The Accord
Encyclopedia
The Prices and Incomes Accord was an agreement between the Australian Council of Trade Unions
and the Australian Labor Party
government of Prime Minister
Bob Hawke
and Treasurer
(later Prime Minister) Paul Keating
. Employers were not party to the Accord. Unions agreed to restrict wage demands and the government pledged to minimise inflation. The government was also to act on the social wage. At its broadest this concept included increased spending on education as well as welfare.
This was seen as a method to reduce inflation without reducing the living standards of Australians. At the beginning of the Accord, only one union, the New South Wales Nurses Federation
, voted against the Accord. The Accord continued for the whole period of the Labor government through seven stages including, after 1993, enterprise bargaining
.
The first Accord secured for all workers a 4.3% pay rise (September 1983), a 4.1% pay rise (April 1984), and a deferred 2.6% pay rise over the initial 3-year period, improvements in family payments and child care, and the introduction of Medicare. Unemployment also fell from over 10% (in the 2nd quarter of 1983) to just under 8%. Other achievements won by the Accord during its first three years included: included:
• The establishment of the Economic Planning Advisory council.
• The introduction of the Tripartite Australian manufacturing council, together with other industry councils.
• The introduction of a National Occupational Health and Safety Commission.
• Increases in family income supplements for low-income families.
• Targeted tax cuts for low-income and middle-income workers.
• The introduction of various tax avoidance measures.
• Increased pensions and unemployment benefits.
• The fastest employment and economic growth in the OECD.
• The introduction of various steel and vehicle industry plans.
• Pay rises of 3.8% (November 1985) and 2.3% (1st of July 1986).
• The introduction of 3% award superannuation.
and to reduce the number of industrial disputes. It included half-yearly wage increases indexed to the consumer price index
(CPI), and supported the introduction of Medicare
Bob Hawke
, Prime Minister of Australia, described the Accord as a centralised system of wage fixation, for the purpose of economic recovery:
Source material for accord 3
Source material for accord 4
Source material for accord 8
in 1996 dramatically changed the ideological position of the Australian government. The Liberal government was opposed to any wage fixing
. This government's core beliefs were that the free market
should determine wages, whilst the government should focus on tight monetary policy
and avoid budget deficit. This began a period of increased hostility between the government and the union movement in Australia and marked the end of the Accord period.
and corporatism
. By contrast, right-wing critics claimed that the Accord reduced the flexibility of the wages system. Supporters of the Accord, however, pointed to the significant improvements in the social security system that occurred under the ALP governments, including the introduction of rental assistance for social security recipients, extensions in child-care funding, the creation of useful labour market schemes such as NewStart and Jobs, Education and Training, the introduction of Medicare, the indexation of family allowance payments, and the introduction of the Family Income Supplement for low-income working families. Despite a fall in money wages under the ALP, the social wage of Australian workers was argued to have improved as a result of government reforms in health, social welfare, superannuation, and taxation.
In addition, the number of industrial disputes fell, while inflation was brought under control. In the lead up to the 1984 budget, unions agreed to a wage/tax trade-off in which they forewent an indexed wage increase in return for a tax cut geared towards low and middle-income earners. Job protection, family leave, and a standard 38-hour workweek had been extended to most workers, whose living standards were protected via superannuation, social wage improvements, and tax cuts. Union members and their families benefited from lower inflation, more jobs, maternity allowances, family leave, trade union education, improved access to education, Medicare, superannuation, higher pensions, occupational health and safety improvements, family income supplements, and regular real wage increases from 1991 onwards (after having fallen under Hawke). Collective bargaining rights were enhanced, while an effective minimum wages system was sustained. By 1991, the lowest paid workers received additional increases through the mechanism of supplementary payments. It is arguable that most Australians were a little better off materially on the eve of the 1991 recession than in 1983. By 1991, despite decline in real wage levels under Hawke, household real incomes rose as a result of social wage and employment changes.
(Liberal
member for Mackellar
) argued that the Accord would discourage employment:
The Hon Ralph Willis
, Minister for Employment and Industrial Relations
argued that things were worse under Malcolm Fraser
:
With the benefit of hindsight, the official Australian unemployment rate did fall under the early Accord, reaching a minimum of 6% in 1990, but rapidly increased between 1990 and 1992.
Australian Council of Trade Unions
The Australian Council of Trade Unions is the largest peak body representing workers in Australia. It is a national trade union centre of 46 affiliated unions.-History:The ACTU was formed in 1927 as the "Australian Council of Trade Unions"...
and the Australian Labor Party
Australian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...
government of Prime Minister
Prime Minister of Australia
The Prime Minister of the Commonwealth of Australia is the highest minister of the Crown, leader of the Cabinet and Head of Her Majesty's Australian Government, holding office on commission from the Governor-General of Australia. The office of Prime Minister is, in practice, the most powerful...
Bob Hawke
Bob Hawke
Robert James Lee "Bob" Hawke AC GCL was the 23rd Prime Minister of Australia from March 1983 to December 1991 and therefore longest serving Australian Labor Party Prime Minister....
and Treasurer
Treasurer of Australia
The Treasurer of Australia is the minister in the Government of Australia responsible for government expenditure and revenue raising. He is the head of the Department of the Treasury. The Treasurer plays a key role in the economic policy of the government...
