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ACTU Secretary says that current high inflation figures will complicate negotiations over wage rises and income tax cuts

PAUL MURPHY: One of the country's key power brokers, the ACTU Secretary Bill Kelty, says yesterday's high inflation figure will make wage tax negotiations with the Hawke Government difficult, but he also says, wage earners should get increases bigger than the rises in the cost of living. But Mr Kelty adds, those increases should come through award restructuring and not through general wage rises. Bill Kelty says, in the long term, workers will be better off through restructuring which will provide greater increases than those available through wage indexation.

Here is our industrial correspondent, Agnes Warren.

AGNES WARREN: ACTU Secretary, Bill Kelty, is pressing ahead with his plan for wage rises to be granted in return for award restructuring, despite this week's bad inflation figure. Mr Kelty rejects calls for a return to wage indexation. He says workers will receive a bigger wage rise through restructuring coupled with a tax cut. For example, he says, pay rises of up to 20 per cent will be available for some low paid workers, with others receiving increases of around 14 per cent. Mr Kelty admits that the inflation figure of 7.7 per cent will make negotiations on the wage tax trade off difficult.

BILL KELTY: I have always said that it is time for an improvement in living standards. You can't get an improvement in living standards if at the end of the day all you are looking at is maintaining real wages through CPI. We have always said - consistently said, that what we want is to improve living standards. We think it is appropriate that that improvement take place. We believe it is appropriate to take place for a combination of wages and tax and that has always been our views.

AGNES WARREN: And as inflation creeps up, is it going to make your job harder to achieve that goal?

BILL KELTY: I think it would be silly not to pretend that a higher rate of inflation makes the task easier; it makes it harder; it does make it harder. We believe that the first test for the Government is to honour their commitment to maintain real wages, living standards, during the course of this financial year, and consequently, the first test will be whether the Government is prepared to do that.

AGNES WARREN: You were banking on a figure of around 6 per cent. How difficult is it going to be with the inflation climbing the way it seems to be?

BILL KELTY: I think there are particular reasons for the rate of inflation. When you look at it, you have got an underlying rate of inflation of about 6 per cent, but you do have special factors, mainly land prices in Sydney and Melbourne.

AGNES WARREN: What is your view of removing the housing component from the CPI Index?

BILL KELTY: We are not in favour of removing the component from the Index. What we are in favour of is looking at the way in which real incomes can be maintained in the most effective way. It would be an artificial exercise just simply to remove it.

AGNES WARREN: So, what do you mean by that? What should happen?

BILL KELTY: I think you have got to look at the fundamental causes of inflation. Look at what the effect is in terms of each geographical region; look at the overall effect in terms of the nation; look at whether there is two ways to handle the issue: one is a general wage increase for everybody arising out of the adjustment process, or deal specifically with the issue of housing so that the basic objective is met. The basic objective has to be the maintenance of living standards.

AGNES WARREN: The first real test of the union movement's position on wages will come on February 9th, when a special unions conference will be held to consider progress on award restructuring and decide attitudes to wage claims.

BILL KELTY: I think the most important thing is that it achieves placing a union movement strategy on restructuring clearly on the agenda, to do what no other industrialised nation in the world has sought to do, and that is to place a blueprint for the restructuring of all awards. I think that is the most important task. But again, I would be silly, as anybody would be silly, to believe that that can be done in a vacuum, that people want to know basically answers to the question: Are their living standards going to improve? I have always put that living standards should improve, and that has been the basis of my arguments consistently within the trade union movement and with Government.

PAUL MURPHY: The ACTU Secretary Bill Kelty with Agnes Warren.