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[2026] NSWIRComm 21
General information, not legal advice.
Industrial Relations Commission (NSW)
2026-10-08
Taylor J, President Chin J, Vice President Paingakulam J, Deputy President Deputy President McDonald Deputy President Howell
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: State Wage Case 2026 (No 3) [2026] NSWIRComm 21
Hearing dates: 25 August 2026
Date of orders: 08 October 2026
Decision date: 08 October 2026
Jurisdiction: Industrial Relations Commission
Before: Taylor J, President
Chin J, Vice President
Paingakulam J, Deputy President
Deputy President McDonald
Deputy President Howell
Decision: (1) Pursuant to s 51 of the Industrial Relations Act 1996 (NSW), the paid rates adjustment for 2026–27 is 3.5%.
(2) By 4.00pm on 29 October 2026, the parties are to file any submissions they may wish to make as to the terms of the draft Award Making Principles annexed to this decision.
Catchwords: EMPLOYMENT AND INDUSTRIAL LAW ─ Awards and enterprise agreements ─ Variation ─ State Wage Case ─ Paid rates adjustment ─ Appropriate measure of changes in real value of wages ─ NSW HFCE and CPI compared ─ Whether adjustment should be determined by reference to sample classifications ─ Consideration of NSW economy ─ Consideration of Government’s fiscal position and outlook ─ Effect of adjustment on bargaining ─ Quantum of adjustment for 2026–27 ─ Award Making Principles ─ Whether to consolidate Arbitrated Case Principles ─ Whether new grounds for remuneration increases should be introduced ─ Whether review of Award Making Principles should proceed incrementally or comprehensively
Legislation Cited: Industrial Relations Act 1996 (NSW), ss 15(3), 21(2), 48, 50, 51, 146(2)
Fair Work Act 2009 (Cth)
Cases Cited: Annual Wage Review 2026 (2026) 348 IR 1; [2026] FWCFB 3500
Crown Employees (Police Officers - 2009) Award (2012) 220 IR 1; [2012] NSWIRComm 23
Fire Brigade Employees’ Union v Industrial Relations Secretary (on behalf of Fire and Rescue NSW) (2025) 348 IR 350; [2025] NSWIRComm 1063
Health Secretary, Ministry of Health v Australian Salaried Medical Officers’ Federation (New South Wales) (No 2) (2025) 348 IR 131; [2025] NSWIRComm 27
New South Wales Nurses and Midwives’ Association v Health Secretary [2026] NSWIRComm 4
Nurses’ (Local Government) Residential Aged Care Consolidated (State) Award 2021 – Award Variation; Unions NSW v Local Government NSW [2025] NSWIRComm 1051
Re Public Service Board and Public Service Association of New South Wales (Local Court Anomaly Case) [1989] AR (NSW) 638
State Wage Case 1983 (1983) 5 IR 1
State Wage Case 2024 (No 3) (2024) 337 IR 111; [2024] NSWIRComm 19
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33
State Wage Case 2025 (No 3) (2025) 348 IR 297; [2025] NSWIRComm 36
Wage Fixing Principles Case (1978) 211 CAR 268
Texts Cited: Australian Bureau of Statistics, Consumer Price Index: Concepts, Sources and Methods (November 2025)
Reserve Bank of Australia, Statement on Monetary Policy (August 2026)
Crown Employees (Fire and Rescue NSW Permanent Firefighting Staff) Award 2024
Crown Employees (New South Wales Education Standards Authority – Education Officers) Salaries and Conditions Award 2024
Category: Principal judgment
Parties: Industrial Relations Secretary
Public Service Association and Professional Officers’ Association Amalgamated Union of New South Wales
Unions NSW
Local Government NSW
New South Wales Nurses and Midwives’ Association
Electrical Trades Union of Australia, New South Wales Branch
Health Services Union
Fire Brigade Employees’ Union of New South Wales
Representation: Counsel:
T Prince SC / D Fuller (Industrial Relations Secretary)
L Saunders (Public Service Association and Professional Officers’ Association Amalgamated Union of New South Wales)
O Fagir (Unions NSW)
Solicitors:
Crown Solicitor’s Office (NSW) (Industrial Relations Secretary)
Others:
P Collier (Lead, Public Health Organising, New South Wales Nurses and Midwives’ Association)
A Dansie (Director, Workforce and Legal, Local Government NSW)
J Dowling (Legal Officer, Electrical Trades Union of Australia, New South Wales Branch)
E Yap (Deputy Secretary, Allied Health Division, Health Services Union)
D Zayit (Industrial Officer, Fire Brigade Employees’ Union of New South Wales)
File Number(s): 2026/231285
Publication restriction: Nil
The first two decisions issued in State Wage Case 2026 dealt with adjustments to minimum rates awards. This decision deals with the two remaining questions identified in the Summons to Show Cause issued by the Commission on 4 June 2026, namely:
the paid rates adjustment for public sector awards for the year commencing 1 July 2026, set by reference to the factors in subprinciple 6.4; [1] and
whether there ought to be any change to the 2025–2026 Award Making Principles. [2]
We begin by clarifying the purpose and scope of the paid rates adjustment mechanism.
A paid rates adjustment is a straightforward mechanism to increase rates in public sector awards, on application, where:
the nominal term of the relevant award has expired;
the last increase in rates of pay for ordinary hours for most or all employees covered by the relevant award took effect more than 12 months earlier;
each union party to the relevant award gives to the Commission a no extra claims undertaking; and
the Commission considers it appropriate to make an adjustment having regard to the state of existing bargaining or arbitration.
It is a means to allow wages to broadly keep pace with inflation, rather than a mechanism to increase real wages. [3] It is not intended to be a rigid form of wage indexation. It is not intended to undermine or discourage bargained outcomes.
The adjustment is not set with regard to the circumstances of any particular group of employees. Such focus may be applied, where necessary, when a paid rates adjustment is sought in respect of a particular award. However, as it is intended that once set, a paid rates adjustment should be capable of straightforward application, a different approach will only be warranted if there is something exceptional about the circumstances of the affected employees.
Nor is the adjustment intended to address changes in the real value of wages arising from increases in years preceding the prior year, even if those increases were greater or less than required to address inflation in those earlier years. [4]
Rather, when setting the adjustment, the Commission will consider changes in the value of money over the previous year ending in June, mindful that the awards to which it may apply are paid rates awards. From that starting point, the Commission will have regard to:
the public interest in encouraging bargained outcomes, including for multi-year agreements, which promote industrial harmony and certainty, such that the Commission will not set the rate so high as to disincentivise bargaining;
the likely effect of its decision on the economy of NSW and on the Government’s fiscal position and outlook, [5] both of which are factors that will often (but not always) weigh in favour of a more conservative approach; [6] and
the objects of the Industrial Relations Act 1996 (NSW) (IR Act), to the extent they are relevant.
The mechanism does not create an automatic entitlement to an increase matching the last 12 months of CPI change. [7] Once the paid rates adjustment is set, it is not applied to settled awards. Nor will it ordinarily be applied to awards for which bargained or arbitrated outcomes are expected to materialise during the year in question.
When it established the paid rates adjustment principle in 2025, the Full Bench said it was “intended to be a largely uncontroversial mechanism to maintain rates going forward”. [8] Despite that intention, the parties filed substantial expert evidence and conflicting submissions going not only to the quantum of the adjustment, but also the correct approach to determining it.
The parties were at least agreed on the proper starting point, being to identify changes in the value of money in the 12-month period ending in June in the year of the State Wage Case, [9] although the Industrial Relations Secretary (Secretary) sought to do this by reference to the changes in the real value of wages of a select cohort of employees rather than by reference to the traditional measures of inflation per se.
The primary year-end inflation measures in June 2026 were:
Australian CPI (headline) inflation of 3.9%; [10]
Australian trimmed mean inflation of 3.6%; [11] and
Sydney CPI (headline) inflation of 4.0%. [12]
The year-end Australian headline CPI of 3.9% was substantially lower than the 4.8% that had been forecast at the time the Fair Work Commission determined the 2026 annual wage review, when it increased the minimum wage rates prescribed by modern awards made under the Fair Work Act 2009 (Cth) by 4.75% from the first full pay period on or after 1 July 2026. [13] For that reason we do not consider it appropriate for the paid rates adjustment to reflect the increase awarded by the Fair Work Commission.
While the parties agreed on the starting point, they diverged as to how the change in the value of money should be measured and the quantum of the proposed paid rates adjustment.
