Members of Parliament (Victoria) Annual Adjustment Determination 2021 – notice of intention

The Determination applies to the following elements of MP salaries and allowances: 

• basic salary
• additional salaries for specified parliamentary office holders
• electorate allowance
• any expense allowance
• motor vehicle allowance
• travel allowance
• parliamentary accommodation sitting allowance
• commercial transport allowance
• international travel allowance
• the Electorate Office and Communications Budget.

In making the Determination, the Tribunal is required to consider the following matters under section 24(2) of the VIRTIPS Act: 

• any statement or policy issued by the Government in respect of its wages policy (or equivalent) and the remuneration and allowances of any specified occupational group as defined in the VIRTIPS Act 
• the financial position and fiscal strategy of the State of Victoria 
• current and projected economic conditions and trends 
• submissions received in relation to the Determination.

The Tribunal’s understanding of current economic and financial conditions and wages policy is set out below. 

Current and projected economic trends  

The coronavirus (COVID-19) pandemic has had a significant impact on the Australian and Victorian economies since early 2020. The latest Reserve Bank of Australia’s (RBA) Statement on Monetary Policy noted that a faster than expected economic recovery has been aided by Australia’s relatively better health outcomes (by global standards), the easing of restrictions and supportive fiscal policy. However, the RBA also noted that the recovery is likely to be bumpy and uneven, and will require ongoing fiscal and monetary support. 

Australia’s Gross Domestic Product (GDP) grew by 3.3% in the December quarter 2020, marking the first time in the more than 60-year history of the national accounts that quarterly GDP growth has exceeded 3% in consecutive quarters. Assuming that there are no further large outbreaks and accompanying hard lockdowns, the RBA noted that it expects GDP to reach pre-pandemic levels by mid-2021. The national unemployment rate decreased to 5.8% in February, down from a peak of 7.5% in June 2020. 

The 2020/21 Victorian Budget forecast that Victoria’s real Gross State Product (GSP) would contract by 4% in 2020-21, following a 0.5% contraction in 2019-20. More recently, the  Mid-Year Financial Report for the State of Victoria noted that recent economic data has been positive. The report noted that Victoria’s State Final Demand (a measure of the total value of goods and services purchased in the state) grew by 6.8% in the December quarter 2020, led by a strong rebound in consumer spending. The report also noted rises in business and dwelling investment and signs of recovery in the housing market. 

Regarding movements in wages and prices, the Tribunal notes the following: 

• both the Consumer Price Index for Melbourne and Victorian Wage Price Index grew by 1.3% in the 12 months to December 2020 
• the average weekly ordinary-time earnings for full-time adults in Victoria increased by just over 4% in the 12 months to November 2020

Financial position and fiscal strategy of the State of Victoria  

The Victorian Auditor-General’s Report on the Annual Financial Report of the State of Victoria, released in November 2020, noted that the COVID-19 pandemic ‘necessitated a significant shift in the state's revenue and expenditure policies, with longer-term consequences for financial sustainability’ (p.1). The report highlighted the significant unexpected falls in revenue, and increases in expenditure in 2019-20 and consequently debt, compared with 2018-19 and the original and revised budgets. 

The 2020-21 Victorian Budget forecast an operating deficit of approximately $23.3 billion for 2020-21, with smaller deficits expected in the following years. Net debt is forecast to be $86.7 billion (19.5% of GSP) in June 2021 and to increase to $154.8 billion (28.9% of GSP) by June 2024. 

The 2020-21 Victorian Budget included significant infrastructure spending. Annual capital investment is estimated to average $19.6 billion over the next 4 years, a substantial increase over the previous 4 years. 

The Victorian Government outlined several efficiency measures for government departments in the 2019-20 Victorian Budget. Given the government’s priorities of responding to the COVID-19 pandemic and of economic recovery, the 2020-21 Victorian Budget noted that implementation of these efficiency measures had been deferred. 

More recently, the Victorian Government’s 2020-21 Mid-Year Financial Report reported a higher operating deficit for the first 6 months of the 2020-21 financial year than in the previous full financial year ($10.1 billion compared with $6.5 billion, respectively). 

In February 2021, Moody’s Investor Service downgraded Victoria’s credit rating to Aa1 from Aaa and changed its financial outlook to ‘negative’, reflecting the state’s elevated debt burden due to the COVID-19 pandemic.  

Relevant Victorian Government remuneration policies  

The VIRTIPS Act requires the Tribunal to consider any statement or policy issued by the Government of Victoria which is in force with respect to its Wages Policy (or equivalent) and the remuneration and allowances of any specified occupational group.  

The Victorian Government Wages Policy and Enterprise Bargaining Framework (Wages Policy) which applies to departments and agencies in the Victorian public sector, is reproduced below. 

^{Source: Industrial Relations Victoria, ‘Victorian Government Wages Policy,’ Wages Policy and the Enterprise Bargaining Framework (State Government of Victoria: Melbourne, Victoria, 2019).}

The Tribunal invites submissions from any person or body, including any affected person or class of affected persons, in relation to the proposed Determination. Submissions are invited regarding the following questions:

• What level of adjustment to the values of MP salaries and allowances should the Tribunal consider? 
• Should the Tribunal consider different adjustment levels for different elements of the MP salaries and allowances system? For example, should the Tribunal adjust the MP salaries with greater weight given to movements in the Wage Price Index, and adjust allowances with greater weight given to movements in the Consumer Price Index? 
• Are there any other matters the Tribunal should consider when making the Determination, in addition to those listed in the VIRTIPS Act? 

All written submissions should be emailed to the Tribunal Secretariat at enquiries@remunerationtribunal.vic.gov.au

Submissions must be made by 5pm on Thursday 29 April 2021.  

If you require assistance to make a submission, please contact the Tribunal Secretariat by email at enquiries@remunerationtribunal.vic.gov.au. 

Publication of submissions 

The Tribunal may use information provided in submissions in its Determination. 

All submissions will be published in full or in summary form as appropriate on the Tribunal website, unless the person making the submission seeks confidentiality or the submission contains information that is identified as commercially sensitive. In this instance, the submission will be published in a form which protects the confidentiality or commercial sensitivity. 

The Tribunal may remove identifying information from submissions if published.

Submissions that contain offensive or defamatory comments, or which are outside the scope of the Determination will not be published.

The Tribunal may receive a request under the Freedom of Information Act 1982 (Vic). Any such requests will be determined in accordance with that Act which contains provisions designed to protect personal information and information given in confidence. Further information can be found at the Office of the Victorian Information Commissioner website.