National Wage Case March 1977

IN THE AUSTRALIAN CONCILIATION

AND ARBITRATION COMMISSION

CONCILIATION AND ARBITRATION ACT, 1904

C. Nos.

146, 168, 154. and 108 of 1977

PUBLIC SERVICE ARBITRATION

ACT, 1920

C. No.

172 of 1977

NATIONAL

WAGE

CASE

MARCH

1977

MELBOURNE, 31 MARCH 1977

SIR JOHN MOORE, PRESIDENT

MR. JUSTICE LUDEKE

MR.	DEPUTY PRESIDENT I S M C

MR. PUBLIC SERVICE ARBITRATOR TAYLOR

MR. COMMISSIONER NEIL

REASONS

FUR

DECISION

L .

These are claims

for increases in rates

of pay following

upon the publication

of the December quarter 1976 Consumer Price

Index.

The Index which

would normally have been published on

about 21 January 1977

was not published until 22 February 1977

and these proceedings cormnenced on 1 March 1977.

The Index

moved by 6 per cent for the quarter.

This was the largest

quarterly increase since indexation

was introduced. The Australian

Statistician has attributed 3.2

per cent of this increase

directly to changes in the method of financing health insurance

and 2.8 per cent for other reasons.

In brief form the claims and attitudes of parties and

interveners are:

Australian Council of

The 6 per

cent increase for the

Trade Unions

December 1976 quarter plus

2 per

cent catch-up for the tvo quarters

of 1976 for which full indexation

was not granted, all to operate from

15 February 1977.

Council of Australian

6 per cent increase to operate

Government Employee

Organizations

from 15 February 1977.

Council of Professional The same

C.A.G.E.O.

Associations

Australian

Council of

The

same as A.C.T.U.

Salaried and Professional Associations

Australian Public

The same as C.A.G.E.O.

Service Federation

Australian Journalists'

The same as

C.A.G.E.O.

Association

New South Wales

Primary proposition - if ComPonwealth

Government agreed to any increase

being non taxable then

a much lover

increase than 6 per cent.

Alternative or secondary proposition -

6 per cent to a plateau of Average

Weekly Earnings thereafter a flat

money amount.

South Australia

2.8 per cent increase to all rates,

plus 3.2 per cent to $12,000 and then

a flat money amount for this part of

the C.P.I.

Tasmania

The same as South Australia

Victoria

2.5 per cent increase to all rates.

Queensland

As to the 2.8 per cent increase, a

percentage less than that amount to

all rates, the figure

to be determined

by the Commission; no increase for the

3.2 per cent increase.

Western Australia

The aame as the Commonwealth.

Commonwealth

$2.90 increase to all for the 3.2 per cent;

no increase for the 2.8 per cent.

Private employers

No increase on economic grounds but if

on other grounds, mlnimal.

No increase

for the 3.2 per cent, though if any increase a

flat amount of $2.50.

4 .

Substantial compliance

Again we were given statistics on industrial disputes and on movements in rates of pay all of which are relevant to this question and have been the subject of discussion in earlier

judgments.

In this case there has

been no serious challenge to the

unions' submission that there has been substantial compliance. disputation with concern'' did "not argue chat there has been a

lack of compliance".

It was supported by Western Australia.

Victoria after directing our attention to its ovn area of employment said: "We have not looked at the question of Substantial compliance generally and, as always. that remains a matter for the Comission to consider generally, having

regard to all the material that is placed before it.".

Queensland

said: "It

is our opinion that there has been a very high level

of substantial compliance over the period since the last hearing.".

NW South Wales submitted that "in the period under review there

has been substantial compliance with the guidelines within the

State of New South Wales.".

South Australia supported by Tasmania

.said: "The condition precedent for the implementing of the concept

of wage indexation has ... been satisfied.".

The private employers

after putting to us material about quite a number of strikes said,

"we are not putting ... anything other than this, that the

Commission should consider whether there has been substantial

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.

5 .

The Economy

The economy continues to cause concern and the submissions

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

The A.C.T.U.

said that:

' l . . .

the very severe problems still besetting

the Australian economy justify some comment and analysis ... the perilous state of the economy remains. and a fillip is urgently

required to stimulate demand and create

employment opportunities.".

This assessment was supported by New South Wales which

added that it could "see no clear signs of recovery.".

Victoria in a similar gloomy assessment of the economy

stated that:

"Never before has Australia had to face rapid

and sustained inflation combined with high

and sustained unemployment. This problem has

persisted for more than two years. It shows

no sign of immediate improvement.".

The Commonwealth supported by Western Australia had a

lore hopeful outlook.

It said "1976 was a year of economi

recovery but employment continues to lag.".

The private employers made a similar overall assessment

of the economy as the unions and New South Wales and Victoria.

In relation to the

Cornonwealth's evaluation the employers said:

"True it is, as the Commonwealth has submitted,

that there are some signs of economic improvement,

but the signs are few and they are faint.

The

best that can be said is that they offer some

slight encouragement to those who long since

despaired of some improvement ....