The Secretary contended that the Commission ought to set the paid rates adjustment at 3%, which, he contended, would exceed the changes in real wages experienced by employees covered by the awards eligible for the 2026–27 paid rates adjustment. That figure matches the Government’s preferred bargaining outcome for the year commencing 1 July 2026. Unions NSW, on the other hand, contended that the Commission should determine a paid rates adjustment of 4.5%, to account for inflation as measured by the Sydney CPI (headline), and make some inroad to the diminution in real wages said to have been experienced by NSW public sector workers over previous years.
The Secretary relied on the expert opinion of Dr Alexandra Heath. Dr Heath is the Deputy Secretary for the Economic Strategy and Productivity Group in NSW Treasury and possesses PhD and Masters qualifications in economics. Amongst other matters, Dr Heath was instructed to ascertain changes in real wages experienced by employees in two sample classifications under awards that the Secretary contended are eligible for a paid rates adjustment. Dr Heath opined that was best done by:
| NSW HFCE (incl. super) | NSW HFCE (excl. super) | SYD CPI (incl. super) | SYD CPI (excl. super) | AUS CPI (incl. super) | AUS CPI (excl. super) | | 0.25% | -0.20% | -0.16% | -0.61% | -0.25% | -0.70% |
Only the application of the NSW HFCE deflator and the inclusion of 100% of superannuation (which we consider inappropriate) gives rise to a result indicating that real wages, after accounting for inflation, have risen, year-on-year. On all other measures, the wages of a Senior Education Officer, Grade 2 declined, albeit by less than 1%.
Both HFCE and CPI are means to monitor inflation and its effect on the spending power of wages. The HFCE deflator is an implicit or inferred price index, constructed from the Australian Bureau of Statistics’ (ABS’) quarterly national accounts data, rather than from directly observed changes in the prices of a specific “basket of goods and services”, which is the how CPI is calculated. NSW HFCE is not calculated or published by the ABS; rather, it is a figure calculated, but not published, by NSW Treasury, from the ABS data.
Relying on the evidence of Dr Heath, the Secretary contended that NSW HFCE should be preferred to CPI as a measure of changes in the real value of wages because:
NSW HFCE more accurately captures household cost pressures because it takes account of changes in consumption patterns. Those changes bear upon the real value of wages which are not captured in a timely way by CPI; and
NSW HFCE captures price movements across NSW, whereas CPI measures price changes only in the capital cities, including Sydney.
According to Dr Heath, as the methodology used to calculate NSW HFCE incorporates changes in consumption patterns, it is a more responsive and accurate measure of the costs faced by households. She provided the example of households starting to buy apples instead of bananas due to bananas becoming more expensive, allowing the household’s expenditure on fruit to remain the same. The NSW HFCE deflator will capture such changes in the next quarter, whereas the fixed basket of goods and services used to calculate CPI is usually updated annually and prior to 2018 was only updated every five to six years using the Household Expenditure Survey.
The Secretary relied on studies reported in an ABS document titled “Consumer Price Index: Concepts, Sources and Methods” [16] which showed that over the long-term CPI tended to overestimate price changes faced by consumers, or in other words, that it was ‘upwardly biased’, due to the inability to take account of the “upper-level item substitution effect”. The longer the period between the re-weighting of the CPI basket, the larger the potential upper-level item substitution bias effect on the index. The Secretary submitted that NSW HFCE was therefore a more reliable measure of the cost of living.
Unions NSW argued there were several difficulties with using NSW HFCE to measure changes in the real value of money. It relied on the expert opinion of Dr Stanford, Chair of the Board of Directors of the Centre for Future Work in Australia, who made the following observations:
| Nominal Pay, 1 July 2025 | $3,302.90 | | Change in Sydney CPI 12 Months to 1 July 2026 | 4.01% | | Real Pay, 30 June 2026 (in 1 July 2025 dollar terms) | $3,175.67 | | Change in Real Pay | -3.85% | | Increase Required to Restore Real Pay | 4.01% |
The task of this Full Bench is to arrive at a figure by which rates may be adjusted with effect from (at the earliest) 1 July in the year of the State Wage Case, so as to account for changes in the value of money over the preceding 12 months (together with such other factors as we have identified). That is a more straightforward inquiry than an assessment of changes in real wages as experienced by particular cohorts of workers over an extended period of time.
The starting point for the paid rates adjustment is to be the change in the value of money generally. It is not the change in real wages of employees in particular classifications. [17] Such movements are relevant when assessing the practical and fiscal consequences when an application is made for the adjustment to apply to particular employees. As observed earlier, however, absent some special circumstances, which may include a significant change in the value of real wages, the adjustment would be applied without the need for evidence directed to those circumstances.
For those reasons we reject the Secretary’s submission that the paid rates adjustment should be determined having regard to evidence of changes in the real wages of Senior Education Officers, Grade 2 or Senior Firefighters. In our view, the appropriate starting point is the base CPI data for the year ending in June.
As noted, the Government’s preferred (and budgeted) position is that increases to public sector awards should not exceed 3% for the year commencing 1 July 2026. Having regard to the CPI data, this places the Commission in the situation foretold at [49] of last year’s decision:
“If a future Government policy were to seek increases to awards below the [amount necessary to reflect the decrease] in the value of money in the preceding 12-months, it may well be necessary for the Commission to determine a paid rates adjustment that is higher than the Government’s bargaining position. At that point, the Commission would have to consider the negative impact on bargaining and the impact on the fiscal position of the Government. Notwithstanding those matters, it may be appropriate for the Commission to determine a paid rates adjustment higher than Government policy to ensure that rates of pay remain fair and reasonable.” [18]
Ms Elizabeth Livingstone gave evidence as to the Government's fiscal position and outlook. She projected a net operating deficit of $2.3 billion in 2026–27, followed by a surplus of $1.1 billion in 2027–28 which is expected to continue in 2028–29.
Despite this projected return to surplus, Ms Livingstone considered that the Government’s fiscal position and outlook remain challenging because of a range of pressures, including substantial cash deficits projected to persist until 2029–30 and rising inflation, which makes borrowing more expensive.
Those pressures bear directly upon the Government’s ability to manage increases in salary and salary-related allowances. Ms Livingstone’s evidence was that such increases would require further borrowing, thereby increasing the State’s gross debt, interest expenses and associated fiscal burdens.
The Government has budgeted for a 3% increase in paid rates awards. An increase of that magnitude would therefore have no impact on the Government’s fiscal outlook. Ms Livingstone gave evidence that, over the four years to 2029–30, an increase of 2% above the budgeted position for employees covered by awards that are eligible for the proposed paid rates adjustment would increase gross debt by $5.9 million. That represents 0.003% of the State’s gross debt in 2026–27.
Ms Livingstone’s evidence was that the fiscal impact of the decision is confined to five awards, affecting 4,564 full-time equivalent employees. Two of those awards concern Fire and Rescue NSW firefighters and affect 4,361 full-time equivalent employees. Those awards may be the subject of bargaining for a multi-year award after this decision is handed down.
The fiscal impact of the firefighter awards is, however, substantially moderated by the funding arrangements applicable to Fire and Rescue NSW. Ms Livingstone explained that the NSW Government contributes 14.6% of the funding for firefighters’ wages, with the balance funded through insurer and local government contributions.
Ms Livingstone’s evidence was that a further 2% increase would not prevent the State from returning to a net surplus in 2027–28.
Ms Livingston also addressed the fiscal impact of a higher paid rates adjustment taking effect on 1 July 2027, by which time substantially more workers, principally teachers, would be eligible for an adjustment. Counsel for the Secretary accepted that this evidence had limited relevance to the determination of the adjustment taking effect on 1 July 2026. It was principally led to underscore the potential for the adjustment we determine to be regarded as a floor for future bargaining. The Secretary also pointed to other possible indirect effects of setting a paid rates adjustment higher than that budgeted for by Government in order to meet inflation, including:
the prospect of a spill-over into private sector wage growth and, in turn, increased inflationary pressures;
We turn to the quantum of the paid rates adjustment. As already stated, the available CPI reference measures provide the appropriate starting point. The highest is the Sydney headline CPI measure of 4%.
We are satisfied that this year the adjustment should be set at a lower rate, namely 3.5%, principally for the following reasons:
A measure based on two points in time is susceptible to transient shocks, measurement and survey error and short-term volatility. Those effects are moderated when a longer period is considered or averaging is applied, after removing the most extreme price movements. For that reason, we place greater weight on the trimmed mean CPI, which was 3.6%.
