PRESS RELEASE
Address by the Acting Prime Minister, the Rt. Hon. J. D. Anthony,
to a meeting of the Economic Advisory Committee of
the Liberal Party of Australia,' at the Liberal Party Federal
Secretariat, Canberra, Friday 19 November 1982.
I suppose it was predictable that the first reaction of many
people to the Government's proposal for a wage pause has been to
ask, if wages are going to be frozen, why shouldn't prices be
frozen as well. This reaction is predictable, and even
understandable. Those who ask this question, however, must
recognise that it has not been price increases, but excessive
wage increases, which have been destroying jobs over recent
months. Because domestic demand is weak and the world economy has
become increasingly competitive, many businesses have not been
able to put up prices enough to cover increases in costs, and
have been forced to retrench staff.
Freezing prices now would just lock industry in to this
depressed profitability which is forcing the shedding of
labour. That would not reduce unemployment. It would increase
it. The squeeze on profits has, of course, been the result of a
combination of factor's. The world economy is in recession. Real
gross national product in the OECD counts is expected to actually
fall this year, * and unemployment has climbed. It is now over 13
percent in the United Kingdom, 12 percent in Canada and
percent in the United States.
The value of world trade fell last year for the first time
in 20 years, and remains stagnant. Protectionism is growing.
Commodity prices are weak. Real interest rates are high worldwide.
For a time, we were insulated from the recession by
resource-related growth. It has now hit us, and excessive wage
increases made that a double blow. Those who have recently
become unemployed are paying the price.
Wage increases are the one factor making unemployment worse
which we as a nation can, if we have the will, do something
effective about.
Some of the comments on the Government's initiative imply
that until now we had done nothing about unemployment. I find
that sort of comment extraordinary. Step by step, throughout
this year, the Government has put in place a framework of
measures to deal with the emerging economic sitution.
I was very disappointed to read an editorial in the Sydney
Morning Herald on Tuesday, which said, in part, that although the
Government thought that the drought justified an addition of $ 350
million to the Budget deficit, it did not feel that unemployment
justified the addition of one per cent to the deficit. That is
very unfair comment. It ignores the obvious fact that increased
unemployment benefit payments will boost the deficit by a similar
amount to the drought relief payments and for a similar
purpose, to relieve hardship. It also completely ignores the
many measures the Government took in the Budget and before the
Budget to deal with the worsening economic situation.
It is true that unemployment has increased even more than
was anticipated before the Budget. The Government's present
initiative recognises that, and builds on the medsures already
taken. In March, we brought in a major housing package, designed to
give real assistance to the housing industry, to those seeking to
build homes and to families struggling with their mortgage
repayments. In June, at the Premiers' Conference, we gave an
increase of more than 16 per cent in tax-sharing funds to the
States, and an even larger increase, of 21 per cent, in funds for
local government. At the Loan Council we provided a 10 per cent
increase in State Government borrowing programs, including a
substantial extra allocation for welfare housing. Borrowings by
electricity authorities were freed of restrictions, and we agreed
to an increase of 14 per cent in the programs of other semigovernment
authorities. Those decisions helped make possible
major increases in capital works now in train throughout the
country. In July, we brought in a special package of fiscal measures
to assist industry. The final steps came in the August Budget,
where we concentrated heavily on measures to help cushion the
effects of the difficult economic circumstances which we knew
were facing the country.
The Budget provided'income tax cuts worth $ 1.5 billion in
1982-83. It provided higher family allowances and other major
measures of income support, and a new housing interest rebate
scheme complementing the March package. Most of these measures
are now coming into effect, from 1 November. They are directed
particularly to those likely to be facing harship: those on
lower incomes; families, particularly families struggling to meet
mortgage repayments; pensioners and the unemployed.
Those measures of tax relief and income support
significantly increase the disposable incomes of ordinary working
people and so lay a firm basis for wage restraint. A typical
breadwinner will be receiving benefits of about $ 20 a week, or
around $ 17 after taking account of the indirect tax increases.
