Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I thank Senator Chapman for his question. Today the ABS released the June quarter’s labour price index, which is the main measure of wage inflation in the Australian economy. That index was up 1.1 per cent for the quarter and four per cent through the year, down slightly on the 4.1 per cent growth to March. These results do confirm that despite economic expansion, which is in its 16th year, and 30-year low unemployment figures, wage inflation overall remains contained.

Today’s figures show that wage pressures are strongest, unsurprisingly, in the booming sectors. The index for the mining sector rose by 5.6 per cent. But, significantly, these pressures are not flowing through automatically to other sectors which cannot afford them. The rise in the mining sector contrasts with a 3.2 per cent increase in the retail sector and a 3.1 per cent increase in the hospitality sector. The index rose 5.1 per cent in WA and 3.6 per cent in Victoria. While wages are growing across all states and sectors, there is not an automatic flow-on of high wage growth in some areas through to others that cannot afford it. That is the great virtue for Australia of labour market flexibility.

We have seen in our history how previous commodity booms have ended in tears for Australia, with high inflation, high interest rates and mass unemployment, because wage setting was centralised and union dominated, and pay rises in one sector automatically flowed through to every other sector. That system was very bad for Australian workers. You might have seen temporary nominal rises in wages, but they were soon eaten up by double-digit inflation, high interest rates and workers losing their jobs. Under our workplace relations reforms, the economy is much better able to adjust to the opportunities and challenges stemming from high commodity prices. By keeping wage pressures under control in our growing economy, we have been able to keep inflation low, keep unemployment low, keep people in jobs and get a 20.8 per cent increase in real wages over our 11 years in office, compared to a zero increase in Labor’s 13 years. Australians are better off and workers are better off. Labor wants to reverse that.

Paul Kelly, in an article today headed ‘Rudd clueless on economy’, accurately summed up the stupidity of Labor’s position when he said of Labor’s policy:

… the idea that such a comprehensive shift in the industrial balance can be achieved in the present economy without upwards wages pressure seems heroic.

Kelly quotes Chris Richardson of Access Economics, who said:

On industrial relations I fear that Labor misjudges the risks involved. The short-term risk lies in bargaining power moving back towards the labour movement with wages growth being too high for a while with more consequences for interest rate increases. The longer-term risk is different. I think a slow-up in flexibility of the industrial system risks slower average growth and ... a smaller economic cake for Australia overall.

Those comments are entirely consistent with the Econtech report and remind us of Labor’s last period in office—exactly that happened then. You had a centralised and regulated IR system, inflation averaging five per cent and interest rates reaching 17 per cent. In our circumstances, with strong commodity prices, global inflationary pressure and the financial market volatility which Senator Sherry pointed to, you have to have the economic settings right. The labour price index out today confirms the importance of our workplace relations reforms and the enormous threat to our prosperity posed by the Labor-ACTU industrial agenda.