament: prepared for
the Remuneration Tribunal, 1988, pp. 18–19.
[17]. The PEO
classification structure provides a framework for the negotiation of the terms
and conditions of PEO employment.
[26]. Remuneration
Tribunal, 2014 Review of Remuneration for Holders of Public Office, Statement,
12 May 2014, accessed 18 April 2016.
[28]. 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, accessed 9 March 2016.
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