Prime Minister Julia Gillard's salary will rise to $481,000 and backbenchers will get a base rate of $185,000 from 2012, under a plan released today.
The Remuneration Tribunal has released its final determination of politicians' and public servant pay, which needs the parliament's approval before it comes into effect.
Tribunal president John Conde told reporters in Sydney the prime minister's new salary would be $481,000 - up from $367,000.
"In our view that is not an unreasonable salary for the prime minister of Australia, whoever he or she may be," Mr Conde said.
It was important that Australia paid its politicians well enough to attract and retain people from all walks of life in the parliament.
Asked whether it was the right time in the economic cycle to be thinking about pay rises, Mr Conde said: "There is never a right time for this.
"It's been a long time coming. We've concluded our work and this is our conclusion."
The annual salary for a backbencher will rise from $141,000 to $185,000.
Mr Conde said he did not believe it was excessive, considering the workload of an MP.
"I think in our view with this level of base salary for a backbencher, the backbencher would continue to set an example of restraint compared to the work they do," Mr Conde said.
The tribunal's report found that the pay rise was justified by the advent of email and social networking.
"Email, Facebook, Twitter and the like have increased community expectations on members as regards their availability to their constituents," it said.
"It is not only the case that it is now easier to contact a local member - the expectation of a speedy response has also increased dramatically.
"As some members at interview noted, this means that they are now never off duty."
The report said it was unfortunate that politicians' pay was treated with such cynicism, especially when the electorate were demanding more from parliamentarians.
They needed to be remunerated sufficiently so as to attract and retain men and women of appropriate capacity.
The tribunal also recommended abolishing the individual overseas study travel entitlement and abolishing the life gold pass scheme for ex-MPs.
A cabinet minister would get 72.5 per cent more than a backbencher, while an MP in the outer-ministry would get a 57.5 per cent bump and a parliamentary secretary 25 per cent.
A shadow cabinet minister would get 25 per cent additional salary.
The pay for the head of the Department of Prime Minister and Cabinet would rise gradually during the next two years, from $661,000 to $825,000.
The Treasury secretary's pay would rise in a similar way from $653,000 from July 1, 2012, to $805,000 by July 1, 2014.
Their base salary at present is $540,000.
Other top federal public servants will be paid between $650,000 and $780,000 a year from mid-2014 after gradual rises.
