Application for Crown Employees (Public Sector – Salaries 2020) Award and Other Matters (No 2) [2020] NSWIRComm 1066

1. There were objections to the Commission accepting into evidence parts or the whole of particular statements or affidavits. The evidence was admitted subject to the Full Bench determining what weight ought to be attached to it. It has been considered in that light.
2. A large number of other documents were also accepted into evidence, predominantly addressing economic matters.
3. We do not propose to summarise the effect of all of the evidence before the Commission. Where it has been necessary to make reference to a particular piece of evidence we have done so.

Applicable principles

1. Section 10 of the Act empowers the Commission to make awards "setting fair and reasonable conditions of employment for employees".
2. Section 146(2) of the Act requires the Commission to take into account the public interest in the exercise of its functions. For that purpose, it must have regard to the objects of the Act, and the state of the economy of New South Wales and the likely effect of its decisions on that economy.
3. The objects of the Act are set out in s 3, which for present purposes, relevantly provides as follows: 3 Objects The objects of this Act are as follows - (a) to provide a framework for the conduct of industrial relations that is fair and just, (b) to promote efficiency and productivity in the economy of the State, … (e) to facilitate appropriate regulation of employment through awards, enterprise agreements and other industrial instruments, …
4. Under s 146C(1)(a), the Commission must, when making or varying any award or order, give effect to any policy on conditions of employment of public sector employees that is declared by the regulations to be an aspect of government policy that is required to be given effect to by the Commission. Such a policy is to be found in cl 6 of the 2014 Regulation, which is relevantly in the following terms: 6 Other policies (1) The following policies are also declared, but are subject to compliance with the declared paramount policies - (a) Public sector employees may be awarded increases in remuneration or other conditions of employment, but only if employee-related costs in respect of those employees are not increased by more than 2.5% per annum as a result of the increases awarded together with any new or increased superannuation employment benefits provided (or to be provided) to or in respect of the employees since their remuneration or other conditions of employment were last determined. (b) Increases in remuneration or other conditions of employment can be awarded even if employee-related costs are increased by more than 2.5% per annum, but only if sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs beyond 2.5% per annum. …
5. As it will become relevant, it is convenient here to note cl 9 of the 2014 Regulation, which is in the following terms: 9 Meaning of employee-related cost savings (1) For the purposes of this Regulation, employee-related cost savings are savings - (a) that are identified in the award or order of the Commission that relies on those savings, and (b) that involve a significant contribution from public sector employees and generally involve direct changes to a relevant industrial instrument, work practices or other conditions of employment, and (c) that are not existing savings (as defined in subclause (2)), and (d) that are additional to whole of Government savings measures (such as efficiency dividends), and (e) that are not achieved by a reduction in guaranteed minimum conditions of employment below the minimum level. (2) Savings are existing savings if they are identified in a relevant industrial instrument made before the commencement of this Regulation (or in an agreement contemplated by such an industrial instrument) and are relied on by that industrial instrument, whether or not the savings have been achieved and whether or not they were or are achieved during the term of that industrial instrument.
6. To provide guidance as to the making or varying of awards the Commission has over the years developed Wage Fixing Principles, which were most recently re-affirmed by the Full Bench in State Wage Case 2019 [2019] NSWIRComm 1065 at Annexure A of Annexure 1. Those principles relevantly provide as follows: 8. Arbitrated Case 8.1 General Any claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the Principles, will be processed as an Arbitrated Case by a Full Bench of the Commission unless otherwise allocated by the Chief Commissioner. In determining such an application, the Commission shall, subject to the relevant provisions of the Act, do so in accordance with the following criteria: 8.2 Work Value Considerations (a) Changes in work value may arise from changes in the nature of the work, skill and responsibility required or the conditions under which work is performed. Changes in work by themselves may not lead to a change in wage rates. The strict test for an alteration in wage rates is that the change in the nature of the work should constitute such a significant net addition to work requirements as to warrant the creation of a new classification or upgrading to a higher classification. … 8.3 Productivity and Efficiency Considerations Productivity and efficiency measures that have delivered substantial costs savings and/or productivity or efficiency improvements or which have made a substantial contribution towards the attainment of the objectives of the employer (including departments and agencies of the Crown) in seeking to become more competitive and/or efficient, to which employees have made a significant contribution, may constitute the basis for increases to wages and salaries or improvements in employment conditions without the requirement to make out a special case, provided that such measures, savings or improvements have not already been taken into account in previous wage adjustments. 8.4 Special Case Considerations 8.4.1 A claim for increases in wages and salaries, or changes in conditions in awards, other than those allowed elsewhere in the Principles, and which is not based on work value and/or productivity and efficiency pursuant to this Principle, will be processed as a special case in accordance with the principles laid down in Re Operational Ambulance Officers (State) Award [2001] NSWIRComm 331; (2001) 113 IR 384 and the cases referred to therein at [165]-[168]. 8.4.2 All special cases shall be tested against the public interest.
7. For reasons that will be explained later in this decision, we have concluded that the Joined Applications fall to be considered as a special case.
8. The approach that the Commission should adopt in making or varying awards, including as a special case, has been considered by the Full Bench in numerous decisions. The principles to which we have had particular regard are as follows: 1. Whether the conditions of employment in the award are fair and reasonable is a primary test for evaluating whether an award should be altered: Re Operational Ambulance Officers (State) Award (2001) 113 IR 384; [2001] NSWIRComm 331 at [164]. 2. Awards of the Commission are presumed to set fair and reasonable terms and conditions of employment: City of Sydney Wages/Salary Award 2014 (2014) 247 IR 386; [2014] NSWIRComm 49 at [12]. 3. The terms "fair" and "reasonable" in s 10 of the Act import a requirement that the conditions of employment set represent a proper and proportionate balance between the entitlements afforded employees and the interests of those employing them: City of Sydney Wages/Salary Award 2014 at [19]. 4. In a contested case, the onus falls on the applicant to make out a case for an alteration to an award: Re Pastoral Industry (State) Award at [77]. 5. In a special case the applicant bears the onus of persuading the Commission that the application satisfies a dual test: that the terms of the award sought constitute fair and reasonable conditions of employment and that the matter in question has "special attributes" or is "out of the ordinary" so as to take the matter outside the restrictions which otherwise apply under the Wage Fixing Principles: Re Operational Ambulance Officers (State) Award at [166] and [168]; City of Sydney Wages/Salary Award at [16]. 6. The applicant must meet the ordinary onus to make out its case. In a special case the applicant does not bear a higher onus or standard of proof: Re Pastoral Industry (State) Award at [73]; Re Operational Ambulance Officers (State) Award at [165] and [168]. 7. The onus borne by a party was described by Kite AJ in Transport Industry - General Carriers Contract Determination (2016) 257 IR 294; [2016] NSWIRComm 3 in these terms: "34. It has long been recognized that Industrial Tribunals are in a different position to the general courts. The duty of the Commission is to make an award or determination which prescribes fair and reasonable rates and conditions. In doing so the Commission is not bound by the rules of evidence or to act in a formal manner but 'is to act according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms.' See s 163 (1)(c) of the Act. 35. The various authorities referring to the 'onus' born[e] by a party are to be understood in that context. There must be information before the Commission which allows it to be satisfied that the determination or award, if made, will provide just and reasonable rates and conditions. The assessment of the adequacy of that material will vary according to the nature of the case, including the degree of consent, before the Commission: see In re Butchers, Wholesale (Cumberland) Award 1971 AR 425 especially at 437- 440." (Emphasis in original) 1. The Commission should have regard to all factors relevant to the determination of the general claim including economic considerations and then make a global assessment of what is a fair and reasonable wage to be determined in the circumstances. In this context, the state of the economy, including fiscal considerations, will be taken into account in the overall assessment but will not be determinative of the Commission's decision: Crown Employees (Police Officers - 2009) Award (No 2) [2012] NSWIRComm 104 at [72], citing Re Crown Employees (Teachers in Schools and TAFE and Related Employees) Salaries and Conditions Award (2004) 133 IR 254; [2004] NSWIRComm 114 at [432] in which the Full Bench observed: "...The economic and financial position of the State and the effects of our decision on the New South Wales economy have played a significant role in our decision, but not a determinative one. It is our statutory duty to fix fair and reasonable rates of pay and conditions. In a matter, such as this one, where a compelling basis for increases in rates of pay has been demonstrated, then the Commission must give recognition to that conclusion even though it may temper the final result in recognition of economic considerations. The terms of s146 of the Act require no more than this, particularly in the light of the paramount requirements of s10 of the Act. …" 1. The Commission must attempt to fix rates which will be just and reasonable rates at the time when the award commences to operate and which, unless unforeseeable happenings occur, will continue to be just and reasonable during the term of the award: Re Crown Employees (Teachers) Award [1964] AR 463 at 482-483, cited with approval in Crown Employees (Police Officers - 2009) Award (No 2) at [78]. 2. In this regard, it is appropriate for the Commission to have regard to economic considerations, including the changing value of money over time, when deciding the amount of any increase which should be awarded. Matters which may be considered in that regard are the date on which the last wage increases for employees in question took effect, and changes in money values which have occurred since that time or are forecast during the term of the award to be made: Re Crown Employees (Administrative and Clerical Officers State) Award and other Awards (No 2) (1993) 52 IR 243, cited with approval in Re Operational Ambulance Officers (State) Award at [167]. See also Crown Employees (Police Officers - 2009) Award (No 2) at [121].

A presumptive increase?

1. In the light of this authority, it is necessary to consider the approach urged on the Commission by the PSA, the NMA and the HSU. The premise underpinning the case advanced by those unions was stated as follows: [6] "10. Any assessment of what constitutes fair and reasonable conditions of employment in a particular year must commence with the presumption that public sector employees receive a 2.5% increase each year. …"
2. This presumption was said to arise for a number of reasons, including: 1. the policy underlying the 2014 Regulation was constructed on the basis that an appropriate balance is struck between the fiscal requirements of government and the maintenance of fair working conditions for employees by providing a 2.5% increase in remuneration or other conditions of employment each year; 2. the Commission will in future years be constrained from increasing remuneration or conditions of employment beyond 2.5%, at least without cost offsets. Consequently, an increase below 2.5% in any year will constitute a permanent cut to the remuneration of public sector employees which cannot be corrected or made good in future years regardless of the economic or merit considerations which may then arise; 3. the Commission is entitled, and required, to take into account as a public interest consideration the repeated statements by Government that public sector employees would be guaranteed a 2.5% increase each year: per Boland J in Re Crown Employees Wages Staff (Rates of Pay) Award 2011 (No 3) (2013) 240 IR 24; [2013] NSWIRComm 109 at [99] to [102] and [170]; 4. cl 9 of the 2014 Regulation dictates that employee-related cost savings must be "additional to whole of Government savings measures (such as efficiency dividends)". The necessary consequence is that the payment of an increase of 2.5% per annum is intended to compensate employees not only with respect to the changing value of money over time, but also for contributions to "whole of Government savings measures" such as efficiency dividends; and 5. the public interest considerations relevant to the applications go beyond economic considerations. These include a consideration of the objects of the Act.
3. The PSA, the NMA and the HSU submitted: "20. It is to be presumed these public interest considerations, going to fairness, justice, the promotion of efficiency and productivity, appropriate regulation of employment, cooperative workplace reform are all contemplated in the 2.5% wage increase provided for in the policy. These factors point to a strong presumption that whilst the Policy is in place public sector employees should receive a 2.5% per annum increase. The Commission should be reluctant to depart from that presumption." (Emphasis in original)
4. In our Earlier Decision we observed: "76. The Commission cannot award more than 2.5% (subject to cl 6(1)(b) of the 2014 Regulation), but it is open to it to award increases in remuneration of 2.5% or less. Within that 'narrow scope', as it was described by Boland P in Re Crown Employees, the Commission is bound to apply the provisions of both ss 10 and 146(2) of the Industrial Relations Act. There is nothing in s 146C or the 2014 Regulation that would make it inconsistent for the Commission to apply those provisions. 77. In answer to the question: Does the Government policy declared in clause 6(1)(a) of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 require the Commission to ensure that public sector employees be awarded increases in remuneration or other conditions of employment of 2.5% per annum? The answer is 'No'."
5. A contention that a particular increase is to be presumed (or assumed, as it was otherwise submitted) runs very close to an argument that employees have a de facto entitlement to what had previously been claimed, essentially, as a de jure entitlement. The effect of our Earlier Decision was to make it clear that the employees do not come into these proceedings with an entitlement to a particular wage increase. As a result, we do not approach this decision from a position that there is a presumptive outcome.
6. A related submission advanced by the PSA, the NMA and the HSU is that a failure to afford a 2.5% increase to the employees "will constitute a permanent cut to the remuneration of nurses, health workers and public service employees which cannot be corrected or made good in future years". [7] This proposition only bears scrutiny if one starts from the premise that 2.5% is an entitlement (however described). For the reasons stated, we do not accept it.
7. It is possible that a failure to afford an increase, or a particular quantum of increase, may result over the life of any award in a decrease in the real wages of the relevant employees. This is a different proposition and is one to which we will return.
8. Another feature of the case presented by the PSA, the NMA and the HSU is that once the 2.5% increase is presumed, the unions are not required "to put forward a positive case for the 2.5% increase". [8] Rather, the onus was said to fall on the Employers to make out the "need for restraint". That is, it was for the Employers to demonstrate why an increase of less than 2.5%, or no increase, was warranted.
9. The PSA, the NMA and the HSU submitted that to the extent that a party suggests the Commission should exercise restraint, the party is required to demonstrate that "real harm" would be done to the economy by granting an increase to employees. We were referred to Re Public Hospital Nurses (State) Award (No 4) (2003) 131 IR 17; [2003] NSWIRComm 442 in which the Full Bench observed: "233. …Hence, even though wage increases may be justifiable under the work value principle, if to grant them were to have an adverse impact on the economy, a case may exist for restraint. The onus of demonstrating the need for restraint would fall on those opposing the increase because unless it can be convincingly demonstrated that real harm will be done to the economy by the granting of any increase, the employees concerned are entitled to receive remuneration commensurate with the value of their work."
10. ASMOF relied on the same passage in support of submissions to the same effect.
11. With respect, the reliance by the Applicants on Re Public Hospital Nurses (State) Award is not entirely sound. The passage reproduced above makes it clear that the Full Bench in that case was dealing with an application under the work value principle. There is nothing remarkable in the proposition that the Commission would be loath to permit employees to be paid at a rate less than the value of their work, and that cogent reasons would be needed to justify why it was in the public interest that such an outcome should result.
12. However, the effect of the submissions made by the Applicants is that it is possible to extrapolate from the passage in Re Public Hospital Nurses (State) Award a two-stage approach. The first is that the applicant must establish that it is fair and reasonable that there be a particular wage increase. The second, which appears to require a reversal of the onus, involves those opposing the increase having to make out the case for restraint, in the sense that the increase would cause "real harm" to the economy.
13. We have difficulty reconciling such an approach with the authorities referred to at [31(4)], [31(5)] and [31(8)] above. The onus to make out the case in respect of each of the Joined Applications rests with the Applicants.
14. The question of what is fair and reasonable cannot be determined in a vacuum. The making of awards under s 10 of the Act is one of the functions to which s 146 refers. Section 146(2) makes it clear that it is when exercising the relevant function that the Commission must take into account the public interest, which will include (but, we emphasise, not be limited to) having regard to the objects of the Act, and the state of the economy of New South Wales and the likely effect of the Commission's decisions on that economy. It is inconsistent with these provisions to require, in effect, that a finding first be made under s 10 which would then be subject to "calls for restraint" under s 146. But this is the effect of the position advanced by the Applicants.
15. A further matter to observe in this regard is that a great many of the witnesses called for the various union parties deposed as to the impact that the COVID- 19 pandemic had and was having on their lives, both personal and professional. ASMOF in particular placed significant reliance on this consideration in its Final Submissions. As we express elsewhere, we do not for one moment doubt that the pandemic would have caused for the witnesses the same anxiety, dislocation and challenges that have been experienced across New South Wales and Australia. Indeed, in some areas of the Government sector the pandemic may have had an even greater impact on employees. However, the Commission cannot have regard to these matters in order to determine what is "fair and reasonable" without also taking into account the broader impact that the pandemic has had on New South Wales and its economy.

