Wage indexation in Australia and the role of the gross earnings deflator

<p>The wage determination process in Australia operates substantially under the guidelines set down by the Australian Arbitration and Conciliation Commission. The commission's primary role is to set minimum award rates, through award wage rate, work value and wage indexation hearings. Some wage drift has occurred in teh past through increased collective bargaining, but the Commission still dominates the wage fixing process. The most important aspect in recent years of the Commission's role, has been that of attempting through wage indexation hearings, to compensate workers for the effects of inflation. When the original guidelines were considered in April 1975, it was envisaged that in addition to full indexation for inflation, there would be an annual productivity case. The outcome though has been primarily the granting of indexation gains and these only partial in many cases. This has resulted not only from pressure to restrain wage increases, but also confusion over just what index on which to base indexation. In this paper we shall show that this confusion is justified since the index upon which it is currently based is inappropriate for the task set before the Commission.</p>