(later Prime Minister) Paul Keating
Paul Keating
Paul John Keating was the 24th Prime Minister of Australia, serving from 1991 to 1996. Keating was elected as the federal Labor member for Blaxland in 1969 and came to prominence as the reformist treasurer of the Hawke Labor government, which came to power at the 1983 election...
. Employers were not party to the Accord. Unions agreed to restrict wage demands and the government pledged to minimise inflation. The government was also to act on the social wage. At its broadest this concept included increased spending on education as well as welfare.
This was seen as a method to reduce inflation without reducing the living standards of Australians. At the beginning of the Accord, only one union, the New South Wales Nurses Federation
Australian Nursing Federation
The Australian Nursing Federation was established in 1924. The ANF is the national union for nurses and the largest professional nursing organisation in Australia...
, voted against the Accord. The Accord continued for the whole period of the Labor government through seven stages including, after 1993, enterprise bargaining
Enterprise bargaining agreement
Enterprise bargaining is wage and working conditions being negotiated at the level of the individual organisations. Once established, they are legally binding on employers and employees....
.
The first Accord secured for all workers a 4.3% pay rise (September 1983), a 4.1% pay rise (April 1984), and a deferred 2.6% pay rise over the initial 3-year period, improvements in family payments and child care, and the introduction of Medicare. Unemployment also fell from over 10% (in the 2nd quarter of 1983) to just under 8%. Other achievements won by the Accord during its first three years included: included:
• The establishment of the Economic Planning Advisory council.
• The introduction of the Tripartite Australian manufacturing council, together with other industry councils.
• The introduction of a National Occupational Health and Safety Commission.
• Increases in family income supplements for low-income families.
• Targeted tax cuts for low-income and middle-income workers.
• The introduction of various tax avoidance measures.
• Increased pensions and unemployment benefits.
• The fastest employment and economic growth in the OECD.
• The introduction of various steel and vehicle industry plans.
• Pay rises of 3.8% (November 1985) and 2.3% (1st of July 1986).
• The introduction of 3% award superannuation.
Original accord (February 1983)
The original accord was designed to tackle the problem of stagflationStagflation
In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...
and to reduce the number of industrial disputes. It included half-yearly wage increases indexed to the consumer price index
Consumer price index
A consumer price index measures changes in the price level of consumer goods and services purchased by households. The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of...
(CPI), and supported the introduction of Medicare
Medicare (Australia)
Medicare is Australia's publicly funded universal health care system, operated by the government authority Medicare Australia. Medicare is intended to provide affordable treatment by doctors and in public hospitals for all resident citizens and permanent residents except for those on Norfolk Island...
Bob Hawke
Bob Hawke
Robert James Lee "Bob" Hawke AC GCL was the 23rd Prime Minister of Australia from March 1983 to December 1991 and therefore longest serving Australian Labor Party Prime Minister....
, Prime Minister of Australia, described the Accord as a centralised system of wage fixation, for the purpose of economic recovery:
As far as wages are concerned, the Government will participate in the conference on wage fixation scheduled to be held in the Conciliation and Arbitration Commission. We will base our approach to that Conference on the conclusions of the Summit and on the prices and incomes accord. In that context, I would point out again that all at the Summit agreed that if a centralised system of wage fixing is to work, there must be an abstention from sectional claims except in special and extraordinary circumstances. Let me say that my Government's interpretation of what constitutes such circumstances is the common -sense interpretation and leaves no room for selfish claims from maverick sections of the trade union movement. Participants at the Summit Conference recognised that if restraint in incomes is to be exercised, then it should be exercised universally. In that spirit of equitable sharing of the burdens of recovery the Summit also stressed the need for restraint in non-wage incomes such as dividends, professional fees and the like.
Accord Mark II (September 1985)
The accord was a reaction to the falling Australian dollar and inflation caused by higher priced imports.Accord Mark III (March 1987)
This represented a move from the formally indexed wage rises to a two tier system of wage fixation requiring efficiency offsets in exchange for wage increases.Source material for accord 3
Accord Mark IV (1988)
Accord Mark IV stressed the Structural-efficiency principle. It encouraged employers to adopt new ideas like, The Establishment of Career Paths, Broadbanding, Multi-skilling and work patterns and Arrangements.Source material for accord 4
Accord Mark VI (February 1990, revised November 1990)
Source material for accord 6Accord Mark VIII
Accord Mark VIII was never implemented.Source material for accord 8
End of the accords
The election of John HowardJohn Howard
John Winston Howard AC, SSI, was the 25th Prime Minister of Australia, from 11 March 1996 to 3 December 2007. He was the second-longest serving Australian Prime Minister after Sir Robert Menzies....
in 1996 dramatically changed the ideological position of the Australian government. The Liberal government was opposed to any wage fixing
Incomes policy
Incomes policies in economics are economy-wide wage and price controls, most commonly instituted as a response to inflation, and usually below market level.Incomes policies have often been resorted to during wartime...
