Wage Indexation - The Australian Experience

Abstract

Wage indexation, a process whereby "wages (or significant elements of them) are regularly adjusted to movements of a prices index" was introduced into Australia as a form of incomes policy. The perceived need for such a policy emanated from economic and political realities. Inflation, running at 2.4% per annum in 1969 gradually increased to 7.1% in 1972, the year in which Labour gained office. Thereafter it rapidly moved into double digit figures and by the end of 1974 was running at nearly 20% Cost push factors were seen by many as the key catalysts in bringing about this economic disequilibrium. This reflected poorly on the government's ability to control such costs, particularly labour costs which increased spectacularly. In the year ending July 1974 male award rates rose by a record 27.3% while female rates, propelled by the phasing in of equal pay, increased by 39.2%