J> AUSTRALIA
PRIME MINISTER
FOR PRESS JANUARY 30. 1976
NATIONAL WAGE CASE
At its meeting this morning Cabinet considered the gravity of tiie possible
consequences for the economy flowing from the 5.6 per cent increase in the
Consumer Price Index for the December quarter, announced earlier this week.
In particular, Ministers expressed their grave concern about the possible
implications of this increase, inherited from the previous Government, for
proceedings in the National Wage Case, due to open before the Conciliation
and Arbitration Commissinn next Tuesday, 3 February.
This confronts the Government with a very difficult decision.
The Government has expressed its support, under current economic circumsta:' ces,
for the wage indexation principles laid down by the Commission last year.
The first of the Wage Indexation Principles enumerated by the Commission
last year states:
" The Commission will adjust its award wages and salaries each
quarter in relation to the most recent movement of the six
capitals CPI unless it is persuaded to the contrary by those seeking
to oppose the adjustment." ( Emphasis added)
Because of the difficult economic circumstances, particularly inflation . Lnd
unemployment, the Government finds it necessary to argue that instead of
granting the increase of 6.4 per cent which would result from fully passing
on the CPI increase for the last two quarters, the Commission should at this
time determine upon a figure of about half that order..
An increase of that magnitude in money wages at this time would have quite
calamitous consequences for the economy. It would be in the interests of nobody.
The ultimate goal for Government, employers and employees must be renewed
econom~ ic growth, more jobs and fewer people out of work.
The econcr~ y is in, a very serious condition. A sharp rise in wage costs such
as would be involved in fully carrying through the latest CPI increase into
wage rates would produce a sharp shock to business confidence, wvould
reinforce expectations of continuing high inflation, and would retard the
process of reducing unemployment. / 2
There is a very clear and close nexus between inflation and unemployment.
Until inflation and inflationary expectations are reduced, there can be
no prospect of lasting economic recovery; that in turn means that there can
be no prospect of improving real wages and providing jobs for all Australians.
Under the most favourable circumstances, it would not be possible to halt
inflation overnight on the contrary, the struggle , to rein it back will
at best be a long one and a hard one.
What I now say is that if a very large wage increase is now to be injected
into the situation, the task of the Government and the Australian community
as a whole will be made infinitely harder.
We have concluded that in present circumstances the Commonwealth Government
would be breaking faith with the Australian people's wish to control
inflation if it were not to argue against a full adjustment of wages and
salaries according to the movements in the CPI for the last two quarters.
It is for the Commission to rule upon the applications it will have before
it next week.
It will of course be open-to other participants in the Commission hearings to
argue their own views in accordance with the principles laid down by the
Commission. For our part, we believe that any such argumentation must have
regard first and foremost to the effects of the final outcome upon the
outlook for economic recovery and the availability of jobs for all Australians."