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Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary of New South Wales - [2021] NSWCA 64 - NSWCA 2021 case summary — Zoe
Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales v Industrial Relations Secretary of New South Wales
[2021] NSWCA 64
Court of Appeal (NSW)|2021-03-24|Before: Bathurst CJ, Bell P, Leeming JA
[2012] FCAFC 90
Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32
Source
Original judgment source is linked above.
Catchwords
[2016] FCAFC 174
Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
D'Amore v Independent Commission Against Corruption [2013] NSWCA 187303 ALR 242
Goodwin v Commissioner of Police [2012] NSWCA 379
Kirk v Industrial Court of New South Wales (2010) 239 CLR 531[2010] HCA 1
LVR (WA) Pty Ltd v Administrative Appeals Tribunal (2012) 203 FCR 166[2012] FCAFC 90
Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 3278 ALJR 992
Nadinic v Drinkwater (2017) 94 NSWLR 518[2017] NSWCA 114
Public Service Association and Professional Officers' Association Amalgamated of NSW v Director of Public Employment (2012) 250 CLR 343[2012] HCA 58
Re Minister for Immigration and Multicultural AffairsEx parte Applicant S20/2002 [2003] HCA 30
Judgment (19 paragraphs)
[1]
tion (Fourth defendant)
Landcom (Fifth defendant)
Auditor-General (Sixth defendant)
Industrial Relations Commission of New South Wales (Seventh defendant)
Health Services Union NSW (Eighth defendant)
Australian Salaried Medical Officers Federation (Ninth defendant)
Representation: Counsel:
M Gibian SC, A Slevin (Plaintiffs)
I Taylor SC, M Easton, Z Heger (First to sixth defendants)
[2]
Solicitors:
Alison McRobert, Legal Counsel, Public Service Association and Professional Officers'
Association Amalgamated Union of New South Wales (First plaintiff)
Elizabeth Robinson, Lead (Public Health Organising Team), New South Wales Nurses and Midwives' Association (Second plaintiff)
Crown Solicitor's Office (First to seventh defendants)
Maurice Blackburn Lawyers (Eighth defendant)
Hall Payne Lawyers (Ninth defendant)
File Number(s): 2020/364048
Publication restriction: Nil
Decision under appeal Court or tribunal: Industrial Relations Commission of New South Wales
Citation: [2020] NSWIRComm 1066
Date of Decision: 1 October 2020
Before: Chief Commissioner Constant, Commissioner Murphy and Commissioner Sloan
File Number(s): 2020/79899, 2020/141023, 2020/141054, 2020/141076, 2020/142592, 2020/143576, 2020/143834, 2020/143934, 2020/144112, 2020/144177, 2020/145080, 2020/145086, 2020/145184, 2020/145362, 2020/161502, 2020/161507, 2020/161511, 2020/161538, 2020/161544, 2020/161549, 2020/161557, 2020/161564, 2020/161568, 2020/161582, 2020/162841, 2020/162844, 2020/162849, 2020/162860, 2020/162861, 2020/163005, 2020/163048, 2020/163121, 2020/163146, 2020/163179, 2020/163193, 2020/163207, 2020/163241, 2020/163257, 2020/163272, 2020/163286, 2020/163927, 2020/168263, 2020/170775
[3]
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[4]
Judgment
THE COURT: Two industrial organisations representing many public sector employees have brought proceedings in this Court's supervisory jurisdiction to quash decisions made by the Industrial Relations Commission of New South Wales made on 1 October 2020 and 12 November 2020, and orders reflecting those decisions made on 15 December 2020. The result of the litigation in the Commission was that there should be a 0.3% increase in salaries payable with effect from the first full pay period commencing on or after 1 July 2020. The industrial organisations had contended for an increase of 2.5%, as had occurred in previous years. The State had submitted that there should be no increase at all, due to the economic impact of COVID-19.
No appeal lies from the determinations and orders of the Commission, whose decisions are final: Industrial Relations Act 1996 (NSW), s 179. However, it was common ground and accords with authority that the decisions and orders may be quashed if the plaintiffs demonstrate jurisdictional error: Kirk v Industrial Court of New South Wales (2010) 239 CLR 531; [2010] HCA 1 at [105].
This Court's role is a limited one. It is not the task of this Court to determine whether there should be a salary increase and, if so, what that increase should be. This Court's jurisdiction is limited to resolving the parties' submissions as to whether jurisdictional error has been established. If it has, then it is common ground that the decisions and orders should be quashed and the matters remitted to the Commission to be determined according to law.
For that reason, the entire hearing of the summons was completed in a single day, although the proceedings in the Commission occupied parts or all of 13 days. For that reason, the majority of the evidence before the Commission was not reproduced in the materials provided in this Court.
