Keynes versus the Classics in the 1970s

Abstract

The wage inflation and unemployment in Australia during the 1970s have been analysed by many writers. With the benefit of hindsight, this paper examines the facts and assumptions of earlier writings in connection with various questions — whether centralisation of wage determination was a factor in the wage inflation, the circumstances leading to the wage indexation system, why the system failed, and whether reduced trade union density and enterprise bargaining after the 1990s were responsible for more moderate wage increases and reduced industrial strife. The paper notes the neglect in earlier discussion of the importance of trade protection and globalisation in the operation of the labour market.