The Australian basic wage case of 1930-1931: Judge-made economic policy

Abstract

This essay examines a significant event in Australia’s economic and labour relations history in which an industrial relations court acted against government policy but in line with the advice of professional economists to impose a general wage reduction. This determination, unique during the period of central wage fixation, was made as the country fell into deep depression in 1930–1931. Arguments that a reduction in purchasing power would exacerbate the depression did not prevail over expert economic advice that wage reduction would lessen the structural consequences of reduced rural export income. The Court determined that the loss of real national income had to be accommodated without a wider package of measures such as exchange rate depreciation or expansionary monetary and fiscal policies. The impressive endeavours of the Court to understand and respond to a difficult economic reality represented a significant elevation of the status of wages policy in macroeconomic management – one that was to last for 60 years.