PRIME MINISTER
STATEMENT BY THE PRIME MINISTER 20 April 1977
Mr. Speaker, I seek leave of the House to make a statement regarding
the Heads of Government Agreement for a three month price and wage
halt
At the Premiers Conference on 13 April, the seven Heads of
Government agreed that they should unite to hasten the success
of the fight against inflation and unemployment.
The agreement to which all seven Heads of Government appended
their signatures was directed to breaking the price-wage cycle.
None of us imagined that this was more than a supplement to
other action we would need to continue to take, such as through
our budgets and through monetary policy, collectively and
individually, to deal with our national economic problem: s.
We knew that implementation of this proposal would not ' be a simple
matter. We believed that given the existence of a national willingness and
the collective will and backing of the seven governments,
the incomesvprices halt offered a chance to resolve
Australia's economic problems more rapidly.
There was an agreement that went beyond political divisions.
Let me read the quite brief text of the agreement to you:
Its message is clear: " Prices and incomes restraint. The
Heads of the Commonwealth and all State Governments, meeting in
Premciers Conference in Canberra today, unanimously called for
a three month halt in price and wage increases.
They agreed that such restraint was urgently needed if Axustralia
is to overcome its current economic problems.
It w~ as agreed that all Heads of Governments will approach
employer and professional organisations and put to them the
proposal that their membership should voluntarily commit themselves
to a pause for a period three months from increases in the prices
of their goods and services.
At the same time, all Heads of Governments will be making an
approach to the A. C. T. U. and other employee organisations to
seek~ a voluntary commitment to a three months pause from wage
increases. Governments would not expect either the business organisations
or the union organisations to agree to such voluntary restraint
agrEements without agreement by the others.
Immediately following agreement to the proposal for a voluntary
general pause from increases in prices and incomes approaches
would be made to the Arbitration Commission and the Prices
Justification Tribunal for the implementation of the general pause.
-2-
Goverments would also use their influence and the powers available
to them towards achieving a successful outcome. Governments
will commit themselves to not increasing their own charges during
the period of the pause.
Local Government will be expected to do likewise.
All Heads of Government commit themselves to work for this voluntary
pause. Upon its achievement a further conference of Heads of Government
will be held to consider what further steps should be taken.
The Heads of Government called on all members of the Australian
Community to give full support to this vital endeavour to help
overcome inflation".
The Statement was signed by myself and all six Premiers.
The Statement was agreed to after the possibility of a national
conference was canvassed and rejected as unnecessary and impractical.
All Heads of Government agreed on the principle of a wage/ price
pause and were willing to use existing institutional machinery
for carrying it into effect. Given these cond-itions
there was little that a national conference could add.
We also saw that a national conference could mean delay, posturing,
rhetoric, recriminations, and very likely, no constructive outcome
whatsoever. In thr! discussion at the Premiers Conference nobody raised the
quesIC. Lon of tax cuts.
We also saw overwhelming problems because of constitutional and
administrative considerations in attempting to impose
mandatory controls.
The Heads of Government agreement reached beyond partisan politics
to the nation's interest.
Such,. & n Agreement between the Heads of Government, despite
different party alliances, was remarkable in the best sense of the word.
The Agreement of Heads of Government reflected a unanimous
bipartisan convictionof the need to defeat inflation.
The overwhelming majority of Australians, irrespective of party
loyalty or sectional interest, desire an enduring solution to the
problem of inflation.
The Heads of Government iranslated this national aspiration into
political agreement. The next task was to convert it into practical
reality.
Heads of Government clearly understood that if the proposal was to
have a reasonable Prospect of success it was not sufficient mnerely
to accetpt its desirability, but to pursue it with unity and
enthusiasm. There was every reason to believe that all the State Governments
did enter into the Agreement with the intent of making it work.
This in turn crea-ted the conditions for the widespread community
acceptabnce of the desirability and equity of a wage/ price pause.
After the initial agreement by the seven governments, there were
inevitz. bly many detailed matters which needed attention.
TogethEr with the States, we moved rapidly to attend to these
questions, and within a day the machinery was set up with the
States for close coordination.
For our part, we sought immediately to implement the agreement.
We sent. messages to over 200 major national employer employee
professional and community groups.
We inserted advertisements in newspapers on 16th April in all State
capitals seeking support for the Heads of Government Agreement.
The Minister far Business and Consumer Affairs wrote to the Prices
Justification Tribunal asking the Tribunal to defer decisions on
price rises and to monitor and investigate any claims that price
rises had occurred.
We also obtained agreement from some companies which had been
granted price increases to defer implementation of such rises
and agreement from companies which had applied for increases to
defer their applications.
All Comm~ onwealth Ministers and Departments were informed that there
would b2 no increases in commonwealth charges or fees. On
April, I and three other Ministers met with representatives of
natinal employer organisations. They indicated their willingness
to supprt the initiatives of the seven Governments.
This was a most encouraging response and a telex was sent -to the
Premiers providing details of the organisation.
