The Northern Territory government has backflipped on its wages policy for public servants, with an unpopular four-year pay freeze jettisoned amid union pressure.
About 20,000 government employees will now be offered a compounding two per cent pay rise as a base for wage negotiations with their unions.
"The economic situation has changed significantly, with interest rate rises and Australia experiencing higher than normal inflation," a government spokesman said on Wednesday.
"The NT government is working to reduce the cost of living for Territorians through a number of incentives and schemes."
The pay freeze was introduced in November 2020 in a bid to save more than $400 million amid ongoing territory government deficits and climbing debt levels.
It was accepted by 57 per cent of employees but became increasingly unpopular, with unions attempting to negotiate wage packages for their members, and teachers, firefighters and correctional officers among the workers who took industrial action in recent months.
The NT government said it remained focused on returning the budget to surplus in the medium term.
"Budget 2022 forecasts a general government net operating deficit of $253 million in 2022-23," the spokesman said.
"An improvement of $283 million compared to the position forecasted in last year's budget, and in aggregate is forecast to improve by nearly $1.4 billion over the four years."
The NT's public sector unions welcomed the news, saying the chief minister had listened to firefighters, teachers, dentists, nurses, power and correctional officers.
"This is a great day for public sector union workers who have campaigned hard and taken their anger to the streets," Unions NT secretary Erina Early said.
"We have won the battle to lose the freeze and now our members can now properly negotiate their conditions of employment".
