Government backs down on ADF pay deal

The federal government is expected to cave in to the demands of Independent Senator Jacqui Lambie and revisit some areas of its controversial ADF pay deal.

Prime Minister Tony Abbott is holding firm on the 1.5 per cent pay rise for the armed forces, but is seeking support to reinstate entitlements including leave benefits, News Corp has reported.

However, Mr Abbott has also confirmed that the 1.5 per cent pay rise will be the most generous offered to any publicly-paid employee and is the best the government can do under its current budget.

It is expected the Prime Minister will meet with Senator Lambie next week to talk with her on the pay deal, before making his announcement.

The reversal will reportedly cost the government less than $20 million.

Senator Lambie has opposed the original deal since it was announced, and has vowed to vote against all government legislation until they agree to re-examine the offer.

She recently joined with a number of other Senators to block the government's proposed financial advice reforms.

Her position lead to her leaving the Palmer United Party and vowing to serve out her term as an Independent, following ongoing conflict with leader Clive Palmer.