PRIME MINISTER
FOR PRESS 27 FEBRUARY 1977
EMBARGO: APPROX: 7.00 p. m.
ELECTORATE TALK
The rate of inflation in Australia came under scrutiny in the
Federal Parliament during last week, following release of the
December quarter Consumer Price Index.
One clear and irrefutable fact emerged the underlying rate of
inflation in Australia has shown a sustained and measurable
decline. The facts show that we have been getting on top of
inflation. They show that our policies of government spending
restraint and the transfer of resources to private industry are
the right policies.
For the 12 months of 1976 the Consumer Price Index excluding
Medibank was 10.8 percent. This was the lowest increase for
four years and 50 percent lower than the 1975 figure.
The statisticians figure for the December quarter increase in the
C. P. I. was 6 percent. However, as Australians know this figure
included 3.2 percent for the cost of the Medibank levy and
othEr health costs.
For the quarter there was an underlying increase in the price
of a nominated range of goods and services by 2.8 percent.
Although inflation in Australia is significantly less than it was
12 maonths ago, it is still far too high. It is for this reason
that: the decisions coming from this week's national wage case
wil L be critical in our fight against inflation. The Government
will be presenting a strong and detailed argument for t: he
max: LMUlf possible restraint in wage increases.
The main cause of inflation in Australia over recent years, for
which we are still paying, was excessive wage and salary demands.
Aus-: ralians know that wages have gone up dramatically in the past
few years. We also now know that the extra money that fills pay
packets has not enabled people to buy more goods and services.
Normally, wage increases can be responsibly financed by increases in
productivity. A company increases its output, improves profit, and
is -able to pay increased wages. Until recently, however, there has
been~ very little growth. In its last year of office, Labor / 2
presided over the physical decline of most of the productive
output of the economy. In these circumstances wage increases
had the effect of increasing inflation. This in turn lead
to cutbacks in business activities at the expense of jobs.
I have said before as have people like Mr Crean and Mr Whitlam,
that one man's pay increase in another man's job. That is still
the rule.
Today many Australian companies are returning to profit. They are
starting to compete more aggressively in the marketplace. They
are planning ahead with renewed confidence. They have faith in
this nation' s capacity to recovery from economic depression.
But this new spirit, and new optimism which is being translated into
positive investment decisions, will be destroyed if these companies
are forced to feed large parts of their profit back into paying
excessive wage increases.
These companies now have the opportunity to put profits back where
they belong and that is, back in the business. They can put
profit into new plant, new processes, and expansion programmes
which in turn will lead to greater production and more jobs.
It is only in these circumstances that the great producers and
employers of labour will be able to grant wage increases without
destroying their business.
Until then, the employer the man who takes risk with his
capital must be given a fair go at recovering his profit
and using it to put back into his business. It is for this
reason that the need for wage restraint at this time is utterly
critical. It will remain crucial for quite some period.
The Treasurer and Minister for Employment and Industrial Relations
have already told Parliament that the Federal Government will be
pressing the need for the maximum possible restraint in awarding
any wage increases before the Commission.
In this regard, it was interesting to note Mr Hawke's comment that
the ACTU would be pressing for a full 6 percent flow on of the
C. P. I. into wages. His call for the full flow on is utterly.
irresponsible. It is not a call that would be supported by the
unionists he purports to represent.
Mr Hawke's pleas for the full flow on amount to nothing less than
a call for higher inflation, higher and continually increasing
unemployment and a shattering of business confidence.
His public statements will not distract the Government from acting
in the national interest.
Australia today is growing stronger. We have made a good start
in our economic recovery. It is imperative that the gains we
have made are not frittered away or destroyed.
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