Allen v Townsend

[1977] FCA 10

c .	NATIONAL WAGE CASE MARCH 1977
MELBOURNE, THURSDAY 31 MARCH 1977

STATEMENT BY PRESIDENT

In this case there has been no serious challenge to the

unions' submission that there has been substantial compliance. The Commonwealth although viewing "the level of industrial

disputation with concern" did "not argue that there has been	a
lack of compliance".

The fact that no one submitted that there has not been

substantial compliance does not absolve us from looking at

the material and making up our own minds about it. We are still concerned at the incidence of strikes with their consequent effect on the economy as a whole including our overseas trade.

Once again the figures of rates paid show little movement

outside indexation.

On balance we think there has been substantial compliance

with the guidelines.

The economy continues to cause concern and the submissions

before us varied only in emphasis on the state of the economy.

The figures which we have included in the Appendix bear out

the assessment of the employers that there "are some signs of

economic improvement but the signs are few and they are faint.".

For its part, the Commonwealth claimed that it had further

tightened all the instruments of economic policy under its control.

The rate of recovery, it said. will depend on the movement of wages.

In this connection the Commonwealth stressed the vital importance

of correcting what it submitted to be a distortion in economic

relationships caused by the excessive growth in wages during 1973-75. of the extent to which the real wage may be said to be excessive.

This, it argued, called for a reduction in real wages "to a level

consistent with continuing recovery and increased job opportunities.".

The contending arguments on what are the most appropriate

actions to promote rapid recovery put us once again in a difficult

position on what should be done about wages. In coming to its

decision, the Commission is. of course, moved by the weight of

argument and evidence, and not by the party or intervener submitting

it. On the material before us, it is not clear that a reduction

in real wages without immediate compensatory action from other sources will provide a stimulus for recovery. A reduction in consumption spending with further deterioration in economic

activity could ensue. A further point to consider is the increased

risk in these circumstances of a breakdown in our indexation package,

which could add to inflation and discourage spending even more.

On the other hand, a slowing down of labour costs would help to

reduce the rate of inflation and could assist recovery. It is

impossible to say with	any confidence how these forces would balance
out.

The Comission embarked on indexation on the assumption that

its viability would depend on wide consensus and support and in

particular on supporting mechanisms which would enanate from

governments. In effect, it had hoped that the economic pollcies

of governments would not be inconsistent with our indexation

principles and with the objectives which underpin them.

The courae of events has to some extent negated those

expectations and increased our difficulties.

We do not intend these observations as a criticism of

government economic measures. Governments must design their

economic policies in accordance with their understanding of what is best for the economy. But we believe we should record that

as a result of these measures we are placed in a difficult position

to meet the economic requirements suggested by the Cornonwealth as

well as our indus t r ia l ob l iga t ions under the Act.

We be l ieve tha t we should determine a wage increase which

offers the prospect of a continuation of a systematic approach

t o wages not only in t he p re sen t s t a t e of high unemployment but

also through to t h e recovery phase and beyond. We bel ieve tha t

what we do now w i l l have a bearing on what we can achieve l a te r .

We should add by way of emphasie that in t h i s t a s k we a r e

v i t a l l y dependent on community consensus and on the support of

unions and employers and on the appropriate act ions which

governments a re w i l l i ng t o t ake .

After near ly two years of ass is t ing to reduce progressively

the r a t e of i n f l a t ion . we are faced on this occasion, with the

daunting prospect of adding fue l to the in f la t ionary t rend by

increasing labour costs substant ia l ly through ful l indexat ion.

The dangerous consequences of such an ac t ion , espec ia l ly in

conjunction with the increase in cos t s r e su l t i ng d i r ec t ly from

devaluat ion, are too apparent to need elaborat ion. For t h i s

reason and not because we a r e s a t i s f i e d on the material submitted

t h a t it is economically necessary to reduce the real incomes a s

such of wage and sa la ry earners , w e do not bel ieve that we can

respons ib ly g ran t the fu l l 6 per cent. The circumstances

confronting the country	compel	us	once again to depart	from	f u l l
indexation.

The increase in the C.P.I . f o r t he December quarter was

6 per cent, comprising 3 . 2 per cent for Medibank and 2 . 8 per cent

for a l l o ther fac tors .

The Medibank pa r t of the increase was debated separately

and various proposals were made a s t o how it should be treated.

The agreement between the unions and the Commonwealth has

created a s t rong expec ta t ion tha t the e f fec t of Medibank w i l l

bring about a wage increase in th i s case .

However, we face two r e l a t e d d i f f i c u l t i e s . F i r s t . t h e

c

4.

magnitude of the overall increase in the December quarter C.P.I.

and the extent to which we may prudently add to labour costs

in the present circumstances. Second, the fact that we are able

to identify the health contributions in their various forms -

the levy or its equivalent at various levels of income, single and

family contributions, and the different standards of medical

service - sharply poses, in a way not encountered in connection

with the price movements of other C.P.I. items, the difficulty

of dealing with this question equitably.