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.

The decline in output in the December 1976 quarter

as evealed in

the most recent issue of the !!Quarterly Estimates of National

Income and Expenditure"

is disturbing especially in view of the

sustained revival in the share

of profits. Further, the

unemployment position appears to have worsened, particularly if

account is taken of the

fall in overtime and the virtually

unchanged number of employed wage and salary earners during

1976 when, on normal experience, the labour supply would have

risen substantially.

The devaluation of the exchange rate since the last National

Wage adjustment has brought a

new stimulus to export and import

competing industries and

an improvement in international reserves.

But the Commonwealth supported by Victoria, Western Australia and the employers has stressed the importance of keeping wage and

price increases to a minimum in order

to allow this stimulus

operate fully and spread the benefit of recovery to the rest of

the economy.

The Commonwealth emphasized that:

We will be caught in a vicious circle if the

benefits of devaluation, which was made necessary

by inflation, are disslpated by inflation."

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 J

distortion in economic

relationships caused by the excessive growth in wages during

1973-75. This, it argued, called for a reduction in real wages

"to a level consistent with continuing recovery and increased job

opportunities.". But the Commonwealth

was not able to give

a quantitative measure of the extent to which the real wage may

be said to be excessive.

The Commonwealth admitted

that:

'l... if one

were prepared to put up with high levels

of unemployment for a somewhat longer period and

leave it to the market to restore the balance

between wages and profits then arguably real wages

might not need to be adjusted downward at all.

"But acceptance of the Commonwealth's view that we ought to endeavour to return to more normal employment levels rather sooner than market

forces would achieve.would imply some immediate

scaling down of real wages."

The unions supported by New South Wales, South Auetralia and

Tasmania believed that hope of early recovery depended essentialIy on

fiscal and monetary encouragement rather than on a reduction

in real wages. They saw a reduction in real pay as reducing

the disposable income of wage and salary earners and further

depressing consumption expenditure, notwithstanding any

reasonable reduction in the savingsjdisposable income ratio.

Victoria, while admitting that fiscal stvnulus might

lead

fuller utilisation of the large degree of excess

capacity currently existing and promote recovery

m output

and employment, argued that such stimulus would increase wage

pressures and add to the

risk of departure from the indexation

guidelines and lead to greater inflation. Until the inflation

rate was brought down below the present high level, it

submitted, it would be wrong and irresponsible to take stimulatory

fiscal action. The Commonwealth endorsed this view and added

that fiscal action beyond present levels would f itself worsen

inflationary expectations.

These views were rebutted by

Mr. Jolly as being inapplicable

in the context of the indexation principles. The argument,

he submitted

"...would have some force if

we were operating in

a decentralised wage fixation system which

existed in 1974, but

I fail to see the force of

their argument given the present wage policies

that have been adopted and are currently applied

in the Commission."

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.

coming to its decision, the Commission

is, of course, moved

by the weight

of argument and evidence, and not by the party

or mtervener submittmg It.

On the material before us,

It is not clear that

a reduction in real wages without

imediate compensatory actlon from other sources wlll

provide a stlmulus for recovery.

A reductlon In consumption

spending with further deterloration In economic activity

could ensue.	A further pomt to consider is the increased
risk in these	circumstances of a breakdown of our rndexatlon

package, vhlch 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 inflatlon and could asslst

recovery.

It 1 s ~ ~ ~ ~ s % l b l e

to say wlth any confldrnce how these

forces would balance out.

In sumarlzing its submlsslon, the

Comonwealth said:

I, There are four major arms of economic policy;

fiscal, monetarv, external and wages pollcles. The Commonwealth largely controls and directs monetary, fiscal and external economlc policles.

Consistent with the responsibility for the

economic well-being

of the community, the

management of these 3olicles has been directed

to slowlng the rate of lnflatlon and thereby

creatlng the pre-condltlons for sustainable

economic recovery. The Commonwealth's dlrect

control of the fourth arm, wages policy,

1 s

limited. The reality is that thls Commlsslon

very largely determlnes the level	of wages paid
In Australia.

It follows that the efforts of the

government in the areas of economic policy under

its control can be seriously prejudiced unless

the Commission's declslons on wage adjustment

are consistent with those efforts. This

We submit it 1s lmperatlve, therefore, that the

even more vital in the post-devaluatlon situation. prime determinant of the level of any adjustment

awarded. We say this in full knowledge

of the

Commission's responsibility in relation to the settlement of Industrial disputes."

We think this puts our task too simply. Our prlme task

is the prevention and settlement

of industrial disputes. Sub-section

'"'?I

of the Act zn I ~ S

present form reoulres that in the matter before us

"the Commission shall take into consideration the public intereat

and for that purpose shall have regard to the state

of th

national economy and the likely effects

on that economy of

any award that might be made

in the proceedings or

to which

the proceedings relate, with special reference to likely

effects on the level of employment and

o inflation.".

