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Thursday, 7 November 1985
Page: 1731

Senator MESSNER —My question is directed to the Minister representing the Treasurer. In light of the continuing free fall in the value of the Australian dollar as financial markets understand and pass judgment on the straitjacket of the accord with the trade union movement, will the Government seek to vary its agreement with the Australian Council of Trade Unions in the interests of a more productive arrangement between employers and employees? As the Minister rightly pointed out yesterday, the Opposition supports a floating exchange rate, but does he agree that a free currency market cannot operate to maximum effectiveness and economic advantage unless the labour market is free of the inflexibility imposed upon it by the accord?

Senator WALSH —Senator Messner has been using words like `free', `flexible' and `inflexible' with respect to the labour market. I think what he means by `free' is a deregulated labour market-that is, one in which there is no centralised wage fixing mechanism-and he assumes that that will lead to more flexible wage rates. Indeed, there is some historical evidence to support that conclusion, providing one does not stipulate whether one means flexibility upwards or downwards. As I said earlier, when the discredited former Treasurer had his first flirtation with a deregulated and decentralised labour market and allowed collective bargaining, and commended that as the appropriate wages policy to follow, he did it at a time of more moderate, though short-lived, economic growth. Certainly it produced wage flexibility; wages went up 11 per cent in 1981 and 14 per cent in 1982. That was the sort of flexibility that that free labour market produced.

Unfortunately, despite the evidence of their own experience and despite evidence from the United States and the United Kingdom, the Liberals cling to the illusion that a free labour market-that is, one without any centralised wage fixing mechanism-will either cause money wages to fall or cause them to increase by less than they would otherwise have done. People may believe whatever they like, but the evidence from Australia and from abroad, even in times of economic growth significantly lower than that which Australia has experienced in the past 2 1/2 years, is that that sort of freedom does not necessarily produce a lower growth in money wages. Indeed, in our case, with significantly lower and less sustained rates of economic growth in 1981-82, it produced a much higher rate of wages growth.

In the rhetoric with which he introduced his question, Senator Messner also made some reference to financial markets understanding Australia. He assumed that the financial markets understand what is going on in Australia right now whereas at some point in the past they did not. Since the Opposition has put forward the proposition-I dare say it will restate it ad nauseam during the matter of public importance debate later today-that the 3.8 per cent national wage case judgment announced at the beginning of this week has precipitated a significant decline in the international traded value of the Australian dollar, the financial markets concerned certainly did not understand Australia very well if the Opposition's hypothesis and diagnosis are correct. Since 19 September at least, anybody who knew anything about the Australian economy would have known that a wage increase of that magnitude would be awarded. Therefore, there should have been no surprise and any rational reaction to that decision should have taken place seven weeks ago and not this week.