The framework in which the Whitlam government argued the case for wage indexation is examined and critically reviewed. Particular critical attention is devoted to the appropriateness of automatic adjustment of wages for price changes and to the direction of causality in the inflationary process. It is argued that the government's wage indexation policy contributed to a wage outcome above what would otherwise have occurred; a slowing of the process of adjustment to economic imbalance in the Australian econorny; and a socially undesirable economization in the use of labour services. The employment implications of these conclusions are necessarily unfavourable.
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