It was with such

a concept In mind that the Commission

embarked on the indexation principles to meet the serious

industrial and economic situation which

had arisen In 1974.

The Commission's view has been that the abatement

of inflation

and the promotion of recovery	is for industrial reasons
necessarily a slow process.	It was aware then and is still

aware that from the point

of view of slowing inflation and

promoting economic recovery, the safest course might be not

to add to labour costs. But bearing in mlnd industrial

considerations which,

we should stress, have signiflcant

economic implications, the Commission believed that it should

try as far as possible to maintain real wages by indexation.

The Couunission embarked on indexation also

on the

assumption that Its viability would depend on wlde consensus

and support and

in particular on supporting mechanisms which

would emanate from governments. In effect, it had hoped that

the economic policies

of governments would not be inconsistent

with our indexation principles and with the ObJeCtiveS which

underpin them.

The course of events has to some extent negated those

expectatlons and increased our difficulties. In particular

the increase in the excise

on beer and cigarettes in the

Federal budget of August 1975 and the change in the method of

financing health services have directly added substantially

to a key element in our indexation principles, namely the

C.P.I..

Without these events, it is likely that the annual

rate of increase of the C.P.I. would

now be below 10 per cent.

In the decision of April 1975 it was said that "Lt goes without saying that fiscal action which adds to costs and prices will

have a direct and rapid effect	on wage movements through
indexation.".

10.

no t i n t end these obse rva t ions

c r i t i c i sm o f

government

economic

measures.

Governments

must

design

t h e i r

economic

po l i c i e s i n acco rdance wi th

their

understanding of

w h a t

b e s t

f o r

t h e

economy.

But

be l i eve w e should

record

t h a t a s

r e s u l t

these measures

a r e p l a c e d i n

d i f f i c u l t

p o s i t i o n t o

meet

t h e economic

requirements suggested

t h e

Commonwealth

well

a s

OUT

industr ia l obl igat ions under the Act .

A s

pointed out

earlier

t h e Connuonwealth

r e f e r r e d t o t h e f o u r

arms

economic

policy namely,

f iscal , monetary, external

and

wages

p o l i c i e s .

s u b m i t t e d

t h a t

" t h e

e f f o r t s

the Government

i n

t h e areas of

economic

pol icy under

i ts cont ro l can

s e r i o u s l y

prejudiced unless the Commission 's decis ions

wage

adjustment

are

cons i s t en t

t hose

e f fo r t s . " .

a l s o

t r u e

that t h e

f o u r t h arm,

which m t h e Commonwealth submission is "very

largely" determined

t h e

Commission.

c a n a l s o b e p r e ~ u d i c e d

government

d e c i s i o n s

i n o t h e r

arms

economic

policy.

t h e May

1976

dec i s ion

was

s t a t e d " t h a t c o s t s

and

p r i c e s a r e

a f fec ted not on ly

by wages

b u t a l s o

o t h e r f a c t o r s , e s p e c i a l l y

t h e

e x t e n t

t o

which

i n d u s t r i a l

c a p a c i t y

is used;

and

t h a t

t h e

f u t u r e of

t h e

economy w i l l depend on

va r i e ty o f ac t ions

which

are ou t s ide ou r con t ro l

and which

o v e r a l l w i l l be more

important

than OUT

p re sen t dec i s ion

. .".

A l l the

evidence and

argument

before us	i n	the p re sen t ca se have no t a l t e r ed ou r op in lon in th i s
connection.

The Commission

h a s l a i d g r e a t

stress on the importance

wide consensus in the operat ion

i t s wage

p r i n c i p l e s

and has

attempted by

conferences to provide

forum

for consensus

e s p e c i a l l y on

those matters

which al though outs ide

i ts con t ro l ,

are

n e v e r t h e l e s s . c l o s e l y r e l a t e d t o t h e v i a b i l i t y

i ts

wage

dec is ions .

f a r ,

t hese

confe rences

have

y i e lded

f ru i t .

cons t ruc t ing

and applying the indexat ion pr inciples ,

the

Commission

h a s t r i e d t o

draw wage

f i x i n g o u t

from

the hazards of

s e c t i o n a l and

inf la t ionary a r rangements in to

"system"

i n which

wage movements

a re based on p r inc ip l e s wh ich i f app l i ed in an

o rde r ly way,

would

conduce

t o g r e a t e r e q u i t y

and

b e t t e r i n d u s t r i a l

r e l a t i o n s and so assist t h e economy.

It has so f a r

n o t

been

11.

en t i r e ly

success fu l .

I ndus t r i a l

d i spu te s

have

no t

f a l l en

much

a s we might have hoped but

some

allowance may

need

t o b e

made	fo r t he nove l ty o f an o rde r ly approach wi th the r e s t r i c t ions

i t

necessa r i ly

imp l i e s

s e c t i o n a l

a c t i o n s .

period

adjustment may have

been

necessary.

