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National wage case decision



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NO. 85

V

TREASURER

EMBARGO I m m e d i a t e R e l e a s e

STATEMENT BY THE TREASURER, THE HON JOHN HOWARD. MP

NATIONAL WAGE CASE DECISION. 14 JULY 1980

Today's decision by the Conciliation and Arbitration Commission to award a 4*2

per cent National Wage increase is no.t' consistent with the needs of the economy

at the present time.

Whilst I welcome the Commission's continued recognition of the need to avoid

passing petroleum product price rises into wages, I am disappointed that the

Commission's allowance for this factor was smaller than that indicated by the

Government's calculations as being warranted.

It would also appear that the Commission did not appreciate the significance of

the Commonwealth's submission that a substantial National Wage increase, coming on

top of sizeable 'work value' increases that have also been granted by the

Commission, would have adverse implications for inflation, economic activity and

employment. .

As the Commonwealth's submission pointed out, the economy needed a "breather" -

time to absorb and check the recent drift to higher inflation that has largely

derived from increases in overseas prices; instead the Commission has fed yet another

large wage increase into an already accelerating upward trend in wage costs. As a

result it is now very likely that the increase iii average weekly earnings will jump

to something over 11 per cent for the year ended" in the December quarter 1980,

compared with 9*8 per cent for the same period in 1979 and 7·5 per cent in the year

before that. In short the Commission has acceded to a sharp acceleration in the rate

of wage inflation over the past two years.

It is also disappointing that, in addition to making inadequate allowance for

the effect of petrol price rises, the Commission did not accept the Commonwealth's

submission on discounting for the effects of health financing policy changes. As

a result, the Commission has fed a n o t . insignificant part of the total

policy-induced component of the CPI movement into wages; it has thereby acted to

frustrate Government policy.

The Commonwealth argued that there should be no National Wage increase, but that

in any case the 5*5 per cent increase in the Consumer Price Index for the six

months ended March ought to be discounted by 1.08 per cent for the direct and

indirect effects of policy-induced petrol price rises and by a further 90 cents

for changes in health care financing if deliberate Commonwealth policy decisions

were not to be frustrated. In total the Commonwealth argued that discounting

equivalent to 1.62 percentage points would, at a minimum, be justified. ✓

The Commission's decision to discount for industrial disputes is welcome, though

the size of the allowance can hardly be said to adequately reflect the costs

which recent high levels of industrial disruption have imposed upon the

businesses concerned - not to mention the adverse effects that have already

impacted on national output. The inadequacy of the Commission's allowance for the

impact of industrial disputation is all the more remarkable when much of the

industrial unrest has been over wage claims, including disguised wage claims,

such as that for a 55 hour week in the metal industry. If successful, such claims

would simply add further to costs and prices, and deny people jobs.

There will now be slower growth in employment and activity in 1980-81 than if the'

Commission had accepted the Commonwealth's submission. However, the policies which

the Government has been pursuing have enhanced business confidence and improved

the underlying economic situation. Even with this decision, there should therefore

be some strengthening in economic activity in 1980-81. But the decision will

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greatly add to the difficulties of economic management and, as mentioned, make for

a weaker outcome than would have been the case. More than ever, it will be

necessary to. maintain the Government's strategy of seeking to reduce

inflationary pressures.

CANBERRA 14 J u l y M 980

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