Updated 12 September 2013

PDF version [321KB]

Leanne Manthorpe; updated by Cathy Madden and Deirdre McKeown

Politics and Public Administration Section, and 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—$195,130 from 1 July 2013.[1] This background note 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.

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.

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.

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]

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]

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 recent 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.

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]

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]

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

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.

Table 1: Base salary compared with average wages 1968–2013

Base salary

($ per annum) Male total average wages

($ per annum) (b) Ratio allowance to average wages Year Date of effect Current

prices Real prices

(2012 dollars) (a) Current

prices Real prices

(2011 dollars) (a) 1968 1.12.68 9 500 103 241 3 525 37 858 2.7 1973 1.4.73 14 500 123 387 5 256 44 203 2.8 1975 1.3.1975 20 000 131 679 6 987 45 465 2.9 1975 15.5.1975 20 720 131 616 7 597 47 694 2.7 1975 9.9.1975 20 000 126 154 7 659 47 751 2.6 1976 1.6.1976 21 250 120 550 8 739 48 997 2.4 1977 1.6.1977 24 369 121 777 9 656 47 693 2.5 1978 1.7.1978 25 692 116 747 10 637 47 771 2.4 1979 1.7.1979 26 720 111 067 11 606 47 682 2.3 1979 23.11.1979 27 575 111 287 12 091 48 230 2.3 1980 1.7.1980 28 816 108 753 13 139 49 011 2.2 1980 1.8.1980 30 026 113 320 13 139 49 011 2.3 1981 1.7.1981 36 000 124 653 14 771 50 551 2.4 1981 1.7.1981 33 013 114 310 14 771 50 551 2.2 1982 1.7.1982 36 000 110 826 17 201 52 337 2.1 1982 1 10 1982 38 500 115 181 17 602 52 048 2.2 1983 6.10.1983 40 156 110 598 18 875 51 379 2.1 1984 1.5.1984 41 802 115 307 20 011 54 557 2.1 1985 1.7.1985 42 889 108 516 21 018 52 559 2.0 1986 1.7.1986 45 543 105 876 22 796 52 377 2.0 1986 10.3.1987 46 065 102 090 23 176 50 766 2.0 1987 1.7.1987 47 815 102 688 23 828 50 578 2.0 1988 1.7.1988 49 180 98 360 25 350 50 111 1.9 1989 1.1.1989 55 000 106 803 27 483 52 747 2.0 1990 16.11.1989 55 000 100 020 28 156 50 606 2.0 1990 1.7.1990 58 300 101 813 29 339 50 641 2.0 1991 1.1.1991 61 798 105 372 30 533 51 456 2.0 1991 1.7.1991 64 768 109 607 30 001 50 181 2.2 1991 15.8.1991 66 387 112 347 30 001 50 181 2.2 1992 17.12.1992 67 715 113 214 31 258 51 652 2.2 1993 11.3.1993 68 663 113 745 31 868 52 177 2.2 1994 1.1.1994 68 663 112 199 32 619 52 681 2.1 1994 10.3.1994 69 693 113 882 32 619 52 681 2.1 1994 15.12.1994 74 460 119 083 33 620 53 142 2.2 1995 12.1.1995 75 949 119 452 33 990 52 837 2.2 1995 6.4.1995 77 438 120 222 34 115 52 347 2.3 1995 13.7.1995 78 987 121 167 34 240 51 914 2.3 1996 7.3.1996 80 251 121 658 34 949 52 365 2.3 1996 17.10.1996 81 856 122 750 35 507 52 626 2.3 1999 7.12.1999 85 500 124 288 38 657 55 540 2.2 2000 1.7.2000 92 000 126 790 40 085 54 600 2.3 2001 1.7.2001 95 600 128 511 41 681 55 378 2.3 2002 1.7.2002 98 800 128 690 43 386 55 853 2.3 2003 1.7.2003 102 760 130 457 45 753 57 408 2.2 2004 1.7.2004 106 770 132 471 47 041 57 685 2.3 2005 1.7.2005 111 150 133 855 49 950 59 453 2.2 2006 1.7.2006 118 950 137 820 51 916 59 451 2.3 2007 1.7.2007 127 060 144 525 54 778 61 582 2.3 2008 1.7.2008 127 060 137 667 56 880 60 911 2.2 2009 1.10.2009 131 040 139 467 60 623 63 771 2.2 2010 1.8.2010 136 040 141 613 61 702 63 483 2.2 2011 1.7.2011 140 910 142 570 64 471 64 471 2.2 2012 15.3.2012 185 000 185 928 66 995 66 547 2.8 2012 1.7.2012 190 550 190 550 67 000 68 601 2.8 2013 1.7.2013 195130 195 130 70 754 70 754 2.8 Annual average percentage change 1968 to 2013 1.1 1.0 1.1 1.0 1970 to 1980 11.7 0.5 14.1 2.6 1980 to 1990 6.7 -0.8 7.9 0.3 1990 to 2000 5.3 2.4 3.6 0.8 2000 to 2010 4.0 1.1 4.4 1.5 2011 to 2013 (c) 38.5 33.6 9.7 5.9

(a) adjusted for inflation with the Consumer Price Index (CPI) to June 2013 prices

(b) average weekly wages annualised

(c) wages growth to May 2013 and MPs’ base salary to 1 July 2013

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, Jun 2013, cat. no. 6401.0. Average weekly earnings, Australia, May 2013, 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 July 2013 figure, 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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