However,

we b e l i e v e

t h a t

we have succeeded

by the confidence

we have generated

i n t h e

system,

in keep ing

wages and

p r i c e s below

t h e l e v e l s

which

otherwise

might

have

prevailed.

n o t e

a l s o

t h a t

t h e

s h a r p

con t r ac t ion

i n

t h e s h a r e

p r o f i t s

gradual ly be ing reversed .

Fur ther ,

while

t h e r e

may

be reserva t ions about cer ta in aspec ts

o u r p r i n c i p l e s ,

matter

which

propose should be given

f u l l e r c o n s i d e r a t i o n ,

par ty or in te rvener has sugges ted tha t

the

concept of an orderly system of

wage

fixation should be abandoned.

I n t h e l i g h t o f

these

cons idera t ions ,

w e

b e l i e v e t h a t

should determine

wage

inc rease which

o f fe r s t he p rospec t o f

cont inuat ion of

sys temat ic approach to

wages

not only

t h e

present

state

of high

unemployment

b u t a l s o t h r o u g h t o t h e

recovery

phase

and

beyond.

b e l i e v e

t h a t

what we do now w i l l

have a bearing

what

w e can achieve

later.

As was

s a i d i n t h e

dec is ion of

May

1976,

should approach " the quest ion of

wage

f i x i n g n o t a s t h e r e s o l u t i o n

each d i spu te a s an I so l a t ed

and

independent case but

as the de te rmina t ion

i n t e r - r e l a t e d

matters

wi th in a

' system'

in which short

term

advantages or disadvantages

may

have

to be ba lanced aga ins t long

term

cos t s o r ga ins . "

should add

way

o f emphas i s t ha t i n th i s t a sk

are

v i t a l ly dependen t

community

consensus and on

the

support

unions and employers and on the appropriate actions which

governments

are

w i l l i n g t o t a k e .

Af t e r nea r ly

two

yea r s o f a s s i s t i ng to r educe p rogres s ive ly

t h e rate

i n f l a t i o n ,

are faced on

th i s occas ion wi th

the

daun t ing p rospec t o f add ing fue l t o the in f l a t lona ry t r end	by
inc reas ing l abour cos t s subs t an t i a l ly th rough fu l l i ndexa t ion .

The	dangerous consequences of such an act ion, especial ly in

c o n j u n c t i o n w i t h t h e i n c r e a s e i n c o s t s r e s u l t i n g d i r e c t l y

from

devalua t ion ,

are too

appa ren t

t o

need

e l a b o r a t i o n .

t h i s

reason

and

not because

are

s a t i s f i e d on

the mater ia l submi t ted

12.

that

i t

is economical ly necessary to reduce the

real

incomes

such of

wage and

s a l a r y e a r n e r s ,

do not be l ieve

that

c a n

r e s p o n s i b l y

g r a n t

t h e

f u l l

per

cent .

The

circumstances

confront ing the count ry	compel	u s	once aga in to depar t	from	f u l l
indexat ion.

December

qua r t e r

C . P . I .

Heal th

Services

(Medibank)

The

i n c r e a s e i n t h e

C.P.I .

f o r t h e

December

q u a r t e r was

per

cent,

comprising 3.2 per cent for

Medibank

and 2.8 per cent

f o r

a l l

o t h e r f a c t o r s .

The Medibank

p a r t of

t he inc rease

was

debated separa te ly

and

var ious proposa ls

were

made

a s t o

how

i t should

t reated.

All

the unions claimed that

t h e

3.2

per cent

was

p a r t

the C.P . I .

i nc rease ou r p r inc ip l e s r equ i r e tha t

i t

should be appl ied in the

same way as any

other

increase.

The private

employers

asked

u s

t o cons ide r

sepa ra t e ly

and

make

spec i f ic de te rmina t ion about

i t

which

i n t h e i r v i e w

would

invo lve no inc rease o r i f t he re

was

t o be an inc rease on soc ia l g rounds

i t should be

a f l a t money amount

of no t more than

$2.50.

Queensland

argued

that none

t h e

3.2

per

cent

should

passed

on.

New

South Wales

a rgued

t ha t

t he

f u l l 3.2

per cent should not

t o a l l because

i t

would

"g ive to

some

be t t e r pa id

employees

than the i r p roper en t i t l ement under

t h e wage

indexat ion scheme.".

submi t ted

tha t

percentage

apply up

t o t h e l e v e l

of Average

Weekly

Earnings and thereaf ter

f l a t amount

equa l t o tha t payab le

Average

Weekly

Earnings.

South Austral ia

and

Tasmania

a l s o a s k e d t h a t

i t

be t r ea t ed sepa ra t e ly

and

t h a t

i t be

app l i ed

t o

p l a t eau of

$12,000 a

year .

Vic

tor

s a i d

i t

saw

"no

p a r t i c u l a r

merit

i n t r e a t i n g t h e h e a l t h s e r v i c e s

con t r ibu t ion o f t he

December

C.P.I . increase in any

special

way"

alLhough

s a i d

that

our decis ion should determine the

Medibank

i s sue .

