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Thursday, 28 February 1985
Page: 388

Mr BURR —My question is directed to the Prime Minister. In view of the difference of opinion between the Treasurer and the Prime Minister over the discounting of wage adjustments for inflation caused by exchange rates, can the Prime Minister clarify exactly what views the Government will put to the Australian Conciliation and Arbitration Commission on this matter?

Mr HAWKE —Any lack of clarity is not as between the Treasurer and myself, but in the mind of the honourable member. The issue involved in the honourable member's question is an important one and I want to deal with it with the seriousness that it deserves. We need to understand that the inflationary impact of what is happening to our currency is not just a question of its relationship with the United States dollar, but also one of its relationship with the currencies in the rest of the world. The honourable member will appreciate that the movement of the dollar against the rest of the world's currencies has not been as great as it has been against the United States dollar.

It is the case that if the trade weighted index to which I refer remained permanently at its present level-no one at this stage can say whether it will-there could be a significant increase in the price of some internationally traded goods. I also remind the honourable gentleman of the fact that only about 15 per cent of our demand is imported, so we have to put that perspective against it. While the direct price effects of the devaluation cannot be avoided, we will be concerned to ensure that they do not contribute to a renewal of an inflationary cycle which, as a result of the very successful economic policy of this Government, has been arrested. The people of Australia are enjoying the fact that the level of inflation in this country now as a result of our efforts is less than half that which we inherited from the previous Government.

It has to be understood that discounting of wage indexation, which is the subject of the honourable member's question, is only one of a number of means of avoiding a second round of inflation which can flow from the cause to which the honourable member referred. This Government will take these matters seriously into account. It is not only the question of discounting which has to be considered. A number of other methods are available to government to meet this problem. As I am sure the honourable member will appreciate, in respect of the current case, it is not relevant because the prices that are reflected in the two quarters indexes that are before the Commission are not affected by devaluation. The issue will not arise until September of this year.

I say, as did the Treasurer, that anything the Government does in formulating its position in regard to not only the wage case, but also any other decisions we take, will at all times be consistent with two criteria: The general objectives of economic policy of trying to have an environment in which there is growth with low levels of inflation; and, consistent with that, the objective of ensuring the total maintenance of the prices and incomes accord.