The plaintiffs' summons contains five grounds. Broadly speaking, they were that the Commission had misconstrued the legislation by placing an onus upon the industrial organisations, the Commission denied the plaintiffs procedural fairness insofar as it rejected a claim for an increase based on productivity and efficiency measures, the Commission failed to have regard to a relevant consideration in the form of those productivity and efficiency measures, the Commission failed to take into account the fact that ordinarily increases greater than 2.5% may not be made and, finally, that the decision was legally unreasonable and/or irrational or illogical.
[5]
Applicable legislative regime
Section 10 of the Industrial Relations Act empowers the Commission to "make an award in accordance with this Act setting fair and reasonable conditions of employment for employees". Section 17 empowers the Commission to vary or rescind an award in certain circumstances. The applications before the Commission were applications either to make new awards or to vary existing awards, predominantly the latter, and ultimately the only orders made were orders varying existing awards. The litigation proceeded on the basis that, at least for present purposes, nothing turned on the different sources of power in ss 10 and 17.
Section 146(2) requires the Commission to take into account the public interest in the exercise of its functions and, in particular, requires it to 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. The objects are contained in s 3, and include (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" and (e) "to facilitate appropriate regulation of employment through awards, enterprise agreements and other industrial instruments".
Section 146C was central to much of the argument. It is expressed to have effect "despite section 10 or 146 or any other provision of this or any other Act" (s 146C(7)). Section 146C requires the Commission when making or varying any award or order to 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" and applies to the matter to which the award or order relates. The circumstances surrounding the enactment, the purpose and the validity of s 146C were considered in Public Service Association and Professional Officers' Association Amalgamated of NSW v Director of Public Employment (2012) 250 CLR 343; [2012] HCA 58.
Clause 4 of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 (NSW) declares that it contains government policy that is required to be given effect to by the Commission. It expressly engages s 146C. Clause 6 relevantly provided:
"(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. For this purpose -
(i) whether relevant savings have been achieved is to be determined by agreement of the relevant parties or, in the absence of agreement, by the Commission, and
(ii) increases may be awarded before the relevant savings have been achieved, but are not payable until they are achieved, and
(iii) the full savings are not required to be awarded as increases in remuneration or other conditions of employment."
[6]
The proceedings in the Commission
The plaintiffs (together with two other industrial organisations which became the eighth and ninth defendants to the amended summons, and which played no active role in this Court) commenced proceedings in the Commission in March 2020. There seem to have been some 43 applications which were heard and determined together. The details are irrelevant. It will be convenient to refer to the plaintiffs as the two industrial organisations which played an active role in this Court, and the "Employers" as the active defendants in the Commission and in this Court.
On around 15 May 2020, the first plaintiff filed submissions which contended that the Commission was required to award increases of 2.5% per annum as a result of s 146C read with cl 6(1). They were joined a fortnight later by the second plaintiff. This contention was the subject of a separate, preliminary hearing on 18 June 2020. It was rejected by decision dated 22 June 2020: Application for Crown Employees (Public Sector - Salaries 2020) Award and Other Matters [2020] NSWIRComm 1044. No application has been brought to impugn or quash that determination.
Thereafter, the Commission heard evidence and submissions on the balance of the applications over some 11 days in June, July and August 2020. The Commission reserved, and issued its principal decision on 1 October 2020. Aspects of the reasoning in that decision will be summarised below. For present purposes it suffices to note that the Commission concluded that employees were "entitled to maintain the real value of their earnings": at [157]. The Commission indicated that it proposed to make awards and variations to avoid a real reduction in earnings by awarding increases of 0.3%: at [158].
The Commission directed written submissions to be filed concerning the mechanics of a 0.3% increase. By a third decision, made on the papers following receipt of submissions, the Commission determined that the increase would be awarded by way of an increase to salaries and salary-related allowances in each of the awards, and that it should not include or vary a no extra claims provision in any of the awards: Application for Crown Employees (Public Sector - Salaries 2020) Award and Other Matters (No 3) [2020] NSWIRComm 1077.
Ultimately, orders (which occupy some 175 pages) were made on 15 December 2020. Their details need not be summarised.
[7]
The Commission's reasons for its second determination
The parties' grounds and submissions were directed to the reasoning in the second determination. The determination is some 172 paragraphs over 75 pages, prepared in just less than seven weeks after an 11 day hearing in proceedings involving some 43 applications and large quantities of evidence. It took the following form.
Paragraphs 1-23 summarise the procedural background and the nature of the evidence adduced. Paragraphs 24-31 reproduce the applicable legal principles.
Paragraphs 32-46, under the heading "A presumptive increase?", were said to give rise to jurisdictional error as identified in the first ground of the summons. Under that heading, the Commission addressed the plaintiffs' submissions that "[a]ny 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". The Commission noted the similarity between this submission and the submission rejected in its first decision, and noted how the submission had been put in various ways, some of which were reiterated in this Court. It was said that a failure to afford a 2.5% increase would "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" and, alternatively, that the onus rested on employers to make out the "need for restraint". The Commission rejected the submission, holding that the onus to make out the case rested with the applicants, as had been identified in many earlier decisions.