Do the Wage Fixing Principles apply?

1. It seemed to be contended by the PSA, the NMA and the HSU that the Wage Fixing Principles have no operation in the determination of the Joined Applications. Reliance was placed on Re Crown Employees (Public Sector - Salaries 2011) Award (No 3) (2011) 210 IR 458; [2011] NSWIRComm 104 in which the Full Bench (Boland J, President, Backman J and Tabbaa C) stated: "36. Before the PSA's application could be heard, the rules about wage fixation changed and it was no longer open to the Commission to apply its Wage Fixing Principles to the application.…"
2. In that case the PSA had applied for new awards seeking increases to salaries and allowances as determined by the Commission in accordance with the Wage Fixing Principles. The application involved the consideration of salary increases beyond 2.5% per annum. The employers put on a counter-claim, providing for wage increases of 2.5% only. On 17 June 2011, after the proceedings had been commenced, the Act was amended by the insertion of s 146C. The Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 (NSW), the predecessor to the 2014 Regulation, was promulgated on 22 June 2011. The judgment discloses that the PSA had challenged the constitutional validity of s 146C. The Full Bench determined to accept the cross-claims, in part, by ordering a 2.5% increase. A question for the Full Bench was whether it should proceed to hear and determine the PSA's application before the PSA's challenge to s146C could be determined. It was in that context that the Full Bench made the observation reproduced above.
3. Viewed in that light, Re Crown Employees (Public Sector - Salaries 2011) Award (No 3) cannot properly be seen as authority for the proposition that the combined operation of s 146C and the 2014 Regulation is to render otiose the Wage Fixing Principles. Rather, the concern was more whether a claim beyond the 2.5% which had been determined could properly be considered. It was in this respect that the Commission was unable to apply its Wage Fixing Principles.
4. Moreover, subsequent decisions of the Commission have confirmed the application of the Wage Fixing Principles in proceedings such as these: see for example Re Crown Employees (NSW Fire Brigade Retained Firefighting Staff) Award 2008 [2012] NSWIRComm 122 at [32].
5. We are satisfied that the Joined Applications must be brought within the Wage Fixing Principles.

Work value principle

1. There was no case advanced that the Joined Applications, or any of them, fall to be determined under the work value principle.