That is equivalent to a wage increase before tax of eight or nine
per cent a valuable boost to family incomes, by any standards.
That is a solid basis on which we have called on every
Australian who has a job to sacrifice a future wage increase to
help save the jobs of others and perhaps even his or her own
job. The Budget contained a range of other measures designed to
help employment, including a major expansion of capital works
funding, more money for aged persons' accommodation, welfare
housing, roads and airports. In total, * the Budget provided over
$ 4 billion for capital purposes an increase of 17 per cent on
last year. And to help those seeking jobs, we increased funds
for manpower and training programs by 21 per cent to $ 250
million. Yet the Sydney Morning Herald says we are not willing to
provide one extra cent to relieve unemployment! I think the
facts I have outlined show how shallow this response is.
We are doing all we can, and not only at home. We are
making a significant contribution to helping find ways out of the
world recession. The whole reason for the initiative I will be
pursuing in Geneva next week at the GATT Ministerial meeting is
to try to stimulate world trade. For a country like ours, so
dependent on trade for growth and prosperity, that is absolutely
essential if our industries are to get moving strongly again.
Returning to the initiative which the Government has
launched this week, by inviting the Premiers to come to Canberra
on 7 December to discuss a proposal for a wage pause, I'd like to
make it absolutely clear why we are focussing on wages.
The plain fact is that wage increases have gravely
aggravated our problems, just at a time when we should have been
preparing to meet the tougher climate of a recession. The
economy is now feeling the effects of an extraordinarily badlytimed
major push in wages. That push was spearheaded by a metal
trades package which, taking account of reduced hours, was
equivalent to an increase of over 20 per cent in wages.
The push spread widely. Over the year to the September
quarter, average weekly ordinary time earnings of adult males
employed full-time rose by 18.2 per cent and this does not take
account of reductions in standard hours. That means wages rose
per cent faster than prices over the year to the September
quarter. To put it another way, real wages rose by over five per
cent, more than 10 times the increase of only 0.4 per cent in
non-farm productivity over the most recent 12 months recorded.
Our international competitiveness was severely affected.
Businesses have not been able to pass on the cost increases and
have been forced to retrench staff. In the OECD over the latest
12 months ( to May), the average wages increase was 10.7 per cent
and falling. That compares with our 18.2 per cent to September.
We can contribute to efforts to find solutions to the
international problems, but of course we cannot do much about
4.
them directly. Nor do we have any " magic wand" which will get us
rapidly out of our own difficulties. But I repeat what I said
earlier: the wages front is where we do have a weapon in our own
hands, if only we have the courage and the will to use it.
This is a weapon which cannot be wielded effectively unless
there is a broad consensus behind it. The Government earnestly
hopes that the States will join us in helping to lead this
consensus, which must extend right throughout the community.
I cannot stress too strongly that the essence of the
proposal, and the key to its success in saving jobs, is that it
should put in place an effective economy-wide pause in wages.
Spending the savings we will make in public wages on employmentrelated
activities will be a supplement to that, certainly but
the thrust of the proposal is the wage pause.
It is not easy for a Government to ask the community to make
sacrifices. But that is precisely what the Government is now
doing. We cannot the nation cannot effectively tackle
unemployment without cost.
We want those who have jobs, who have mostly received
substantial wage increases and will all receive substantial
further support from the Budget, to sacrifice a future wage
increase to help save their own jobs, and help restore jobs for
those now out of work.
If the community is not prepared to make that sacrifice, the
outlook for many thousands of Australians is a bleak one indeed.
We know the course we propose is a hard one. It will be
strongly opposed. We know similar efforts have failed before.
But things are much more serious now than they were then, and I
believe there is a mood in the community to face up to difficult
choices. Speaking here to people representing the business sector, I
urge your full commitment to the Government's proposal. The
Government looks to the whole private sector to join with the
public sector in making this proposal work, and securing the
benefits it is designed to bring.