. This government's core beliefs were that the free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
should determine wages, whilst the government should focus on tight monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
and avoid budget deficit. This began a period of increased hostility between the government and the union movement in Australia and marked the end of the Accord period.
Criticism
Criticisms of the Accord come from both the right and the left. Leftist critics claim that it kept real wages stagnant for over ten years. In this view, the Accord was a policy of class collaborationClass collaboration
Class collaboration is a principle of social organization based upon the belief that the division of society into a hierarchy of social classes is a positive and essential aspect of civilization.-Class collaboration under capitalism:...
and corporatism
Corporatism
Corporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
. By contrast, right-wing critics claimed that the Accord reduced the flexibility of the wages system. Supporters of the Accord, however, pointed to the significant improvements in the social security system that occurred under the ALP governments, including the introduction of rental assistance for social security recipients, extensions in child-care funding, the creation of useful labour market schemes such as NewStart and Jobs, Education and Training, the introduction of Medicare, the indexation of family allowance payments, and the introduction of the Family Income Supplement for low-income working families. Despite a fall in money wages under the ALP, the social wage of Australian workers was argued to have improved as a result of government reforms in health, social welfare, superannuation, and taxation.
In addition, the number of industrial disputes fell, while inflation was brought under control. In the lead up to the 1984 budget, unions agreed to a wage/tax trade-off in which they forewent an indexed wage increase in return for a tax cut geared towards low and middle-income earners. Job protection, family leave, and a standard 38-hour workweek had been extended to most workers, whose living standards were protected via superannuation, social wage improvements, and tax cuts. Union members and their families benefited from lower inflation, more jobs, maternity allowances, family leave, trade union education, improved access to education, Medicare, superannuation, higher pensions, occupational health and safety improvements, family income supplements, and regular real wage increases from 1991 onwards (after having fallen under Hawke). Collective bargaining rights were enhanced, while an effective minimum wages system was sustained. By 1991, the lowest paid workers received additional increases through the mechanism of supplementary payments. It is arguable that most Australians were a little better off materially on the eve of the 1991 recession than in 1983. By 1991, despite decline in real wage levels under Hawke, household real incomes rose as a result of social wage and employment changes.
Effect on employment
In 1983, the Hon Jim CarltonJim Carlton
James Joseph Carlton AO is a former Australian politician.Carlton was born in Sydney and earned a Bachelor of Science from the University of Sydney...
(Liberal
Liberal Party of Australia
The Liberal Party of Australia is an Australian political party.Founded a year after the 1943 federal election to replace the United Australia Party, the centre-right Liberal Party typically competes with the centre-left Australian Labor Party for political office...
member for Mackellar
Division of Mackellar
The Division of Mackellar is an Australian Electoral Division in the state of New South Wales. It is located in the Northern Beaches region of Sydney, on the Pacific coast, south of Broken Bay and the Hawkesbury River. It includes the suburbs of Narrabeen, Beacon Hill, Newport, Palm Beach and...
) argued that the Accord would discourage employment:
Today, in my remarks on this Bill, in particular, I speak on behalf of the unemployed. Again, as I do not represent an existing interest group dependent on government protection or largesse and am not fearful of a cessation of benefits, I do not feel obliged to congratulate the Prime Minister (Mr Hawke) on his capacity to assemble and charm the group of people most likely to provide willing or conscripted endorsement of the disgraceful deal cooked up between the ALP and the Australian Council of Trade Unions before the election. This so-called accord-this deal-was and is a recipe for the continuing exclusion of 10 per cent or more of the work force from the opportunity to earn gainful reward for employment.
The Hon Ralph Willis
Ralph Willis
Ralph Willis AO , Australian politician, was Treasurer for the final years of the Keating Labor Government.-Career:Willis was born in Melbourne to Stan and Doris Willis and educated at Footscray Central School, University High School and Melbourne University, gaining a Bachelor of Commerce degree...
, Minister for Employment and Industrial Relations
Minister for Employment and Workplace Relations (Australia)
The Australian Minister for Tertiary Education, Skills, Jobs and Workplace Relations is currently the Hon Senator Chris Evans.The Minister administers this portfolio, through the Department of Education, Employment and Workplace Relations....
argued that things were worse under Malcolm Fraser
Malcolm Fraser
John Malcolm Fraser AC, CH, GCL, PC is a former Australian Liberal Party politician who was the 22nd Prime Minister of Australia. He came to power in the 1975 election following the dismissal of the Whitlam Labor government, in which he played a key role...
:
The only policy they had for controlling wages during that period and since has been to use the bludgeon of unemployment to reduce wage claims. That was a deliberate act of policy. The former Government pursued budgetary and monetary policies designed to make it more difficult to advance wage claims. As we saw, under such policies an unemployment rate of 10 per cent was needed to bring wage claims down to their present state, one in which virtually no increases at all are taking place.
With the benefit of hindsight, the official Australian unemployment rate did fall under the early Accord, reaching a minimum of 6% in 1990, but rapidly increased between 1990 and 1992.