We are concerned not to set the rate at a level that might disincentivise bargaining for a multi-year agreement because it may be preferred as a one-year outcome.
We also place some (albeit lesser) weight on the matters set out below:
Just as NSW HFCE can be criticised as having a downward bias, which results in it consistently giving rise to suggested rates of inflation that are lower than CPI for the same period, CPI can be said to have a modest upward bias as a result of its failure to rapidly account for substitution in consumer’s expenditure. The ABS’ periodic reweighting of CPI is ordinarily expected to result in published figures approximately 0.1% to 0.2% lower than the figures initially published. [20] That consideration militates against the strict adoption of headline CPI.
We also have some regard to the 0.5% increase in superannuation contributions that took effect on 1 July 2026, while noting this is not a matter expected to arise in future years.
In determining an adjustment below headline CPI, we note that our determination does not preclude a higher increase being awarded to a particular cohort through arbitration, including on the ground that earlier increases have failed to adequately account for inflation.
In determining the paid rate adjustment amount we do not place any weight on the following matters:
The extent of any changes in real wages measured from 2011 (as relied upon by the Secretary) or since 2020 (as relied upon by Unions NSW). Subprinciple 6.4(4) of the Award Making Principles directs attention to the 12-month period since the last State Wage Case. Longer-term changes in real wages are not the focus of the paid rates adjustment.
A need to avoid “chasing inflation”. The paid rates adjustment exists to assist in preserving the real value of wages that have been previously set for eligible awards that are not otherwise the subject of an increase in rates. The adjustment cannot take effect before 1 July and is directed to changes in the value of money over the preceding year. Even where the increase takes effect from 1 July, due to the strictures of s 15(3) of the IR Act, the increase may not be able to be fully backdated, with the consequential loss of the value of access to that money from an earlier time. There is nothing inherently objectionable in an adjustment which ameliorates the effect of inflation on the real value of wages. On the contrary, that is an important part of the function the adjustment is intended to perform.
From 1983 until 2024, these principles were known as the “Wage Fixing Principles”. [21] They have undergone several iterations over that period, most recently in State Wage Case 2025 (No 3). [22] Their dual purpose, however, has remained consistent. They exist to guide the Commission in the exercise of its discretion when making or varying awards, while also informing the parties of the matters the Commission will take into account in determining applications. [23]
The Commission considered amendments to the Award Making Principles in State Wage Case 2025 (No 2). [24] The most significant proposal was put forward by the Health Services Union (HSU), which sought to remove what was described as the historical and restrictive language of the Principles. It proposed the removal of Principles 9 to 14 and their replacement with a simplified provision, “Principle 9 – Other increases to remuneration”.
The Commission declined that proposal. No party other than the HSU supported it, and the Commission considered that such a substantial alteration could not properly be made without detailed consideration and submissions from the parties. [25] It nevertheless addressed some of the HSU’s concerns through more limited amendments to the Principles. [26] Importantly, it flagged that the Commission would likely return to the question of simplifying the Principles in a future State Wage Case.
The Summons issued by the Commission required the parties to address this Full Bench on whether we should further amend or fundamentally rewrite the Principles.
The HSU formally maintained the same position it adopted in State Wage Case 2025 (No 2) but put no submissions beyond supporting the somewhat similar approach taken this year by the Public Service Association and Professional Officers’ Association Amalgamated Union of New South Wales (PSA). [27]
The PSA contended that the Principles are archaic and in large part also arcane, using language such as “wage leapfrogging” and “comparative wage justice” that were creatures of their time and have a meaning which can be described, at best, as uncertain.
The PSA proposed a fundamental rewrite of the Arbitrated Case Principles, moving away from a series of separate bases to increase remuneration by deleting Principles 10 to 13 and incorporating their substance into a single principle with a number of subprinciples, as follows:
“9. Arbitrated Case – remuneration
9.1. Other than as allowed elsewhere in these Principles, an application for increases in remuneration (including for new service increments or superannuation contributions higher than those mandated by Commonwealth legislation) will be determined as an Arbitrated Case and, unless otherwise allocated by the President, will be heard by a Full Bench of the Commission.
9.2 An Arbitrated Case application concerning remuneration (including allowances) may be granted if the Commission is satisfied that, together or separately, the change is necessary to provide fair and reasonable conditions of employment because:
(1) since the last time the rates of pay were assessed or varied by consent on a work value basis, there have been changes in the nature of the work, the level of skill and responsibility required or the conditions under which the work is done (i.e the environment in which it is performed) which are significant enough to warrant an increase in remuneration to reflect the changed value of the work;
(2) the rates of pay significantly undervalue the work in that they do not take into account core aspects of it;
(3) the current rates of pay do not provide equal remuneration for work for men and women of equal or comparable value;
(4) the current rates of pay undervalue the work on the basis of gender in that they do not properly reflect the value of the work for reasons relating to historical gender-based undervaluation;
(5) productivity or efficiency measures impacting the work of employees, and facilitated by the work, have led to cost savings, more efficient attainment of the objectives of the employer, improved quality of service or other efficiency gains and warrant an increase in remuneration;
(6) changes in the value of money, which have not been addressed by the application of the Paid Rates Adjustment, justify the change;
(7) an acute shortage of appropriately skilled staff, through difficulties with recruitment, retention or both, is arising due in part to the existing rates of remuneration and is causing a threat to the delivery of public services;
(8) the adjustment is necessary to restore, or create appropriate wage relativities within the award system; and/or
[(9)] there is some other special attribute or out-of-the ordinary feature which warrants the alteration.
9.3 Where it is established that there have been changes in the nature of the work, skill and responsibility required or the conditions under which work is performed that are not recognised by an existing rate of pay or allowance that meet the test in 9.2, these are to be compensated as follows:
(1) where all employees in a classification are required to hold and maintain the relevant skills and/or qualifications to perform particular or similar work, and are required to perform it from time to time, this is to be reflected in the rate of pay for the classification;
(2) where a particular employee or employees within a classification are required to hold and maintain particular skills and/or qualifications to perform the work that are in addition to those otherwise required by those employed in that classification, and can be required at any time to perform that work, this is appropriately compensated by an all-purpose allowance payable to that employee or employees instead of by increasing the rate for the classification as a whole;
(3) where new or changed work is work that can be requested of any employee in a classification from time to time, but only arises occasionally and does not form part of the core work for that classification, this is appropriately compensated for by an incident allowance; and
(4) where the addition or alteration to work is related to particular conditions under which the work is performed, and the conditions only arise from time to time, this is appropriately compensated for by a disability allowance.
9.4 In respect of value of money considerations:
(1) maintaining fair and reasonable conditions of employment involves setting annual increases that:
1. are broadly capable of absorbing changes in the cost of living value of money over time;
2. in the medium to long term, grow in real value with regard to increases in enterprise, State and National productivity;
but does not involve a precise mathematical process or a guarantee or any particular level of change;
(2) in the ordinary course the Commission will consider the period from the last time that the rates of pay within the Award were adjusted to the end of the life of the proposed award, although this approach may be departed from where the circumstances warrant it; and
(3) an applicant will need to point to some special circumstance to satisfy the Commission to increase rates based on a change in the value of money as the sole criterion in an Arbitrated Case.
9.5 In respect of productivity and efficiency considerations:
(1) for the avoidance of doubt it is not necessary to identify cost savings before an increase in remuneration will be warranted; and
(2) the time from which such measures, savings and improvements will be measured is the last time the Award was adjusted on the basis of productivity and efficiency (whether by arbitration or consent).
9.6 In any Arbitrated Case the parties are expected to confer in advance to discuss and to the extent agree [sic] on procedural matters to ensure that the proceeding progresses in a fair, cost- and time-efficient manner, including in suitable cases of sufficient size with regard to the potential use of sample classifications to represent a large cohort, as in the Police Case. [28]
[9.7] When determining an Arbitrated Case the Commission may grant a minor claim that does not meet any of the criteria in Subprinciple 9.2 where satisfied it is appropriate to do so. A minor claim is a claim to modernise or improve an award in a manner that neither alters remuneration nor significantly alters conditions of employment.
[9.8] Following determination of an Arbitrated Case the Commission will not include a no extra claims clause in the settled award, but may identify in the decision the extent to which it is open to parties to the award to make further claims that would take effect during the life of the resultant award.
[9.9] There will be no double counting, provided however, that an Arbitrated Case may rely upon a cumulation of the factors referred to in these Principles.”
The Secretary opposed such a fundamental alteration to the Award Making Principles. He submitted that the consistency of the Principles is one of its principal strengths. That consistency has, he said, served parties and the Commission by promoting a settled and predictable approach to the determination of applications.