The Commission noted that it had rejected the plaintiffs' preliminary submission that a 2.5% increase was mandated, and addressed the fallback submission that the starting point was that there should be a 2.5% increase, with the onus on the employers to justify any different approach. This submission turned on the constraint upon the power to make awards which were fair and reasonable which was effected by s 146C and cl 6 of the 2014 regulation. It necessarily assumed that a similar constraint would apply into the future. The Commission reproduced a summary of the submissions to this effect and rejected it at [36]:
"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."
[8]
Grounds two and three: procedural fairness
Grounds two and three are inter-related and were addressed collectively in the plaintiffs' submissions. They turned on the reasoning at paragraphs [58]-[60] which have been reproduced above. It is commonly appropriate to resolve claims of a denial of procedural fairness first (see Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 at [100]) and it is convenient to consider at the outset the plaintiffs' claim that the Commission determined the applications in a way which was procedurally unfair.
The plaintiffs maintained that the Commission had rejected one strand of their submissions on the basis that it required them to adduce financial analysis of the measures which had been undertaken to improve productivity and efficiency. They claimed that this had not been part of the Employers' case, and had not been foreshadowed by the Commission, such that deciding this aspect of the proceedings on that basis was procedurally unfair. Alternatively, the plaintiffs submitted that it amounted to a failure properly to apply s 10 of the Act.
In writing, the point was advanced thus:
"A requirement that an application for a wage increase must include financial analysis that established in a stringent way that employees' contributions to improvements in productivity and efficiency have at least offset the cost of the increases claimed forms no part of the Commission's Wage Fixing Principles. It was not part of the defendants' case that the plaintiffs must do so. It was not raised by the Commission during the lengthy proceedings as a requirement the plaintiffs must meet. It was a matter of which the plaintiffs had no notice and so were denied an opportunity to present evidence or submissions relevant to its consideration. The plaintiffs were denied procedural fairness as to the manner in which the Commission dealt with the productivity/efficiency claim.
Furthermore, by insisting that any productivity or efficiency measures would result in increases in wages only if they at least offset the costs of the salary increases claimed, the Full Bench failed to properly apply s 10 of the IR Act. Particularly in the context of public sector employment, it would constitute an unwarranted constraint on the discretion of the Commission to award increases within the 2.5% cap to insist that, in setting fair and reasonable conditions of employment, productivity or efficiency measures would only justify wage increases if they offset the costs of the increases. That is a requirement imposed only in the event of increases in wages or conditions of employment above the 2.5% cap by clause 6(1)(b) of the Regulation."
[9]
The written and oral submissions before the Commission
In closing submissions before the Commission, the plaintiffs had relied on more than 50 improvements in productivity and efficiency. The first five were as follows.
"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[al] 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."
It is not necessary to reproduce the remainder (which occupy more than eight single-spaced pages); those five give their flavour. These points were put forward with a view to engaging paragraph 8.3 of the Wage Fixing Principles. As relevantly formulated, in the State Wage Case 2019 [2019] NSWIRComm 1065, being orders made pursuant to s 51 of the Industrial Relations Act, that principle is:
"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."
[10]
The construction of the Commission's reasons
The parties' submissions raise a threshold issue as to the construction of the reasons. The Employers maintained, and the plaintiffs denied, that the first sentence of [59] which is extracted at [24] above ("We accept the Employers' submissions") stood alone, and all that followed was supplementary. According to the Employers, it followed that there was no "practical injustice" in the course taken by the Commission, and any breach was immaterial. There is force in the plaintiffs' submission that, fairly read, the sentences which follow the opening sentence of [59] are the reasons which justify the conclusion. That is a natural way of reading [59] and [60] as a whole.
Further, in litigation as significant as the present, it would be undesirable for the Commission merely to adopt one side's submissions, rather than to explain in its own words why it had acceded to or rejected the application. That would give rise to the concern identified by the Full Court of the Federal Court in LVR (WA) Pty Ltd v Administrative Appeals Tribunal (2012) 203 FCR 166; [2012] FCAFC 90 at [5] and by this Court in Goodwin v Commissioner of Police [2012] NSWCA 379 at [23] that the Commission had failed to bring its own mind to bear on the issues before it and thus that it had constructively failed to exercise its jurisdiction.
[11]
No denial of procedural fairness
But the fact that the first sentence of [59] does not stand apart from what follows does not mean that this ground is established. The exchange of written and oral submissions reproduced above makes it plain that the Employers regarded the evidence adduced by the plaintiffs as insufficient, and were urging the Commission so to find. The position was as described during the hearing:
"BATHURST CJ: But it was put squarely by the employer, dealing with it on the procedural fairness question, it was put squarely by the Employer that the evidence didn't establish substantial cost savings and or that the productivity improvements had made a contribution to the attaining of objectives as a relevant employer. You're faced with that submission and it was a matter ultimately for the tribunal to decide whether that submission was made good. Now, the fact they suggested a way it might be made good doesn't mean you're denied procedural fairness. It's not a matter for the Commission to give you any advice on evidence.
