
Issue No 75		27 October 2000

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Unions

Costello's Con

The low paid are bearing the brunt of the GST with inflation at a 10 year high argues the ACTU's Greg Combet.


	ACTU's Greg Combet

Even though this week's CPI result surprised on the low side of market expectations, the prospect of 5% inflation as Australia goes to the next election is not far-fetched.

Thanks to Prime Minister Howard and Treasurer Costello, the CPI figures will deliver Australia its highest inflation rate for a decade.

Not since December 1990 has the headline over-the-year rate of inflation exceeded 6%.

It is in this context that the ACTU will announce its annual Living Wage Claim next week. Our priority will be to ensure that the lowest paid in our community are not left to unfairly carry the burden of increasing petrol prices, rising interest rates and an inflationary GST.

The claim will be for a fair increase in the minimum rates of pay to give low-paid workers a buffer against inflation. The GST income tax cuts were paltry for these people, failing even to compensate them for tax bracket creep since 1993.

Petrol price rises, the currency slide, and continuing strong economic growth fuelled in part by hefty tax cuts for high-income earners, has contributed to rising inflation.

But the GST is by far the dominant factor pushing prices up this quarter.

In the May Budget, Treasury forecast an inflation rate peaking at 6.75% in the September quarter, falling to 6% over the year to the December quarter. This requires a zero or negative CPI result next quarter.

The same Treasury forecasts have inflation falling to around 5% over the year to March and June 2001, implying successive quarterly price rises of around 0.5%. Over the year to the September 2001, Treasury forecast headline inflation rate of only 1.5%.

These forecasts will surely be exceeded.

In no other country has the price impact arising from introduction of a broad-based consumption tax washed out of the economic system within twelve months.

Whatever today's inflation spike, the real test for the Treasurer will play out over the coming twelve months.

In the Australian economy thousands of micro-level price adjustments are made each day. Strident hectoring from the ACCC will have caused most businesses to adjust their prices cautiously in this quarter, but this restraint is unlikely to last.

The pipeline effects of currency depreciation, oil prices and income tax cuts for the better off, will continue to flow through the economy. There will be plenty of economic noise to camouflage any further price adjustments, even if the regulator is still looking assiduously at corporate Australia's price setting practices.

The GST tail in the inflation profile over the coming year or two will most likely be much fatter than official forecasts suggest. High inflation may not be here to stay, but is likely to persist for a good deal longer than the Government has anticipated.

This has implications for monetary policy and for wages. It means the social security compensation arrangements provided under the Government's package will be inadequate.

Unions will also be looking to protect their members from GST-induced inflation and further interest rate hikes through the Living Wage Claim and collective bargaining.

No one realistically expects executive and managerial salaries to grow more slowly than prices. Nor is parliamentary and judicial remuneration likely to be restrained - the Remuneration Tribunal has linked those salaries to growth in average earnings.

In a fair society, low-paid workers alone should not be left to pay the price for Howard and Costello's new tax.

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  Issue 75 contents

Interview: Civilized Capital
The FNV's Harrie Lindelauff explains to Peter Lewis how a friendly government and moderate employers make for a different sort of workplace in Holland.

Politics: Where Too Much Politics Is Barely Enough
With daily newspapers providing polling and analysis, television, cable, radio and Internet providing 24 hour coverage over a year long campaign -- there's more than enough politics for even the most voracious American political junkie reports Michael Gadiel.

International: US Cleaners on Hunger Strike
A number of US cleaners have this week gone on a hunger strike to back a union campaign for higher wages.

Economics: The Pass The Risk Trick
Derivatives, often seen as the currency of casino capitalism, are the fastest growing, largest and potentially most volatile aspect of capitalist economies. Economist Dick Brian sees behind this image an even deeper danger.

Health: Depressing Workplaces
New technologies and the impact of globalisation have sparked more stress and bouts of depression for workers, while causing a growing burden for social security systems, a new ILO report says.

Unions: Costello's Con
The low paid are bearing the brunt of the GST with inflation at a 10 year high argues the ACTU's Greg Combet.

Satire: Bush campaign an in-joke, admit advisors
TEXAS, Thursday: Following Bush's disastrous performance in the first Presidential debate it has been revealed that his bid for president is actually the result of a in-joke about how stupid the American people are.

» ACTU Calls For Compo For Costello's Inflation Spike

» Despair At Our ABC

» Outlaw Banks Strike Again

» Church Leader Confesses: We're Not Always Good Employers

» Building Workers Win $150 A Week Pay Rise

» MUA Prosecutes Patrick

» WA Secrecy Laws Gag Union Members

» LHMU Seek $1 An Hour Rise

» Picket Protects Broadway Squats

» APHEDA Appeal For Palestinian Medical Relief

» World Bank, IMF To Consult Unions

» Festering Joy

» Heath Our Hero Wins Two Gold