Public sector pay negotiations have been blown open by a federal government promise to increase the ceiling on pay rises that departments can offer their staff to 2 per cent per year.

Public Service Minister Michaelia Cash announced on Wednesday that Australian Public Service (APS) departmental and agency heads would be allowed to offer up to an additional 0.5 per cent per year when negotiating with their staff, with the proviso that ‘costs [are] to be met within existing budgets.’

The move is a major concession on a pay cap previously set at 4.5 per cent over three years and is likely to kickstart stalled negotiations as the Turnbull government seeks to implement an agenda of major public sector reforms driven by innovation.

“Under the revised framework, agency heads will be provided with more flexibility to conclude bargaining quickly and deliver new enterprise agreements that support the modern and agile public service that Australia needs,” Ms Cash said in a statement.

This leaves open the possibility that savings could be found elsewhere and that the definition of ‘productivity gains’ could be broadened to include technology-driven efficiencies and new ways of working.

Government News foreshadowed a reset in APS bargaining negotiations earlier this week and took a fresh look at what ‘productivity gains’ the government might reasonably expect in return. Read the analysis here.

Unions have argued that slashing 17,000 public sector jobs has already delivered the government massive savings and say this has not been acknowledged as a productivity gain. As well, it remains to be seen whether there is fat left to be trimmed and bright ideas untapped.

Despite union unease that the government will forge ahead with cuts to terms and conditions to extract their measure for measure, the lifting of the pay cap could prove a game changer in a moribund process that has dragged on for more than 18 months and left more than 100 APS enterprise agreements unsigned.

It is a circuit breaker that has been desperately needed, particularly after two rounds of strikes.

Staff at the Department of Agriculture became the latest group of employees to reject their enterprise agreement – of 4.5 per cent over three years – in a 67 per cent ‘no’ vote earlier this week.

The vote followed hot on the heels of Prime Minister and Cabinet staff, who voted 78 per cent in favour of rejecting their enterprise agreement on Monday this week.

But the government is still talking tough on what it expects to get in return for softening its stance on pay rises.

Ms Cash said: “The Australian public expects the public sector to be flexible and responsive to changing demands.

“These reforms will enable employees to receive modest wage increases quickly and still see taxpayers benefit from productivity gains.”

Neither could she resist a dig at the unions when making the concessions.

“The Community and Public Sector Union and others have run a misleading campaign against the Government’s bargaining policy, but have not put forward any solutions that would advance agreement making,” Ms Cash said.

“Instead, the CPSU and others have stuck to their unaffordable and unworkable claims.”

The Minister recently scolded public sector workers for not living in the ‘real world’ and accused some of them of expecting pay rises without delivering efficiencies.