prices and incomes policy

Prices and Incomes Accord

The Prices and Incomes Accord was an agreement between the Australian Council of Trade Unions and the Australian Labor Party government of Prime Minister Bob Hawke and Treasurer (later Prime Minister) Paul Keating. Employers were not party to the Accord. Unions agreed to restrict wage demands and the government pledged action to minimise inflation and price rises. The Government was also to act on the social wage. At its broadest this concept included increased spending on education as well as welfare.

This was seen as a method to reduce inflation without reducing the living standards of Australians. At the beginning of the Accord, only one union, the New South Wales Nurses Federation , voted against the Accord. The Accord continued for the whole period of the Labor Government through seven stages including, after 1993, Enterprise Bargaining.

There were a total of 8 accords.

Original Accord (February 1983)

The original accord was designed to tackle the problem of stagflation and to reduce the number of industrial disputes. It included half-yearly wage increases indexed to the CPI, and supported the introduction of Medicare

Bob Hawke, Prime Minister of Australia, described the Accord as a centralised system of wage fixation, for the purpose of economic recovery:

As far as wages are concerned, the Government will participate in the conference on wage fixation scheduled to be held in the Conciliation and Arbitration Commission. We will base our approach to that Conference on the conclusions of the Summit and on the prices and incomes accord. In that context, I would point out again that all at the Summit agreed that if a centralised system of wage fixing is to work, there must be an abstention from sectional claims except in special and extraordinary circumstances. Let me say that my Government's interpretation of what constitutes such circumstances is the common -sense interpretation and leaves no room for selfish claims from maverick sections of the trade union movement. Participants at the Summit Conference recognised that if restraint in incomes is to be exercised, then it should be exercised universally. In that spirit of equitable sharing of the burdens of recovery the Summit also stressed the need for restraint in non-wage incomes such as dividends, professional fees and the like.

Accord Mark II (September 1985)

The accord was a reaction to the falling Australian dollar and inflation caused by higher priced imports.

Accord Mark III (March 1987)

This represented a move from the formally indexed wage rises to a two tier system of wage fixation requiring efficiency offsets in exchange for wage increases.

Source material for accord 3

Accord Mark IV (1988)

Source material for accord 4

Accord Mark V (1989)

Accord Mark VI (February 1990, revised November 1990)

Source material for accord 6

Accord Mark VII (October 1991)

Brought the concept of Enterprise Bargaining.

Accord Mark VIII

Source material for accord 8

End of the Accords

The election of John Howard in 1996 dramatically changed the ideological position of the Australian government. The Liberal government was opposed to any wage fixing. This government's core beliefs were that the free market should determine wages, whilst the government should focus on tight monetary policy and avoid budget deficit. This began a period of increased hostility between the government and the union movement in Australia and marked the end of the Accord period.

Criticism

Criticisms of the Accord generally come from the right within Australia, who claim that it kept real wages stagnant for over ten years. In this view, the Accord was a policy of industrial peace, class collaboration and corporatism.

Effect on Employment

In 1983, the Hon Jim Carlton (Liberal member for Mackellar) argued that the Accord would discourage employment:
Today, in my remarks on this Bill, in particular, I speak on behalf of the unemployed. Again, as I do not represent an existing interest group dependent on government protection or largesse and am not fearful of a cessation of benefits, I do not feel obliged to congratulate the Prime Minister (Mr Hawke) on his capacity to assemble and charm the group of people most likely to provide willing or conscripted endorsement of the disgraceful deal cooked up between the ALP and the Australian Council of Trade Unions before the election. This so-called accord-this deal-was and is a recipe for the continuing exclusion of 10 per cent or more of the work force from the opportunity to earn gainful reward for employment.

The Hon Ralph Willis, Minister for Employment and Industrial Relations argued that things were worse under Malcolm Fraser:

The only policy they had for controlling wages during that period and since has been to use the bludgeon of unemployment to reduce wage claims. That was a deliberate act of policy. The former Government pursued budgetary and monetary policies designed to make it more difficult to advance wage claims. As we saw, under such policies an unemployment rate of 10 per cent was needed to bring wage claims down to their present state, one in which virtually no increases at all are taking place.

With the benefit of hindsight, the official Australian unemployment rate did fall under the early Accord, reaching a minimum of 6% in 1990, but rapidly increased between 1991 and 1994.

Notes

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