Productivity and efficiency principle

1. Each of the Applicants contended that to the extent that the Wage Fixing Principles apply, the Joined Applications fall within the productivity and efficiency principle.
2. The principle was considered by the Full Bench in Crown Employees (Police Officers - 2009) Award (2012) 220 IR 1; [2012] NSWIRComm 23 as follows: "510. Sub-principle 8.3, productivity and efficiency considerations, is a new sub-principle introduced by the State Wage Case 2010 (No 2) (although its origins lay in the acceptance by the Full Bench in Crown Employees (1993) that similar factors were available to establish a special case). … 511. The rationale for the sub-principle was stated by the Full Bench in State Wage Case [2010] NSWIRComm 183; (2010) 201 IR 155 ('State Wage Case 2010 (No 1)') at [98], as follows: ...Whilst the DPE accepted that claims based on productivity and efficiency improvements were already permissible under the existing Special Case Principle, we think it is important to make it clear just what the criteria are for such claims and to ensure that claims brought on that basis do not need to be made out as a special case (such claims being treated in a similar manner to work value claims). 512. The sub-principle does not itself require a party to meet the requirements of either work value or special case components of the Arbitrated Case Principle. 513. The Association provided what is described as a summary of the requirements of the sub-principle. This was uncontentious and, in our view, broadly encapsulates the operating conditions for the sub-principle. That submission was as follows: (a) The case must be based upon 'productivity and efficiency measures'. 'Measure' in that context presumably has its relevant ordinary meaning, namely 'an action or procedure intended as a means to an end'. (b) The relevant measures must have either delivered substantial cost[s] savings and/or productivity or efficiency improvements or made a substantial contribution towards the attainment of the objectives of the employer (including departments and agencies of the Crown) in seeking to become more competitive and/or efficient. The latter alternative appears to recognise that Government departments and agencies providing services to the public may have their productivity and efficiency measured by reference to their service objectives, rather than just by reference to notions of cost and profit which would apply to a private sector business. (c) Employees must have made a significant contribution to the requisite productivity and efficiency measures. The required nature of this contribution, which is not elaborated upon further, is likely to reflect the approach taken in Re Crown Employees (Administrative and Clerical Officers) Award (No 2) at 378-380 and the cases which followed it."
3. In his closing submissions, Mr Gibian stated: [9] "If it is necessary to rely upon the wage fixing principles, we think that the evidence which is put forward plainly justifies an increase on productivity and efficiency grounds. The extent to which there must be productivity and efficiency demonstrated, must take account of the fact that [the] increase that is sought is only the usual increase of 2.5%, and the [detailed] and uncontroverted evidence of the changes in work arrangements, productivity and efficiency, make clear that that is more than satisfied."
4. The evidence to which Mr Gibian referred was outlined at some length in the Final Submissions of the PSA, the NMA and the HSU. As those passages are a useful summary of the evidence in this regard, it is both appropriate and convenient to reproduce them in their entirety, despite their length: [10] "PSA cases - Productivity/Efficiency Examples 115. The evidence filed in the PSA case identify the following improvements in productivity and efficiency: a. Corrective Services restructure 2015-2019 resulted in reduction of 133 positions and the loss of 388.8 FTE jobs meaning remaining employees are performing the same work with fewer resources. b. The deletion of the Assistant Superintendent rank from Corrective Services has resulted in the reduction of 133 positions. A significant proportion of duties of the Assistant Superintendent are undertaken by Senior Correctional Officers or Senior Assistant Superintendents who do not receive additional remuneration for undertaking these duties. Further, the large regional Correctional Centre in Grafton was closed in August 2020 to be replaced by a private facility resulting in continued costs savings for the NSW Government. Rapid build correctional centres have replaced the Berrima, Illawarra and Ivanhoe correctional centres. Rapid build correctional centres are cheaper and quicker to build than traditional correction centres. c. Ministry of Health changes in response to Covid 19 - has seen the introduction of 2 emergency Operations centres. This has seen additional responsibilities associated with administering testing and dissemination of test results for Covid 19. d. The NSW Ministry of Health will be relocating a number of its operations to one location in September/October 2020. The 1 Reserve Road project will combine ten facilities in the one outpost resulting in significant savings in rent, building maintenance, electricity, resources and telecommunications costs. e. Since its creation in 2013, Service NSW has consolidated over 384 NSW government 'shop fronts' or services into 104. Since 2016, the number of lines of businesses, services or agencies that are dealt with by Service NSW Contact Centres has increased from three to approximately 94. In 2019 alone, major services such as the Cost of Living service (which has had over 1.2 million transactions since it was introduced), NSW Digital Drivers Licences, Making Business Easier and My Community Project were added to the services provided by Service NSW. f. The Machinery of Government changes in 2019, brought Service NSW into the newly formed Department of Customer Service ('DCS'). Identified shared functions across the DCS cluster such as Corporate Services and Corporate Affairs were transitioned into one directorate - DCS Corporate Services to operate across the cluster. On 27 June 2019, at a meeting between the Applicant and DCS, Ms Erica Mahon, Director - People and Relations for the DCS advised that there were currently 10,000 Full Time Equivalent jobs within the newly formed DCS which was anticipated to reduce to 7000 FTE by mid-2020. g. In December 2019, DCS announced the restructure of NSW Births, Deaths and Marriages ('BDM') with all customer facing services to be delivered by Service NSW and the digitalisation of services provided by BDM by Service NSW staff. The restructure means that BDM has new functions that primarily focus on revenue growth, business development and innovation that will support BDM in meeting and exceeding its Net Cost of Services targets by $9.7 million for 2019/2020. During the restructure of BDM, 28 positions were deleted. h. In September 2019, the Department of Finance, Service and Innovation (which has since come under the Department of Customer Service) released the Restructure Management Plan for the Office of the Secretary which resulted in the loss of 32 jobs. This Restructure Management Plan also stated that the 2019/2020 NSW Budget had identified $3.2 billion in savings from the creation of the DCS. i. During the pandemic, calls to the Service NSW 137 788 number have increased from 3000 calls to approximately 9000 calls a day. j. The half yearly review of the NSW Budget highlighted that system upgrades and improved data management for Revenue NSW, a service that falls under the Service NSW cluster, will make it easier for taxpayers to manage their land tax obligations and facilitate improved compliance, increasing land tax revenue by $264.5 million in 2022-2023. The Towards Zero program, which includes the rollout of mobile detection cameras, is expected to increase revenue from fines and fees by $62.8 million by 2022-2023. k. In 2018, Housing NSW expanded the Homelessness Outreach Support Teams ('HOST') program. The Tenancy Management and Access and Demand staff seconded to HOST teams during the pandemic have largely not been backfilled, resulting in the seconded employee's workload being redistributed to the remaining staff in their team. This has resulted in a dramatic increase to workloads for example Client Service Officers who previously received six properties a day to assign tenants to, now receive 11. l. Since the outbreak of the COVID-19 Pandemic in early 2020, the workload of HOST teams has increased dramatically. Due to the highly virulent nature of COVID-19, the NSW Government sought the rapid accommodation of homeless in a bid to reduce the spread of the virus. This has created a massive increase in work as HOST teams liaise with multiple stakeholders, undertake health care checks of homeless persons and attempt to arrange accommodation for homeless persons. To accommodate this increase, HOST teams have been working excessive hours before and after normal office opening times to reach homeless people in the early morning or late in the evening. m. According to the NSW Department of Family and Community Services ('FACS') 2019 Annual Report, FACS has achieved the following efficiency measures and savings: i. FACS caseworkers saw more children and young people at risk of significant harm than in any previous year: 30,949 in total, and 18 per cent more than in 2017-2018; ii. FACS helped more people to maintain tenancies in the private rental market by providing 19,876 unique households with one or more private rental assistance products, an increase of 7.4 per cent from 2017-2018; iii. The 'Reducing youth homelessness' Premier's Priority aimed to increase the proportion of young people (15-24 years old) who successfully move from Specialist Homelessness Services ('SHS') to long-term accommodation to more than 34 per cent by June 2019. This target was achieved a year ahead of schedule with 34.7 per cent of young people (1,918 of 5,531) who presented alone to SHS achieving stable, long-term accommodation; and iv. The total number of ongoing employees within FACS has been reduced from 11,886 in financial year 2015-16 to 7,060 in financial year 2018-19, a 59% reduction in ongoing employees. n. In May 2019, the NSW Rural Fire Service (RFS') announced the Area Management Model restructure ('the Restructure'). The Restructure commenced in August 2019 and was fully implemented in February 2020, after being delayed by the 2019-2020 NSW bushfire season ('the Black Summer bushfires'). The purpose of the Restructure was the streamlining of processes, increasing efficiency and improving service delivery to volunteers, the community and private and government land owners. The Restructure consolidated existing structures within the RFS by deleting the State Mitigation Services structure and the Operational and Mitigation Services ('OMS') Business unit, in addition to deleting regional offices. SMS was absorbed into the Area structure, becoming an Area resource. The OMS Business Unit was partially made redundant and partially absorbed by the existing Infrastructure Services Directorate. o. The productivity of State Mitigation Service ('SMS') crews has also been increased by the availability of new assets, include POSI-Track vehicles and more industrial quality slashers. This is enabling SMS crews in Zones to complete more work and undertake larger jobs previously impossible. In turn, this has created an increase in work for the District staff, as District staff must undertake considerable office duties in order for SMS to conduct hazard reduction. These duties include land owner consents, environmental approvals, cultural heritage checks and consents and consultation with the community. With an increase of work being assigned to SMS crews, necessitates an increase in work for districts, in order for the SMS crews to conduct their work. p. NSW Rural Fire Service Restructure which saw the deletion of higher grade positions to make way for lower grade positions and the relocation of 26 FTE positions to regional areas. Further evidence given by Kim De Govrik, who was a Senior Ranger at Oberon National Park until taking redundancy as part of the restructure, provides further details of the changes. De Govrik gives an account of the changes in work performed and added responsibilities arising from the 2019/20 bushfire season. q. From 2017 to 2019 the Restructure to National Parks and Wildlife Services involved 778 positions being deleted, altered or relocated including 28 Senior Ranger positions being deleted and the loss of 246 FTE jobs. The 2019/20 budget cut a further $81.4m from NPWS (on top of the efficiency dividend) which will see further job cuts and efficiency measures. r. Lack of trained fire-fighters and the increasing severity of bushfires means that during the most recent 2019/2020 bushfire season, National Parks and Wildlife Service ('NPWS') staff were working 16 hours shifts on a five days on one day off roster for an increasingly longer and exhausting bushfire season. When NPWS fire-fighters had a day off from the fire line, staff shortages meant their position was not replaced in their absence. Further, in previous years, NPWS fire-fighting staff would work on a rotating roster during the bushfire season of weeks on the fire line broken up with weeks working in their substantive position which helped ease mental and physical exhaustion and meant that their role was not left completely abandoned during these months. In 2020, staff shortages meant that fire-fighting staff were not able to do a rotating roster and would be on the fire line for months on end. s. In March 2020, the NSW Government introduced the Post-Fire Pest Management program as part of the duties of Post Fire Recovery. This program includes aerial culling, fox baiting and other pest management activities. The Post-Fire Pest Management program is completed by Rangers and Field Staff in addition to their role and they do not receive any additional remuneration or allowance for carrying out this additional work on top of their normal duties. t. According to the OPE 2019 Annual Report, in 2018/2019, the Department of Planning and Environment ('DPE') achieved the following quantifiable efficiency measures: i. Exceeded the Premier's Priority target of 61,000 new completed homes per year on average, with over 75,000 homes built across NSW in 2018-19, and residential housing approvals of more than 57,600 the for same year, well above the annual target of 50,000; ii. Assessing 359 state significant project applications, while also halving the time to assess and determine them, which has a combined capital investment value of more than $18 billion; iii. The minerals industry, overseen by the Resources and Geosciences Division, contributed approximately $2.1 billion in royalties to the NSW Government in 2018-19, a 15 per cent increase from the previous year; and iv. the digitisation of applications under the OPE including the introduction of the Titles Management System (TMS), a new workflow system that will replace legacy tools to improve the processing of mining applications and the ePlanning Program that digitalises planning services and information in regards to planning applications. NSWNMA - Productivity/Examples 116. The NSWNMA evidence generally asserts that the nurses and midwives of NSW are constantly under pressure to respond to a growing demanding health system and meanwhile provide quality care to their patients. This is highlighted in the evidence of nurses who are risking their own lives to save lives in the current COVID-19 pandemic. The evidence identifies the following changes in particular: a. Preparation and readiness for COVID-19 patient influx involving significant additional training in intensive care, respiratory care skills, the revision of policies and clinical guidelines, re-organisation of wards to change potential models of care and functionality which relies heavily on nurses and managers' contribution. b. Impact of COVID-19 on nurses and midwives undertaking new training and procedures (eg intubating patients), new equipment (eg new ventilators) and implementation of infection control measures. c. Justice Health - the establishment of a field hospital at Long Bay Gaol with the option to build up to 9 field hospitals across NSW aligned to isolation hubs at regional gaols in readiness for the COVID-19 pandemic. d. From 2018-19: i. the progression of digital health capabilities and improvements in the technology such as Electronic Medication Management, Electronic Medical Record and Electronic Record for Intensive Care. ii. other initiatives and quality improvements to support the move towards value-based healthcare which intensify the work of nurses and midwives: A. workforce patient safety and quality improvement capabilities. B. Updated Between the Flags, electronic observation charts, including charts for Antenatal Short Stay, Standard Maternity and Standard Newborn. C. Recorded 27,000 occasions where patients received acute care in a Hospital in the Home service rather than having to stay in a hospital bed. D. Implemented Emergency Department Patient Experience. E. Developed Electronic Patient Journey Boards and a bed status update tool, rolled out to special care nurseries to improve patient flow and ensure babies were safely transferred closer to home. e. Substantial productivity improvements by nurses and midwives due to the unprecedented strain on emergency departments are demonstrated in Bureau of Health Information ('BHI') October to December 2019 Healthcare Quarterly Performance Emergency department, ambulance, admitted patients, seclusion and restraint, and elective surgery. f. NSW Mothers and Babies 2015 and 2018 Report indicates increased rates of birth by caesarean section involving greater complexity and intensity of care. 117. The NSWNMA reply evidence identifies the following changes: a. 2011 to 2020 BHI reports indicate significant increases in throughput of patients cared for by nurses and midwives in NSW hospitals, and highlight initiatives such as new models of care to meet service objectives which also represent cost savings such as reducing length of hospital stays. b. Mental Health initiatives: PACER program (in 2020) in police stations, 2017 engagement and observation policy and 2014 quality improvement program. c. Maternity Services initiatives: increased more efficient models of care eg caseload midwifery, reduced length of hospital stay and a dilution of the labour force has been occurring across maternity services in NSW public hospitals contributing to cost savings. d. Palliative Care initiatives to address a growing ageing population. e. Regular restructures across Local Health Districts providing tangible improvements and efficiencies to the delivery and management of clinical care and /or an improvement in the quality of care provided and / or making more efficient / improved use of its workforce. HSU cases - Productivity/Efficiency Examples 118. The HSU Evidence identifies the following ongoing changes: a. Between 2018 to present day, there have been 163 restructures that have occurred across the state with the stated aim of increased workplace capacity with either a static or decreased workforce and enhanced multi-skilling. b. Achieving Integrated Digital Patient Records which saw the improvement of digital storage and communication of medical information. The program includes the roll out of the electronic medication management system to more NSW public hospitals to support better use of medications in the NSW health system and improve patient safety by reducing medication errors and adverse drug events. c. Whole of System Digital Platform which will enhance the digital infrastructure that supports clinical and other health-related systems across the state. It will complete the fast, secure state-wide network at the remaining sites which clinicians use to access data anywhere, any time. d. The 2018/19 Budget Paper No.3 highlights that the Health Cluster is leading the delivery of the following Premier's and State's Priorities, such as improved service levels in hospitals: 81 percent of patients through emergency departments within four hours by 2019, Premier's priority to tackle childhood obesity and reduce overweight and obesity levels of children by 5 percent over ten years and cut waiting times for planned surgeries. e. The 2018/19 Budget Paper No.3 also had a description of State Outcomes delivered by the Health Cluster such as strengthening health care for people with mental illness, including through better access to community mental health services, improved quality of care and patient safety, providing community health and public services including dental services, health protection and preventative health and conducting research programs which translate research evidence into improved health care. f. Mentally Healthy Communities which allowed for investment will focus on improving admitted and community-based mental health services. A State-wide Mental Health Infrastructure Program is also referred to. It is stated that investment in this program "will transform existing infrastructure to support new contemporary care models, provide new specialist mental health units for mothers and their babies, children and adolescents, and older people. g. Multipurpose Services (MPS) Strategy which will deliver integrated health services to better meet the needs of rural and remote communities. h. Investment in Community Based Palliative Care in Western Sydney Local Health District and the development of other integrated palliative care services. Health workers on the HSU Awards, such as social workers, counsellors, doctors, and support staff, contribute to the provision of services such as these. i. Establishment of an Integrated Violence, Abuse and Neglect Service in NSW Health to provide 24-hour integrated crisis counselling, medical and forensic responses to sexual assault, child abuse and neglect, and domestic and family violence presenting to hospital. j. Additional investment in Acute and Sub-acute Health Services to allow for community based palliative care services in Western Sydney Local Health District, including a 24-hour, seven day a week on call specialist palliative care service at home. k. Implementation of Living Well: A Strategic Plan for Mental Health Reform in NSW which allows for increased specialist community health teams, enhanced psychosocial supports in the community and continuing transitioning long stay patients to appropriate community accommodation. l. Small Rural Hospitals and Specialist Hospitals received additional investment to maintain service delivery from small rural and specialist hospitals, including enhancing security provision for high risk forensic and civil patients at the Forensic Hospital. m. Community Health Care Services received additional investment to tackle drug and alcohol misuse in communities through early intervention for young people, additional support and treatment for pregnant women, and expanding community treatment and aftercare to help more people. n. Improving service levels in hospitals and cutting wait times for planned surgeries through extra investment to meet increased patient demand for hospital and emergency department services. o. The Quality Data Improvement System had created more than 200 improvement projects and was generating or refreshing around 15,000 reports every month. p. Patient Flow Collaborative which has resulted in more than 240 improvement initiatives being implemented across the 31 hospitals involved in the program. q. Implementation of the Leading Better Value Care Initiatives that involved redesigning workflows to help provide more efficient and effective care including the rollout of the Renal Supportive Care model to more hospitals. r. Deployment of the Electronic Record for Intensive Care (eRIC) which has reduced administration time by over 50 percent. s. The use of the Make Ready Model Logistics Support Team by HealthShare NSW ensures that vehicles are restocked efficiently, cleaned and ready to go when needed by paramedics, subsequently freeing up paramedics to focus on the care of patients. t. Implementation of the NDIS leading to clear referral pathways, system wide understanding of roles and responsibilities, early identification of clients who may be eligible for NDIS support and adding a range of resources to support clients and staff. u. The roll out of the My Food Choices Program, which has resulted in a reduction of meal order times, increase in patient meal intake, reduction in organic food waste, reduction in patient tray waste, reduction in kitchen wash process time and changes in rostering which has allowed for the redirection of staff from the kitchen toward increased patient facing roles. v. The Linen Service Restructure in 2017 which allowed for a revised management and operation support structure which would apply across the entirety of the Linen Service. The restructure resulted in savings both through redundancies and downgrading of positions, as well as through ensuring that future appointments and gradings will be done in accordance with a uniform, state- wide structure whereby the NSW Government pays workers the same wages for the same work. w. Restructure of NSW Health Pathology in 2012 which merged all pathology services into a single state-wide system and resulted in the operation of over 60 laboratories, 200 pathology collection sites and the processing of over 61 million tests per year. x. NSW Procurement has exceeded its saving target for the year of 2019 by more than $113 million, allowing for those funds to be reinvested back into frontline health services. y. The impact and flexibility required by members due to the COVID-19 pandemic such as redeployment into different roles, significantly increased workload, learning and applying new procedures, use of new technologies and implementation of additional infection control protocols." (Sic, footnotes omitted)
5. ASMOF submitted as follows: [11] "16. A number of matters are relevant to the consideration of what constitutes fair and reasonable terms and conditions of employment, including (at least) the following: a. the long period of wage restraint achieved by the limitation on annual increases to 2.5% (of total wages cost) for public sector employees since 2011 as a consequence of s.146C of the Act and the operation of the Regulation; b. the need to maintain the real value of the wages and salaries of public sector employees over the medium and longer terms; c. the productivity and efficiency gains in the health sector, to which those covered by the awards in which ASMOF has an interest, have contributed; d. the frontline role of salaried medical officers, along with their colleagues in the health sector ([and] no doubt many others in public sector roles), in effectively implementing the State government's healthcare response to the COVID-19 pandemic, and the likelihood that through the 2020/2021 financial year (and further) there will be significant demands upon that workforce as a consequence of the pandemic; e. the need to maintain the salaries of doctors at rates comparable to their interstate counterparts to ensure that the New South Wales health system attracts and retains the best qualified doctors possible; and f. the desirability of awarding increases which are at least consistent with those determined by the Fair Work Commission in the Annual Wage Review Decision ([2020] FWCFB 3500 where a 1.75% wage increase was determined in respect of frontline health care workers, such increase to take effect 1 July 2020."
6. In reply, the Employers submitted that the evidence adduced by the Applicants was "little more than a list of changes that have occurred in particular parts of the public sector, with no evidence that they amount to achieving set objectives or have otherwise achieved the sort of across-the-board savings and/or productivity measures that would justify an increase". [12] It was contended that: 1. the evidence did not allow for a stringent examination; 2. the evidence did not establish substantial cost savings and/or productivity or efficiency improvements or that relevant employees had made a substantial contribution towards the attainment of the objectives of the employer in seeking to become more competitive and/or efficient; and 3. the fact that some parts of the public sector have been reorganised does not mean that the work of employees has a higher value. That is, the initiatives referred to in the evidence might involve a change to the way work is done in some limited areas, but do not involve a change in the value of that work.
7. We accept the Employers' submissions. The position advanced by the Applicants effectively asks the Commission to accept, without any financial analysis, that the putative productivity and efficiency gains would at least offset the increases claimed in the Joined Applications. That does not properly discharge the onus that the Applicants bear.
8. While it would be open to the Commission to make awards in respect of some of the Joined Applications and not others, the evidence adduced on behalf of the Applicants does not allow for a proper analysis to be done as to the extent to which the programs and initiatives referred to by the witnesses can properly be said to result in productivity and efficiency gains that ought to be translated into increases to salaries and salary-related allowances. In any event, the cases presented by the Applicants did not anticipate that the evidence might be used by the Commission to award increases for only some of the relevant employees. The productivity and efficiency evidence was relied on to justify the increases claimed in respect of all of the Relevant Awards. It falls well short of establishing a basis for an across-the-board increase.