Preparations were made to implement the Agreement. On 17 April
it was announced that a special committee comprising representatives
of empl-yers, employees, and the P. J. T. would be constituted to
advise on the implementation of the Heads of Government Agreement
including the question of whether amendments to the Prices Justification
Act wouLd be appropriate to support the agreement.
Peak Coancils were invited to meet today with myself and other
Commonwealth Ministers.
At the same time, we had received : eports that the State Premiers
were co-isulting with employers and employees and taking other
measures to encourage compliance by all sections of the community
with the wage/ price halt.
-4-
It was clear that the public reaction to the plan was one of
overwhelming approval.
We were encouraged by a private survey which indicated that
the vast majority of Australians including the great majority
of trade unionists supported the concept of a simultaneous
freeze in prices and incomes.
And one of the critical preconditions for the plans success employer
support for a prices-incomes freeze was evident.
Yesterday, the Arbitration Commission called a special hearing to
discuss the call of the seven Heads of Government.
Acting in the spirit of the Joint Agreement the Commonwealth took
the unprecedented step of seeking the views of the States on a
draft of the submission to be put at the hearing.
It was at this stage that we became aware of indications that
the three Labor Party State Governments were having second thoughts
about the Agreement to which their Premiers had appended their
signatures.
There were public announcements of their disagreement with the
text of the draft submission to be put by the Commonwealth to the
Conciliation and Arbitration Commission.
Because we saw the Agreement being of such great importance to
Australia, we amended our submission to take into account the
views expressed by the three State Labor Premiers.
We hoped that by so doing, all State Premiers would continue to
honour the Agreement they had signed.
Here was the opportunity for Mr. Hawke to show that he and other
union leaderswould put the nation' s interest, and the interest
of his own constituen~ ts first and agree that a three month halt
in wages would be matched by a three month halt in prices.
Instead Mr. Hawke made the most blatantly political speech he has
ever made before the Commission.
He refused to support the Heads of Agreement made by all the
Governments of Australia.
He tried to suggest that it was entirely a federal Government initiative
He described the Heads of Government Agreement as a " concoction
foisted by an Australian Government".
of course this was not so. To repeat, the Scheme was agreed to by
all the Heads of Government as a Joint cooperation Community programme.
Plainly, what Mr. Hawke is about is to break the scheme.
To make the fight against inflation that much harder in the hope that
it wilL. embarrass the Federal Government.
He is prepared deliberately to make it harder for people t~ o get
jobs, harder for firms to earn profits and expand, all in the cause
of try:-. ng to gain sorte short-term political advantage.
Instead of speaking to the central issue of a price/ wage pause,
Mr. Hawke put to the Arbitration Commission four other proposals:
1. F1irstly amendments to the Prices Justification Act.
The Government has already agreed to appoint a joint committee
to look at this if employees accept the principle of: a price/
wage halt.
2. Deferment of an application for an increase in real wages,
based upon past productivity increases.
This was an application which had little relevance in
the next three months.
3. "' he convening of a national conference to discuss a] ll
economic policies, to discuss the " whole question of the future
course of the Australian economy".
He wanted an ongoing opportunity " to work out what E! conomic
policies in general and pricing policies in particul. ar"
should be adopted.
.' he convening of a national conference was rejected at the
Premiers Conference, and,
4. A cut in direct taxes sufficient and I quote him, to
" produce a real after-tax level of disposable income!,
equivalent to what would be necessary by way of monely wage
: Lncreases to compensate for the March quarter C. P. I..
iiovement".
I will comment directly on this proposal in a moment.
Sadly, and incredibly, the three State Labor Governments chose to
depart from the Heads of Government Agreement to which they
were parties and support Mr. Hawke's propositions.
In return for the four concessions which Mr. Hawke demandedconcessions
which fell outside the terms of the Heads of Government
Agreement what did Mr. Hawke offer?
Did he offer compliance by the A. C. T. U. with a three month halt in
income : 3Z
No his sole magnanimous offer was "' to convene a special Federal
unions conference to consider the foregoing of the March quarter
application.
-6-
He went on to qualify even this offer,, he said " I am not saying
that we can deliver the goods, I make no false promises about that".
Honourable Members can judge for themselves the worth of Mr. Hawke's
proposals.
He absolutely refused to accept that in return for a halt in prices
the Unions could voluntarily agree to a three month pause in wage
increases. Instead he put forward proposals outside the Agreement.
One of these was tax cuts.
Mr. Hawke's notion that it is possible to substitute tax reductions
for wage increases while being economically responsible is blatant
nonsense. Let me give a few simple examples.
3, The cost of reducing by 5 percentage points the 27 per cent tax rate,
applying to incomes between $ 2260 to $ 5650 would be*$ 840 million.
The benefit to most taxpayers would only be $ 3.27 a week.
Honourable members may compare this with. the $ 5.70 a week increase
recently granted by the Commission with which the A. C. T. U. has
expressed strong dissatisfaction.
