Kym Richardson (Kingston, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Would the Treasurer outline to the House the results of the June quarter wage price index? What does this indicate about the importance of flexible labour markets and what are the risks of rolling back to a more centralised industrial relations system?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

Today’s publication of the wage price index is good news for the economy, because what it showed was that the wage price index rose 1.1 per cent in the June quarter and four per cent through the year, which is actually down on the through-the-year result for the March quarter. Private sector wage costs increased 3.8 per cent through the year and public sector wage costs increased a little more at 4.3 per cent through the year.

What this illustrates is that, notwithstanding record low unemployment—now at a 33-year low—wages continue to be moderate. The importance of that is this: on previous occasions when we have experienced either a terms of trade increase or a surge in employment, it has always set off wage inflation in this country. One of the main reasons wage inflation was set off in this country was that, under enterprise bargaining agreements, pattern bargaining and centralised wage fixation, we took wage settlements out of profitable areas of the economy and we put them right through the economy, which set off inflation.

With the kind of industrial relations system we now have, we have been able to manage strong employment growth and a terms of trade increase, yet keep wage outcomes moderate. As Ken Henry, the Secretary of the Treasury, said in his speech last night:

Today the Australian economy is as close to full employment as it has been for more than 30 years. At 4.3 per cent the unemployment rate is at a level that many would have thought was not achievable without unsustainable wage and price pressures.

The IMF has said that improved industrial relations are in Australia’s interests, the OECD has said it and the Reserve Bank governor has said it. I know of only one political movement in Australia that wants to roll back industrial relations reforms, and that is the Labor Party. They want to do it because Mr Rudd, the Leader of the Opposition, is a patsy for the trade union movement. He fronts up here for and on behalf of the trade union movement; he is a trade union member; most of his frontbench are trade union officials; he is funded by the trade union movement; and he is beholden to the trade union movement. Let us make this clear: if Australia rolls back industrial relations reform, if we do it in an economy where we have low unemployment, if we do it in an economy where we have strong terms of trade, we will be going back to the boom and bust of previous generations, interest rates will rise and people will lose their jobs. We do not want to go back to the boom and bust, high interest rate Labor way; we want to take this economy forward.