Special case principle

1. The principles to apply in the application of the special case principle are set out in the principle itself, namely those "laid down in Re Operational Ambulance Officers (State) Award [2001] NSWIRComm 331; (2001) 113 IR 384 and the cases referred to therein at [165]-[168]". We will not reproduce those passages; they are well-known.
2. While the considerations on which the PSA, the NMA and the HSU relied fall short of making out a presumption of a 2.5% increase, they may still be relevant in considering whether the Joined Applications fall within the special case principle. So, too, can the evidence referred to at [56] above and that which underpinned ASMOF's submissions reproduced at [57] above.
3. To provide context, we reproduce the following passages from our Earlier Decision: "35. The PSA, the NMA and the HSU led evidence which was said to provide historical context to the 2014 Regulation. In their Outline of Submissions in Reply those unions described that evidence, and its significance, as follows: '18. The context of the enactment of s 146C and the making of the initial Regulation in 2011 is critical in understanding the nature of the "policy" to which the Commission is required to give effect. The NSW Government first introduced a wages policy in 2007 which was contained in Premier's Memorandum M2007-12. The 2007 Premier's Memorandum recorded as follows: … It is intended to maintain real wages by allowing for increases of 2.5 per cent per annum. Additional increases are available where employee-related cost savings are achieved. Since wage agreements are set in a forward looking manner, forecasts for inflation need to be utilised to maintain the real value of wages. The Reserve Bank of Australia (RBA) has an agreement with the Federal Government to maintain CPI increases within a range of 2-3 per cent. That is, on average, the CPI will increase by 2.5 per cent. While increases in the CPI may exceed, or be less than 2.5 per cent in the short-term, the RBA actively pursues monetary policy to achieve the target range. Therefore, in multi-year wage agreements, a 2.5 per cent Sydney CPI inflation rate is the best available forecast. This is also NSW Treasury's medium-term inflation parameter as published in the Budget papers. 19. In 2011, the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 was enacted amending the Act by inserting s 146C. At the same time the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 ("the 2011 Regulation") was made. At or around the same time the NSW Government issued the 2011 Wages Policy ("the Wages Policy"). The 2011 Regulation was designed to ensure that the Commission applied the fundamental tenets of the Wages Policy and to continue key aspects of the 2007 Wages Policy, but to require the Commission to comply with the policy. 20. As set out in the earlier submissions filed on behalf of the PSA, NSWNMA and the HSU, in parliamentary debates associated with the introduction of s 146C and the making of the 2011 Regulation, the relevant Minister asserted repeatedly and unequivocally that the Regulation would "ensure that wage increases of 2.5 per cent are available each year to our hard-working public sector employees". Furthermore, the Wages Policy expressly indicated that the policy was designed to maintain the real value of public sector wages in line with the mid-point of the Reserve Bank's target range for inflation. Those aspects of the statutory history and the underlying policy are ignored by the Industrial Relations Secretary. 21. There are additional statements made in Parliament which make clear the object and purpose of the Regulation. On 2 June 2011, for example, Mr Greg Smith in a speech to the Legislative Assembly stated (New South Wales Parliamentary Debates (Hansard), Legislative Assembly, 2 June 2011, p 2145): We will provide 2.5 percent wage rises across the public service, and rises above that level will have to be offset by productivity gains… 22. On 3 August 2011, the responsible Minister, the Hon. Greg Pearce stated, in a speech to the Legislative Council in relation to the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 (New South Wales Parliamentary Debates (Hansard), Legislative Council, 3 August 2011, p 3483): Despite the scaremongering from the Opposition, our policy is more transparent than Labour's 2007 policy by clearly guaranteeing the 2.5 per cent increase and minimum conditions. It allows unions, as representatives of the workforce, the flexibility to decide what they determine to be conditions of employment they are willing to put on the negotiating table for increases above the guaranteed 2.5 per cent. If they are happy with the 2.5 per cent increases and their current conditions of employment then nothing changes. 23. It could not have been more clearly stated that the government's policy was that a wage increase of 2.5% would be guaranteed for public sector employees under the Regulation: Re Crown Employees Wages Staff (Rates of Pay) Award 2011 (No 3) (2013) 240 IR 24 at [84]. That guarantee is consistent with the underlying policy of the Regulation, namely, that real wages and fiscal responsibility would be maintained by providing for increases in remuneration each year by reference to the mid-point of the Reserve Bank's target range for inflation. 24. The 2011 Regulation was repealed by Schedule 5 to the State Revenue and Other Legislation Amendment (Budget Measures) Act 2014 and replaced by the text contained in sub-schedule 5.2 of the Budget Measure Act which is referred to as the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014. The Regulation continues the purpose and structure of the 2011 Regulation other than to address, in clause 6(1)(a), the relevance of changes in superannuation entitlements to the constraint on the Commission's jurisdiction. …'" (Emphasis in original)
4. The PSA, the NMA and the HSU submitted that the Commission is entitled and required to take into account as a public interest consideration statements by Government that public sector employees would be guaranteed a 2.5% increase each year. In Re Crown Employees Wages Staff (Rates of Pay) Award 2011 (No 3) Boland J observed: "102. In observing the requirements of s 146(2) I am bound to take into account the objects of the Act, which are, relevantly, to provide a framework for the conduct of industrial relations that is fair and just and to encourage and facilitate equitable, innovative and productive industrial relations. These are relevant considerations in the exercise of my discretion as to what is an appropriate amount to award. Moreover, in determining the amount of increase, it is to be fair and reasonable within the constraints imposed by s 146C and the Regulation. Within the scope of these discretionary considerations I am entitled to take into account the fact that, despite the terms of cl 6(1)(a) of the Regulation, the former Minister promised annual wage increases of 2.5 per cent for public sector employees."
5. While these are matters to which the Commission may have regard, we do not consider that we are required to do so. We are, as Boland J made clear, "entitled to take into account" these matters in the exercise of our discretion under the Act. Further, the weight to be attached to any "promises" made in 2011 must be considered in light of the effluxion of time since they were made. We have considered the promissory statements made by the Government in 2011 in that light.
6. It is apparent that the 2.5% cap was imposed by the Government as a wage restraint mechanism which has, with few exceptions, eliminated wage increases by way of work value and/or productivity and efficiency claims which had been a regular feature of public sector employment prior to the imposition of the cap. The rates of pay and work-related allowances in the awards the subject of the Joined Applications have, since 1 July 2011, been increased by 2.5% annually, almost invariably with the consent of the parties to those awards (apart from 2013 and 2014 when the increases were 2.27% due to the increase in the superannuation guarantee).
7. On 27 May 2020 the Honourable Gladys Berejiklian, the Premier of New South Wales, and the Honourable Dominic Perrottet, the Treasurer of New South Wales, issued a media release which contained the following statements: "The NSW Government will pause pay rises for the next 12 months to protect public service jobs as unemployment spikes across NSW. … The new wages policy will be implemented by regulation and will apply prospectively. For workers with agreements already struck, the pay rise pause will apply for the first 12 months of their next agreement."
8. On 29 May 2020 the Government made the Industrial Relations (Public Sector Conditions of Employment) Amendment (Temporary Wages Policy) Regulation 2020 (NSW). That regulation purported to amend the 2014 Regulation so as to give effect to the "new wages policy" referred to in the media release of 27 May 2020.
9. On or around 31 May 2020, in discussions that occurred outside the customary conciliation processes of the Commission, the Treasurer put an offer to several union secretaries, including Brett Holmes of the NMA and Gerard Hayes of the HSU, of a one-off payment of $1,000.00 to all New South Wales public sector workers in lieu of an across-the-board pay increase combined with a promise of no forced redundancies.
10. On 2 June 2020, the Legislative Council disallowed the Industrial Relations (Public Sector Conditions of Employment) Amendment (Temporary Wages Policy) Regulation 2020. The offer made by the Treasurer on 31 May 2020 was withdrawn.
11. The developments between 27 May 2020 and 2 June 2020 must be viewed in the light of the history of these proceedings. Stewart Little, the General Secretary of the PSA, deposed as follows: [13] "8. On 18 December 2019, the Applicant wrote to Mr Charlie Heuston, director with the Respondent stating their intention to lodge an application for an increase to the Crown Employees (Public Sector - Salaries 2019) Award. … 9. On 9 March 2020, the Applicant filed Form 1 - Application for an award with the NSW Industrial Relations Commission with the proceedings No. IRC 00079899/2020 ('the Award Application'). 10. On 2 April 2020, the Award Application was listed for Directions before Chief Commissioner Constant. At the Directions, the representative for the Respondent indicated that they had not yet received bargaining parameters. Therefore, the Directions hearing was relisted for 7 April 2020. 11. On 9 April 2020, the Applicant wrote to the Respondent noting that the Respondent still did not have bargaining parameters. The Applicant requested that the Respondent confirm by 16 April 2020 where they had received bargaining parameters and instructions of the purposes of proceedings. … 12. At the Directions hearing on 7 April 2020, the Award Application was listed for Conciliation before Chief Commissioner Constant on 20 April 2020. 13. At the Conciliation hearing on 20 April 2020, the Respondent still did not have bargaining parameters and therefore the matter was relisted for Further Conciliation on 30 April 2020 before Chief Commissioner Constant. 14. At the Further Conciliation hearing on 30 April 2020, the Respondent still did not have bargaining parameters and directions were made for the filing of evidence. 15. On 12 May 2020, the Applicant lodged applications for new Awards in the following matters: a. Crown Employees (SAS Trustee Corporation) Award 2019; b. Landcom Award 2019; c. Local Land Services Award 2019; d. Independent Commission against Corruption Award 2019; e. Crown Employees (Independent Pricing and Regulatory Tribunal) Award; f. Crown Employees (Audit Office) Award 2019; g. Service NSW (Salaries and Conditions) Employees Award 2018; h. Crown Employees (NSW Department of Communities and Justice) Residential Centre Support Services Staff Award 2019; and i. Crown Employees NSW Department of Communities and Justice (Community Living Award) 2019 ('the Corresponding Awards'). 16. On 14 May 2020, the Applicant filed its evidence in the Award Applications. 17. On 22 May 2020, the Corresponding Awards were listed for a Directions hearing before [Chief] Commissioner Constant. 18. On 25 May 2020, the Applicant filed their evidence in the Corresponding Awards. 19. On 28 May 2020, the Award Application was listed for a Directions Hearing before Chief Commissioner Constant. 20. On 3 June 2020, the Respondent filed their evidence in the Award Application." (Emphasis in original)
12. Ayshe Lewis, the Manager, Industrial Division of the HSU deposed: [14] "8. From in or about March 2020, the Ministry convened daily briefing meetings with the Health Unions including the HSU to discuss COVID-19 (COVID) and the impacts COVID was having on NSW's Health Services and employees of the Health Service. I attended a number of these briefing sessions with Gerard Hayes, Secretary of the Health Services Union (HSU) NSW/ACT. Other attendees included Dr Tony Sara and Andrew Holland for the Australian Salaried Medical Officers Federation (ASMOF) and [Brett] Holmes General Secretary of the NSW Nurses and Midwives Association. Attendees from the Ministry included Annie Owens, Executive Director of Workplace Relations for the Ministry and Phil Minns, Deputy Secretary People Culture and Governance. … 10. I recall on two occasions that the HSU requested, during these discussions, that the Ministry advise of its position on a pay increase for employees covered by the Awards. 11. During one of the COVID Meetings, Ms Owens said words to the effect of 'We haven't heard anything from PSIR. We are preparing our payroll systems for a 2.5% increase'. 12. I understood this to mean that at that time, the Ministry had not received the bargaining parameters, however, the Ministry had commenced its preparations to make applications for the new Awards. 13. On both occasions I recall the issue being raised, Ms Owens maintained the position that the Ministry had not received a formal position from PSIR yet but was still working on the premise of a 2.5% increase. … 16. On 14 May 2020, the Premier of the State of NSW, the Hon. Ms Gladys Berejiklian, indicated publicly for the first time that the Government might seek to impose a freeze in wages for NSW public servants. 17. Between 21 and 26 May 2020, the HSU and the Ministry engaged in without prejudice discussions in relation to (without limitation): a. pay increases for employees covered by the Awards; and b. a framework agreement for Award reform (WOP Discussions) 18. During the WOP Discussions, the parties exchanged without prejudice and confidential correspondence. The Ministry stated that their position in the WOP Discussions was predicated on obtaining approval from PSIR and NSW Treasury (Treasury) (which they did not have at that point in time). … 20. On or around 31 May 2020, the NSW Government advised the HSU of its intention to offer a one off payment of $1,000 to all NSW public sector workers in lieu of an across the board pay increase. Mr Hayes and other union officials had meetings with the Treasurer of the State of NSW, the Hon. Dominic Perrottet (Treasurer) regarding this offer." (Emphasis in original)
13. Given the regularity and consistency of public sector wage increases over the past nine years, it is reasonable to conclude that employees covered by the Relevant Awards held a legitimate expectation that their rates of pay would be increased by 2.5% from 1 July 2020. This is an expectation they could reasonably have held until late May 2020.
14. Under cross-examination, Stephen Walters, the Chief Economist for the NSW Treasury, had the following exchange with Mr Gibian: [15] "Q. The other thing I was going to ask you in that respect is that you're aware, you're at least sufficiently aware, of government wages policy to know that the government's wage policies of 2011 are dictated by regulation that there be 2.5% increases in salaries each year; correct? A. Correct. Q. You would expect that public servants would have adjusted their spending patterns and financial commitments on the basis that that's what would happen each year; correct? A. People generally adjust their spending plans according to their income expectations, yes. Q. If a person expected to receive a pay rise in a particular year, they may enter into financial commitments on that expectation; correct? A. They may, correct. Q. If that expectation, that is, that they would receive a pay rise does not come to fruition, that may cause them difficulty in terms of the financial commitments that they've entered into; correct? A. I'm not in a position to say. It would depend on the individual circumstances. Q. If they had acted as you said they would, that is, set their spending patterns and financial commitments based upon expected increases in pay, there is clearly that potential; correct? A. All I can say is that their income would be lower than they had expected."
15. While we have found - and reiterate - that any expectation held by the employees does not translate into an entitlement (however described), it is properly a matter to which we should have regard in considering the public interest. In the particular circumstances described above, we are satisfied that the Joined Applications fall within the special case principle.

