Tuesday, 13 May 2008
Matters of Public Importance
When the Prime Minister released his five-point plan to reduce inflation, there was a sixth point that should have been there—that is, workplace relations. This is an element that the OECD would recognise as important in reducing pressure on prices, and in reducing pressure on inflation. There is a reason why the Labor government will not talk about workplace relations as one of their strategies to fight inflation—that is, because they know that the policies that they are promoting will be adding to wage inflation, will be adding to inflation and will be going on to increase interest rates and so on. And if the opposition are wrong, it is very simple: release the Treasury minute. Release the 38-page Treasury minute, but release it uncensored. We do not want the blacked out version, the completely blank 38 pages. What we want to see is what Treasury’s honest, frank and fearless advice was to the Rudd Labor cabinet on their workplace relations proposals.
We need to look at the situation as it is now, and what we see is inflation. On the forecasts of the Reserve Bank’s quarterly statement released on Friday, inflation will not be back in the two to three per cent band until the end of 2010. Look at wage inflation. The wage price index for the year ended December 2007 had growth of 4.2 per cent. It is the highest in 10 years. Looking at a broader measure of earnings, the average growth in average earnings is around five per cent. Generally the Reserve Bank sees wage increases over 4½ per cent as inconsistent with the inflation between two to three per cent. As we look around the country, there are disturbing signs of wage break-outs. We have seen Brian Boyd, the Secretary of the Victorian Trades Hall Council, saying, ‘We’ve put up with 11 years of industrial relations laws that have been aimed at restricting our ability to find a fair price for labour.’ That is in the face of all evidence of what actually happened during the Howard government. We are seeing a 15.2 per cent pay rise for Victorian teachers. For anyone who has any familiarity with Australian economic history, for anyone who has lived through the previous periods of wage break-outs in the 1970s and 1980s, this is looking very familiar. In 1974 we saw wages go up by 31 per cent in one year, and there is a reason why we always talk about having the lowest unemployment since November 1974. November 1974 was the period when the Australian economy was destroyed through wages rising by 31 per cent. In 1982 average earnings went up by 17½ per cent in the year to September 1982. Both of these periods led to very severe downturns or recession in the Australian economy.
We see a number of economists predicting that unemployment will rise to about five per cent, and that is why we think it is very important we know what the Treasury advice is. We have seen already a number of studies on the public record. Econtech predicted that winding back IR reforms that have occurred since 1993 would reduce productivity, cause the loss of 316,000 jobs, reduce GDP by 4.8 per cent and lead to higher wage inflation, lower productivity, higher inflation and higher interest rates. The Treasury advice of 18 April, based on a speech by the Prime Minister, who was then Leader of the Opposition, said that, on Labor’s known approach at that time, it would cut jobs, put upward pressure on prices, put more flow on wage claims and allow unions to bid wages above their market level. What we know is that inflation is high, wage inflation is high and there are already two analyses of wind-backs of industrial relations which point to them putting pressure on inflation. That is why we call for the Treasury— (Time expired)