The Commonwealth,

supported by Western

Aus t r a l i a ,

had an

a p p r o a c h t o t h i s p a r t

t h e

C.P.I.

d i f f e r e n t

from any one

else.

argued that

it would

b e f a i r

and

e q u i t a b l e i f a n

amount

13.

$2.90

per week

were

awarded

t o everyone , tha t be ing the

maximum

compulsory

cont r ibu t ion payable

s ing le pe r son fo r bas i c

medical

and

hospital

care.

It produced

f igures

show

t h a t

73.3

per cent

t he l abour fo rce

would have

t o pay no more

t h a n t h a t

amount.

I t

a l so sa id tha t t h i s approach

was

cons i s t en t w i th

J o i n t

Press Statement

of 12 June 1976 following

Commonwealth Government -

Union

t a l k s .

Under

the

heading

Medlbank the following

passage

appears:

"The

Government

i n d i c a t e d t h a t i n s o f a r a s

these

changes r e su l t ed in inc reases in the

Consumer

Pr ice Index ,

then , for

the

purpose

jus

tment

t o award wages

f o r movements

i n t h e Consumer

Price

Index under

the wage

i n d e x a t i o n p r i n c i p l e s ,

t h e Cornonwealth would

nof

be arguing tha t the

index

should

'd iscounted '

for

these par

icular

increases. "

This passage

was

r e l i e d on

a l l t h e u n i o n s a s r e i n f o r c i n g

t h e i r c l a i m s f o r t h e 3 . 2 p e r c e n t i n c r e a s e a t t r i b u t a b l e t o

Medibank

which

i n t h e i r

v iew they were en t i t l ed to

anyway.

The

pr ivate

employers

took

q u i t e d i f f e r e n t a t t i t u d e .

They

a rgued tha t i n e s sence the

3.2 per cent

was,

f a r a s

wage

f i x i n g

was

concerned, analogous

surcharge on

income t a x and the re fo re

should not be used

j u s t i f i c a t i o n f o r i n c r e a s i n g

wages.

Moreover,

they

said

the arrangement between the

Commonwealth

and

the unions

was

one

i n which they did not par t ic ipate ,

they

should

not

requi red

pay

f o r Medibank.

The arrangement

between

the unions and the

Cmmnonwealth

was

d i f f e r e n t

from any other

arrangement made

between

two

p a r t i e s -

i t should not be forced

an ucwi l l ing th i rd par ty .

However whi le there

may

well be substance

t o the employers' argument

about

the

agreement

between

the

unlons

and

the

Commonwealth

the Important

f a c t from our pomt

of view 1s that

the agreement has created

s t rong

e x p e c t a t i o n t h a t t h e e f f e c t

of Medibank

w i l l b rmg about

wage

i n c r e a s e i n

t h i s c a s e .

It was also

suggested

by the unions

tha

because

the

in t roduct ion

Medibank

had

reduced

the

C.P.I .

f o r t h e

September

and

December

q u a r t e r s 1975 it would

be illogical

and

incons i s t en t

n o t t o a l l o w t h e

C . P . I .

i nc rease

which has occurred because

Medibank

i n

t h e

December

q u a r t e r 1976.

recognize

the

l o g i c of

th is argument.

We	a l so ag ree wi th the un ions tha t , g iven the Aus t r a l i an

S t a t i s t i c i a n ' s

treatment

of the change

i n t h e method

defraying

the cos t o f hea l th in su rance , l og ica l ly the

Medibank

component

t h e C.P.I .

Increase is no

d i f f e r e n t

from any other price

increase

t he

i ndex .

Mr.

J o l l y has

s a i d ,

t h e

e s s e n t i a l

i s s u e a r i s i n g

from

t h e Medibank

mat te r

t h e q u e s t l o n

t h e

form

which pay should be adjusted.

However,

i n t h i s connec t ion ,

f a c e 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 , the magni tude

t h e o v e r a l l I n c r e a s e i n t h e

December

quarter C.P.I .

and

t h e e x t e n t t o

which we

may

prudent ly add

t o

l abour

cos t s

i n

t he

p re sen t

c i r cums tances .

Second,

t h e

f a c t

t h a t

are

a b l e t o i d e n t i f y t h e h e a l t h c o n t r i b u t i o n s i n t h e i r

various

forms

t h e l e v y o r

i t s equivalent

v a r i o u s l e v e l s

income,

s i n g l e

and

fami ly cont r ibu t ions , and the d i f fe ren t

s tandards of medical service

- sharply poses ,

i n a way not

encountered in connect ion with the pr ice

movements

o the r

C . P . I .

items,

t h e d i f f i c u l t y

d e a l i n g w i t h

t h i s q u e s t i o n

equi tably.

t r y t o

compensate

f u l l y t h o s e w i t h t h e l a r g e s t h e a l t h

con t r ibu t ions

means

awarding the

amount

i n d i s c r i m i n a t e l y t o

a l l and

inc reas ing

the

wage b i l l

e x c e s s i v e l y .