Introductory comments

1. As we turn to consider whether the awards or variations sought in the Joined Applications would represent fair and reasonable conditions of employment, there is one matter which we would like to emphasise. Our determination is constrained by the terms of the Act and the 2014 Regulation, as guided by the authorities referred to earlier in this decision. The parties focussed the Commission's attention on economic considerations and it is predominantly those considerations to which we have had regard in reaching our determination.
2. However, many of the public sector employees who gave evidence in these proceedings expressed views to the effect that the Government's proposed "wage freeze" represented a slight, in the sense that it failed to recognise, let alone reward, the value of the work they perform and the efforts they put into that work, particularly in response to the COVID-19 pandemic. We do not consider that it is necessary to explore this evidence. Suffice it to say, nothing in this decision should be construed as in any way denigrating the work performed by the public sector in New South Wales. We recognise the work performed day-to-day by employees in the Government sector in New South Wales, in particular those who have had to go "above and beyond" in responding to the pandemic.

Reports relied on by parties

1. The PSA, the NMA and the HSU tendered a report titled "Economic Analysis of NSW Public Sector Wage Case June 2020". [16] That report was prepared by Dr Andrew Charlton, a director of AlphaBeta Advisors Pty Limited, and Angela Jackson of Equity Economics. Dr Charlton deposed that he "advised on the preparation of the whole report" [17] and that "[t]he whole of the report represents [his] opinion". [18] The report came to be known as the "Charlton Report" and we will adopt the same term.
2. The Employers relied on a document titled "NSW Treasury Report" ("Treasury Report"), [19] which appears to have been prepared by a number of officers working within NSW Treasury. Each of Michael Pratt, the Secretary of the NSW Treasury, and Stephen Walters adopted particular parts of the Treasury Report as setting out their own opinions.
3. The PSA, the NMA and the HSU submitted that the Treasury Report should be given little weight for the following reasons: 1. each of Mr Pratt and Mr Walters are Treasury officials and cannot be regarded as either independent or impartial; 2. the Treasury Report was drafted by a team of people, who neither Mr Pratt or Mr Walters was able to identify. Neither of the witnesses could recall having made any, or any substantive changes, to the document. This called into question the extent to which the Treasury Report could be treated as independent expert evidence or even as representing the personal opinions of Mr Pratt and Mr Walters; 3. neither witness adopted the expert witness code of conduct in Sch 7 of the Uniform Civil Procedure Rules 2005 (NSW); and 4. documents produced in response to summonses to produce demonstrate that the Treasury Report is partisan and was not intended to be an impartial account of the economic circumstances relevant to the case. It was fashioned more in the manner of submissions skewed to advocacy of the Employers' case.
4. There is force to these submissions. We have had regard to them in considering the weight to be attached to the Treasury Report.

Economic environment

1. This case falls to be determined in the shadow cast by the COVID-19 pandemic and in particular its economic impacts. These were neatly summarised by the Reserve Bank of Australia ("RBA") in its Statement on Monetary Policy ("SOMP") issued in August 2020 as follows: [20] "The COVID-19 pandemic represents the largest a shock to the global economy in many decades. Labour markets have been severely disrupted. While infection rates have declined in some countries, they have escalated in many others, including the United States and some large emerging market economies. Renewed outbreaks are also occurring in some other countries, including Japan and parts of Australia. The ongoing spread of the virus, and the responses to contain it, will combine to slow the recovery. The Australian economy has experienced a severe contraction and, like many other economies, is now in the early stages of recovery. … However, the pace of recovery is expected to be slower than previously forecast. Generalised uncertainty and deficiency in demand have turned out to be more of a drag on growth than previously thought. … The coronavirus outbreak has been enormously disruptive for Australia's labour market. Employment declined by more than 850,000 in April and May, and increased by around 200,000 in June. The measured unemployment rate increased by more than 2 percentage points over the course of a few months, reaching 7.4 per cent in the month of June, the highest rate in more than two decades."
2. In the August 2020 SOMP the RBA was guarded as to Australia's economic outlook. The RBA stated: [21] "During the first half of the year, the COVID-19 pandemic led to the most severe contraction in global and domestic economic activity in decades. Since around May, economic conditions have started to recover as containment measures have been eased and fiscal and monetary policies have provided significant support. But a high degree of uncertainty surrounds the outlook domestically and abroad. The main source of uncertainty is the evolution of the pandemic and medical developments. Indeed, a resurgence in new cases has already led to the reinstatement of containment measures in some economies, which has slowed down their recoveries, including in Australia. Beyond the direct effects from a containment measures, there is also considerable uncertainty over the voluntary response from households and businesses. Inflationary pressures are likely to remain subdued globally for some time because of considerable spare capacity, though in the longer term there is more uncertainty over the inflation profile given supply will also be lower."
3. Due to the "high degree of uncertainty for the outlook", the RBA posited three possible scenarios, which it summarised as follows: [22] "• The baseline scenario assumes the heightened restrictions in Victoria are in place for the announced six weeks and then gradually lifted. In other parts of the country, restrictions continue to be gradually lifted or are only tightened modestly for a limited time, although restrictions on international departures and arrivals are assumed to stay in place until mid 2021. Under this scenario: GDP is expected to contract by around 6 per cent over the year to December 2020, but then grow by around 5 per cent over 2021; the employment rate is expected to rise to almost 10 per cent over the next six months and gradually declined to around 7 per cent over the latter part of the forecast period; and underlying inflation is expected to remain below 2 per cent over the next couple of years. • A stronger economic recovery is possible if faster progress in controlling the virus is achieved in the near term. A series of positive health outcomes would help limit the damage to consumer and business confidence and support a more rapid economic recovery. In this scenario, the virus is assumed to be rapidly controlled domestically (but not overseas) and activity restrictions are lifted (with the exception of international travel) leading to a faster recovery in consumption, investment and employment. The unemployment rate would peak at a lower level and decline faster than in the baseline scenario. • However, a plausible downside scenario is where Australia faces further periods of outbreaks and heightened restrictions in certain areas, and the world experiences a widespread resurgence in infections in the near term. In this scenario, it is likely that the recovery in service exports would be delayed further and consumer spending would continue to fall through the second half of 2020, despite continued policy stimulus and income support measures. Business investment would also decline sharply. Domestic activity would take much longer to recover in this scenario, resulting in the unemployment rate remaining close to its peak throughout 2021."
4. The evidence led by the parties in these proceedings as to the state of the New South Wales economy was well summarised in the Employers' Closing Submissions in these terms: "NSW Economy 31. There is no debate that the NSW economy and budget were in good shape in December 2019 when the NSW Treasury released its Half-Yearly Review. At the time of the Half-Yearly Review, the NSW economy was expected to grow 1¾ percent in 2019-20. Growth was then forecast to accelerate to 2¼ percent in 2020-21 and 2½ percent in 2021-22. The outlook for inflation and wages growth were both forecast to be weaker through to 2021-22, with the WPI forecast at around 2¼ percent in 2019-20 before accelerating slightly to 2½ percent in 2020-21. Year average inflation (see below) was forecast at around 1¾ percent in both 2019-20 and 2020-21. That was before the impact of the bushfires and the impact of COVID. 32. Plainly, the onset of the pandemic has altered the economic landscape fundamentally and no reliance can be placed the forecasts contained in the Half-Yearly Review. As the Secretary of Treasury explained in cross examination when taken to the projections for expenditure as published in the Half-Yearly Review: "these were on economic projections pre-COVID. Of course, if you look at current expenses, they will be well in excess of these forecasts." Mr Walters similarly confirmed in re-examination that the forecasts contained in the Half-Yearly Review were no longer accurate, due to the onset of COVID-19 and the severe restrictions that have been imposed as a result. … 35. NSW Treasury forecasts prepared in mid-May 2020 predicted: a. Real GSP in NSW to fall by around 1½ percent in 2019-20 with a further fall of around 1¼ percent in 2020-21, before rebounding by around 4¼ percent in 2021-22; and b. The unemployment rate to peak at a little less than 8 percent in June 2020, and average around 7 percent across 2020-21. 36. ABS labour force statistics indicate that, at least in so far as unemployment is concerned, NSW Treasury forecasts might have been a little overly pessimistic, however the NSW labour market has nevertheless dramatically altered since December 2019. The ABS labour force statistics indicate: a. The NSW unemployment rate rose 0.5 percentage points from May to June to 6.9 per cent, being 0.2 percentage points higher than the highest point during the global finance crisis in March 2009 (6.7 percent); b. NSW's unemployment rate remains the equal lowest of the states (with Tasmania); c. Spare capacity in the NSW labour market (the underutilisation rate) lowered to 18.2 per cent; d. Employment in NSW rose by 80,800 in June. This was driven by a small increase in full-time employment (+5,300) and a large increase in part- time employment (+75,500); e. The NSW participation rate rose 1.6 percentage points from May to June to 63.7 per cent. 37. ABS statistics regarding weekly payroll, jobs and wages, as at 11 July 2020 also reveals: a. a 5.3% decline in jobs in NSW since COVID restriction commenced in mid-March; and b. that aggregate wages have declined since mid-March by 4.3%." (Footnotes omitted)
5. The Treasury Report stated that the COVID-19 pandemic had significantly impacted on the State's revenue. Treasury had estimated a $20.3 billion reduction in revenue from state taxes and GST over the five years to 2023-24. The economic shutdown was also expected to significantly impact on "agency own source revenues", such as public transport fares.
6. We observe that there was by the conclusion of the proceedings broad consensus that uncertainty in the economic environment argued against any consideration of changes to the Relevant Awards to operate beyond the current financial year. We note the following: 1. As stated at [5] above, the PSA, which was the only Union Applicant seeking an order to operate beyond the current financial year, accepted "that there is some force in the submission that the present uncertainty in economic conditions makes it difficult to forecast the circumstances that are likely to apply in 12 months' time" and submitted that "the existing PSA award should simply be varied to provide for a 2.5% increase in salaries and allowances from 1 July 2020". [23] 2. The Australian Education Union submitted that the Commission "should decide this case on the basis of the economic and other evidence relating to the next 12 months. Any consideration [of] the economic evidence beyond the next twelve months would amount to speculation". [24] 3. Charles Heuston, Acting Executive Director, Employee Relations in the NSW Department of Premier and Cabinet deposed: [25] "19. … If the term of the award was limited to one year this will allow the parties to review the suitability of industrial arrangements given the significant change to the way employees have been working in response to the COVID-19 pandemic. Specifically, the large number of employees who have been working remotely and whether existing employment conditions should be reviewed to better accommodate this change. Moreover, given the unprecedented nature of COVID-19 and the resulting economic situation, it is difficult to know what challenges the State Government will face in 12 months' time." 1. The Employers submitted, admittedly in support of the contention that the Commission ought to award no increases at all in this financial year, that "[t]he forecasts as to the future state of the economy, including the movement of CPI, are heavily qualified by the RBA" and that the economic data available to the parties is "imperfect". [26]
7. We accept that the Commission should consider the Joined Applications in light of the evidence relevant to the present financial year ending 30 June 2021. We have proceeded on that basis.

Maintenance of real wages

1. As stated at [31(9)] above, the Commission's task is to set fair and reasonable rates at the time when the award commences to operate and which, barring unforeseen circumstances, will continue to be fair and reasonable during the term of the award. This can include the consideration of the changing value of money over time and the maintenance of employees' real wages.
2. Such a consideration is, at least in part, consistent with the Government's Wages Policy. The purpose of that policy was described in NSW Treasury Circular NSWTC 14/18 "NSW Public Sector Wages Policy 2011" as being "designed to maintain the real value of public sector wages over the medium term in line with the mid-point of the Reserve Bank of Australia's target range for inflation over the cycle".
3. There was some contest on the evidence as to the effect on the real wages of the relevant employees if no increase is awarded from 1 July 2020. Disregarding the presumption of a 2.5% increase (for the reasons already stated), this contest broadly came down to two considerations: firstly, the appropriate rate of inflation to apply, and, secondly, the extent to which historical pay increases to the relevant employees ought to be taken into account.

