N.Z. wage round parallels in Britain, Australia

Press, 6 February 1986, Page 2

N.Z. wage round parallels in Britain, Australia

The big pay increases which workers obtained in the latest wage round may lead to pressures on the Government to prevent a repetition in the next round, says an expert in incomes policy, Dr Jonathan Boston. Dr Boston, a lecturer in political science at the University of Canterbury, said that although it was too early to be certain of the average increase, it looked likely to be just over 20 per cent when both public and private sector groups were taken into account. There were parallels for New Zealand in both the United Kingdom in the mid-1970s and Australia between 1973 and 1975. The British Conservative Government installed wage controls between 1972 and 1974. When Labour came to power it eased controls, and in the next 18 months there was a pay explosion. In both Britain and New Zealand,

the pay increases were made more difficult to control by reports which recommended big increases to senior public servants and politicians. Another parallel was the falling behind of public sector wages during wage controls in both countries, and substantial rises after- the controls were lifted. In Britain between 1974 and 1975, nurses and midwives’ pay rose 30 per cent, postal workers’ pay by 38 per cent, teachers’ pay by 30 per cent, and railway workers’ pay by 30 to 50 per cent. The Government’s response in Britain had been to enforce a sixpound increase limit in co-operation with the unions. In Australia there were big pay increases under the Whitlam Government between 1973 and 1975. Pay for males rose 43 per cent, and for females, 60 per cent, in the two years ended October, 1975. The Governments response there was to impose wage indexation. In both Britain and Australia, the pay explosions had been followed by declining profitability, declining international competitiveness, and econo-

mic recessions, with a fall in output and a rise in unemployment, said Dr Boston. In both countries the pay explosions had weakened public confidence in the economic, management skills of their Governments. In Australia it contributed to the defeat of the Whitlam Government, while in Britain it fuelled economic crises which gripped the nation in 1975-1976 and prompted the Government to call in the International Monetary Fund.

Asked to speculate on the political consequences of the wage round in New Zealand, Dr Boston said that it was difficult to judge because there were conflicting forces at work. On one hand the shortterm increase in real wages would no doubt have a positive, albeit temporary, effect on people’s consumption. On the other hand the wage increases would trigger higher inflation and unemployment, which would count against the Government.