The Federal Government and the Reserve Bank of Australia are to be commended on their attempts to reduce the rate of inflation. This effort should continue to be the Government's number one priority. Nevertheless, it seems inevitable that some inflation will continue in the foreseeable future.
Domestically, trade union pressure for wage increases as well as decisions being handed down in work value cases give little cause for optimism. Inflation in Australia's main trading partners and increased oil prices are additional factors from overseas which must give concern.
MANY STEPS ARE NEEDED
There is no single remedy for inflation. Accordingly a package of measures including the following should be implemented:
Elimination of avoidable Government expenditure at both Federal and State levels.
Continuation of the current pattern of Federal budget surpluses.
Negotiations between the Commonwealth and the States to ensure that at all times the latter co-operate fully with Federal economic strategy, and to vary some long standing financial arrangements between the Commonwealth and the States so that the latter can eliminate those State taxes which help to increase the rate of inflation. In particular, steps should be taken to abolish payroll taxes as a matter of priority.
Education of the community in regard to the damage to the economy and the harm to the Australian workforce if excessive wage increases occur. The unfortunate consequences in regard to job opportunities for young persons if wage rates in this area continue at levels substantially above those which a free market would produce need to be pointed out.
It should also be stressed that the setting of relatively high wages for unskilled workers has the long term consequence of discouraging people from obtaining higher qualifications, to the national detriment.
A public relations campaign to remind the community that wages have risen substantially faster than prices - for example, in the 10 years to mid-2005 the Average Weekly Earnings figure rose some 57 per cent, whereas the Consumer Price Index rose at less than half of this, at 28 per cent.
The full automatic indexation of personal income tax scales. In the absence of these, rising dollar wages result in an increasing proportion of incomes being absorbed in tax, thus exacerbating the pressure for even higher wages.
CONCLUSION
Even modest rates of inflation tend to slow down Australia's economic growth and cause hardship to many sections of the community. A co-operative effort on the above lines is urgently required in the national interest.