Reference rate for inflation

1. A distinction must be drawn between "headline" and "underlying" inflation. Headline inflation is derived from movements in the value of all of the goods and services included in the calculation of the Consumer Price Index ("CPI"). Underlying inflation is calculated after removing the more volatile items in that parcel of good and services.
2. The RBA uses a measure of underlying inflation referred to as the "trimmed mean". Dr Charlton described it in these terms: [27] "The one that the RBA uses is called the trimmed mean inflation. It's a measure of underlying ‑ underlying inflation, which is ‑ which is ‑ all they do is they take the total inflation basket and they take off the most volatile 15% at each end of the spectrum, and that gives what they call the trimmed mean. And the value in doing that is that it takes out some of the things that you were referring to earlier, like things that are very volatile ‑ like fuel, for example, is often excluded from the trimmed mean."
3. It was common ground that COVID-related developments had distorted inflation. For instance, the June 2020 CPI issued by the Australian Bureau of Statistics noted significant price falls in the June quarter for childcare (-95%), automotive fuel (-19.3%), preschool and primary education (-16.2%) and rents (-1.3%). These were attributable to government subsidies on childcare and preschool costs, international oil pricing, and low demand on the relevant goods and services brought about by COVID-19 restrictions.
4. In the Treasury Report Mr Walters expressed the opinion that due to this volatility the underlying measure of inflation would be a better indicator of the general increase in prices. He stated: "31. Several factors…such as government subsidies in response to COVID-19, will cause the near-term outlook for headline inflation to be distorted. Therefore, the underlying measure of inflation would be a better indicator of the general increase in prices over this period…"
5. Dr Charlton agreed with Mr Walters that "the underlying measure is a better measure". [28] He explained that the underlying measure of inflation takes out some of the volatility in inflation figures and would give a better measure of "what will trend over time". [29]
6. Specifically in relation to trimmed mean inflation, Dr Charlton gave the following evidence under cross-examination: [30] "Q. The treasury have used an averaging rather than a point‑to‑point. You've expressed a view quite strongly about underlying being better than headline. What do you say about what is more useful: an average or a point‑to‑point approach in circumstances of volatility? A. Yes, well, this is ‑ this is the very interesting question. I think if you use the trimmed mean, and again I don't have the benefit of the calculations underneath the year average calculation, but I think if you use the trimmed mean, and you'll see this on page 89 of the RBA statement on monetary policy, the inflation is actually much less volatile. So I'll read you the figures. The trimmed mean inflation for June 2020 is one and a half, for December 2020 it's one and a quarter, for June 2021 it's one and a quarter again, so it's very flat inflation, and as you correctly pointed out previously, if there's very flat inflation then the through the year and the year average are going to be very similar. And so another nice ‑ another feature of using the trimmed mean inflation is that you won't have this discrepancy between year average and through the year. Q. You expect the numbers to be closer between the two? A. I would expect so, yeah, without having ‑ without having seen the calculation. I'd expect the year average numbers to be similar to the ‑ year average trimmed mean numbers to be similar to the year ended trimmed mean numbers."
7. Consistent with the evidence of both Mr Walters and Dr Charlton, we accept that in the present circumstances underlying inflation, and in particular, trimmed mean inflation is the better measure by which to assess any movements in the value of employees' salaries.

Consideration of historical wage increases

1. The next question is whether, in determining fair and reasonable salaries, it is appropriate for the Commission to take into account increases which have been provided to employees in the past. The Employers submitted that the Commission should have regard to increases received by employees since July 2011. They did so in reliance on the Treasury Report which stated: "25. Since the conception of the current public sector wage policy on 1 July 2011, real public sector wages in NSW have grown by 5.6 per cent, or an average of around 0.6 per cent per annum. This compares with real private sector wages in NSW which have grown by 4.0 per cent, or an average of around 0.5 per cent per annum."
2. We do not place much weight on increases afforded to the relevant employees prior to 1 July 2019. This is for two reasons.
3. Firstly, with very few exceptions there has been consent between the Employers and the relevant unions for the increases provided to the employees. In the relevant period the Commission has only arbitrated wage increases in 2011 and 2013.
4. Secondly, as Mr Gibian submitted, "the approach of comparing CPI to wage increases over a longer period assumes that the increases in each year were granted only on a cost of living adjustment basis and no other basis". [31] There is no evidence as to the basis on which consent to past increases was provided.
5. Since 2011 wage increases above 2.5% have only been permitted to the extent that they are fully funded by employee-related cost savings. However, cl 9(1)(d) of the 2014 Regulation (reproduced at [28] above) provides that such savings must be "additional to whole of Government savings measures (such as efficiency dividends)". The same provision appeared in the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011.
6. Mr Pratt provided the following evidence regarding the efficiency dividend, under cross-examination: [32] "Q. Just in broad overview, then, efficiency dividends, in a broad sense, centrally impose savings measures, imposed on departments and agencies? A. That's correct. There were some broader savings across different budget lines, yes. Q. The efficiency dividend is an across‑the‑board savings measure imposed on agencies and departments, isn't it? A. Yes, it is, but it's without where those savings would be gained from. There were additional savings as you've mentioned here that were identified as line items to be saved rather than a broader efficiency dividend. Q. Is that the second dot point on page‑‑ A. That is the ‑ that is the second bullet point, yes. Q. Before we come to that, the efficiency dividend, as you say, is a centrally imposed savings mechanism which, in short, reduces expenditure provision for departments and agencies by previously 2% and in future, 3% per year? A. That's right. Q. Without committing the savings to any particular measure or mechanism; correct? A. No, the ‑ the intent of the efficiency dividend is that agency of government would look to be more productive, more efficient, year on year. Q. And have their allocation of funding reduced in a general sense by the range of the efficiency dividend; correct? A. That's correct, yes. Q. Centrally, the Treasury does not indicate how the 2% ‑ or, in future, 3% ‑ savings are to be realised? That's up to each department and agency to work out how to operate with reduced expenses; correct? A. Yes. I mean, the way this generally works out in practice is that the agency will often work with Treasury, or they will consult with Treasury. The‑‑ Q. I'm sorry, I think you've just dropped out for a moment there. I just caught an incomplete sentence, I think. A. What I was indicating was that often, in practice, the ‑ whilst the agency is accountable for delivery, they will consult with the Treasury team often and talk about opportunities. So, ..(not transcribable)..sits with the agency. Q. In a broad sense, the purpose of the efficiency dividend is to derive efficiencies in government operations? A. That's right. Q. And the departments or agencies would undertake their existing functions more efficiently with fewer resources? A. Yes. It is about saving cost in process. Government has a lot of investment in core process, so it's largely targeting ..(not transcribable)..That can also mean reduction in headcount as well. Q. So, it can be achieved in various ways, which as you say, ultimately rests with the department, but that can include employee costs and headcount numbers? A. Yes, it can. Yes. Q. And ultimately, the department's required with fewer resources to produce, in short, the same outcome? Pursue the functions that they have pursued in the past? A. Yes."
7. Having noted these matters we would briefly observe that to the extent the case for the Applicants rests on a "moral" claim to an annual 2.5% increase there would be no incongruity in the Employers placing reliance on the extent to which over the relevant period the employees have enjoyed wage increases in excess of CPI. However, given the findings that we have otherwise made, it is not necessary to further explore this point.
8. While we do not consider that increases prior to 1 July 2019 have particular relevance, the same cannot be said for those awarded with effect from that date. It is well-established that awards of the Commission are presumed to set fair and reasonable terms and conditions of employment. The onus is on the Applicants to rebut that presumption; that is, to make out the case for change to, or replacement of, the Relevant Awards. This necessitates findings that the existing terms are not fair and reasonable; that the changes sought will render them so; and, that the new or varied awards will remain fair and reasonable for their terms.
9. In this context, and consistent with the authorities referred to at [31(10)] above, it is appropriate to have regard to developments since the Relevant Awards were last made or varied. The consideration of the changing value of money over time includes changes which have occurred since the employees last received a salary increase and those which are forecast during the term of the award to be made or varied. This entails the Commission taking into account the wage increases awarded to employees with effect from 1 July 2019 in determining whether the Applicants have discharged the onus they bear to justify any change to the current salaries and salary-related allowances.

Conclusions

1. In its August 2020 SOMP the RBA recorded that trimmed mean inflation for the year ending 30 June 2020 was 1.2%. It forecast that trimmed mean inflation for the year ended June 2021 will be 1.25%.
2. In 2019 each of the Relevant Awards was amended (by consent) to allow for a 2.5% increase to salaries and salary-related allowances from the first full pay period commencing on or after 1 July 2019. Applying the RBA's figures for trimmed mean inflation, and making a calculation on raw numbers (which we accept is an imprecise method), the employees will have seen an increase in the real value of their salaries in the year to 30 June 2020 of 1.3%. Using a trimmed mean inflation rate of 1.25% for the year ending 30 June 2021, a calculation on raw numbers would result in a conclusion that the employees would see no reduction in the real value of their salaries for that period.
3. However, Dr Charlton gave evidence that if it is assumed that employees received a 2.5% increase from 1 July 2019 and received no increase from 1 July 2020, in the two year period to 30 June 2021 the employees covered by the Relevant Awards would see a reduction in their real wages of approximately 0.3%.
4. It appears to us that a similar outcome would result even if we were to apply headline CPI. In its publication 6401.0 "Consumer Price Index, Australia, June 2020" the Australian Bureau of Statistics recorded that the All groups CPI for the year ended 30 June 2020 fell by 0.3%. In its August 2020 SOMP the RBA forecast headline CPI for the year ending 30 June 2021 will be 3%. On a simple calculation utilising raw numbers, the net CPI over the two year period is 2.7%. In that period, assuming no increase as at 1 July 2020, the employees will have received one increase of 2.5%. The difference of 0.2% may be regarded as the net reduction in the real value of their wages over the relevant period.
5. We have already accepted that in the present circumstances underlying inflation, and in particular trimmed mean inflation, is the preferable measure. We are of the view that it would not be fair and reasonable for the Commission to make awards and variations, which, on the basis of the economic evidence, would result in a reduction of the real value of the employees' earnings over the two-year period to 30 June 2021. On that basis, we do not propose to second guess the evidence of the experts. To ensure fairness to the employees we will proceed on the basis of Dr Charlton's calculation. The likelihood that on current projections employees covered by the Relevant Awards will suffer a reduction, albeit a relatively modest one, in their real wages is a relevant consideration in determining whether the Commission ought to make the awards or variations sought in the Joined Applications.

Section 146 considerations

1. The potential for a negative impact on the employees' real wages is not the final or determinative consideration. In exercising our discretion it remains necessary to consider whether any award or variation ought to be made having regard to the public interest, including having regard to the objects of the Act, and the state of the economy of New South Wales and the likely effect of any decision on that economy.
2. At [82]-[86] above we provided an overview of the economic climate in which the Joined Applications come to be determined. The parties are in agreement that there is such uncertainty in the current economic forecasts that the Commission should not look at making any changes that would operate beyond the current financial year. It follows in our view that we must be cautious when considering the future impacts that any decision we might make will have on the economy of New South Wales.

Stimulating the economy

1. The position of the Government can be stated relatively succinctly: through "pausing" wages in the New South Wales public sector for the 2020-21 financial year, savings of approximately $3 billion will be realised in the next four years; these funds will be placed into a new "Infrastructure and Job Acceleration Fund" which will be used for "smaller, shovel-ready projects touching every corner of the state"; [33] investment in these projects will have a greater stimulatory effect on the New South Wales economy than a pay increase to public sector employees; and, for this reason the Commission should decline to award any increases to salaries or salary-related allowances in respect of the Relevant Awards.
2. There was some contest during the proceedings as to the claimed future savings of $3 billion. In some respects this arose from confusion as to whether the figure was understood to be derived from a "wage pause" applying across the New South Wales public sector as a whole or only in respect of employees covered by State awards. We accept that it is to be understood as being a public sector-wide calculation. That said, the Employers adduced evidence to suggest that the savings arising from a wage pause applying to the Relevant Awards would be in the order of $2.2 billion to $2.4 billion.
3. It was not possible for the Commission to verify these claimed future savings. Despite having requested details of the calculations, we were provided only with the "methodology" which had been used by the Treasury.
4. Similarly, we were provided with virtually no details as to the "shovel-ready projects" to which the Employers referred. Although a list was provided to the Full Bench near the conclusion of the proceedings (following our request), questions arose almost immediately as to whether it represented new infrastructure projects or those which had already been approved and had funding allocated to them. Ultimately, the list was not tendered nor accepted as evidence in the proceedings.
5. Leaving these considerations aside for the present, a significant focus of attention in the proceedings was whether the Government's proposed investment in infrastructure would have a greater benefit for the New South Wales economy than an increase in the salaries paid to employees under the Relevant Awards.
6. Before addressing the positions of the parties in this regard, we observe that we accept the submissions made by the PSA, the NMA and the HSU that it is not for the Commission to determine Government policy. The Commission can make awards requiring the Employers to provide fair and reasonable terms and conditions to their employees. The requirement under s 146 of the Act that the Commission have regard to the state of the economy of New South Wales and the likely effect of its decisions on that economy in making such awards does not confer on the Commission the discretion, much less authority, to dictate to the Government how it manages the State's economy.
7. Dr Charlton argued strongly against a freeze on public sector wages. In the Charlton Report he stated that the macroeconomic benefits of a 2.5% increase in public sector wages would substantially outweigh the costs. He opined that a failure to pass on such an increase would result in "a real wage cut" [34] for New South Wales public sector employees which is not necessary given the State's strong financial position coming into the current recession; which would undermine the economic recovery in New South Wales; and, which would fail to support public sector productivity at a critical time.
8. The Charlton Report included the following opinions: 1. Sustained deflation due to poor wages growth and excess spare capacity in the economy represents a risk to economic recovery as it incentivises consumers to save rather than spend, prolonging the economic downturn. The "proposed real wage cut" would add to that risk. 2. With low debt coming into this crisis, a AAA credit rating and long-term interest rates of 1%, the NSW Government is in a strong position to increase borrowing during the recession. This strong financial position means the Government is not in a fiscal position requiring it to freeze public sector wages to meet the immediate health needs of the pandemic or to fund a program to provide stimulus to the New South Wales economy. 3. Consumption plays a central role in the Australian economy and household income is a critical driver of consumption. 4. Increasing the disposable income of households during an economic crisis has been shown to be an effective economic stimulus. Increasing the income of middle and lower income households is an effective form of support for the economy because they are more likely to spend the extra money in the economy, lower tax rates and lower import shares than many other recipients of fiscal support. Fiscal support to lower and middle income people has a high fiscal multiplier (a concept we explain below) which is an important consideration in designing fiscal policy. 5. The median public sector salary in New South Wales is $87,926. This makes public servants an important sector of the workforce for stimulus given the relatively high propensity to consume and consequently high fiscal multiplier. Conversely, the impact of a wage freeze on the average public sector salary in 2020-21 is a cut of $2,198, which is that much less than each public servant will, on average, have to spend in the New South Wales economy. 6. A 2.5% increase in the average public servant's income for 2020-21 equates to $2,198 in 2020-21, but an increase of $56,150 in future income over the next 20 years. Households will factor in the extra money they receive each year into their borrowing and spending decisions today. This increases the stimulatory impact of the wage increase above any direct fiscal multiplier. Public servants will not just spend a portion of the additional earnings they receive over the next four years; they will borrow more than this on the basis of the permanent increase in their wages. 7. Public sector wage constraints may negatively affect private sector wages, placing further constraints on the economic recovery. 8. Freezing public sector wages may detrimentally affect productivity, by impairing the ability of the government sector to attract and retain high-quality staff, with high performers leaving to pursue higher paid opportunities in the private sector. Reduced productivity may also arise from a negative impact on staff morale.
9. The Employers did not take issue with the proposition that under normal circumstances increasing the wages of public sector employees could result in an increase in household spending. This is particularly the case for lower income earners who have a higher marginal propensity to consume than higher income earners. However, they submitted that in times of recession and when consumer confidence is low, such as the present, there is a higher probability that much of the additional income provided by the wage increase could be saved and therefore not add as much to growth in the economy. Even allowing for that, though, the Employers accepted that a public sector wage freeze is likely to have a comparatively negative economic impact "but only if the funds are not deployed for other more productive purposes". [35]
10. This is the gravamen of the Employers' case. That is, that the money that would otherwise be spent on wage increases would be better spent - in the sense of having a more positive stimulatory effect on the economy - through government investment in infrastructure.
11. We were presented with evidence regarding fiscal multipliers, which were described in the Treasury Report in the following terms: "72. A fiscal multiplier is a measure of the short-term impact of discretionary fiscal policy on output. That is, how much additional economic output (GDP/GSP) the State will get from an additional dollar of spending via the different fiscal instruments available. …"
12. The Employers submitted: [36] "177. It is also not in dispute that an increase in public sector employees' wages would have a positive impact on household consumption, which in turn would have a positive impact on Gross State Product, particularly compared to a 'do nothing' counterfactual . … … 178. As explained in the Treasury Report at [72]-[83] however, by drawing from overseas research, and from short-term fiscal multipliers published by the IMF, the strongest economic stimulus is to be provided by Government investment rather than by expenditure on public sector wages because it minimises economic leakages. Where cash grants are made, for example, leakages occur when households or businesses save stimulus funds received, rather than spending the money; or when imports are purchased. The same is true for tax cuts, where households or businesses may choose to save the tax savings rather than invest or take on additional staff. Saving the additional funds often occurs during times of economic uncertainty. 179. The fiscal multiplier associated with a public sector wage increase would be relatively low, and is likely to be considerably lower than the fiscal multiplier for increased government investment, in terms of the contribution to real economic activity (adjusting economic output for changes in inflation) measured by real GSP."
13. The Treasury Report concluded as follows: "83. In short, increased government investment can be expected to have a higher fiscal multiplier, and consequently a larger positive impact on NSW output, employment and incomes than the same sum spent on increasing public sector wages."
14. We recognise that there was some contest between the parties as to the application of fiscal multipliers to the current circumstances. This is particularly the case in the absence of details of the "shovel-ready projects" which purportedly will form the basis of the Government's infrastructure spending, which prevents an assessment as to their likely impact on the New South Wales economy. Notwithstanding these issues, on all of the evidence we accept the contentions of the Employers reproduced at [126]-[127] above.

