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Wednesday, 10 October 1984
Page: 1546

Senator SIBRAA —Has the attention of the Minister representing the Treasurer been drawn to a report in the Australian Financial Review in which the new permanent head of the Treasury, Mr Bernie Fraser, is reported to have said that the prices and incomes accord between the Government and the Australian Council of Trade Unions has proved more durable and worked better than most commentators had predicted and has contributed substantially to the moderation of labour costs and industrial disputation? Can the Minister indicate whether he agrees with Mr Fraser's observations?

Senator Chaney —It is all right for Secretaries to the Treasury to make speeches if they agree with you, is it?

Senator WALSH —Certainly, so far as the Treasury Secretary's observations and comments go, there is absolutely no question that his observations are correct about what has happened over the last 12 months or so, in particular because of the contribution of the prices and incomes accord to the massive decline in industrial disputation over the last 18 months compared with the preceding period, figures on which were given yesterday by Senator Button. However, the Treasury Secretary was commenting only on what has happened so far and did not speculate or comment about what was about to happen in the future. I believe that the major benefits of the prices and incomes accord are yet to come-major benefits in the form of the continuing downward trend of the consumer price index in 1984-85 and the fact that, because of the prices and income accord, the Medicare policy and the cementing of an agreement with the ACTU through the tax cuts in the 1984 Budget, there will be no increase in award wages between autumn 1984 and autumn 1985. Therefore, because there was no increase in award wages over that 12-month period, the downward trend in the inflation rate should continue at least into 1985-86 as well as prevail throughout this year. A major contributor to that fortunate outcome and prospect is, of course, the Medicare policy and the agreement with the ACTU not to pursue, through wage indexation, compensation for the effect that that had on the consumer price index. It has established a new and lower threshold of inflation.

One type of policy change could upset and reverse the achievements of the last 18 months and that is if a taxation change were to have perverse effects on the consumer price index in the opposite way to the changes caused by the Medicare effect and, in particular, if a massive increase in indirect taxation in the order of $4 billion, as suggested at the weekend by the Centre of Policy Studies and endorsed by the discredited former Treasurer and present Deputy Leader of the Liberal Party, were to be introduced without any prior agreement or arrangement with the Australian Conciliation and Arbitration Commission or the ACTU on the discounting of such CPI increases induced by a shift from direct to indirect taxation. Such a policy would clearly add around six percentage points to the consumer price index and, through the wage indexation system, establish a new and higher level of inflation. It would, of course, be quite catastrophic to proceed in the way that the Centre of Policy Studies has suggested, a suggestion which was uncritically endorsed by Mr Howard and presumably the rest of the Liberal Party.