2. For the critical 35 percent tax rate area covering incomes between
$ 5650 and $ 11,300 a 5% reduction would cost $ 740M
This would provide the following benefits to taxpayers.
A taxpayer on $ 5650 or less would receive no I repeat no benefit.
A taxpayer on $ 6000 a year would receive the magnificent benefit
of 34 cents a week.
A taxpayer on $ 80 00 a year would receive $ 2.60 a week benefit and
a taxpayer on $ 10,000 a year0 which is about the level of average
earnings, would receive a benefit ofl$ 4. l8 a week.
If Mr. Hawke had done some very simple arithmetic, he would have
discovered the absurdity of this sort of wage/ tax proposition.
It would have taken these two proposals together to come anywhere.
near offsetting the-last wage increase.
That is a cost to the Government's budget of over $ 1600 million to
compensate for just one single quarter. Clearly to implement literally
Mr. Hawke's proposal, tax:. revenues would be slashed to anc-extent
this country could not stand..
ivis proposal is not in any sense a viable alternative to the evenhanded
initiative to break the price-wage spiral embodied in the Heads
of Government Agreement.
-7
There was, of course, no suggestion from Mr. Hawke as to how the tax
cuts a~ ere to be financed. He did not mention whether additional
expenditure cuts should be made to avoid the inflationary effects
of additional recourse to the printing press.
The t. iree Labor Premiers who he forced into line have not indicated
whether they are prepared to contribute to the tax cuts bV accepting
pro-r. ata reductions in their financial assistance grants., We should
certainly welcome any meaningful offers from them in this direction.
It should be said that Mr. Hawke has not been alone in attempting
to undermine the Heads of Government Agreement.
With -: he honourable exception of the Leader of the Opposition, many
Membercs opposite have attacked the Agreement. The Deputy, Leader
of the opposition has said that the plan should be " abandoned".
The Honourable Member for Oxley has attacked the plan devised by
this Government and all six State Premiers as a " flimsy political
gimmick". The Honourable Member for Adelaide, even though he poses
as the Shadow Treasurer, refuses to give his support to the plan.
He said yesterday he is cynical. I think he describes himself
correctly, and he pays himself no tribute.
The Opposition in this House, with the notable exception of the
Leader of the Opposition, has taken every opportunity to attack
and criticise the plan to which three of their colleagues; are
partiE! s.
They have missed every opportunity to give the plan the wholehearted
support which the occasion clearly demanded.
Mr. Speaker, the Government in its determination to make the price/
wage halt work if at all possible, today met with peak Union Councils.
We sought from the representatives of the peak Councils support
in principle, for the objectives set out in the Heads of Government
Agreement that they would accept the principle of a voluntary pause
in waces corresponding to the voluntary pause in prices which is
alreaf~ y substantially in effect.
Mr. Ha. wke persistently evaded the questions I put to him. He recited
a list. of difficulties he foresaw in resp-ect of prices. He refused
to discuss a pause in wage increases.
Mr. Hawke insisted that what was needed was a national conference sucl
as had been rejected in principle by all Heads of Government at the
Premiers' Conference no doubt to provide him with a forum for
another of his gra -t-, 2itous and increasingly boring attempts to usurp
the functions of Government.
He specifically asked me to seek the views of the Premiers on his
proposal for a national conference.
In a final effort to try to prevent a complete breakdown of the Heads
of Government initiative, I said that my Government would be prepared
to approach the State Governments on the question of a national
conference if we could obtain from the peak Councils support in
principle to the objectives of the Heads of Government Agreement.
On being told that Mr. Hawke and the other representatives present
could not commit their organisations, I indicated that I was
prepared to acceptL a personal commitment from them. Mr. Hawke
was not even prepared to do this.
Since there was no willingness to give even an expression of
support, there was no point in any national conference. The Unions
had made it quilte clear they would not make any commitment even
in the vaguest terms to the objectives of the Heads of Government
Agreement. In thelight of this negative attitude of the Unions, the Commonwealth
has made a further approach to the Premiers in an attempt to achieve
the wages/ prices halt.
We are proposing that an application be made to the. Arbitration
Commission to take action on the wages front, action which would
be consistent with the prices halt the Arbitration Commission has
already recognised.
We would hope that all businesses and other price setters will hold
prices until the results of this approach is known.
While the Commonwealth hopes that all Premiers will agree with this
approach -, band w * e know that some Premiers will agre-e the
Commonwealth has determined to take this course.
Some may ask how can such an agreement be effective in view of
Mr. Hawke's refusal to support the concept of a wage price freeze
and in view of his publicly expressed view in 1973 that a wage/ price
freeze will never be acceptable to the union movement.
The answer is simple. We believe that on this issue Mr. Hawke
and his colleagues are out of sympathy with the overwhelming
majority of trade unionists.
We believe that a decision of the Arbitration Commission which is
seen to be emminently fair because a price freeze is in operation
will receive the great weight of support of Australian employees.