The Minister for Public Expenditure and Reform has said he hopes there will be engagement this month with unions in public service pay talks.
Speaking on RTÉ's Morning Ireland, Michael McGrath said the Government has to make sure that any deal is fair to public servants "who are impacted by the cost-of-living like everybody else and whose living standards are also under pressure".
The Government had offered a 2.5% pay increase this year and a further 2.5% next year but unions rejected the deal saying it "fell far short" of inflation.
The Government pointed out however that the 5% pay rise offered to unions comes on top of a 2% increase already provided for in the existing public sector pay deal 'Building Momentum'.
Mr McGrath said he believes the proposal made by the Government is a credible one, which, he said, amounted to a total increase of 7% across two years.
He said pay alone cannot fully be expected to offset the impact of inflation, "and that some account has to be taken of the measures already taken by Government and the measures that we have just been speaking about in the past while as well.
"But it is in everyone's interest that a deal is done."
The minister said he also has to ensure that "looking at the overall expenditure position, that it is affordable and sustainable into the future."
He said the Government has "committed to improving on the existing terms of 'Building Momentum’, but the question of how far we can go in an affordable way is one that we continue to consider."
Speaking on the same programme, the President of the Irish Congress of Trade Unions said there was an expectation that public service pay talks would resume at the Workplace Relations Commission, but last week the Government indicated that it "needed more time for reflection".
Kevin Callinan said the offer that was made in June could not be put to members and this stance was given a "resounding endorsement" by the Public Services committee.
"It simply didn't do enough for low and middle-income earners who are struggling like workers across the economy. They're struggling with the cost-of-living issues."
Mr Callinan said it is "quite an unusual situation" because "bizarrely there is no contact" between the unions and Government representatives through the WRC.
He said the WRC said there was no point in resuming talks "when one side, in this case the Government side, wasn't prepared to move its position".
He said that "if one side isn't prepared to move, well, an agreement is really impossible to achieve".
However, he said, the unions "will respond positively" if they get the call to come back to negotiations.
"I think what will bring us back is an assessment by the Workplace Relations Commission that there's a point to the talks process," he said.
Mr Callinan said it has been almost four months since the unions triggered the review clause of 'Building Momentum'.
It is a two-year agreement for last year and this year, he explained, and now inflation for the period is probably heading towards 10%, so unions want to focus on that.
He said the unions wanted to include next year in the negotiations "but now that we haven't been able to resolve matters, we're focusing back now on the current agreement and the pay terms within it".
Mr Callinan said unions want to go back into the negotiations and "want a fair outcome".