The

information

before us

sparae but

n o t e t h a t

some

per cent of the

l a b o u r f o r c e a r e s i n g l e c o n t r i b u t o r s

and

$2.90

per

week

t h e

maximum

amount

l ev ied on s i n g l e

c o n t r i b u t o r s .

We be l i eve we

should protect those

who

most need

p ro tec t ion

and

t h l s c a n b e s t

done

by a f l a t money amount.

are aware t h a t many

s i n g l e

income

f a m i l i e s w i l l not

fully

compensated,

But

a s t h e

Commission

has noted

prev ious occas ion in

connect ion with the family

wage

concept inherent in the

e a r l i e r minlmum wage,

a wage

adjustment

is not an appropr ia te

method

of do ing equal jus t ice to the s ing le person

and

t h e

15.

family.

Taxation

and

soc ia l

s e rv i ce

p rov i s ions

a l low

a more

satisfactory

avenue.

Because

what we have s a l d about

ser ious inf la t ionary consequences

l a r g e wage

inc rease at

t h e present time,

we have decided

award

$2.90

t o a l l .

Th i s i nc rease in

wages

because

Medibank

in tended to

s a t i s f y all union demands

about

hea

insurance .

a r e

aware

tha t independent ly

these proceedings unions have been

making

claims on employers

t o pay

fo r hea l th in su rance

and

t h i s

i nc rease shou ld sa t i s fy	all	such claims.
Remainder of C.P.I.

Now

that Medibank

has been dea l t wi th as

sepa ra t e i s sue

tu rn

to cons ider

the remainder

t h e C . P . I .

increase ,

namely

2.8 per

cent.

The

a t t i t u d e s of

the

p a r t i e s and

in t e rvene r s

have been mentioned

e a r l i e r i n t h e s e r e a s o n s .

r e l a t i o n t o t h e

form of

t h e i n c r e a s e t h e

Commission

has

s t a t ed on

many occasions it is aware of

the arguments

for and

against

concept

of percentage

increases .

We recognize

tha t

in the long run

a series of

f l a t wage increases can

l e a d t o

problems about

relativit ies

and

t h a t t h i s e f f e c t c a n b e

ameliorated by a combination of percentage and

f l a t inc reases

p l a t eau

i ndexa t ion .

a r e

a l s o

aware t h a t a

f l a t rate

increase will favour those

m the lower

income

groups

and

i n

c e r t a i n s i t u a t i o n s

where

i t

cons idered tha t

f u l l p e r c e n t a g e

increase

no t poss ib l e

i t

may

b e p r e f e r a b l e t o f a v o u r

tllosc group’;.

There

is of course a v a r i e t y of

methods

which

can

be used between

f u l l p e r c e n t a g e

and

f l a t r a t e

increase.

As we have noted

i n connection with our

review of t h e

economy,

the circumstances facing

the country

compel us once

a g a i n

t o

d e p a r t

from

f u l l

i n d e x a t i o n .

do not

see

any

alternative

to such

c o u r s e i f

w e

a r e t o a v o i d i n t e n s i f y i n g

t h e r a t e

i n f l a t i o n w i t h

a l l

the undesirable consequences

f o r t h e

economy,

a t present showing at best

some

s i g n s of

recovery.

16.

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 . 8 0 for the 2 . 8 per cent component of the C.P.I.

increase, that being the application	f 2 . 8 per cent to the
Six Capitals Minimum Wage.

Catch-up

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 was the amount by which full indexatlon

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 thls part of the claim is dismissed.

Date of operation

The unions asked that any increase should be made payable

from 15 February 1977 which would give effect to the spirit

of Principle 3

although a literal application of the Principle

would make the date 15 March 1977, the December

1976 C.P.I.

not having been published until 22 February 1977. Retrospectlvity

was opposed by the Commonwealth. Western Australia and the

private employers. Victoria, Queensland, South Australia and

Tasmania made no specific submissions about the date of operatlon.

New South Wales said it had	no submissions to make as	to date of
operation but said:

"We would leave that matter to be determined by

the Commission in accordance with the normal

princlples applying to such matters."

1 7 .

The quest ion of

r e t rospec t iv i ty has g iven

us concern.

are consc ious

t h e aim

P r i n c i p l e

that

there should

some

c e r t a i n t y and

r e g u l a r i t y of

increases under the

indexation

system.

But

as t h e Commisslon

s a i d

i n

i t s dec i s ion

t h e

September 1976

q u a r t e r f i g u r e s " r e t r o s p e c t i v i t y i n

major

cases

not normal" and retrospectivity

was

not

then

awarded.

The

normal

p r a c t i c e a b o u t r e t r o s p e c t i v i t y

i n h e r e n t i n

P r i n c i p l e

which

based on the assumption that an increase

w i l l ope ra t e from a

d a t e some

t h r e e weeks

a f t e r t h e

normal

pub l i ca t ion of

t h e C . P . I .

f i g u r e s

and

a f t e r

shor t hear ing .

