Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table an explanatory memorandum, and I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

This bill establishes caps and reporting requirements for the remuneration of executives in the Commonwealth public service. The Greens believe for the broader issue of excessive executive remuneration to be tackled, and for the pay gap between the rich and the poor to be bridged, this is a good first place to start. Because the government has a role to play in setting public service salaries, Parliament can play a leadership role in tackling growing wage inequality, and set public service executive salaries to better conform to community expectations and standards. There is power and purpose in this symbolism.

Ordinary Australians are coming to realise that the economic reforms of the last thirty-odd years haven't delivered all the benefits that were promised to them. People are beginning to realise that our political and economic system has failed them, and that it favours the wealthy and powerful. The strong sense of this is fuelling discontent with politics and a decline in respect for institutions globally. This growing tide of anti-establishment sentiment will only serve to increase political volatility and introduces its own set of challenges for parliaments.

Globally and in Australia, workers have increased their output, but wages have not kept up with productivity. Companies are making more money, but workers are getting a smaller share of the pie. Ordinary Australians are being asked to accept less security and be more 'flexible', but a casualised workforce is far from relaxing.

There is no more conspicuous example of income inequality that the growing disparity between what executives—our bosses—are paid and what ordinary workers are paid. The spectacle of executives taking home fat pay-packets while wages are growing at the slowest rate on record is emblematic of a system gone wrong. This does not need to be so and should not be so.

There is little evidence that, beyond a certain point, increased remuneration provides an incentive for executives to perform better. Senior executives are rarely as uniquely skilled or as valuable as excessive salaries would suggest.

There is also little evidence that excessive executive salaries make for better workplaces. Conversely, a large pay gap between executives and workers can have a negative impact on employee satisfaction and self-worth.

However, there is evidence to suggest that excessive executive salaries have become self-reinforcing phenomena. Excessive salaries can encourage people motivated by big money to manoeuvre themselves into these positions. In doing so they risk the creation of a rarefied club; and encouraging an organisational culture that emphasises the importance of money rather than the importance of the job: public service. Ultimately, this offers up the self-serving justification: it's the market rate, it must be right.

Well it isn't right, and we should call this out. More broadly, wage inequality is becoming a drag on economic performance and social cohesion. To the extent that executive pay contributes to pay inequity—and is emblematic of it—it should be of concern to anyone interested in a fairer and more prosperous society.

The Commonwealth public service has not been immune from the trend towards excessive executive salaries. Since 2010, the salaries the Senior Executive Service has risen 18%, and that of Commonwealth Departmental Secretaries even more. Over the same period, the salaries of lower ranking public servants have risen just 13%.

This is not acceptable. The current system is clearly failing to reward employees equally. It's time for the Parliament to take additional steps to restore some balance. It's time to make sure everyone in the public service gets a fairer go.

The Public Governance, Performance and Accountability Act 2013 (the Act) sets standards for Commonwealth entities and Commonwealth companies. Within the framework provided by the act, this bill inserts requirements relating to the remuneration of executives.

This bill will establish a cap on the total remuneration of senior executives, inclusive of any performance payments or other bonuses, at five times the average earnings of full-time adults across the Australian public service. The introduction of this cap will close the gap between the wages of public sector executives and those of ordinary Australians. Thereafter, this cap will ensure that public sector executives do not get a pay rise greater than that of average workers.

The effect of this will be to reduce the maximum salary of executives in the public service to an amount, on current figures, in the order of $420,000. This is still a lot of money, and much more than most people earn. However, it would be a significant reduction in salary for the most highly paid public servants, and would cut the wages of some by as much as half.

In time, the introduction of this pay cap is also likely to lead to a reduction, in real terms, of the wages of second tier management. Remuneration in the public service is structured around a hierarchy of pay grades. So as to maintain a premium for the chiefs, second tier management will likely see their wages stagnate for a period while a new hierarchy is established within the cap.

Finally, the introduction of this cap will help break up the 'normalisation' of the club. It will directly challenge the idea that excessive executive pay is inevitable and, in doing so, will set an example for the private sector.

This bill also introduces annual public reporting requirements. Commonwealth departments and companies covered by the act will be required to report annually on the total remuneration of executives, the ratio of total remuneration to the average wage, and the ratio of total remuneration to the minimum wage.

Introducing ongoing transparency and comparisons for executive pay in the public service will ensure that there is a constant reminder of the level of disparity that exists within the wage structure.

If the parliament is to speak with any authority on inequality, then it must lead by example and structure remuneration in the Commonwealth public service in a way that is fair and reasonable. Sky-high executive salaries are an affront on the dignity of ordinary workers, and are deeply unpopular with most Australians. Dramatic pay inequity inherently devalues the efforts of lower-ranking employees. For the sake of respect we need to take steps to put limits on executive pay.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.