"Fiscal responsibility"

1. Dr Charlton accepted under cross-examination that in the current circumstances some form of government stimulus is required. He resisted the suggestion that the government was required to make a choice between the binary options of an investment in infrastructure or an increase in spending (in the form of a salary increase). He accepted that at least part of the government stimulus should be targeted infrastructure spending.
2. The Employers contended that it was not feasible in the current economic climate to increase both public sector wages and infrastructure investment. Mr Pratt drew the Commission's attention to the Fiscal Responsibility Act 2012 (NSW). Section 3 of that act is in the following terms: 3 Object of Act (1) The object of this Act is to maintain the AAA credit rating of the State of New South Wales. (2) The purpose of that object is: (a) to limit the cost of government borrowing, and (b) to enable access to the broadest possible investor base for government borrowing, and (c) to maintain business and consumer confidence, thereby sustaining economic activity and employment in the State.
3. There was equally some speculation as to the impact of a salary increase on the State's AAA credit rating. There was evidence of the State's credit rating with Standard & Poor's. The Treasury Report stated: "49. … Australia was placed on negative outlook S&P in April 2020. In a related move, NSW was also placed on negative outlook as S&P have the view that no state or territory can maintain stronger credit characteristics than the sovereign."
4. Under cross-examination Mr Pratt conceded that the change to the New South Wales outlook occurred in 2016; that this was not reflective of the State's fiscal position, but rather because there was a change in the view of the Commonwealth, which was necessarily flowed on to the States and the territories; and, New South Wales had been on a negative outlook for the 2016-17 and 2017-18 financial years, returning to "stable" in the 2018-19 financial year.
5. On all of the evidence, there is an insufficient basis on which we could find that any increase to the salaries or salary-related allowances of employees would necessarily have an impact on the State's credit rating. It follows that we have not given particular weight to this consideration.
6. One of the fiscal targets contained in the Fiscal Responsibility Act designed to meet the object of maintaining the State's AAA rating is that "annual growth in general government expenses of the State is less than the long-term average general government revenue growth of the State": s 6. The evidence suggested that "the long-term average general government revenue growth of the State" was 5.6%. Mr Pratt stated that the impact of COVID-19 could see the Government "breach" the Fiscal Responsibility Act by having expenses exceed that revenue growth. [37]
7. Once again, we do not place any great weight on this consideration. The evidence adduced by the Employers did not allow a finding to be made that an increase in the salaries or salary-related allowances of the employees would result in general government expenses exceeding the requisite level of revenue growth. Further, s 9 of the Fiscal Responsibility Act provides that nothing in the act "places on any person any obligation enforceable in a court of law or administrative review body".
8. However, the fact that the Government may be able to fund both an increase to public sector salaries and an increase in government investment without risking its credit rating or "breaching" the Fiscal Responsibility Act does not inevitably lead to the conclusion that an increase to wages must follow. The fact that increases may be affordable does not necessarily mean that it would not have a detrimental impact on the economy to require such expenditure.

Effective date of any awards or variations

1. Clause 6.1(e) of the 2014 Regulation provides as follows: (e) Changes to remuneration or other conditions of employment may only operate on or after the date the relevant parties finally agreed to the change (if the award or order is made or varied by consent) or the date of the Commission's decision (if the award or order is made or varied in arbitration proceedings).
2. However, this clause does not apply "if the relevant parties otherwise agree or there are exceptional circumstances": cl 6.2.
3. The Applicants sought an order that any award or variation operate with effect from the first full pay period on or after 1 July 2020. In the terms of cll 6.1(e) and 6.2 such an order could only be made with the agreement of the parties or where there are exceptional circumstances. The Employers did not agree to such an order being made. It is necessary therefore to consider whether exceptional circumstances exist which would allow for the order to be made.
4. The parties referred us to several authorities in which courts and the Commission have considered the meaning of "exceptional circumstances".
5. In Maan v Minister for Immigration and Citizenship (2009) 179 FCR 581, Branson J observed: "51. Although the expression 'exceptional circumstances' is not defined in the Regulations it has been the subject of consideration in numerous cases. Assistance in interpreting the expression can be found in comments of Lord Bingham of Cornhill CJ in R v Kelly (Edward) [2000] 1 QB 198 at 208 as follows: We must construe 'exceptional' as an ordinary, familiar English adjective, and not as a term of art. It describes a circumstance which is such as to form an exception, which is out of the ordinary course, or unusual, or special, or uncommon. To be exceptional a circumstance need not be unique, or unprecedented, or very rare; but it cannot be one that is regularly, or routinely, or normally encountered. …"
6. This passage from Maan was cited with approval by the Full Bench in Re Crown Employees (Public Sector - Salaries 2011) Award (No 3) at [48].
7. In Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290 Campbell JA, with whom Handley AJA and Tobias JA agreed, observed: "66 Another question of construction concerned 'exceptional circumstances' in rule 31.18(4). In San v Rumble (No 2) (2007) NSWCA 259 at [59]-[69], I gave consideration to the expression 'exceptional circumstances' in a different statutory context to the present. Without repeating that discussion in full, I shall state such of the conclusions as seem to me applicable in the construction of rule 31.18(4). (a) Exceptional circumstances are out of the ordinary course or unusual, or special, or uncommon. They need not be unique, or unprecedented, or very rare, but they cannot be circumstances that are regularly, routinely or normally encountered: R v Kelly (Edward) [2000] 1 QB 198 (at 208). (b) Exceptional circumstances can exist not only by reference to quantitative matters concerning relative frequency of occurrence, but also by reference to qualitative factors: R v Buckland [2000] 1 WLR 1262; [2000] 1 All ER 907 (at 1268; 912-913). (c) Exceptional circumstances can include a single exceptional matter, a combination of exceptional factors, or a combination of ordinary factors which, although individually of no particular significance, when taken together are seen as exceptional: Ho v Professional Services Review Committee No 295 [2007] FCA 388 (at [26]). (d) In deciding whether circumstances are exceptional within the meaning of a particular statutory provision, one must keep in mind the rationale of that particular statutory provision: R v Buckland (at 1268; 912-913). (e) Beyond these general guidelines, whether exceptional circumstances exist depends upon a careful consideration of the facts of the individual case: Awa v Independent News Auckland [1996] 2 NZLR 184 (at 186)."
8. The PSA, the NMA and the HSU submitted as follows: [38] "126. The circumstances surrounding the making and determination of these applications are, on any rational or reasonable view, out of the ordinary and not regularly, routinely or normally encountered: (a) The decision by the Government to depart from its long-standing Public Sector Wages Policy of providing at least a 2.5% increase in salaries each year was prompted by the extraordinary circumstance of the COVID-19 pandemic which began to affect the country in March 2020. The pandemic, on any view, represents an exceptional circumstance in and of itself which is unprecedented in modern history and has shaped the conduct and timing of these proceedings. (b) Each of the unions sought to progress negotiations with respect to the usual increase in salaries in the first half of 2020. The respondent employers persistently indicated that they were unable to communicate any position. This conduct was inconsistent with the requirements of the Government's own Public Sector Wages Policy which requires that Bargaining parameters must be approved by the Wages Policy Taskforce or the Expenditure Review Committee at least three months prior to the expiry of the current industrial instrument. In those circumstances, the union parties had no way of knowing whether it would be necessary to prepare for or conduct substantive proceedings. (c) The Government announced its intention to 'pause pay rises' for public sector employees in an announcement by the Premier and the Treasurer on 27 May 2020. The Government did not initially seek to achieve that objective through proceedings in the Commission, but to render those proceedings moot by publishing a new regulation on 29 May 2020 known as the Industrial Relations (Public Sector Conditions of Employment) Amendment (Temporary Wages Policy) Regulation 2020. The new regulation, if valid, would have rendered the proceedings moot. In the event, the new regulation was disallowed by the Legislative Council on 2 June 2020. (d) The applications made by the PSA, the NSWNMA, the HSU and ASMOF were, over the objections of those unions, joined to be heard together on application by the respondent employers and set down for hearing initially for two days on 24 and 25 June 2020. The proceedings were unable to be concluded on those hearing days. Without criticism of counsel, it is noted that about a day and half were taken up with cross-examination by senior counsel for the respondents. The hearing time was also, unavoidably, delayed to some extent by the use of video technology necessitated by COVID-19 social distancing restrictions. (e) The conduct of the Industrial Relations Secretary and the Secretary of the Treasury, particularly in relation to the production of documents, has delayed the resolution of the proceedings. The Industrial Relations Secretary was served with a Summons for Production on 9 July 2020, but asserted it was unable to produce documents by the time of the resumption of the hearing on 24 July 2020 and continued to be recalcitrant in the production of documents during the hearings on 30 and 31 July 2020, including reneging on its indication that it would be able to provide documents as agreed. (f) Further, the employees covered by the existing awards subject of the various application have not had any increase in salaries and allowances since July 2019 and, given the refusal of the respondent employers to provide consent, will be denied any increase in salaries or allowances for in excess of 12 months. The refusal to provide such consent was communicated only on 22 July 2020 following repeated requests by the unions for the Government to indicate its position. 127. Those circumstances, individually and taken together, plainly represent exceptional circumstances for the purposes of clause 6(2) of the Regulation. …" (Footnotes omitted)
9. In opposing these submissions the Employers contended as follows: [39] "222. The union parties seek, it seems to place some blame on the Respondents for a delay in finalising a bargaining position. The Commission would reject any such submission. Given the fundamental changes that were occurring to the NSW economy, the significant disruptions and the variety of pressing matters that had to be considered from March 2020, it is unsurprising that it was not until late May that the Government's bargaining position was developed. Any earlier bargaining position, if it had been presented, would have been redundant in any event by that date. 223. The intention of the Regulations is clear - changes to remuneration or other conditions of employment arising from arbitrated proceedings may only operate from the date of the Commission's decision unless exceptional circumstances apply. 224 Obviously the mere fact that the proceedings were contested and arbitrated cannot be an exceptional circumstances." (Sic, emphasis in original)
10. In our view, it is the "fundamental changes" and "significant disruptions" to which the Employers referred that go a significant way towards establishing exceptional circumstances in this case. The unprecedented scale and ever-changing impacts of the COVID-19 pandemic saw the Commission presented with cases from the Applicants and the Employers that were constantly evolving, even if their fundamental claims remained unchanged. This not only prolonged the hearing, but has required some considerable time for the Commission to evaluate the evidence and publish this decision.
11. We also accept that there is force to the submissions of the PSA, the NMA and the HSU reproduced at [144] above. In particular, the hearing took place over a protracted period. This was to a large degree a consequence of the Government's position not being notified to the Applicants or the Commission until late May 2020, and thus hearing dates for three members of the Commission needing to be obtained at short notice. Further, and to a lesser degree, a result of the use of the audio visual court technology causing a loss of hearing time.

