The Federal Government has been questioned over a potential $7.4 billion budget shortfall attributed to wage growth in the Australian Public Service (APS).

Treasurer Jim Chalmers and Finance Minister Katy Gallagher have fiercely defended the budget, dismissing suggestions of fiscal mismanagement.

Media analysis has highlighted an apparent discrepancy in the budget’s accounting for wage growth and APS expansion from 2025 to 2028. 

Under a new Enterprise Bargaining Agreement, the APS’s 185,000 employees are set to receive an 11.2 per cent wage increase over three years, ending in March 2026. 

Despite this, the Mid-Year Economic and Fiscal Outlook (MYEFO) assumes no further wage growth beyond 2025, keeping the APS wage bill static at $30 billion annually until 2028.

This projection contrasts with the government’s plan to hire more public servants to reduce reliance on contractors. 

Critics argue that the flatline assumption could underestimate the financial impact of wage rises and workforce expansion.

Treasurer Chalmers has defended the budget’s approach, saying departmental funding already includes provisions for wage increases. 

“That’s been standard practice for some time now, and that departmental funding is subject to regular indexation,” he told ABC Radio. 

Minister Gallagher says wage costs are managed within departmental budgets. 

“In terms of EBA, we didn’t supplement the first pay increase over and above the indexation that departments get,” she said.

Shadow Treasurer Angus Taylor criticised the government’s budgetary approach, accusing it of losing control of public spending. 

He reiterated the Coalition’s commitment to cutting 36,000 public sector jobs.

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