GIBIAN: I accept that, your Honour, but what in our submission para 59 does by identifying the reason that [the] Full Bench said that the onus was not discharged was an absence of material of a nature that it was not suggested by either [the] Wage Fixing Principles or any submission advanced in the proceedings would be necessary in order to give rise to or to justify an increase within the two and a half percent cap on that basis."
The position was that the plaintiffs were given an opportunity to be heard in response to the Employers' submissions. They exercised that opportunity. The Commission accepted the Employers' submissions that the list of examples was insufficient to engage paragraph 8.3 of the Wage Fixing Principles, and explained why that was so. The absence of any financial analysis was a reason for the conclusion that the plaintiffs had not demonstrated the substantial savings or improvements required by the relevant Wage Fixing Principles. The reasons did not hold that financial analysis was inevitably required in order to engage that principle. There was nothing procedurally unfair about what occurred.
[12]
No misconstruction of the statute
Insofar as it was put, in support of ground three, that the reasoning amounted to a misconstruction of the Act, by requiring a demonstrable and quantifiable benefit before an increase was made within the 2.5% cap, once again the ground is not made out. It is true that the reasons use the word "offset" and in part resemble the language of cl 6(1)(b) of the 2014 Regulation. But the reasons must always be read in the context of the submissions they are resolving. The language which the Commission used was apt to describe what it regarded as the submission's essential deficiency, which was that the plaintiffs had merely assembled a long list of instances of enhanced efficiency and productivity across the entirety of the public sector without providing any detail as to their breadth, and without quantifying the benefit, and without providing any great assistance on whether any trend could be derived across the board.
It was necessary in order for paragraph 8.3 of the Wage Fixing Principles to be engaged for the costs savings and/or productivity or efficiency improvements to be characterised as "substantial". Whether or not that was so was a matter for the Commission. It fell to be addressed by reference to the fact that the plaintiffs sought an across-the-board remuneration increase. The inherent difficulty with pointing to a range of discrete instances of efficiency and productivity savings, which did not apply across-the-board, and which were unaccompanied by any analysis which enabled their cumulative effect to be assessed in order to justify an across-the-board remuneration increase, is obvious. One way of addressing that difficulty is, as the Commission indicated, to quantify the effect of the discrete instances. There may be other ways of doing so. But there was nothing contrary to the statute in the Commission acceding to the Employers' submission that the instances amassed by the plaintiffs were not sufficient to engage paragraph 8.3 of the Wage Fixing Principles so as to justify an across-the-board increase.
These grounds are not made out.
[13]
Grounds one and four
These two grounds were addressed together orally, with the principal focus being on the former, which was summarised thus in the plaintiffs' written submissions:
"Ground 1 is that the Full Bench misconstrued or misunderstood the obligation of the Commission under ss 10 and 17 of the IR Act by imposing an obligation upon a union applicant to rebut a presumption that any variation or new award should be made and by confining its exercise of discretion and failing to ultimately address the question of what provision would ensure fair and reasonable conditions of employment for the coming year."
[14]
Three ways of articulating ground 1
There is no doubt that the Commission placed an onus on the plaintiffs to justify a remuneration increase. The essence of this ground was that under the constraint imposed by s 146C and the 2014 Regulation, it could not be presumed that the existing awards were fair and reasonable, with the consequence that imposing an onus was an impermissible departure from the obligation to set fair and reasonable conditions of employment. It was said:
"The existing awards applying to public sector employees are not the product of an unconstrained determination by the Commission as to what constitutes fair and reasonable conditions of employment. Rather, the jurisdiction of the Commission has been constrained by s 146C and the Regulation since 2011. The Regulation means that it is 'no longer open to the Commission to apply its Wage Fixing Principles'.
By approaching the proceedings on the basis that the unions had an onus to demonstrate existing awards did not set fair and reasonable conditions of employment, the Commission failed to address its statutory obligation to determine fair and reasonable conditions of employment for employees. The Commission rather approached the task by assuming that existing awards are fair and reasonable in circumstances in which they were not set by an independent assessment by the Commission and disregarded the statutory context imposed by s 146C and the Regulation. It thereby failed to address the statutory question in the context of the legislation as a whole."
Alternatively, it was put that imposing an onus was an impermissible fetter on the statutory test in ss 10 and 17:
"Upon the expiry of an award, the question for the Commission was what terms should apply prospectively by variation, or new award, that would provide fair and reasonable conditions of employment. By imposing a requirement that the plaintiffs establish that the existing awards were not fair and reasonable, the Full Bench did not address the correct question."
