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Wednesday, 17 August 2005
Page: 71

Mr McARTHUR (2:03 PM) —My question is directed to the Treasurer. Would the Treasurer outline to the House recent information on wage costs? What are the implications of this data for the inflation outlook? Are there any measures that can be taken to further improve labour market outcomes?

Mr COSTELLO (Treasurer) —I thank the honourable member for Corangamite for his question. I can inform him that the labour price index for the June quarter of this year showed a slight acceleration of wage costs, rising four per cent through the year to the June quarter of 2005, which was marginally up from the 3.9 per cent through the year to the March quarter of 2005. These wage costs show that there are real wage increases going on in the community but they are restrained and consistent with low inflation, provided the economy maintains productivity growth. Indeed, the Reserve Bank governor, in his testimony last Friday, noting that the wage cost index was 3.9 per cent, described it as ‘remarkably well behaved’.

The member for Corangamite also asked about measures to improve labour market outcomes. I know that this is of real interest to him because he asked the Governor of the Reserve Bank questions to this effect in Melbourne on Friday. The governor was asked why Europe was showing slow economic growth compared to Australia. The Governor of the Reserve Bank said:

I think the biggest single explanation is that they have very old-fashioned, heavily overregulated economies.

               …              …              …

One of the forms of heavy regulation in Europe is labour market regulation. It is extraordinarily heavy labour market regulation, most of which has the effect—as a lot of regulations do—of protecting the insiders at the expense of the outsiders. So the people in the jobs are very heavily protected, while people trying to get in find it very difficult. That is why they are all running 10 per cent unemployment.

The Reserve Bank governor’s view that heavy labour market regulation leads to higher unemployment is not his alone; it is also the view of the IMF, the OECD and this government. It is not the view of the Australian Labor Party, who believe that they know more than the OECD, the IMF or the Reserve Bank governor. The Australian Labor Party believe that ‘the lemon has been squeezed dry’, to use the phrase of the Leader of the Opposition, and that you cannot do any more with labour market improvement. They have given up on creating more jobs and they have given up on having a stronger economy here in Australia. If you want to get outcomes, you have to engage in reform. It is not enough to sit there and prattle on, as the Leader of the Opposition does, and give the game away. Labour market reform in this country will create more jobs, more opportunities and better wages for Australia.