The Secretary also challenged the substance of the proposed amendments. He pointed out that the PSA seeks to introduce four new grounds upon which increases in remuneration may be awarded: namely, proposed subprinciples 9.2(2), (3), (7) and (8). The Secretary contended that the PSA has not explained why increases in remuneration ought to be permitted on these grounds, nor why additional grounds are necessary. There is force in the Secretary’s observation that the existing Special Case Principle already provides a means of addressing claims with particular or special attributes that do not fall within the Work Value Changes, Productivity and Efficiency or Gender Based Undervaluation Principles.
The Secretary further opposed the PSA’s proposed amendments to the existing Principles that the PSA seeks to retain. He submitted that those amendments materially lower the requirements traditionally imposed by the Commission and thereby make it substantially easier to establish an entitlement to an increase in remuneration. In so far as the proposed amendments purport to give effect to particular decisions of the Commission, the Secretary submitted that they do not accurately reflect the principles established by those decisions.
The Secretary did not oppose a structured process for developing technical or drafting amendments to the Principles. He supported such a process in so far as it would reduce ambiguity, improve clarity and replace antiquated or confusing language.
Unions NSW in its written submissions contended it did not seek to alter the Award Making Principles. At hearing, counsel for Unions NSW cautioned against an approach in which significant applications to recast the Principles are made each year. Counsel for Unions NSW nevertheless expressed support for the PSA’s proposal in the present case, given that the Commission had indicated in the previous State Wage Case that it would return to this issue.
Local Government NSW’s primary position was to oppose the proposed changes. It submitted that the existing Principles are well established, having been refined over successive years, and that their wholesale replacement as proposed by the PSA was neither necessary nor justified. It opposed the creation of new bases for remuneration increases on the ground that the PSA’s proposal was unsupported by existing authority and inconsistent with the restrictive approach historically taken in the Award Making Principles to date.
Local Government NSW contended that if changes were to be made, the existing distinction between State government and local government awards should be preserved. It submitted that any proposed consolidation threatened that distinction and should not be permitted to obscure the different considerations applicable to the two sectors.
Our starting point is to reject the submission that the Award Making Principles should not be amended unless we are satisfied that there is something significantly wrong with them. While they should not be altered merely for the sake of change, incremental change to the Principles is not a bad thing. Indeed, it is to be preferred to major change all at once, which carries with it the risk of unintended consequences.
We are satisfied that the Principles should be amended in a number of respects.
As to the manner in which that should occur, we agree with the Secretary’s position, which was otherwise embraced by the parties. If the Principles are to be changed, the process should be staged. The parties should first consider our reasons for decision and then prepare proposed redrafts, with the potential for conciliation, before the Full Bench settles the final form of the Principles.
To assist the parties in that regard, we provide an amended copy of the Principles that reflects our views, including preliminary views, as set out below.
We do not consider there is a need to consolidate Principles 10 to 13 into a single Arbitrated Case Principle. Given that several of the Principles will continue to contain multiple paragraphs addressing distinct matters, it will be easier to understand and apply them if they are set out in distinct principles, consistent with the current structure.
Nor do we consider that there is any good reason to amend the Productivity and Efficiency Principle, which was considered and amended as recently as 2024.
The same is true of the Gender Based Undervaluation Principle, with the likely exception of subprinciple 12.7. In our preliminary view, that subprinciple can be deleted. Before receiving the views of the parties on this issue, our preliminary view is that the concerns it seeks to address are matters the Commission would consider in any event. If so, it adds nothing of substance. In so far as it purports to do so, it uses antiquated language which is apt to confuse.
We do not consider there is any good reason to amend the Special Case Principle.
Nor, at this stage, do we consider that there is a need to include the following additions to the Arbitrated Case Principles proposed by the PSA:
The proposed addition to subprinciple 9.2(2), which would permit an increase where “the rates of pay significantly undervalue the work in that they do not take into account core aspects of it”. In our view, such a case will be rare and, where it arises, can be advanced under the Special Case Principle.
The proposed addition to subprinciple 9.2(7), which would create a basis for an increase arising from a shortage of appropriately skilled staff. In our view, a labour shortage alone will rarely constitute a sufficient basis for an increase in remuneration, [29] but in any event the case could be advanced under the Special Case Principle.
The proposed addition to subprinciple 9.3 requiring that the Commission seeks over the medium to long term to achieve growth in the real value of wages having regard to increases in state and national productivity. That is not because we disagree with the proposition that real remuneration should increase over the medium-to-long term, consistent with improvements in labour productivity. We simply take the view that productivity growth should not constitute a standalone basis for an increase, as against the natural outcome of consent and arbitrated increases over time. To be clear, in any proceedings where evidence is presented as to the extent to which remuneration has kept pace with inflation over an extended period, we would expect that the Commission also be informed as to the extent there have been state and national changes in productivity over that same period. That evidence may assist the Commission in determining if real wages have increased to an extent that is broadly consistent with economy-wide improvements in productivity.
We agree that it is preferable that the Principles are modernised and simplified, with antiquated and opaque language removed, although not in a manner that would bring about fundamental change beyond that which we identify below.
We agree with the PSA that the Principles should be amended to reflect an expectation that before an arbitration commences, the parties should confer to discuss and, ideally, agree on procedural matters to ensure the proceeding progresses in a cost- and time-efficient manner, including, where appropriate, giving proper consideration to the preparation of evidence by reference to sample classifications. The text as proposed by the PSA, however, is not appropriate. As drafted, the Principles guide the exercise of the Commission’s discretion rather than the conduct of the parties. To that end, the parties should consider adopting language that reflects the style of subprinciple 14.1.
Further, and to give effect to that approach, we consider it is appropriate that the Principles be amended to recognise that the Commission may determine an Arbitrated Case concerning an award that covers a large number of employees by relying on evidence concerning one or more sample classifications, where that approach has been agreed by the parties and the Commission accepts that the classifications nominated as samples are adequately representative.
The language of subprinciple 9.5 ought to be updated to aid comprehension. As presently understood the expression “comparative wage justice” refers to comparisons to rates of pay set in respect of work done by other workers doing similar or comparable work.
While not stated in the subprinciple, it has always been accepted that reliance on comparable rates of pay is permitted in respect of rates which are set with an established nexus, or to assist the Commission to ascertain an appropriate wage rate after concluding that an increase is otherwise justified under one of the Arbitrated Case Principles. [30] That ought to be made express.
As drafted, subprinciple 9.5 does not prohibit such comparisons being made to support a case but only seeks to prohibit claims where the claim is “substantially” based on such comparisons. That is appropriate, and permits the Commission, if otherwise satisfied that an increase is justified, to have regard to rates paid to other employees doing like work. [31] While such a limited prohibition is in our view broadly appropriate, it could be expanded to allow a narrow class of cases where the applicant seeks to adjust a rate by establishing a nexus. To create a nexus will require more than just establishing the work is similar or comparable. It will require establishing that there is a proper basis for an ongoing link between the rates.
We consider the subprinciple could as a result be drafted accordingly:
Claims that are based on rates paid to other employees doing similar or comparable work will not be countenanced, other than:
(a) to the extent contemplated by the Gender Based Undervaluation Principle; or
(b) in circumstances where there is an established nexus between the rates in question or a case is established that such a nexus should be established; or
(c) to assist the Commission to ascertain an appropriate wage rate after having reached a conclusion that an increase in wage rates is otherwise justified under one of the A**rbitrated C**ase Principles.
In addition to those matters, we have formed the following preliminary views as to further changes which might be made to the current Principles to modernise and simplify them:
the second sentence of subprinciple 10.2, referring to the need to avoid wage leapfrogging, can be removed given that its intended protective element is effectively addressed by the second part of the previous sentence;
subprinciples 10.3 and 10.4 are substantially repetitive of what has gone before and so can be removed;
the reference in subprinciple 10.7 to the structural efficiency principle can be removed;
subprinciple 12.7 can be deleted for the reasons described above.
We make the following orders:
Pursuant to s 51 of the Industrial Relations Act 1996 (NSW), the paid rates adjustment for 2026–27 is 3.5%.
By 4.00pm on 29 October 2026, the parties are to file any submissions they may wish to make as to the terms of the draft Award Making Principles annexed to this decision.
Draft provided for submissions, with emphasis added to indicate our amendments. Text that was inserted is underlined, and text that was removed is struck through.