Thirdly, the plaintiffs advanced an elaborate submission:
"Thirdly, the Full Bench did, in this matter, determine that a special case was made out in circumstances where public sector employees had a legitimate expectation that they would receive a wage increase. The finding that a special case was made out meant that the plaintiffs' case met the Commission's Wage Fixing Principles and that those principles placed no impediment on wage increases being awarded. What should have followed was a consideration of the conditions of employment to apply going forward by reference to the statutory provisions concerning the fairness and reasonableness, the public interest, and the effect of the decision on the NSW economy. Instead, the Commission proceeded to simply consider the economic factors raised as determinative of the applications.
The plaintiffs argued that all of the matters raised in its evidence - much of which went uncontested - were relevant to its claims for wage increases. Those matters included the reasonable expectation that 2.5% would be provided in accordance with the declared policy, the practice of the Government providing the increase in the past, the adverse impact of the limit on past increases to 2.5%, the capricious nature of the wage freeze announcement, the offer of an increase made and then withdrawn, the substantial and ongoing contribution by employees to productivity and efficiency improvements, the efforts made by all, and especially nurses, health workers and front line public servants, to take on new work and changed work practices in light of the pandemic.
Having already dealt with many of those arguments for other purposes, first whether there was a presumption in favour of a 2.5% increase and then by reference to its Wage Fixing Principles, the Commission failed to take them into account in the exercise of its ultimate discretion. Instead, the Commission focussed its mind on the economic analysis in the evidence brought by the parties and determined the matter on one factor arising from that economic analysis. The Full Bench made it clear that it, at least 'predominantly', had regard to economic considerations in reaching its determination and that it was the 'economic evidence' that persuaded the Full Bench that it should limit any adjustments to salaries and salary-related allowances to the projected reduction in real wages over a two year period.
The Commission's consideration was ultimately reduced to the factors in s 146(2)(b). It did so by taking as its starting point that the employees should not suffer a reduction in real wages unless it was in the public interest having regards to the objects of the Act, the state of the NSW economy and the effect of its decision on the NSW economy. The factors referred to in s 146(2) of the IR Act [sic]. This was a misdirection. The factors in s 146(2) are to be taken into account in the exercise of a broad discretion to make awards that are fair and reasonable. The Commission elevated these factors as determinative factors which overrode the ultimate consideration of whether the awards sought were fair and reasonable and to disregard all the other circumstances relied upon by the plaintiffs.
For these reasons, the Full Bench failed to properly determine what provision should be made so as to ensure fair and reasonable conditions of employment by balancing the interests of employees and the defendants in light of all of the circumstances revealed in the evidence." (footnotes omitted)
[15]
None of the three ways is made out
Each of the ways in which this ground was advanced is addressed in turn.
There is, as the Employers submit, some artificiality in the first way in which this ground is advanced. In response to the first point, the Employers submitted, and the plaintiffs did not dispute, that the plaintiffs had made no attempt to establish that the consensual 2.5% increases which had occurred in previous years had left employees being under-remunerated. Had this been established, the position might be different. But that left the plaintiffs in the position that they were asking the Commission to make new awards, or vary existing awards, so as to yield a higher remuneration across-the-board. There was no challenge to the rejection of the plaintiffs' submission in the Commission's first decision that there was an entitlement to an increase. It followed that the onus rested with the party moving to alter the status quo to make out a case for doing so.
In response to the second way in which this ground was advanced, it is inconsistent with the Commission's reasons and it is inconsistent with what the Commission ordered.
The Commission expressly proceeded on the basis that its task was to determine just and reasonable rates for the period during which the award was in operation. It said so in terms at [31(9)], and returned to the point at [89]:
"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."
Further, the outcome of the case, namely, a 0.3% rise in order to prevent the erosion of remuneration by inflation, is inconsistent with the submission that the Commission failed to apply ss 10 and 17 in approaching its function.
The Employers complained that the third way of advancing this ground went beyond what was pleaded in the summons. That complaint is not without force, but it is better to address the submission on its merits. The plaintiffs' submission is not made out. It ultimately amounts to a submission that there was jurisdictional error in the Commission, having expressly taken into account the matters raised in the evidence, accepting the evidence that restraint was called for in the particular financial year, and granting a remuneration increase which was sufficient to maintain the real value of that remuneration. That does not amount to jurisdictional error.
[16]
Ground 4
Ground 4 of the summons was addressed very concisely in oral submissions:
"Ground 4 in the amended summons essentially raises the same issue albeit put in the sense of a failure to take into account a relevant consideration or a failure to address a significant submission …
If the complaint that I've endeavoured to advance to date is not a failure to apply s 10 or s 17 in its proper statutory context by having regard to the constraints imposed by s 146C and the Regulation, then it is a failure to take into account, in our submission, a relevant consideration or to address the significant submission advanced by the plaintiffs and in that circumstance I don't propose to elaborate upon that further in writing. It's a matter of the correct characterisation of the error, the jurisdictional error."
The gravamen of the point was that the Commission failed to appreciate that because the "cap" was largely insusceptible of being exceeded, there was the continuing possibility that the remuneration would not be fair and reasonable. The point was made rhetorically by stating that the failure to grant an increase in 2020 would have the effect of denying an increase not only in 2020 but in all subsequent years, that being the practical consequence of an inability to "catch up".
