A Government senator has broken ranks to push for Sunday penalty rates to be cut for hundreds of thousands of workers in the hospitality, retail and entertainment sectors.

Key points: Senator Seselja says the hospitality industry, in particular, is where reforms should be occurring

Senator Seselja says the hospitality industry, in particular, is where reforms should be occurring He says level of change should be up for discussion but "it will create jobs"

He says level of change should be up for discussion but "it will create jobs" Labour movement threatening biggest campaign since WorkChoices

The Productivity Commission recommended the move in a report released this week.

Employment Minister Michaelia Cash immediately distanced the Government from the finding, saying penalty rates were a matter for the Fair Work Commission.

But ACT Liberal senator Zed Seselja said the Coalition should argue for a cut in Sunday penalty rates at next year's election.

"The Productivity Commission has done some really important work here," Senator Seselja he said.

"I think that we should be looking to put some policies to the next election which make incremental reforms in this area that go down the path the Productivity Commission is recommending.

"In the hospitality industry, in particular, that's where I hear the most from business owners, that's where I think the reforms should be occurring, and I think that's the sort of thing that we could develop a policy to take to an election."

The Productivity Commission recommended reducing Sunday loadings to Saturday levels across the sectors.

For workers under the General Retail Industry Award, for example, double time on a Sunday would fall to 125 per cent of weekday pay for full-time or part-time workers.

The commission did not propose changes to rates for nurses, teachers or emergency services workers.

Senator Seselja said the level of change should be up for discussion, but it would be of "significant benefit" if it allowed more businesses to open on Sundays.

"I think if you look at what the Productivity Commission's had to say in looking to ... just somewhat reduce the penalty rates on Sundays, I think that would be sensible," he said.

"It will create jobs, it will give jobs to people who don't have jobs, or it will give more hours to those who are seeking it in an industry where we often see businesses not even bothering to open on a Sunday.

"If it goes towards making it more likely businesses who want to open on Sunday can open on Sunday ... then I think there's some significant benefit in that."

Anna McPhee from the Retail Council agreed, saying any move to reduce penalty rates would help businesses and consumers.

"The way in which consumers are out there shopping has significantly changed and the retail sector really just wants to be able to deliver its products and goods and services in a convenient way to consumers and that means longer hours and seven days a week," she said.

Don't be spooked by WorkChoices election, senator says

The labour movement is demanding the Government rule out the penalty rate change, and is threatening the biggest campaign since the Howard government introduced its WorkChoices legislation during its final term.

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The industrial relations changes — along with the multi-million dollar union push against the overhaul — are seen as major reasons for the Coalition's 2007 election loss.

"Those that work in the hospitality and retail sector rely on penalty rates just to make ends meet. Just to get by week to week," ACTU secretary Dave Oliver said earlier this week.

But Senator Seselja said the Government should not be haunted by its most recent election loss.

"I don't think we should always be spooked by the fact that we had a WorkChoices election in 2007," he said.

"We're talking about a whole different set of policies. I think a more incremental approach to change [is needed] — I think you bring the community with you.

"But of course it does take some courage to put these things to the people."