1.1 These Principles guide the exercise of discretion when making or varying awards under Part 1 of Chapter 2 of the Industrial Relations Act 1996 (the Act).
2.1 When determining an application to make a new award or to vary an existing award, whether by consent or otherwise, the Commission must have regard to:
(1) whether the terms of the award as made or varied will set fair and reasonable conditions of employment for employees; and
(2) the public interest, and in that respect must have regard to:
(a) the objects of the Act, including the effect of the award as made or varied on:
(i) the promotion of productivity and efficiency; (ii) the promotion of participation in industrial relations by employees and employers at an enterprise or workplace level; (iii) the prevention and elimination of discrimination in the workplace, in particular ensuring equal remuneration for all persons doing work of equal or comparable value; (iv) the encouragement of co-operative workplace reform and equitable, innovative and productive workplace relations; and (v) strategies to attract and retain skilled staff where there are skill shortages so as to ensure effective and efficient delivery of services;
(b) the state of the economy of New South Wales and the likely effect of the decision on that economy; and (c) in respect of an award that will apply to public sector employees, the fiscal position and outlook of the Government and the likely effect of the award as made or varied on the position and outlook.
3.1 Provided it otherwise complies with the requirements of the Act, an award may be made or varied without the application needing to be considered as an Arbitrated Case under Principle 9:
(1) in accordance with an express provision in an award that provides for its variation;
(2) to incorporate test case standards, in accordance with Principle 5;
(3) to adjust wages consistent with a State Wage Case decision, in accordance with Principle 6;
(4) to adjust allowances and service increments, in accordance with Principle 7;
(5) to adjust wages to ensure that they are not below the National Minimum Wage Order as made by the Fair Work Commission, in accordance with Principle 8; or
(6) where the application is consented to by the parties.
4.1 A consent application to make or vary an award may involve parties giving a no extra claims commitment in agreed terms. Such a commitment may take the form of an undertaking to the Commission not to pursue claims for extra or reduced terms and conditions that would take effect during the nominal term of the award, with or without identified exceptions.
4.2 Absent extraordinary circumstances, the Commission will not vary or make an award that is inconsistent with a no extra claims commitment unless otherwise expressly permitted by the award or by consent of the parties.
4.3 The Commission will not include in an award a clause that prohibits a party making an application under the Act or participating in proceedings under the Act.
5.1 There is a presumption that test case standards established and/or revised by a Full Bench of the Commission will be incorporated into an award on application.
6.1 Following the completion of an Annual Wage Review by the Fair Work Commission, the Commission will issue a notice to show cause why that National decision should not be adopted wholly or partly and with or without modification for certain minimum rates awards and for paid rates awards that apply to the public sector, which will be determined at a State Wage Case hearing.
6.2 In the State Wage Case hearing the Commission will determine a minimum rates adjustment for the following awards:
(1) Kindergartens and Child Care Centres (State) Award;
(2) Health, Fitness and Indoor Sports Centres (State) Award;
(3) Transport Industry (State) Award;
(4) Local Government (Electricians) (State) Award;
(5) Entertainment and Broadcasting Industry - Live Theatre and Concert (State) Award;
(6) Local Government Aged Disability and Home Care (State) Award; and
(7) Nurses’ (Local Government) Residential Aged Care Consolidated (State) Award 2021.;
and vary them to give effect to that minimum rates adjustment, provided that each award contains the following clause:
“The rates of pay in this award include the adjustments payable under the State Wage Case for the relevant year. These adjustments may be offset against:
(i) any equivalent over award payments, and/or
(ii) award wage increases other than State Wage Case adjustments.”
6.3 In the State Wage Case hearing the Commission may determine a paid rates adjustment for paid rates awards that apply to the public sector.
6.4 A paid rates adjustment will be determined having due regard to all the circumstances including:
(1) the National Ddecision;
(2) its application to paid rates awards;
(3) the terms of the no extra claims undertaking required;
(4) changes in the value of money since the last State Wage Case; and
(5) the mandatory considerations in Principle 2, including the need to ensure that awards remain fair and reasonable, the likely effect of the decisions on the New South Wales economy, and the fiscal position and outlook of government.
6.5 For the avoidance of doubt, the paid rates adjustment need not be the same as the minimum rates adjustment and need not equate to the rate of inflation over the previous 12 months.
6.6 Following the making of a paid rates adjustment, a public sector award may, on application, be varied to apply that adjustment and extend its nominal term for 12 months from the date the adjustment takes effect, having regard to:
(1) the status of bargaining between the parties to the Award; and
(2) the likelihood of that bargaining concluding in a timely fashion;
but only where:
(3) the nominal term of the award has expired;
(4) the last increase in rates of pay for ordinary hours for most or all employees covered by the award took effect more than 12 months earlier; and
(5) each union which is a party to the award gives to the Commission a no extra claims undertaking in the following terms or in such other terms as the parties agree:
“[Name of union] undertakes not to pursue any further claims to amend the award in proceedings before the Industrial Relations Commission in respect of employees covered by the award that would take effect during its nominal term. This undertaking does not prevent:
(i) participation in collaborative discussions to amend the award by means of mutual gains bargaining or otherwise;
(ii) making an application to vary the award by consent;
(iii) participation in a consent arbitration;
(iv) participation in a s 19 review or other proceedings initiated by the Commission or another party that affects the award;
(v) pursuing and giving effect to claims under the Gender Based Undervaluation Principle during the nominal term; or
(vi) making an application pursuant to 7.1, 7.3 or 8.1 below.”
6.7 Applications to apply a paid rates adjustment will be dealt with expeditiously.
7.1 Existing allowances which constitute a reimbursement of expenses incurred may be adjusted from time to time where appropriate to reflect relevant changes in the level of such expenses.
7.2 If an order is made pursuant to Principle 6 for an adjustment to be made to the applicable award, that adjustment will also apply to existing allowances which relate to work or conditions which have not changed other than in line with whole of award salary adjustments, including shift allowances expressed as monetary amounts and service increments.
7.3 New allowances may be awarded to compensate for the reimbursement of expenses incurred where appropriate.
7.4 Otherwise, applications to increase existing allowances or create new allowances in the absence of consent will be determined in accordance with the Arbitrated Case Principle.
8.1 The Commission will vary an award on application or on its own motion to increase a rate of pay in an award which is below the minimum rate set by the National Minimum Wage Order as made by the Fair Work Commission from time to time.
9.1 Other than as allowed elsewhere in these Principles, an application for increases in remuneration (including for new service increments or superannuation contributions higher than those mandated by Commonwealth legislation) or changes in conditions in awards, will be determined as an Arbitrated Case and, unless otherwise allocated by the President, will be heard by a Full Bench of the Commission.
9.2 An Arbitrated Case may be granted if it meets one or more of the following criteria:
(1) there has been a change in work value that meets the requirements of the Work Value Changes Principle;
(2) there has been an increase in productivity or efficiency in respect of public sector awards that meets the requirements in the Productivity and Efficiency Principle;
(3) the application addresses undervaluation on a gender basis in accordance with the Gender Based Undervaluation Principle;
(4) a special case is established in accordance with the Special Case Principle; and
(5) there has been a change in the value of money justifying a change in rates of pay and conditions for public sector employees.
9.3 When determining an Arbitrated Case, the Commission will have regard to changes in the value of money which ordinarily will be since the effective date of the last wage rate adjustment.
9.3A When determining an Arbitrated Case the Commission may grant a minor claim that does not meet any of the criteria in Ssubprinciple 9.2 where satisfied it is appropriate to do so. A minor claim is a claim to modernise or improve an award in a manner that neither alters remuneration nor significantly alters conditions of employment.
9.4 Following determination of an Arbitrated Case the Commission will not include a no extra claims clause in the settled award, but may identify in the decision the extent to which it is open to parties to the award to make further claims that would take effect during the life of the resultant award.
9.5 Claims that are based substantially on comparative wage justice will not be countenanced other than to the extent contemplated by the Gender Based Undervaluation Principle. Claims that are based on rates paid to other employees doing similar or comparable work will not be countenanced, other than:
(1) to the extent contemplated by the Gender Based Undervaluation Principle; or
(2) in circumstances where there is an established nexus between the rates in question or a case is established that such a nexus should be established; or
(3) to assist the Commission to ascertain an appropriate wage rate after having reached a conclusion that an increase in wage rates is otherwise justified under one of the Arbitrated Case Principles.
9.6 There will be no double counting, provided however, that an Arbitrated Case may rely upon a cumulation of the factors referred to in these Principles.