But this was considered by the Commission, expressly. It recorded the plaintiffs' submission at [33]:
"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".
The Commission also recorded Dr Charlton's evidence at [121]:
"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' 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." (footnote omitted).
[17]
Ground five: illogicality or unreasonableness
This ground fastens upon the Commission's conclusion at [155] that notwithstanding the absence of detail in the evidence adduced by the Employers, it nonetheless called for "restraint" in the particular circumstances of the current financial year. This was part of the Commission's reasoning on the mandatory relevant consideration of s 146(2). The plaintiffs said that this aspect of the Commission's decision was illogical or unreasonable, and for that reason the Commission's conclusion evinced jurisdictional error.
The plaintiffs relied on ARG15 v Minister for Immigration and Border Protection (2016) 250 FCR 109; [2016] FCAFC 174 at [47] for the proposition that illogicality or irrationality in the sense stated in Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 [2003] HCA 30; 77 ALJR 1165 at [34] and [37] and Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32; 78 ALJR 992 at [38] applied not merely to the ultimate decision, "but also extends to fact finding which leads to the end result". The proposition of law may be controversial. It may also be more nuanced than the plaintiffs submitted. Irrationality or illogicality in relation to a step in the reasoning which is a necessary component of the ultimate conclusion is quite distinct from irrationality or illogicality in one aspect of a determination which involves evaluation of a wide range of discrete elements. As Basten JA observed in D'Amore v Independent Commission Against Corruption [2013] NSWCA 187; 303 ALR 242 at [229], a more limited approach is supported in some cases by the statement by Glass JA in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156-7:
"Errors may be committed by a Workers' Compensation judge at any one of three points viz determining the facts by way of primary findings and inferences, directing himself as to the law and applying the law to the facts found. At the first stage the determination of facts by a reasoning process marred though it be by patent error, illogicality or perversity will, as has been said, never be vulnerable to attack as an error of law by an applicant for compensation."
The Commission did not make a judicial decision, but it is far from clear, in point of principle, that in this respect (as opposed to review for error of law) judicial and administrative tribunals should be treated differently.
[18]
Orders
For those reasons, none of the grounds of jurisdictional error has been established. The amended summons dated 16 March 2021 should be dismissed. Both sides proceeded on the basis that costs should follow the event, in relation to the active parties to the litigation in this Court. The submissions refer to an agreement or understanding involving the eighth and (it would appear) ninth defendants, who supported the plaintiffs but played no active role in this Court, as to costs. This Court's order is not intended to undercut that position. If the position is other than we have inferred, any party may apply within the period specified by UCPR r 36.16.
This Court's order will be:
Amended summons dated 16 March 2021 dismissed, with costs.
Order 1 is not to affect the position of the eighth and ninth defendants as to costs.
[19]
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: 23 April 2021
Parties
Applicant/Plaintiff:
Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales
Clause 9 defined "employee-related cost savings" as 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."
It followed that the Commission's general power to make or vary an award was circumscribed, insofar as the new or varied award affected remuneration, by the "cap" of 2.5%, which could only be exceeded if there were substantial employee-related cost savings so as to satisfy cl 6. It was not suggested that the qualifications in cl 6 were ever satisfied at any material time, and so it will be convenient and in the interests of concision to employ the language of the plaintiffs and refer simply to the "cap" as if it were unqualified.
In the ordinary course, the 2014 regulation would be automatically repealed after 5 years, on 1 September 2019, in accordance with s 10(2) of the Subordinate Legislation Act 1989 (NSW). However, this was extended by a year on 30 August 2019 by the Subordinate Legislation (Postponement of Repeal) Order (No 2) 2019 (NSW), and then for a further year by the Subordinate Legislation (Postponement of Repeal) Order 2020 (NSW). Both orders were made under s 11 of the Subordinate Legislation Act. The latter was made on 5 August 2020, during the pendency of the proceedings in the Commission, but no party suggested anything turned on that.
The position in relation to the 2014 Regulation may be contrasted with a different, 2020 Regulation, which was made after the litigation had commenced. On 29 May 2020, the Industrial Relations (Public Sector Conditions of Employment) Amendment (Temporary Wages Policy) Regulation 2020 (NSW) was made. Its effect was to amend the 2014 Regulation to prohibit any increase in remuneration for a 12 month period from 1 July 2020. However, there is no occasion to consider its impact upon the litigation, for that regulation was disallowed by the Legislative Council on 2 June 2020: see the notification on the NSW Legislation website for the week beginning 25 May 2020. The consequence was that the new regulation ceased to have effect, and the former regulation was restored or revived: Interpretation Act 1987 (NSW), s 41(4); Aidon v Minister for Aboriginal Affairs of New South Wales (2006) 145 LGERA 67; [2006] NSWLEC 169 at [19].
