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Keating ditches his own wages strategy

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Last night's admission by the Treasurer that he would for wages growth next year of around 7 per cent means that he has completely ditched the wage tax strategy he outlined in last year's budget.

According to that strategy, tax cuts were to be used to bring about a major deceleration in wages growth, so that unit labour cost growth in Australia would be brought into line with that of our overseas trading partners.

This was to be a "watershed" in economic management and was to have provided the foundation for a reduction in the inflation rate to around 3-4 per cent.

It is clear that Mr. Keating no longer has the stomach for the hard decisions that are necessary to rescue the economy from its current mess.

Now Mr. Keating says that his goal is merely to prevent a major acceleration in labour cost growth. At best, we will see unit labour costs in this country continue to grow at around twice that of our trading partners, which will simply further undermine our international competitiveness and put even more pressure on

our balance of payments.

Despite Mr. Keating's public comment that the ACTU "will not get what it wants" it is becoming increasingly clear that he has caved in to ACTU pressure.

The Treasurer's speech to EPAC last week did not - despite reports to the contrary - call on the parties to widen the agenda for award restructuring. Instead it endorsed the ACTU approach which will do practically nothing to raise productivity and is

designed to further centralise the wage system by locking in wage relativities.

Based on previous experience there is bound to be some "slippage" in the wages target. This means we will probably be looking at earnings growth next year of around 8 per cent. This implies almost complete adherence to the ACTU's wages claim.

The Government has now effectively given in to the ACTU both on the nature of award restructuring and on the quantum of wage rises that are to accompany it.

24 February 1989

For further information contact Peter Reith (059) 79 3188

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