In the p re sen t ca se the f igu res

were

no t pub l i shed un t i l

about

month

after

the usua l da t e

and

a l though th is hear ing

was commenced on 1 March 1977, t h a t is within a week of pub l i ca t ion

t h e f i g u r e s

and

t h e r e was

d e l a y l n t h e h e a r i n g ,

was

not

completed

u n t i l 1 8

March.

I n a l l t h e c i r c u m s t a n c e s

consider

should g ive e f fec t

t o t h e

normal pract ice

and

make

t h e i n c r e a s e s

award

t o o p e r a t e

from the beginning	of	t h e f i r s t	pay p e r i o d t o	commence on or a f t e r
today .

The	f u t u r e

There are three

Important

points

which

have

cropped

i n	v i r t u a l l y a l l i n d e x a t i o n h e a r i n g s :

Whether

C.P.I.

movements should

appl ied

ful ly ,

or whether

the

C.P.I .

should

discounted.

This

i s s u e

emerged

i n a

s t a r k way

i n t h e c u r r e n t

proceedings because

than ha l f t he

movement

i n t h e I n d e x

was

i d e n t i f i a b l e

be ing r e l a t ed

to hea l th Insu rance , t he cos t o f

which can be

ca lcu la ted

thout

re fe rence

the

C .P . I .

o ther

cases

e .g . ,

ind i rec t

t axes ,

impor t

p r ice

inc reases e t c .

t he re a re p rob lems

i den t i fy ing

and measuring the extent

discount ing.

18.

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 either by use

of a lesser percentage, a flat amount,

or a

plateau. This

of course relates to Principle 5 .

quarterly or at longer periods. For instance,

Whether the Commission should consider the Index quarterly hearings should be abandoned in favour of annual or at most half-yearly hearings. If

this was rejected it was submitted

we should deal

with the March and June quarters

1977 at the same

time. The private employers also asked us to

change to annual or at least six monthly

hearmgs.

Al three matters are fundamental

to the package and

although they keep recurring they have not had the opportunity

they deserve of analysis

m greater depth because

of the

pressure to complete the quarterly hearings as quickly as

possible.

The Commission has discerned from the tone rather than the substance of submissions in recent National Wage cases,

dissatisfaction with some

of our present principles. To provide

an opportunity for this dissatisfaction to be articulated, we outlined in the course of the present case a possible new approach and invited comment from the parties and interveners.

It should be understood,

of course, that we were not

to be taken

as necessarily favouring this approach.

The proposal was put on both a long term and short term

basis.

The long term was that the wage would be divided into

two parts. a primary and a secondary part, something like the

o1d"basic wage" and "margins" though not necessarily the same In

concept. Each quarter the

prmary part would be vlrtually automatically

19.

adjusted for movements in an index and only in an extreme situation would that adjustment not take place. The other part of the wage could be adjusted over a longer period of

time, say every one or two years when consideration could be

given to, amongst other things, productivity and general

problems of relativity.

In the short term

we would announce that for two or

three quarters the primary part, which

we would determine,

would be increased virtually automatically for movements in

the C.P.I..

During that period the Commission would

consider an examination in depth of our wage adjustment system,

including the index to be used, the level

of the primary part,

the methods of reviewing the other part of the wage, the present

guidelines and other relevant issues.

The A.C.T.U. opposed the idea of an inquiry as unnecessary

and in particular an inquiry into the C.P.I.. It regarded the

C.P.I.

as the proper index for use in wage fixation and said

that any consideration of change to it should be dealt with by

the Standing Tripartite Commission.

It opposed abandonment of

total wage and pressed for full indexation each quarter as a

result of changes in the C.P.I..

However it indicated

willingness to participate should the Commission decide to have

an inquiry.

C.A.G.E.O. agreed with the A.C.T.U. that the Standing

Tripartite Commission

was the appropriate body to deal with

the C.P.I. and suggested that the Commission should have its

normal hearing to consider the March 1977 quarter figure and

could then discuss with the parties the question	of the inquiry
and its timetable.

A.C.S.P.A.

also submitted that the question

of the C.P.I.

should go to the Standing Tripartite Commission.

The private employers opposed the reintroduction

of a

two-part wage and of any system

of adjustment more automatic

20.

than the present one. They argued that the Commission would

lose a great deal of flexibility and that the proposal might

cause problems about relativities if only one part of the wage

moved. They welcomed the idea of an inquiry into the system

of wage fixation but opposed any virtually automatic	d~ustment
as an interim measure.

The Commonwealth expressed strong support for an inquiry

into the approprlateness of the

C.P.I. and the possibility of

a two-tier wage system.

It expressed grave reservations

however about the virtual automatic adjustment in the short

term and submitted that any inquiry should precede any consideration

of adjustment in consequence of a movement in the C.P.I.. It

was supported by Western Australia.

New South Wales while arguing that the

C.P.I. was the

best available index, sald if the Commission had

an inquiry

It would participate in and cooperate with

that inquiry. It

also expressed preference for a continuation of the present

system of quarterly reviews rather than the proposed virtually

automatic adjustment for future quarters.

