Trade-off on tax ‘obviously desirable’

Press, 10 February 1982, Page 2

Trade-off on tax ‘obviously desirable’

PA Wellington The wage-tax trade-off could reverse “the whole inflationary spiral” if supported by the right money policies, according to the executive director of the Employers’ federation, Mr Jim Rowe.

Mr Rowe told the annual meeting of the Hawke’s Bay branch of the Wellington Regional Employers’ Association yesterday that a tradeoff would be hard to put in place but was “obviously desirable.”

The wage-tax' trade-off concept was to give personal income tax cuts instead of wage rises, in whole or in part. This would result in more money in workers' pockets without increasing labour costs to employers. “Even if this were to result in a short-run increase in the budget deficit this would be worth while in order to get a sharp reduction in inflation,” Mr Rowe said. It would reverse inflation and in the long run encourage growth in production and employment he said. “backed* by appropriate monetary and fiscal policies, a return to a situation of more or less stable prices would then be feasible,” he said. “Without a wage-tax trade-off to start the ball rolling in the other direction it is hard to see how inflation can be brought to heel.”

Mr Rowe said that a 35hour week would aggravate inflation, destroy jobs and further depress jiving standards.

. “Forty hours pay for 35 hours work, or any variant thereof, is not an option that responsible people would even consider,” he said. “A 35-hour week for 40 hours pay would mean at least a 14 per cent increase in wage costs which would have to be passed on to consumers. The result would be workers receiving the same amount of money but paying more for all their purchases—a no-win situation."