News Service from House Harris

Vic: Pay rise cuts to save jobs

MELBOURNE, March 27 AAP - More than 200,000 public sector workers will have their pay rises capped at 2.5 per cent as the Victorian government moves to cut costs not jobs.

In a decision that will save the public wages bill more than $1 billion over four years, pay increases will be slashed from 3.25 per cent a year to 2.5 per cent.

The new wages policy comes into effect on May 4, potentially leaving tens of thousands of workers with pay rises out of step with the increasing cost of living.

Among them are firefighters, who battled Australia's worst bushfire disaster, and coronial staff working to identify fire victims.

Treasurer John Lenders said the cuts would save jobs in the face of growing economic turmoil.

"The state of Victoria, like the rest of the world, needs belt tightening," he said.

"This is a modest and sensible decision, it's a difficult decision for us but it is one that allows us both to enable our workforce to have reasonable pay increases, but, more significantly, allows us to categorically say we will not be in the business of retrenchments."

MPs' wage increases will also be capped at 2.5 per cent.

The consumer price index (CPI) is 3.7 per cent but is expected to fall in coming years.

Public sector workers can only negotiate more if they make productivity improvements.

The wages policy covers public servants across all government departments, agencies and statutory authorities, as well as public sector doctors, nurses, teachers, police, firefighters and paramedics.

Unions were told about the pay rise cut on Friday morning in what the Community and Public Sector Union (CPSU) described as an ambush meeting.

The union is thrashing out a new wages deal for 32,000 public servants.

CPSU state secretary Karen Batt said the public service was already stretched and productivity improvements would mean shedding jobs.

"I think public servants will see it for what it is, which is a kick in the teeth to the fact that they are delivering services to the community in often quite extraordinary circumstances and they never get acknowledged for it," she said.

Agreements with the state's country and metropolitan fire services expire in April.

United Firefighters Union state secretary Peter Marshall said the global financial crisis was being used as an excuse to rip off members.

"Not only do we have severe reservations about what the state government is proposing but we say that it is disrespectful of the efforts that the firefighters have made during Australia's worst bushfire campaign," he told AAP.

Victorian Trades Hall Council secretary Brian Boyd said the changes would affect about half of Victoria's public sector workforce and called on the government to extend the deadline so wage agreements could be finalised first.

The remainder will be affected when current agreements expire.