9.7 In the following Principles the expression “the conditions under which the work is performed” relates to the environment in which the work is done.
10.1 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 an increase in remuneration to reflect the changed value of the work.
10.2 In addition to meeting the test in subprinciple 10.1, a party making a work value application will need to justify any change to wage relativities that might result not only within the relevant internal award structure but also against any external classification to which that structure is related. There must be no likelihood of wage leapfrogging arising out of changes in relative position.
10.3 The foregoing circumstances are the only ones in which rates may be altered on the ground of work value under this Principle and the altered rates may be applied only to employees whose work has changed.
10.4 In applying the Work Value Changes principle, the Commission will have regard to the need for any alterations to wage relativities between awards to be based on skill, responsibility and the conditions under which work is performed.
10.53 Changes in the nature of the work, skill and responsibility required or the conditions under which work is performed that are not recognised by an existing rate of pay or allowance that meet the test in subprinciple 10.1 are to be compensated as follows:
(1) where all employees in a classification are required to hold and maintain the relevant skills and/or qualifications to perform particular or similar work, and are required to perform it from time to time, this is to be reflected in the rate of pay for the classification;
(2) where a particular employee or employees within a classification are required to hold and maintain particular skills and/or qualifications to perform the work that are in addition to those otherwise required by those employed in that classification, and can be required at any time to perform that work, this is appropriately compensated by an all-purpose allowance payable to that employee or employees instead of by increasing the rate for the classification as a whole;
(3) where new or changed work is work that can be requested of any employee in a classification from time to time, but only arises occasionally and does not form part of the core work for that classification, this is appropriately compensated for by an incident allowance; and
(4) where the addition or alteration to work is related to particular conditions under which the work is performed, and the conditions only arise from time to time, this is appropriately compensated for by a disability allowance.
10.64 The time from which work value changes in an award should be measured is the date of operation of any adjustment arising from the last work value inquiry or the date of a consent award where the parties agreed that the wage increases in the consent award reflect or include increases in work value, whichever is the later.
10.75 Care should be exercised to ensure that changes that were taken into account in any previous work value adjustments or in a structural efficiency exercise are not included in any work evaluation under this Principle.
10.86 Where the tests specified in subprinciple 10.1 are met, an assessment will have to be made as to how that alteration should be measured in monetary terms. Such assessment will normally be based on the previous work requirements, the wage previously fixed for the work and the nature and extent of the change in work or the date of a consent award in which the parties have agreed that the wage increases reflect increases in work value.
10.97 The Commission will guard against contrived classifications and over-classification of jobs.
10.8 The Commission may determine an Arbitrated Case concerning an award covering a large number of employees by relying on evidence from one or more sample classifications, where the parties have agreed to that approach and the Commission is satisfied that the classifications nominated as samples are adequately representative.
11.1 Productivity or efficiency measures that have delivered substantial cost 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) to achieve an improved quality of service, and/or 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, provided that the time from which such measures, savings or improvements are measured is the later of:
(1) the date of the last adjustment awarded on account of productivity and efficiency; or
(2) the date of a consent award in which parties have agreed that the wage increases incorporate an adjustment made under this Principle.
11.2 Productivity or efficiency improvements in the public sector could arise from:
(1) delivering the same service (quality or quantity) with fewer inputs;
(2) delivering a better service (quality or quantity) with the same inputs;
(3) achieving a large reduction of inputs, with a relatively slight reduction in service quality/quantity; and/or
(4) achieving a large improvement in service quality/quantity, with a relatively small increase of inputs.
11.3 The following are not productivity or efficiency improvements in the public sector:
(1) gaining a small improvement in output with a proportionate or relatively large increase in inputs;
(2) achieving a small reduction in inputs with a proportionate or relatively larger reduction in service quality/quantity;
(3) gaining a small improvement in quality, with no extra inputs, but with a relatively large reduction in output;
(4) slightly boosting output, with no extra inputs, but with a relatively large reduction in quality.
11.4 For the avoidance of doubt, it is not necessary to identify cost savings before an increase can be awarded under this Principle.
11.5 This Principle does not apply to Local Government awards.
12.1 Claims may be made for an alteration in wage rates or other conditions of employment on the basis that the work, skill and responsibility required, or the conditions under which work is performed, have historically been, or are presently, undervalued on the basis of gender.
12.2 Where such a claim is established, the Commission will seek to ensure that wage rates and conditions of employment properly reflect the value of the work, skill and responsibility required and/or the conditions under which the work is performed.
12.3 Where the undervaluation is sought to be demonstrated by reference to any comparator awards or classifications, the assessment is not to have regard to factors incorporated in the rates of such other awards which do not reflect the value of work, such as labour market attraction or retention rates or productivity factors.
12.4 The application of any formula, which is inconsistent with proper consideration of the value of the work performed, including where such formulas may themselves have been the result or product of gendered conceptions of the value of the work the subject of the application, is inappropriate to the implementation of this Principle.
12.5 The assessment of wage rates and other conditions of employment under this Principle is to have regard to the history of the award concerned, including any historical gendered conceptions of the value of the work the subject of the application.
12.6 Where the requirements of this Principle have been satisfied, an assessment will be made as to how the undervaluation should be addressed in money terms or by other changes in conditions of employment, such as reclassification of the work, establishment of new career paths or changes in incremental scales. Such assessments will have regard to the wages and conditions of employment previously fixed for the work and the nature and extent of the undervaluation established.
12.7 In applying the previous paragraph, consideration is to be given to measures to address so far as possible, consistent with achieving the outcome in 12.2 above, a legitimate concern that changes in wage relativities, not only within the award in question but also against external classifications to which the award structure is related, will give to rise to claims that would cause wage leapfrogging.
12.87 Any changes made to the award as a result of this assessment may be phased in and consideration is to be given, where relevant, to whether any increase in award rates can be absorbed in individual employees' over-award payments.
12.98 The Commission will guard against contrived classifications and over-classification of jobs.
12.109 Equal remuneration will not be achieved by reducing any current wage rates or other conditions of employment.
13.1 A new award or a variation to an existing award can be granted otherwise than under one or more of the preceding Arbitrated Case pPrinciples where an applicant can demonstrate that the matter has special attributes or is out of the ordinary in a manner that warrants approval by the Commission despite the restrictive considerations imposed by these pPrinciples.
13.2 Care should be taken not to rely on factors already taken into account in establishing a predecessor award.
14.1 When considering an application for a new award or the variation of an award, including the timetabling of such an application, the Commission will have regard to whether the parties have complied with the following.
14.2 In respect of the commencement of negotiations for a new award:
(1) a party contemplating a major industrial case must notify the Commission and the other relevant parties at least three months before the nominal expiry date of the award that it is their intention to enter into negotiations for a new award in respect of claims justified under one or more of the Arbitrated Case criteria or otherwise;
(2) the parties to the award must begin negotiations as soon as is practicable after the notification has been given. In this regard, once a written claim has been made by one party on another party, then if negotiations have not already commenced they must begin within 28 days unless it is agreed by the parties to commence negotiations at a later time;
(3) prior to or at the outset of negotiations, a party can make a reasonable request to another party for relevant information to be used for the purpose of evaluating options or developing claims and that request will not be unreasonably refused;
(4) disputes about these procedures will be dealt with in accordance with the dispute resolution procedures in the relevant award applying to the parties to the dispute.
14.3 In respect of any claim to alter existing wages and conditions, including to modernise or consolidate awards, each party is to bargain in good faith prior to any arbitration commencing. In particular, parties are to:
(1) consider whether to enter into mutual gains bargaining under Chapter 2A of the Act;
(2) attend meetings they have agreed to attend and be represented at the negotiations by persons capable of giving genuine consideration and reasoned responses to the proposals of other parties;
(3) comply with agreed or reasonable negotiating or meeting procedures;
(4) disclose relevant information for the purposes of negotiation;
(5) respond to each other's claims and/or counter claims in a reasonable and timely manner; and
(6) to the extent that agreement is reached, apply by consent to the Commission to make a new award or vary an award to give effect to that agreement.
14.4 The good faith bargaining requirements do not require a party to:
(1) make concessions during bargaining; or
(2) reach agreement on the terms that are to be included in the agreement.
14.5 In respect of any claim to alter existing wages and conditions in an award, the parties are to confer a reasonable period before the commencement of arbitration to discuss, and where possible agree upon, procedural matters, such as the preparation of evidence based on sample classifications.
