Treasury said switching from bananas to apples means workers are keeping up just fine
NSW public sector workers just landed a 3.5% pay rise - and the government's own inflation measure went down with it.
The New South Wales Industrial Relations Commission handed down its annual State Wage Case decision on October 8, 2026, setting the paid rates adjustment for public sector awards at 3.5% for the 2026-27 financial year. The figure splits the difference between the NSW Government's preferred 3% and the 4.5% sought by Unions NSW - but the reasoning matters more than the number.
At its core, the case turned on a surprisingly basic question: how should you measure inflation?
The government argued for 3%, matching its own budget, and relied on expert evidence from a senior Treasury official. That evidence introduced a measure called the NSW Household Final Consumption Expenditure deflator - an inflation index calculated internally by NSW Treasury but never published by the Australian Bureau of Statistics. The pitch was that NSW HFCE better captured real household cost pressures because it accounts for changes in consumer behaviour. The go-to example: if bananas get expensive and households switch to apples, NSW HFCE picks up that shift faster than CPI does.
The Commission was not persuaded.
As counsel for Unions NSW put it, the index "treats substitution as a costless exercise." Swapping bananas for apples might keep total spending the same, but the Commission noted that an...
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