Federal MPs and other public office holders are set to receive a 4 per cent pay increase - the most substantial salary hike in ten years. 

The decision by the federal independent remuneration tribunal effectively elevates the basic salary of a backbench Member of Parliament (MP) from $217,060 to approximately $225,742, an amount equivalent to more than double the average earnings of a full-time worker. 

The impact is even more pronounced for higher-ranking officials, with Prime Minister Anthony Albanese's pay rising to $586,929 due to a 160 per cent increase over the base MP salary, while opposition leader Peter Dutton will see his earnings reach $417,623, thanks to an 85 per cent increase.

When asked about this pay raise, Albanese pointed to the alleged impartiality of the independent tribunal, saying it is good that politicians are not involved in determining their own compensation.

In a statement following the tribunal's decision, it acknowledged that pay increases over the past decade had been relatively conservative, including a freeze in pay in 2020 and 2021 and a 2.75 per cent rise in July 2022. 

This comes at a time when Australia has experienced a peak inflation rate of 7.8 per cent in December, with projections suggesting inflation will hover around 6 per cent in 2023-24. 

Consequently, despite the nominal salary increase, politicians and public office holders, like many Australians, are effectively experiencing a decrease in their real wages.

The pay increase for public office holders will be retroactive to July 1, while MPs will see their pay hike come into effect on September 1. 

The tribunal also highlighted that, since 2014, it has raised public office holders' pay by 14.75 per cent, significantly less than the 23 per cent average increase in wages in both the public and private sectors during the same period.

The tribunal defended its decision, stating that it is necessary to provide competitive and equitable remuneration that reflects the responsibilities and experience required for these roles and ensures the attraction and retention of capable individuals. 

It was noted that public office holders accept their roles with a different understanding of compensation, recognizing the public service aspect of their positions.

The Australian Bureau of Statistics reported a 3.1 per cent rise in the June 2023 annual wage price index for the public sector and a 3.8 per cent increase in the private sector. 

This decision comes in the wake of a 5.75 per cent pay increase for minimum wage workers ordered by the Fair Work Commission in June.