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Devaluation could fuel inflation



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RALPH HUNT MEDIA

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DEPUTY LEADER NATIONAL PARTY OF AUSTRALIA

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DEVALUATION COULD FUEL INFLATION

Deputy National Party Leader, Mr Hunt, says the Government must act immediately to free up the rigid wage fixing system and to cut , the level of tariff protection if Australia is to avoid new rounds of inflation flowing from the heavy devaluation of the dollar.

In Sydney today, Mr Hunt said the Australian dollar had devalued 18 per cent against the trade weighted index and 17.6 per cent against the $US since the beginning of February.

Mr Hunt pointed to the findings of a Syntec research team that the current rigid wage fixing system would ensure that the price effect of the devaluation would pass back into wages and therefore, after a delay, into an inflationary spiral.

Today's National Wage Case decision to index wages by another 2.6 per cent meant that the Government should now move as a matter of highest priority to discount any future wage rises for the effects of devaluation.

It should now be clear to everyone that with a free exchange rate and a deregulated financial system Australia cannot continue to have a centralised, highly regulated wage fixation system without there being enormous distortions within the Australian economy, Mr Hunt said.

At the same time, the heavy pressure on costs of production resulting from the increased price of imports meant that immediate attention should be given to an across-the-board tariff cut, he said.

SYDNEY 3 April 1985

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