Seven-point plan to curb inflation

Press, Volume CXI, Issue 32531, 15 February 1971, Page 1

Seven-point plan to curb inflation

(By C. R. MENTIPLAY, Parliamentary reporter of "The Press")

WELLINGTON, February 14.

Harmonius negotiation of awards between employers and unions, supervised by a five-man Wages Authority, t.o limit wage increases this year to between 7 and 8 per cent is the Government’s way of curbing the wageprice spiral.

Details of a seven-point plan to curb inflation were announced by the Deputy Prime Minister (Mr Marshall) —who is also chairman of the Cabinet committee on inflation—when the Government caucus rose after a six-hour sitting on Saturday.

Somewhat surprising was his statement that though legislation would be passed as soon as possible, the clauses relating to penalty would be held in abeyance to help the establishment of friendly negotiations on wage matters.

No ceiling for wage increases has been fixed. The Government will set “a guidline” of between 7 ana 8 per cent, beyond which wage adjustments will not be allowed to go without investigation of particular circumstances by the Wages Authority. This body will be made up of five nominees specially chosen for their abilities. It will not be related to em-ployer-union representation and will be subject to written information by the Government as to "guidelines.”

“Guideline” The “guideline” is defined by Mr Marshall as “the extent to which the parties can go in unrestricted negotiatiation.”

Explaining the Government’s proposals after the Caucus meeting had risen on Saturday afternoon, Mr Marshall said that the discussions had also raised matters of detail for consideration by the Cabinet tomorrow. Parliament would be summoned at the earliest possible date to pass the appropriate legislation to give effect to the stabilisation proposals. Mr Marshall defined the object of the restrictions as “to slow down the rate of inflation, and to do so with particular attention to the needs of farmers, exporters, and those on fixed incomes in relation to risings costs.”

Specifically, Mr Marshall said, the object was to cut in half the wage and price increases which occurred in 1970. During that calendar year, he said, both wages and prices rose by 15 per cent. The aim was to limit the rise in wages and salaries in the present calendar year to between 7 and 8 per cent.

Programme He set out the following seven-point programme:— (1) All new agreements will remain in force without adjustment for a minimum period of 12 months, subject to adjustment where increases in the cost of living, as determined in the halfyearly Consumer Price Index, outrun the terms of the agreement. (2) Existing agreements will continue unchanged until the date of their expiry, subject to the limited provision for updating and the right to update a limited number of cases. (3) A Wages Authority will be established, probably consisting of five persons, and will deal with matters related to remuneration. The Authority will have regard to Government policy for stabilisation, conveyed to the Authority in writing. (4) Guidelines will be given to employers and unions to be followed in any negotiations for the updating of agreements. The guidelines should be on the basis of the 15 per cent increase in remuneration since January 1, 1970. In a few cases, minimum adjustments of margins could be considered in the updating of awards. Provision could be made for reference to the Wages Authority in specific cases.

Wages Authority (5) For new agreements made on the expiry of existing ones, the Government proposes to set a guideline for employers and unions negotiating new rates of remuneration. “The Government has in mind to set the guideline between 7 and 8 per cent,” Mr Marshall said. If the parties in negotiation are agreed that an increase in the rates should be above the guideline, they may refer the matter to the Wages Authority. The Authority would have the power to amend the proposed increase—“or to defer that part of the proposed increase that is above the guideline for such a period as the Authority might decide. The Government would have statutory authority to vary the guideline in the light of economic circumstances.” 1

(6) Because of the requirement that new agreements should continue in operation unchanged for a maximum of 12 months, it is intended to make provision for adjustments for cost of living increases as shown by the half - yearly Consumers’ Price Index. Where new agreements have been en- _ tered into and wage increases obtained which are greater than the cost of living increase, the latter will be absorbed by these wage increases, where no increase had been provided for in the agreements or where no agreement had been entered into, then any adjustment relevant to the cost of living may be made. Where the wage increase received is not as great as the cost of living increase, the Wages Authority will have the power to issue an order adjusting the position. While this scheme operates, the provisions of the General Wage Order will be suspended. State services (7) It is intended that the stabilisation proposals should apply to all remuneration, including that of the State services. The Government has not yet considered the actual application of these proposals to the State services, but consultation with the State services organisation are envisaged. “The stabilisation proposals will apply to al! wages and salaries,” Mr Marshall said emphatically. The Government’s intention is to introduce the required legislation into Parliament as soon as possible, to refer it to a select committee, and to pass it—but to suspend its operation as far as it relates to penalties. “This will encourage employers and unions to negotiate with the guidelines, and to apply to the Wages Authority where increases above the guidelines are sought,” Mr Marshall said. “If the wage negotiations can be conducted within this framework, the Government will hold the legislation in abeyance. However, if the voluntary operation of the stabilisation proposals breaks down, the legislation will be brought into operation forthwith.” Penalties Asked what penalties would be provided for employers or unions who failed to comply with the proposals, Mr Marshall did not reply directly. He said that the penalties would be largely those already existing in the framework of the ’ Industrial Conciliation and Arbitration Act, transferred into the new framework.

The stabilisation proposals will exist for 12 months from the passage of the legislation. They will be subject to review, and could be extended for a similar period. The idea is for the situa- ‘ tion to be reviewed at intervals considerably shorter than the 12-month period.