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Thursday, 24 February 1977

Mr MALCOLM FRASER - It certainly would be disastrous if that situation prevailed. I think honourable gentlemen well understand that there are 4 main arms of economic policy with which a government can try to achieve its objectives- budget policy, monetary policy, external policy and wages policy. In the fight against inflation I have not heard anyone suggesting that budget policy should be tighter, m other words that government expenditure should be cut further than it has been this year. I have not heard any suggestion that monetary policy should be any tighter than it is now. These 2 arms of policy are carrying as much burden in the fight against inflation as I think is reasonable and proper to put on them. External policy is now, as a result of measures that were taken late last year, also bearing an appropriate burden in this particular fight. But one element of policywages policy, which is not within the control of any Commonwealth government- has not been bearing a sufficient share of the burden in the fight against inflation. It is not within the control of the Commonwealth to see that that happens because, whether it likes it or not, the Australian Conciliation and Arbitration Commission is not merely a body whose function it is to settle industrial disputes. It has also by circumstance become a body which in fact determines policy in a significant area of importance for Australia and all Australians.

In Japan, for example, wages in I think the manufacturing industry sector increased by 1 1.8 per cent in the 12 months to September; in the 12 months to December in the United States of America they increased by 8.2 per cent; and in the 12 months to October in Canada they increased by 13.2 per cent, but in Australia they increased by 16.9 per cent over an equivalent period. This still means that wages have been increasing at a faster rate than that of a number of our significant trading partners. Under this circumstance the employment opportunities in Australia are bound to deteriorate unless that trend is reversed.

The figures that I have just indicated make it quite plain that wages policy has not been carrying its share of the burden in the fight against inflation. In addition to that, it ought to be noted that the policies of tax indexation, the changed method of payment for family allowances, the tax cuts which come out of past decisions which will apply from 1 July and which come from tax indexation, materially affect total disposable income. It is not therefore merely a question of the wages or the rate of increase in wages that needs to be looked at in these matters. We have through tax indexation and the family allowances system established a circumstance where people ought to accept and I believe would accept a much greater degree of wage restraint than has occurred over the past 12 months. We have done this in a way in particular which has been designed to protect the lowest paid people in Australia through the revised method of payment of family allowances. We have established by our taxation policies the environment to make wage restraint reasonable and this ought to be understood. It ought to be understood that the policies we have already introduced will result in significant reductions in taxation from 1 July this year flowing out of the indexation decision.

To answer the honourable gentleman's question, all this means that if Australia is to overcome her inflationary problem and if those who are out of work are to have the opportunity of gaining work, as I am sure the great majority of them would want to, a wages policy, together with Budget, monetary and external policies, needs to play an appropriate role in the fight against inflation. That, as honourable gentlemen know, does not depend upon a direct decision of this Government or of this Parliament; it depends upon a direct decision of the Australian Conciliation and Arbitration Commission.

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