To try to compensate fully those with the largest health

contributions means awarding the amount indiscriminately to all

and increasing the wage bill excessively. The informatlon

before us is sparse but we note that some 73 per cent of the

labour force are single contributors and $2.90 per week is the

maximum amount levied on single contributors. We believe we

should protect those who most need protection and this can best

be done by a flat money amount. We are aware that many single

income families will not be fully compensated. But as the

Comission has noted on a previous occasion in connection with the

family wage concept inherent in the earlier minimum wage, a wage adjust-

ment is not an appropriate method of doing equal justice to the single

person and the family. Taxation and social service provlsions allow a

more satisfactory avenue. Because of what we have said about the

serious inflationary consequences of a large wage increase at the

present time, we have decided to award $2 .90 to all.

This increase in wages because of Medibank is intended to

satisfy all union demands about health insurance. We are

aware that independently of these proceedings unions have been

making claims on employers to pay for health insurance and this

increase should satisfy all such claims.

Now that Medibank has been dealt with as a separate Issue

we turn to consider the remainder	of the C.P.I. increase, namely
2.8 per cent.

As we have noted in connection with our review of the economy,

the circumstances facing the country compel us once again to depart

f r w full indexation. We do not see any alternative to

such a course if we are to avoid intensifying the rate of

inflation with all the undesirable consequences for the economy.

at present showing at best some signs of recovery.

To minimize the addition to labour costs while at the

same time acknowledging the position of lower income groups

on whom inflation falls heaviest, we have decided to grant

a flat $2.80 for the 2.8 per cent component of the C.P.I.

increase, that being the application of 2.8 per cent to the

Six Capitals Minimum Wage.

A catch-up claim was made by the A.C.T.U. and A.C.S.P.A.

and was not supported by anyone. They argued that the amount

of 2 per cent which vas the amount by which full indexation was

not awarded last year on the June and September figures should

now be added. They based their case on an equity argument that

they were always entitled to full indexation. The decisions

on the June and September figures were made after a full hearing

of all the arguments. Nothing has been put to us to persuade

us to alter them and therefore this part of the claim is

dimissed.

The question of retrospectivity has given us concern. We

are conscious of the aim of Principle 3 that there should be

some certainty and regularity of increases under the indexation

system. But as the Commission said in its decision on the

September 1976 quarter figures "retrospectivity in major cases

is not normal" and retrospectivity was not then awarded.

In all the circumstances we consider we should give effect

to the normal practice and make the increases we award to operate

from the beginning of the first pay period to comence on	or after
today.

There are three important points which have cropped up in

virtually all indexation hearings:

1.   Whether C.P.I. movements should be applied fully, or whether the C.P.I. should be discounted.

2.    Whether movements in the Index should be applied as a percentage to all wages and salaries or in

some way which gives lesser amounts erther by use

of a lesser percentage, a flat amount or a plateau.

This of course relates to Principle 5 .

3.    Whether the Commission should consider the Index quarterly or at longer periods.

All three matters are fundamental to the package and

although they keep recurring they have not had the opportunity

they deserve of analysis in greater depth because of the pressure

to complete the quarterly hearings as quickly as possible.

Having considered all the matters raised rn argument about

the proposals which fell from the Bench and in particular the

lack of consensus about what should happen for the next two or

three quarters we have come to the conclusron that in broad

terms we should follow the suggestion made by South Australia.

This will mean that on 3 May 1977 the Commission will assemble

to deal with the March quarter figure and to cormnence an

investigation into the following matters:-

1.

Whether the total wage system should continue be preferable.

2.    The use of an index as a satisfactory method of adjusting wages.

3.    The adequacy of the Consumer Price Index for wage fixation purposes and if it is inadequate

what other index is more adequate.

4 . The period between general wage reviews both

i f t h e t o t a l wage is retained and i f a two-tier

system is found to be p referab le .

5. Should any other current guidel ines be a l tered.

6. Any other re levant issue that any par ty or

intervener may wish to raise.

The Commission w i l l be prepared to hear a s a f i r s t s t e p

debate about the March quarter f igure. Such a hearing should

be short and should not delay the inquiry long,

The p r iva t e employers have suggested that we should r u l e

now on how t h e e f f e c t of devaluation on prices should be treated.

We b e l i e v e t h a t t h i s i s a matter which should be l e f t u n t i l t h e

March quar te r C.P.I. is being considered. The Commission would

then be a s s i s t ed by any relevant material prepared by the

S t a t i s t i c i a n . The e f f e c t of devaluation can then be debated

and decided. We t h i n k t h i s i s p re fe rab le t o ou r ru l ing on

devaluat ion in the present proceedings. It follows that we

do not propose, certainly a t t h i s s t a g e , t o make orders about

the appl icat ion of future adjustments to	wages	consequent	upon
mvements of the C.P.I..

The va r i a t ions of t h e awards and determinations w i l l operate

from the beginning of t h e f i r s t pay per iod to commence on o r

a f t e r 31 March 1977. The va r i a t ions of t he awards w i l l operate

for a period of one month from 31 March 1977.

The appl icat ions before us are s tood over unt i l 10.30 a.m.

on Tuesday. 3 May 1977.