Defence Force pay: Prime Minister Tony Abbott increases personnel pay offer to 2pc

Defence personnel will be offered a higher pay increase as the Abbott Government continues to try to cast aside unpopular policies.

The Federal Government had been criticised heavily, including from some of its own backbenchers, for offering ADF personnel a pay rise of 1.5 per cent.

It has now lifted that offer to 2 per cent a year for three years.

Prime Minister Tony Abbott said the boost was "fair and reasonable", particularly given the announcement yesterday to send more troops to Iraq.

"It is just above the current inflation rate," he said.

"It is still frugal government, if I may say so, but it is frugal government that acknowledges the special place that the Defence Forces have."

The current inflation rate is 1.7 per cent.

Mr Abbott said recent ADF pay rises had not been as high as those received by the general public service.

"This is a modest catch-up, if you like, as well as an acknowledgement of the special compact between the Australian people and those who wear our uniform," Mr Abbott said.

The Prime Minister ruled out backdating the increased pay offer.

"The new arrangements will start from the next pay period after the Defence remuneration tribunal approves the Government's position," he said in Parliament.

The Government will ask the Chief of the Defence Force to take the proposed pay hike to the Defence Force Remuneration Tribunal.

But the Prime Minister was quick to make it known that the Government's new stance over Defence pay rates would not extend to the general public service, including civilian staff at the Department of Defence.

"We are absolutely insistent that in return for any significant increase, there has to be productivity trade-offs," he said.

"That remains the case."

Opposition defence spokesman Stephen Conroy warned the Government it may have to further increase the offer if inflation rises again.

"If the inflation moves up over the next six months or so or during the course of this three years, then I think we have to revisit it," he said.

"I think it's not acceptable to play petty games like that."

Lambie unconvinced by announcement

Defence staff have been threatening strike action over a pay offer of 1.05 per cent a year for three years in return for a longer working day.

Lifting the pay rates for uniformed staff and retaining the allowances will cost the budget $217 million over the forward estimates.

In December, Mr Abbott announced the Government would not go ahead with planned cuts to allowances for Defence personnel, including Christmas leave.

At the time, he insisted the 1.5 per cent pay rise would remain, given the budget situation.

Crossbench senator Jacqui Lambie, who is a former soldier, was arguably the Government's harshest critic over the Defence pay issue.

The increase has not won her over.

"I can tell you now the feedback coming back from the veterans, their families and the Defence Force personnel so far in the last 45 minutes or so is pretty damaging for the Abbott Government," she said.

The former Palmer United Party senator had declared she would not support any government legislation unless Defence Force personnel were given a better deal.

She said she has not decided if she will change that stance and will consult Defence Force members over the next week before deciding her next move.

Mr Abbott said he had not spoken to Senator Lambie about the increase, nor had he done any deals with her.

Backbenchers push for pay increase

Australian Defence Association spokesman Neil James said the move was sensible and should help lift morale.

"I think most people will take it on face value, given the straightened financial circumstances the Government's in," he said.

Government backbenchers had been pushing for the pay increase, with WA Senator Linda Reynolds and Tasmanian MP Andrew Nikolic putting a formal proposal to the Defence Minister and Prime Minister last week.

Senator Reynolds said a yet-to-be-released review of Defence programs found enough savings to cover the 2 per cent pay increase.

"I don't think it addresses everything but I think in the current circumstance that it is fair, it is appropriate and it is achievable," Senator Reynolds told the ABC.

She had praised the Prime Minister for the "affordable" decision.

"He's listened and he's now acted because we were able to bring to him a proposal that is implementable," she said.

The decision is another move that may serve to quell backbench disquiet about Mr Abbott's leadership style and "captain's calls".