15.1 Any employer or group of employers bound by an award may apply, temporarily or otherwise, to reduce, postpone and/or phase in the application of any increase in labour costs determined under the Principles on the ground of very serious or extreme economic adversity. The merit of such an application will be determined on a case by case basis and any relevant material shall be rigorously tested. Significant unemployment or other serious consequences for the employees and employers concerned are important factors to be taken into account in assessing the merit of any application.
15.2 Such an application will be processed according to the Special Case Principle.
15.3 Any decision to temporarily reduce or postpone an increase will be subject to a further review, the date of which will be determined by the Commission at the time it decides any application under this Principle.
16.1 These Principles apply to:
(1) any application to make or vary an award that is made on or after the date of commencement of these Principles; and
(2) any such application filed prior to that time where the hearing of the matter has not commenced as at the date of the commencement of these Principles (directions hearings will not count for this purpose).
17.1 These Principles will operate on and from 5 December 2025 [insert] 2026 until further order of the Commission.
**********
Subprinciple 6.3 of the Award Making Principles excludes local government awards from the operation of the paid rates adjustment mechanism.
State Wage Case 2025 (No 3) (2025) 348 IR 297; [2025] NSWIRComm 36 at the Annexure.
State Wage Case 2024 (No 3) (2024) 337 IR 111; [2024] NSWIRComm 19 at [93]–[94].
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33 at [47].
Industrial Relations Act 1996 (NSW) s 146(2).
State Wage Case 2024 (No 3) (2024) 337 IR 111; [2024] NSWIRComm 19 at [95].
State Wage Case 2024 (No 3) (2024) 337 IR 111; [2024] NSWIRComm 19 at [95].
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33 at [47].
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33 at [52].
Reserve Bank of Australia, Statement on Monetary Policy (August 2026).
Reserve Bank of Australia, Statement on Monetary Policy (August 2026).
We note Dr James Stanford’s evidence that consumer prices in Sydney grew 4.01% on average over the 12 months ending in June 2026, however nothing turns on this minor discrepancy.
Annual Wage Review 2026 (2026) 348 IR 1; [2026] FWCFB 3500.
Fire Brigade Employees’ Union v Industrial Relations Secretary (on behalf of Fire and Rescue NSW) (2025) 348 IR 350; [2025] NSWIRComm 1063 at [136].
Fire Brigade Employees’ Union v Industrial Relations Secretary (on behalf of Fire and Rescue NSW) (2025) 348 IR 350; [2025] NSWIRComm 1063 at [126].
(November 2025) at [11.23]–[11.26].
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33 at [37].
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33.
(2025) 348 IR 194; [2025] NSWIRComm 33 at [51].
Consumer Price Index: Concept, Sources and Methods (November 2025) at [11.26].
State Wage Case 1983 (1983) 5 IR 1; State Wage Case 2024 (No 3) (2024) 337 IR 111; [2024] NSWIRComm 19 at [2]–[3].
(2025) 348 IR 297; [2025] NSWIRComm 36.
Industrial Relations Act 1996 (NSW) s 21(2)(b); State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33 at [4].
(2025) 348 IR 194; [2025] NSWIRComm 33.
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33 at [74].
State Wage Case 2025 (No 2) (2025) 348 IR 194; [2025] NSWIRComm 33 at [75]–[77].
(2025) 348 IR 194; [2025] NSWIRComm 33.
Crown Employees (Police Officers - 2009) Award (2012) 220 IR 1; [2012] NSWIRComm 23.
Health Secretary, Ministry of Health v Australian Salaried Medical Officers’ Federation (New South Wales) (No 2) (2025) 348 IR 131; [2025] NSWIRComm 27 at [34]–[37], [42]; Re Public Service Board and Public Service Association of New South Wales (Local Court Anomaly Case) [1989] AR (NSW) 638 at 645; State Wage Case 2024 (No 3) (2024) 337 IR 111; [2024] NSWIRComm 19 at [165], [169].
Wage Fixing Principles Case (1978) 211 CAR 268 at 294.
New South Wales Nurses and Midwives’ Association v Health Secretary [2026] NSWIRComm 4 at [221]–[223], [734].
Typographical amendment to a representative listed on the cover sheet.
[2026] FWCFB 3500
(2026) 348 IR 1
(2012) 220 IR 1
(2025) 348 IR 350
(2025) 348 IR 131
(1983) 5 IR 1
(2024) 337 IR 111
(2025) 348 IR 194
(2025) 348 IR 297
Against that background, we turn to the cases presented by the parties.
identifying the rates of pay of the sample employees over the course of both the year ending in June 2026 and the previous year;
determining changes in real wages between those two years by applying a deflator—in this regard Dr Heath considered the NSW Household Final Consumption Expenditure (NSW HFCE) deflator to be the most appropriate, but also provided calculations using the Sydney CPI (headline) and Australian CPI (headline) measures; and
determining the outcome by comparing the average of real wages for the previous financial year (2024/2025) with the average of real wages for the relevant year (2025/2026).
Dr Heath provided calculations including and excluding the full value of the 0.5% increase in compulsory superannuation contributions that took effect on 1 July 2026.
The two sample classifications Dr Heath was asked to use to prepare her calculations were:
Senior Education Officers, Grade 2 covered by the Crown Employees (New South Wales Education Standards Authority – Education Officers) Salaries and Conditions Award 2024; and
Senior Firefighters covered by the Crown Employees (Fire and Rescue NSW Permanent Firefighting Staff) Award 2024.
Even if we accepted the sample-based approach, the Senior Firefighter classification rate is not a suitable representative sample. That is so for three reasons.
First, the rates for employees within that classification increased on 26 February 2025 and 26 February 2026 rather than on 1 July of those years, confounding comparisons with the average remuneration in that classification with other classifications whose rates increased on 1 July, including Senior Education Officers, Grade 2, over the preceding two years. Second, and relatedly, Senior Firefighters received a pay increase which took effect only four months earlier, making them ineligible for a paid rates adjustment until February 2027 and thus not an ideal comparator. Third, the increases in February 2025 (4%) and February 2026 (6%) (and an earlier increase of 4% in February 2024) were above-inflation increases reflecting an arbitrated outcome that the previous rate was no longer fair and reasonable and needed to be increased to recognise the value of the work performed and to reflect past changes in the cost of living prior to February 2024, as well as to address current and projected changes in the cost of living. [14] The rate set effective February 2026 ought to be regarded as the starting point for any subsequent increases to maintain its real value.
Dr Heath expressed the opinion that the 0.5% increase in compulsory superannuation contributions which took effect on 1 July 2026 should be considered as a matter relevant to the quantum of any paid rates adjustment. She accepted in cross-examination, however, that including the full value of the increase in superannuation was not consistent with studies that she cited in her report that suggest that while additional superannuation increases the amount workers spend of their present income, it is not dollar-for-dollar. We are mindful that any increase awarded due to changes in the real value of wages will have consequential effects for the subsequent calculation of superannuation, leave and other entitlements payable to employees covered by an affected award. [15]
Dr Heath, using her preferred methodology of averaging and applying the NSW HFCE, calculated the year-on-year real wage change from 2024–25 to 2025–26 in respect of a Senior Education Officer, Grade 2 to be:
It is unusual in industrial relations practice to use the NSW HFCE deflator—normally, published data from the ABS’ CPI is relied upon to measure changes in overall consumer prices.
The difference between annual (as per the CPI) and quarterly (as per the NSW HFCE) adjustments to the basket of goods and services is not material when measuring the general trend of inflation and should have no bearing at all when measuring how real wages for state public sector employees have evolved over an entire year. If anything, intra-year basket adjustments lend a small downward bias to estimates of the impact of inflation on the real purchasing power of employees covered by awards eligible for a paid rates adjustment.
While consumers may alter their consumption in response to changes in relative prices of different products and services, that does not mean that the effects of inflation have thereby been avoided, as the act of altering the composition of consumption as a result of inflation is itself a cost to consumers, measured in inconvenience and diminished utility, since they are no longer able to purchase the bundle of goods and services they originally preferred.
The NSW HFCE is designed to assist in the calculation of gross domestic product (GDP) and hence only captures the consumption of currently produced goods and services.
