Reintroduction of quarterly wage indexation 1975–1978

Updated time

Last updated

20 December 2016

In the National Wage Case 1975[1] the Commission decided to reintroduce a system of quarterly indexation of award wages in relation to the most recent movement of the six capitals consumer price index (CPI) unless it was persuaded to the contrary. The Commission said it would also annually consider increases to the total wage ‘on account of productivity’. It increased all award rates by the ‘full 3.6 per cent increase in the CPI for the March 1975 quarter’[2]

The Commission was dealing with severely adverse economic circumstances not experienced since the Great Depression, which it described in the following terms:

‘The unemployment rate has risen to the highest level in the post-war period [4 per cent].  In real terms, private investment fell sharply during 1974 and private consumption expenditure declined during the second half of 1974.  Productivity growth for 1974 was negative. A very large build up of unsold stocks has taken place. Inflation has accelerated to the highest rate since the early 1950s [17 per cent] but it has been outstripped markedly by pay increases.  The combination of these inter-related factors is reflected in the abnormally large increase in the share of wages and salaries in Gross Domestic Product and the corresponding squeeze of profits measured by Gross Operating Surplus of Companies.  Because of the reasonably high level of international reserves, the only feature of the economy which has not caused undue concern is the adverse movement in the balance of payments during 1974.’[3]

The Commission said that it should ‘act in a way which will promote economic recovery in a socially equitable and industrially harmonious way.’[4] The Commission decided to introduce quarterly indexation:

‘We take this course as we are of the view that some form of wage indexation would contribute to a more rational system of wage fixation, to more orderly, more equitable and less inflationary wage increases and to better industrial relations, provided that indexation was part of a package which included appropriate wage fixing principles and the necessary ‘supporting mechanisms’ to ensure their viability. This conclusion is not inconsistent with much of the evidence and argument put in opposition to indexation.’[5]

It also introduced a restrictive set of wage fixing principles which limited what other increases the Commission would award in work value, and ‘catch-up of community movements’. These were an attempt to limit the flow-on into other awards of a series of industry wage increases in the previous year.  Community movement increases must be ‘genuine catch-up cases and not leapfrogging’. 

While indexation was introduced, the resulting award increases were sometimes discounted and were less than the relevant CPI movements, because of the failure of the parties to contain claims to those provided in the decision.  The Commission consistently rejected ‘catch-up’ claims for past increases which were less than the CPI. 

The decisions under the quarterly indexation system were:

  • June quarter 1976 CPI increase of 2.5 per cent—Commission ordered a flat $2.50 increase to all award wages and salaries up to $166 per week and a 1.5 percent increase to all award wages and salaries above this level.  The date of operation of the decision was 15 August 1976
  • September quarter 1976 CPI increase of 2.2 per cent—the Commission rejected the unions’ 'catch up' claim, but awarded the full 2.2 percent increased to apply from the first full pay period commencing on or after 22 November 1976[6]
  • December quarter 1976 CPI increase of 6 per cent—the Commission recognised what it called 'economic responsibilities' and granted a flat $5.70 increase consisting of $2.90 to compensate for the medibank levy, plus $2.80 for all other factors[7]
  • the April quarter 1977 - proceedings were adjourned and increases other than past National Wage increases were deferred until 3 May 1977[8]
  • the March quarter 1977 CPI increase of 2.3 per cent—[9]the Commission decided that all award rates up to $200 per week be increased by 1.9 percent and those above $200 per week increased by a flat $3.80
  • June quarter 1977 CPI increase of 2.4 per cent—the Commission awarded a 2 percent increase[10]
  • September quarter 1977 CPI increase of 2 per cent—the Commission awarded an of 1.5 per cent operative from 12 December, with a discount of 0.5 per cent on account of industrial disputation[11]
  • December quarter 1977 CPI increase of 2.3 per cent—the Commission awarded a 1.5 percent increase on award wages up to $170 per week and $2.60 per week to wage rates exceeding $170 to be payable from 28 February 1978[12]
  • March quarter 1978 CPI increase of 1.3 per cent—the Commission granted a 1.3 per cent increase was granted but refused a claim for catch-up. The Commission said that this would be last decision National Wage Case conducted under the existing indexation guidelines[13].

Footnotes

[1] Print C2200 167 CAR 18

[2] 167 CAR 18 at 37

[3] 167 CAR 18 at 23

[4] Ibid at 25

[5] 167 CAR 18 at 32

[6] Print D1460 182 CAR 225

[7] Print D2720186 CAR 557

[8] Print D3315 188 CAR 591

[9] Print D3315 188 CAR 591

[10] Print D4320 192 CAR 847

[11] Print D5501 198 CAR 520

[12] Print D6070 201 CAR 447

[13] Print D7262 205 CAR 399