Conclusions

1. The Applicants have not discharged the onus they bear to justify the making of new awards, or the variation to existing awards, in the terms contained in the Joined Applications.
2. The Applicants did not establish that the Relevant Awards do not currently provide fair and reasonable conditions of employment.
3. In considering whether the Relevant Awards will continue to provide fair and reasonable conditions of employment a decision not to award any increases for the year commencing 1 July 2020 may see employees under the Relevant Awards suffer a reduction of 0.3% in their real wages over the two year period to 30 June 2021. This to us is the "high water mark" of the case presented by the Applicants. Certainly, no case for a greater increase has been made out.
4. With the possible exception of ASMOF, none of the Applicants put an alternative to the claim for a 2.5% increase for the Commission to consider. While ASMOF did not positively run an alternative case, it did make submissions as to "the desirability of awarding increases which are at least consistent with those determined by the Fair Work Commission in the Annual Wage Review Decision [2020] FWCFB 3500", [40] in which increases of 1.75% were awarded to particular classifications of employees on a staggered basis. For the reasons already stated, we are not satisfied that ASMOF has discharged its onus to demonstrate that such an increase would result in fair and reasonable terms and conditions, within the principles outlined earlier in this decision.
5. In separate submissions filed in response to the PSA Applications, NMA Applications and HSU Applications on 4, 12 and 19 June 2020 respectively, the Employers contended that the Commission should make an award in respect of each of the Joined Applications which has a nominal term of one year, confers no increase to salaries and salary-related allowances and contains a no extra claims clause. This contention was not repeated in the Employers' Final Submissions, but there was no suggestion that they no longer pressed it.
6. The Employers did not themselves make an application for any award. To the extent that the submissions are to be taken to be such an application, the Employers are subject to the same onus as the Applicants bear in respect of the Joined Applications. We are not satisfied that the Employers have discharged that onus.
7. As we have already stated, the Relevant Awards are presumed to set fair and reasonable terms and conditions. The Employers did not seek to rebut that presumption. They further did not make out a case that awards in the terms they sought were necessary to ensure that they provided fair and reasonable terms and conditions over their expected duration.
8. The Employers' assertions as to the savings to be derived from a "wages pause" and the "shovel-ready projects" could not be fully tested. There was a paucity of detail provided to us in this regard. We are satisfied, however, that the evidence adduced by the Employers calls for restraint in the particular circumstances of the current financial year. At the same time, in the exercise of our discretion and having regard to all of the economic considerations we do not accept that an outcome that would see a decrease in the real earnings of employees would be fair and reasonable.
9. We are mindful in this regard that on or about 31 May 2020 the Treasurer made an offer that would have seen all employees in the Government sector receive a lump sum payment of $1,000. This suggests not only that the Government recognised the need to recognise the employees to some degree, but also that such a payment was considered to be affordable.

Maintenance of real value of earnings

1. In our view, employees under the Relevant Awards are entitled to maintain the real value of their earnings. This is not only consistent with the Commission's jurisprudence but with the stated purpose of the Government's wages policy.
2. If no increase is awarded to the employees under the Relevant Awards in the period to 30 June 2021, the employees will, on the economic evidence and projections before the Commission, see a reduction in the real value of their earnings of 0.3%. Subject to what we say below at [168] and the directions at [171], the Commission proposes to make awards and variations to avoid such a reduction, by awarding increases of 0.3%.
3. This is not a determination which the Full Bench has made easily and without some hesitation. Some may regard an increase of only 0.3% as notional at best. We recognise that it will do little to alleviate the concerns of those witnesses and any like-minded co-workers who see the Employers' position in these proceedings as failing to recognise, let alone reward, their efforts. Our decision should in no way be seen as a reflection on the value of the contribution made by employees in the Government sector.
4. At the same time, it must be observed that the Government sector in New South Wales has been shielded from some of the significant employment-related consequences of the COVID-19 pandemic that have been experienced in other parts of the workforce. There is no evidence that the pandemic has resulted in forced redundancies or other job losses in the Government sector in New South Wales. Employees continue to be paid their salaries at rates which are currently fair and reasonable. In a comment that is apposite to the present case, in Annual Wage Review 2019-2020 [2020] FWCFB 3500 the Full Bench of the Fair Work Commission observed: "[289] The impact of the COVID-19 pandemic has been felt across the economy; but the extent of its impact has not been consistent across all sectors of the economy. While some industries have been substantially affected, other sectors have been affected to a much lesser extent."
5. The Commission has been faced with an invidious choice. We acknowledge and have some sympathy for the views expressed on behalf of the employees summarised above. Further, our Earlier Decision and our observations at [32]-[46] above should not detract from the fact that until 27 May 2020 employees in the Government sector might legitimately have expected an increase of 2.5% from 1 July 2020. We also acknowledge that there is a tension in the Government purporting to cap increases in the "good times" and withhold increases in difficult times.
6. On the other hand, in exercising our discretion we are obliged by s 146(2) of the Act to consider the state of the economy of New South Wales and the likely effect of our decisions on that economy. We have outlined at [82]-[86] above the economic environment in which this decision has been made. It was acknowledged throughout the proceedings that the COVID-19 pandemic has caused disruption to the international, national and state economy on a scale not seen since the Second World War. It was common ground that the New South Wales government was required to take action to safeguard the economy, even if the parties disagreed as to the means by which this should be done. All the while, the parties and the Commission have had to grapple with ever-changing economic evidence, reflective of the exceptional circumstances of the pandemic.
7. On balance, it is the economic evidence that has persuaded us that as a matter of discretion we should, in respect of the Joined Applications, limit any adjustments to the salaries and salary-related allowances in the Relevant Awards to the projected reduction in the real earnings of the employees in the two-year period to 30 June 2021.

Form of award

1. At the same time, the quantum of the increase we have determined gives rise to the question as to how it ought to be awarded to the relevant employees. Both the Applicants and the Employers urged the Commission to consider the stimulatory effect on the economy of any Government expenditure, whether by way of increases to rates of pay or infrastructure investment. A 0.3% increase to salaries and salary-related allowances may be expected to have little impact on the employees' expenditure. A lump sum payment, on the other hand, should produce a greater stimulatory economic benefit.
2. There was some evidence of the stimulatory benefits of lump sum payments as compared with salary increases. In his oral testimony Dr Charlton had the following exchange with Mr Gibian: [41] "Q. You may not need to turn it up, but there was tendered a short time ago and marked as exhibit Crown 8A: an opinion piece that you prepared for the Sydney Morning Herald dated 18 May, I think. Your attention was directed to a part of that article ‑ the second page ‑ the bottom of that page. In the second last paragraph on the second page of that document, you refer to the enduring economic damage from a short‑term crisis, which you refer to as hysteresis, and that being the real enemy of public finances. Does the hysteresis phenomenon have any implications for the urgency or timing of stimulus measures in the current circumstances? A. Yes, it does. Hysteresis is the long‑term consequences of a short‑term economic shock, and to put that in very simple terms, if you can stop someone from losing their job or stop a business from closing with rapid action to support the economy, then you will avoid long‑term consequences; long‑term joblessness; long‑term loss of income for the government through lost tax income. So, avoiding that fall is the motivation for fast‑acting stimulus of the type that the government has introduced in this crisis, and governments have introduced in previous crises. Q. Are examples of those fast‑acting measures the $750 payment to certain payment recipients the Commonwealth government introduced a couple months ago, I think? A. Yes."
3. Under cross-examination Mr Walters deposed as follows: [42] "Q. In the global financial crisis there was a cash payment, I think, to everyone in the order of a thousand dollars? A. No. It was more than that. There were two cash payments in December 2008 and February 2009. Q. How much was that? A. It was a thousand dollars in total. Q. There were two payments, and the advantage of that type of measure is it can have an immediate effect; that is, the money can go into people's hands and they can start spending it immediately; correct? A. That's correct. That's correct. Q. A payment of wages is also stimulatory in the same way; that is, if people receive money as increased wages, that has a stimulatory effect on consumption? A. It may do but not in the same way than if you were getting a lump sum, as your example from 2008/2009. Q. Not in the same way in the sense that you receive increased wages over time? A. Correct."
4. Mr Walters was taken to this testimony in re-examination, as follows: [43] "Q. It was suggested to you that in the GFC there were one-off cash payments which had a stimulatory effect and that an increase in wages would similarly have a positive stimulatory effect, to which you said 'Not in the same way.' Why did you say 'Not in the same way'? A. The stimulus payments during the global financial crisis were in lump sums, to a total of around $2,000 in late 2008 early 2009, so literally people got a large deposit in their bank account. An increase in wages clearly happens after a period of time. Like each pay check to pay check so to speak."
5. No party suggested an outcome other than the making of an award which either increased salaries and salary-related allowances by 2.5% (as claimed by the Applicants) or left them unchanged (as claimed by the Employers). The possibility of an award of a lump sum payment in lieu of an increase to the rates of pay was not canvassed. We consider that we need to invite the parties to be heard on that issue. We will make directions to allow for that to occur.

Timing of awards or variations

1. For the reasons set out at [137]-[147] above, we are satisfied that exceptional circumstances have been made out within the meaning of cl 6.2 of the 2014 Regulation. Any awards or variations we make will take effect from the first full pay period to commence on or after 1 July 2020.

No extra claims

1. We defer a determination as to whether any award or variation made by the Commission ought to include a no extra claims provision pending the outcome of the process anticipated by the directions we intend to make.

Directions

1. Having regard to the Full Bench's determination at [158] above, each party is invited by 4.00pm on Friday, 23 October 2020 to: 1. file written submissions with the Commission: 1. as to whether a 0.3% increase ought to be awarded to the employees by way of: 1. that percentage increase to the salaries and salary-related allowances in the Relevant Awards; 2. a lump sum payment to the relevant employees and, if such is proposed, the amount or amounts to be paid to the relevant employees; or 3. any other means, in which case the party is to outline the approach it proposes; and 1. as to the arguments on which it relies as to why the Commission ought to adopt the approach for which the party advocates; and 1. inform the Commission whether it wishes to be heard on its submissions.
2. In the absence of receiving any submissions the Commission will make awards or vary the Relevant Awards consistent with this decision, as it considers, in its discretion, to be fair and reasonable.

Endnotes

1. By s 50 of the Government Sector Employment Act 2013 (NSW) the Industrial Relations Secretary is, for the purposes of any proceedings relating to Public Service employees held before a competent tribunal having jurisdiction to deal with industrial matters, taken to be the employer of Public Service employees
2. By s 116(3) of the Health Services Act 1997 (NSW) the Health Secretary may, subject to this and any other Act or law, exercise on behalf of the Government of New South Wales the employer functions of the Government in relation to the staff employed in the NSW Health Service.
3. By s 85 of the Police Act 1990 (NSW) the Commissioner of Police is to be the employer of non-executive officers for the purposes of any proceedings relating to non-executive officers held before a competent tribunal having jurisdiction to deal with industrial matters.
4. By s 104(9) of the Independent Commission Against Corruption Act 1988 (NSW) the Chief Commissioner of ICAC is, for the purposes of any proceedings relating to staff employed under s 104 held before a competent tribunal having jurisdiction to deal with such matters, taken to be the employer of the staff.
5. By s 33E of the Public Finance and Audit Act 1983 (NSW) the Auditor-General is, for the purposes of any proceedings relating to members of staff of the Audit Office held before a competent tribunal having jurisdiction to deal with industrial matters, taken to be the employer of the staff.
6. Final Submissions of the PSA, NSWNMA and HSU at par 10
7. Final Submissions of the PSA, NSWNMA and HSU at par 96
8. Tcpt, 24 June 2020, p 19(18-19)
9. Tcpt, 12 August 2020, p 31(7-15)
10. Final Submissions of the PSA, NSWNMA and HSU
11. Final Submissions of the Australian Salaried Medical Officers' Federation
12. Closing Submissions for the Respondents at par 11
13. Statement, Stewart Little, 19 June 2020
14. Statement, Ayshe Lewis, 30 July 2020
15. Tcpt, 31 July 2020, p 71(22-47)
16. Statement, Dr Andrew Charlton, 19 June 2020 annexure D
17. ibid., par 4
18. Statement, Dr Andrew Charlton, 22 June 2020 at par 5
19. Affidavit, Michael Pratt, 3 June 2020, Exhibit MP-1, Tab B and Affidavit, Stephen Walters, 3 June 2020, Exhibit SW-1, Tab B
20. Reserve Bank of Australia, Statement on Monetary Policy August 2020, pp 1-2
21. ibid., p 89
22. ibid., p 90
23. Final Submissions of the PSA, NSWNMA and HSU at par 129
24. Final Oral Submissions of Australian Education Union New South Wales Teachers Federation Branch at par 9
25. Affidavit, Charles Heuston, 3 June 2020
26. Closing Submissions for the Respondent at par 65
27. Tcpt, 24 June 2020, p 54(29-35)
28. Tcpt, 24 June 2020, p 51(12)
29. Tcpt, 25 June 2020, p 108(48)
30. Tcpt, 24 June 2020, pp 54(42)-55(13)
31. Tcpt, 12 August 2020, p 28(19-21)
32. Tcpt, 24 July 2020, pp 194(21)-195(29)
33. Treasury Report at par 57
34. Charlton Report at p
35. Treasury Report at par 70
36. Closing Submissions for the Respondents
37. Tcpt, 30 July 2020, p 46(40-41)
38. Final Submissions of the PSA, NSWNMA and HSU
39. Closing Submissions for the Respondents
40. Final Submissions of Australian Salaried Medical Officers' Federation at par 16(f)
41. Tcpt, 25 June 2020, pp 100(43)-101(14)
42. Tcpt, 31 July 2020, p 72(20-41)
43. Tcpt, 11 August 2020, p 79(20-27)

Amendments 11 December 2020 - Removal of incorrect reference DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 December 2020