The national HFCE calculated by the ABS (from which NSW Treasury derives the NSW HFCE) is based on sample data collected from numerous different surveys and administrative data sources (including retail data, bank transactions, surveys from samples of households, and other sources). This data is combined into a comprehensive estimate of overall spending that is benchmarked and adjusted against annual revisions to the ABS’ supply-use tables. This data is thus an approximate estimate and cannot fully or perfectly reflect the composition of state-wide consumption patterns. Moreover, because of the nature of the rotating sampling used to construct some of the inputs to HFCE estimates, it does not immediately and fully capture changes in consumer spending and thus tends to reflect changes in inflation with a lag. Further, because of the composite and synthetic nature of this process of constructing estimates of HFCE (and other macroeconomic aggregates), ABS national accounts data is regularly subject to revisions (as new data is gathered, and data is re-benchmarked against complementary sources for consistency). These revisions can retroactively change previously published data on household spending in both nominal and real terms, and hence also change the implicit price deflator which is calculated as the ratio of those two measures.
NSW HFCE figures are not published by the ABS, in part because the uncertainly associated with the macroeconomic estimates used to calculate the national accounts and to derive the implicit HFCE deflator becomes more significant when the sample sizes are reduced from the national level to the state level. In short, NSW HFCE is not necessarily a more accurate statewide price index than the Sydney or Australian CPI.
NSW HFCE includes categories of spending the cost of which is not directly incurred by households, such as health care and education. Including these costs, which do not necessarily follow broader cost and inflation trends in the market economy, as a component of ‘consumer inflation’ does not fit well with the task of considering the purchasing power of employees’ wages.
While the methodology used by Dr Heath (and NSW Treasury) to construct NSW HFCE appears reasonable, “the use of an unpublished, custom-made price index for purposes of important industrial relations decisions is concerning, since the resulting data is not transparent or universally accessible”.
Dr Stanford opined that while neither the NSW HFCE deflator nor the CPI were perfect measures of inflation, CPI was the preferable measure for the purposes of setting a paid rates adjustment for the following reasons:
CPI is based on actual observations of prevailing prices each month and so is a more objective measure than the HFCE deflator;
CPI includes some non-currently produced goods and services (such as used cars) which are excluded from HFCE measures;
CPI includes user fees actually paid by consumers for public services (such as municipal charges, health care co-payments, and other ancillary charges), but not the main cost of producing public services (such as public schools and hospitals), which are included in HFCE measures despite consumers not having to pay for them directly;
CPI includes a measure for new home construction, unlike the HFCE, and so comes closer to measuring the impact of rising home prices on the cost of living; and
CPI is reported by the ABS on a monthly basis, and the associated inflation data is released two-to-three months earlier than implicit price deflators calculated in the quarterly national accounts.
We accept that NSW HFCE has utility as a measure of inflation and that unlike CPI, it better reflects changes to consumer behaviour in response to movements in prices. That feature, however, also limits its usefulness as a measure of changes in the value of money as experienced by employees. As counsel for Unions NSW submitted, the index “treats substitution as a costless exercise”. In doing so, it overlooks the inconvenience and loss of utility associated with foregone consumer preferences. Clearly an employee loses something when, for example, due to price rises they are forced to holiday locally rather than their preferred interstate or overseas location.
For the reasons identified by Dr Stanford we do not consider NSW HFCE superior to CPI for the task of determining changes in the value of money for the purpose of the paid rates adjustment mechanism.
The practical difficulties in using the NSW HFCE also weigh against its use for present purposes, namely:
The NSW HFCE deflator is not published by the ABS in a form accessible to the Commission or to the public. Its use would require the Commission to undertake or commission economic research each year or require a party to produce the required figure.
The NSW HFCE deflator for the year ending in June is not available until the end of August. It was not available at the time of the hearing, requiring Dr Heath to estimate the figure for the final quarter in order to conduct her calculations. This difficulty is compounded by the fact that her report did not identify the NSW HFCE deflator on which those calculations depended.
As explained by Dr Stanford, after it is published, the national HFCE is revised from time to time as more accurate data is obtained, requiring revision of the NSW HFCE.
Dr Stanford was also critical of Dr Heath’s financial-year-average methodology for calculating the change in real wages. He calculated the change in real wages of a Senior Education Officer, Grade 2, using a ‘point-in-time’ approach which revealed the following:
greater wage volatility, reducing predictability for both employers and employees and in turn affecting their capacity or confidence to make longer-term decisions;
reduction in the reliability of the Government’s budget forecasts thereby increasing fiscal risk;
a diminution in the attractiveness of bargained outcomes, thereby delaying or limiting the implementation of reforms or costs savings; and
additional inflationary pressure, particularly where the adjustment exceeds improvements in productivity.
We consider these concerns to be overstated. Inflation for the year ending in June 2026 is what it is, regardless of the paid rates adjustment we determine. It will no doubt influence the bargaining positions of negotiating parties. The paid rates adjustment we determine should not be understood as a determination that all public sector employees ought to receive an increase at the same level during 2026–27. Some employees will inevitably receive a lower increase and others a higher one. The outcome for a particular cohort will depend upon the range of considerations relevant to the award which applies to them, including any other increases they obtain over the course of a multi-year agreement, which will include years in which inflation may be higher or lower.
Lastly, the Secretary urged general caution in setting the paid rates adjustment, having regard to the risks and uncertainties in the state of the NSW economy. As Dr Heath opined:
there are continuing inflationary pressures;
the labour market is tight;
productivity growth is weak, which constrains the economy’s supply capacity; and
the economic outlook broadly is uncertain in light of ongoing global geopolitical uncertainty.
As noted above, Unions NSW sought an increase of 4.5%. It observed that this was less than the 4.75% annual wage review increase awarded by the Fair Work Commission, acknowledging that inflation had moderated in the June quarter resulting in lower inflation than the Fair Work Commission had anticipated. However, it also submitted that the annual wage review, being a National decision within the meaning of s 48 of the IR Act, was a matter that the Full Bench is obliged to give consideration to pursuant to s 50. It noted that from 2019–25, the annual wage review increases awarded by the Fair Work Commission have outstripped increases awarded by State Wage Case decisions, such that “as things stand, there is no coherence between federal and NSW wage fixation”. One reason for that of course is that until September 2023, the public sector was subject to a 2.5% wages cap. Unions NSW submitted that “[i]f the National Decisions are to be treated as relevant, the discordance between national and state outcomes is a factor weighing in favour of a higher [paid rates adjustment]”.
In further support of a paid rates adjustment above CPI, Unions NSW pointed to the decline in the real value of NSW public sector wages over preceding years and to the fact that the Full Bench in the State Wage Case 2025 (No 2) set a paid rates adjustment of 3%, above all measures of CPI, in part because “the diminution in the real value of award rates in 2020–24 is such that it [was] not inappropriate to have a slightly higher than CPI increase”. [19]
Unions NSW contended that this supported an increase which would indeed establish a floor for future bargaining to ensure wages would not be allowed to fall as a result of the bargaining process absent some fiscal or economic exigency.
Unions NSW submitted that the evidence concerning the NSW economy and the Government’s fiscal position and outlook demonstrated improvement on recent years, and that any paid rates adjustment which might realistically be awarded would have negligible budgetary impacts.
We accept that the impact of the decision on the economy of NSW is a matter that in some years might be significant. We note in that regard the evidence of Dr Heath that wage increases which outpace productivity contribute to inflationary pressures and may have a spill-over effect on private sector employees, who may demand wage increases in line with their public sector counterparts.
We also accept that our decision may impact the fiscal position and outlook of the Government. The significance of that consideration may vary from year to year. We have had regard to Ms Livingstone’s evidence that in years where a greater proportion of employees become eligible for a paid rates adjustment, an excessive increase could affect the State’s return to a sustainable operating position and surplus. It may also result in the withdrawal of essential services. These possibilities may be a significant factor depending upon the Government’s gross debt and reliance on borrowing amid a background of steady inflation.
However, noting the limited number of employees who stand to be affected by this decision, there is no suggestion that it would have a significant effect on the NSW economy, nor the fiscal position and outlook of Government. For the reasons set out above, we do not consider that it will have an indirect flow-on effect. Accordingly, while we have regard to those factors, they do not alter the conclusion we have otherwise reached.
Finally, we agree that the Arbitrated Case Principles are not well suited to conditions claims that do not amount in effect to an improvement in remuneration. However, it is not always easy to distinguish between conditions matters that do and do not affect the take-home pay of employees. For example, providing employees with the right to free parking at work does not change their remuneration but does provide them with a monetary benefit if they are currently paying for parking that may come at a considerable cost to the employer. Subprinciple 9.3A already excludes “minor claims”, defined to include claims that do not “significantly” alter conditions of employment, from the application of the Arbitrated Case Principles. That subprinciple we consider continues to be appropriate and should be sufficient to allow conditions claims that do not affect remuneration to be considered and determined without requiring the application of the Arbitrated Case Principles.