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Nice bloke perhaps-but he has to get on top of his figures

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S Κ 2 M edia R elease


21 August 1991


There are some apparent inconsistencies in the Budget numbers which Mr Kerin really should sit down and begin to understand and then explain.

They are important questions and require answers - not just the bluster he employed in Question Time today.

Take the question of wages and inflation, for example.

In the wake of the "barney" which has obviously taken place with the ACTU over wages policy, the Treasurer has let it slip that the forecast wage rise through the financial year ahead is 6.5 per cent. Anyway that's obviously what they promised the ACTU behind closed doors.

That compares with a rise of 3.75 percent through the year in the consumer price index. Is this possible?

After all, the Budget Papers tell us that corporate profits are going to surge as real unit labour costs are going to fall.

The "missing link" which is necessary to explain these apparently divergent and somewhat surprising forecasts, which John Kerin apparently has not yet twigged to, is that the Treasury has put

a very large surge in productivity in the forecasts.

While a pick up in productivity in a strong recovery is a

possibility - output recovers and employment lags - the increase which the Treasury hucksters have slipped in seems very large indeed. Perhaps something in the order of 3 to 5 per cent seems to have been used.

Most unlikely! Especially with micro-economic reform stymied and under a wages system which has continually failed to guarantee any productivity improvement and that has built a worker

expectation that you don't need to do any more to get a wage

increase - indeed, more for less seems to be the expectation that has built up.

But the real worry to business is that any productivity growth that we do get next year has already been promised to the ACTU.

The question, therefore, is whether there is enough left to both restore seriously sagging corporate profitability and hold prices some 2 to 3 percent below wages growth as Mr Kerin's forecasts suggest?

Because it looks very likely there is another hidden "deal" here.

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The ACTU seems to have been told that a recovery is on the way, just hold your horses until the recovery gets going and we will "back load" a big wage rise for you next year.

Indeed, that timing issue is perhaps at the heart of apparent disagreement between the ACTU, which has an average figure of 5 percent, and the Government, which has gone to Budget with an average year on year figure of 4.5 per cent.

But is it really sensible to promise productivity increases in advance to a union movement when the key national requirement is to ensure that a major portion of future productivity growth is used to get our national cost base down, and to restore corporate profitability which is essential to new jobs and investment and


So, Mr Kerin, you should get off your indignant high horse and start to tell us what the wages "deals" and superannuation "deals" with the ACTU will really cost us - in jobs and in

increased inflation - down the track.

Little wonder that neither you nor the Prime Minister are

prepared to give a commitment to achieving price stability.

But you should be aware that failure to commit keeps the money market yield curve positive and the Reserve Bank opposed to further easing in monetary policy.