Victorla expressed support for the holding of

an inquiry

and indicated it would wish to participate and assist. However,

it opposed the short-term virtual automatic adjustment of a

primary wage.

South Australia suggested that the issues raised would

best be left to debate in the next hearing following publication

of the March quarter figure.

If this hearing were to be long,

the Cotmission could	make an interim decision about the March
quarter.

Having considered all the matters raised in 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 concluslon that in broad

21.

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 commence	an investigation into the following
matters:-

1. Whether the total wage system should continue

or whether a two-tier system of wages would

be preferable.

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 t is inadequate

what other index is more adequate.

4 . The period between general wage reviews both

If the total wage is retained and if

a two-tier

system is found to be preferable.

5 . Should any other current guidelines be altered.

6 .

Any other relevant issue that any party

intervener may wish to raise.

The Commission will be prepared to hear

as first

step debate about ‘the March quarter figure, Such a

hearing should be short and should not delay the inquiry

long.

The private employers have suggested that

we should

rule now on how the effect of devaluation on prices should be treated. We believe that this is a matter which should be left until the March quarter C.P.I. is being considered. The Commission would then be assisted by any relevant material

prepared by the Statistician. The effect of devaluation can

then be debated and decided. We think this is preferable to

22.

our ruling on devaluation in the present proceedings.

follows that

we do not propose, certainly at this stage,

to make orders about the application

of future adjustments

to wages consequent upon movements

of the C.P.I.

Form of Orders

The variations

of the awards and determination will

operate from the beginning of the first pay period to

commence on or after 31 March 1977. The variations of

the awards will operate for a period of one month from

31 March 1977.

Minimum wages will be increased by

$5.70 per week.

Junlor rates prescribed

as money amounts will be

increased by the proportion

of $5.70 that the existing

junior rate concerned bears to the exlstlng

Six

Capitals

Minimum Wage	of $100.70 with	a maximum increase of $5.70
per week.

Weekly rates wlll be calculated to the nearest

1OC

and annual rates to the nearest

$1.

Because of the form of the increase awarded by this

decislon allowances will not be increased.

It 1s not our intention that overaward payments

including those covered by

a recommendatlon provislon

as appears in the Metal Industry Award will be increased.

The form of the orders necessary to give effect to the

decision under the Conclliation and Arbitration Act will be

settled by the Registrar with recourse to

a member of this

Commission.

The form of the determination will be settled by

the Public Service Arbitrator.

The applications before

us are stood over until

10.30 a.m. on

Tuesday, 3 May 1977.

Appendix

TABLE 1

Unemployment and Hours

of Overtime Worked per Employee

Unemployed persons

Percentage of Labour

Lverage number of

as a percentage of

Force Registered

tours of overtime

Period

t h e

Labour Force

Unemployed

wi th the

iorked

per

(Seasonally

Commonwealth

Employ-

mployee

Adjusted)

ment

Serv ice

:Seasonally Adjusted

:Seasonally	(Without
.d]usted)	Seasonal

Adjustment)

(2)

(3 )

(4)

1975 - March

4.5

2.1

Apr i l

4.7

2.2

- Play	4.5	4.5	1.9
- June	4.5	1.6

J u l y

4.0

1.7

- Aug.	4.6	5.0	1.8
- Sept.	5.1	1 . 8
- Oct.	5.2	1 . 8
- NOV.	4.6	4.7	2.0
- Dec.	4.6	2.0

1976 - Jan.

4.3

2.0

- Feb.	4.3	4.2	2.2
- Mar.	4.4	2.4

Apr i l

4.7

2.2

- May	4.3	4.7	2.5
- June	4.9	2.6

Ju ly

5.2

2.6

- Aug.

4.9

4.4

2.4

Sept.

4.4

2.5

- Oct.

4.4

2.4

- NOV.	4.2	4.5	2.4
- Dec.	5.4	2.2

1977 - Jan.

5.0

2.3

- Feb.

4.6

5.7

Appendix

- 2 -

NOTES :

The seasonal adjustment method used in Column (2) is

based on seasonal patterns of recent years vhich

include years of low unemployment.

The Australian Statistician has drawn attention to the difficulties arising from making seasonal adjustments when marked changes in seasonal patterns occur.

The seasonally adjusted statistics taken from the

publications of the Department of Employment and

Industrial Relations are subject to the qualifications

that "no claims are made that the Series. with or

vithout school leavers, are being satisfactorily

adjusted.". This Series was discontinued after

July 1976.

S O U R E :

Column (1):

Australian Bureau of Statistics,

Employment and Unemployment November 1976 (Ref. No. 6.4);

Unemployment, February 1977 - Preliminary Estimates

(Ref. No. 6.35)

Columns (2 ) ,

(3) and ( 4 ) :

Department of Employment and

Industrial Relations, Monthly Review of the Employment

Situation, various issues, to February 1977

1 0 u	. .	0	m
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[1977] FCA 9

31 Mar 1977