The Commission also rejected submissions that the failure to afford a 2.5% increase would constitute a permanent cut to government employees which could not be corrected or made good in future years, saying that that proposition assumed the premise that a 2.5% increase was an entitlement. The Commission maintained that the onus to make out a case rested with the applicants: at [44].
At [47]-[75], occupying some 20 pages of the decision, the Commission addressed the application of the Wage Fixing Principles. It held that those principles applied (at [47]-[51]), and addressed the productivity and efficiency principle at [53]-[60]. This aspect of the reasoning gave rise to grounds two and three. Most of this section was occupied by the recitation of the plaintiffs' submissions concerning their evidence in support of improved productivity over the relevant period. Some details of this will be given when dealing with ground 2 below. A great deal of attention was given in this Court to the dispositive paragraphs of this aspect of the reasoning, [58]-[60], and it is convenient to reproduce them in their entirety:
"[58] 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'. 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.
[59] 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.
[60] 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." (footnote omitted)
The Commission then addressed the "special case" principle, at [61]-[75], in a way that was not the subject of any detailed submissions, and which therefore need not be summarised.
Under the heading "Overview of economic considerations" the Commission reproduced aspects of the economic evidence relied upon by the Employers, directed to the disruption to the Australian and NSW economy due to the COVID-19 pandemic, which included estimation of a $20.3 billion reduction in revenue from State taxes and GST over the five years to 2023-24, a rise in NSW unemployment rate of 0.5% from May to June 2020 and uncontroversial statements that the pandemic led to "the most severe contraction in global and domestic economic activity in decades" and represented "the largest … shock to the global economy in many decades".
Under the heading "Maintenance of real wages", at [89]-[112], the Commission concluded that there would be a reduction in employees' real wages of approximately 0.3% if no increase was awarded for the 2020/2021 year.
Under the heading "Section 146 considerations", the Commission addressed the public interest, including the objects of the Act and the state of the economy of NSW and the likely effect of any decision on that economy, as required by s 146. The Commission summarised the Employers' submission that savings from a wage "pause" over four years would permit some $3 billion to be placed into a new "Infrastructure and Job Acceleration Fund" which would accelerate, over a shorter timeframe, a series of "smaller, shovel-ready projects touching every corner of the State". The Commission was sceptical of this aspect of the case, noting at [117] that it was not possible to verify the claimed future savings and that it had been provided with "virtually no details as to the 'shovel-ready projects' to which the Employers referred": at [118]. The Commission then addressed an issue which was the subject of competing evidence as to whether the economic impact of an increase in salaries would be greater than the economic impact of investment in infrastructure. There was evidence, although it was disputed, that a stronger economic stimulus was provided by government investment rather than expenditure on public sector wages. The Commission reproduced the conclusion from a report from Treasury which was in evidence annexed to an affidavit of Mr Michael Pratt AM, Secretary of NSW Treasury, who was cross-examined, which concluded:
"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."
The Commission's ultimate conclusion was an acceptance of the Employers' contentions, notwithstanding the absence of details in relation to the "shovel-ready projects": at [128]. The Commission rejected the Employers' submission that an increase to salaries or salary-related allowances would necessarily have an impact on the State's credit rating (at [133]), and said that it did not place "any great weight" on the fiscal target contained in the Fiscal Responsibility Act 2012 (NSW) to the effect that annual growth in general government expenses should be less than long-term average general government revenue growth. Of some significance to the grounds alleging jurisdictional error was the acceptance by the Commission that it would be possible to fund the salary increase by debt and the conclusion at [136]:
"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."
At [137]-[147], the Commission addressed the effective date of its determination, in a manner that does not require summary in these reasons. Then, at [148]-[156], the Commission summarised its conclusions, as follows:
"[148] 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.
[149] The Applicants did not establish that the Relevant Awards do not currently provide fair and reasonable conditions of employment.
[150] 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.
[151] 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', 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.
[152] 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.
[153] 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.
[154] 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.
[155] 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.
[156] 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." (footnote omitted).
At [157]-[163], the Commission determined that employees were entitled to maintain the real value of their earnings, with the result that awards and variations would be made involving increases of 0.3%. The Commission explained its reasons for that conclusion as follows:
"[159] 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.
[160] 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.'
[161] 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.
[162] 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.
[163] 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."
The remainder of the reasons concern matters of detail that need not be summarised.
In order to address these grounds, it is necessary to return to the detail of the written and oral submissions before the Commission.
In paragraphs 152 and 153 of their written closing submissions, the Employers said that it was "not sufficient to merely point to the types of usual changes that are expected to ensure Government money is spent as efficiently as possible. The fact that some parts of the public sector have been reorganised does not mean that the work of employees has a higher value" and that "[t]he evidence does not rise any higher than identifying that in some particular agencies there have been changes intended to achieve increased efficiency", which "falls well short of the across-the-board evidence necessary to justify an increase to all employees".
The Employers supplied written submissions on 12 August 2020, on the same day as closing addresses. Understandably, when Mr Gibian made his address, he advised that he had not been able closely to study the Employers' written response.
Later that day, Mr Taylor for the Employers spoke to the written submissions, and addressed by way of elaboration what had been put in writing concerning the examples marshalled by the plaintiffs as follows:
"[W]e make the point that, as this Commission has said in numerous cases this principle is not one that can be just easily met by simply providing or pointing to some change that's occurred. There has to be a rigorous analysis of whether there have in fact been substantial cost savings or substantial contributions towards the attainment of objectives, and it must be established that the employees themselves made a significant contribution.
With great respect to the evidence led by the unions in this secondary case of theirs, what is effectively just a list of some changes that have occurred in some specific areas, doesn't give rise to the type of case that's necessary under that principle to justify an across the board increase of the sort that is being sought in these proceedings."
The plaintiffs addressed in reply, including on this point:
"In relation to the productivity efficiency issues, my learned friend made a reference in passing and there is a number of references in the written submissions, particularly paras 152 to 162 of my learned friend's submissions, to the effect that in relation to productivity efficiency it's not sufficient to point to the usual changes that are expected to ensure government money is spent as efficiently as possible.
Can I say a couple of things about that. The first is the matters referred to in the evidence clearly go beyond what might be said to be the usual changes and they're clearly substantial matters which have changed the way in which employees perform work, to which employees have made a substantial contribution and which has been acknowledged repeatedly by government as constituting substantial changes."
Counsel's second point was that some of the changes reflected the response to bushfires and the COVID-19 pandemic, and denied that they could be characterised as "the usual changes expected of government".
It was clear that the parties were at issue as to the sufficiency of the list of instances of productivity and efficiency changes to satisfy paragraph 8.3 of the Wage Fixing Principles. The Employers contended that the "substantial" cost savings or productivity or efficiency improvements were not established by a list of instances. It thus fell to the Commission to resolve the parties' competing submissions. It is no part of this Court's role to express a view as to the correctness or otherwise of the Commission's determination. The only issue which arises on these grounds is whether the Commission's process was procedurally fair, or otherwise disclosed jurisdictional error.
Finally, when summarising the effect of its decision, the Commission stated at [161]:
"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."
The submission that the Commission failed to have regard to the operation of s 146C read with the 2014 Regulation cannot be sustained. All the passages reproduced above demonstrate that the Commission had regard to this.
These grounds are not made out.
But those matters may, for present purposes, be put to one side, because the submission can be addressed on its merits. The substance of the plaintiffs' challenge was that it had been common ground that a wage freeze would of itself have a negative impact on consumer spending and therefore on the economy. The debate before the Commission was whether the Employers' proposal to accelerate expenditure on capital projects using the funds saved would outweigh the negative impact on consumer spending from not granting a 2.5% increase.
In their written submissions, the plaintiffs contended that the Employers' position required acceptance of at least four propositions:
1. the proposed infrastructure expenditure was incremental in that it was not proposed to be undertaken in any event;
2. the infrastructure projects would be undertaken in a relevant timeframe to provide an economic stimulus;
3. infrastructure expenditure would have a higher stimulatory effect; and
4. the government could not do both.
The plaintiffs complained that the Commission did not address propositions (1), (2) or (4), nor did it make findings which could logically lead to a conclusion that restraint was warranted before increasing public sector salaries.
There is, with respect, nothing irrational or illogical in the Commission's undertaking an evaluative process which considered the differential impact on the economy of a salary increase or infrastructure expenditure. The contrary submission, that it was possible for the government to do both, ignores the consequences of doing so. While the cost of funding debt is historically low, there is nonetheless a cost, which at some time will be required to be met through higher taxes, cuts to services, sale of assets, or other reductions in future spending compared with the position which would have obtained had the borrowing not occurred. But even if that be wrong, on no view was it irrational or illogical for the Commission to evaluate the relative benefits to the economy of wage increase or infrastructure expenditure.
In relation to the economic impact of infrastructure spending, the point resolved to which form of expenditure would have a higher "fiscal multiplier". Based on a NSW Treasury report, the Employers submitted that:
"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 … leakages occur when households or businesses save stimulus funds received, rather than spending the money; or when imports are purchased".
That opinion was tested in cross-examination. The Commission's acceptance of that point at [128] was neither illogical nor irrational.
Further, the Commission did not accept the Employers' submissions in their entirety. Rather than a freeze, an increase of 0.3%, backdated to 1 July 2020, was ordered. That was based in turn upon a rejection of important aspects of the Employers' case (including the difficulties in verifying the infrastructure projects, the insufficiency of evidence establishing that a wage increase would have an impact on the State's credit rating or would result in a breach of the Fiscal Responsibility Act). That was the context in which the Commission determined a level of "restraint" would be exercised, but not such as to preclude an increase which would match inflation. There is nothing irrational or illogical in the Commission taking that course.