The Effectiveness of Incomes Policies, in Australia Bargaining and Inflation Targetting Enterprise

Abstract

This paper updates earlier estimates that show the existence of a range of equilibrium rates of unemployment in Australia. Within the range of equilibria framework, the paper goes on to test the effectiveness of incomes policies, enterprise bargaining and inflation‐target based monetary policy for influencing the rate of inflation in Australia in the period 1965 to 2001. Incomes policies, especially the Accord, and enterprise bargaining are shown to have caused permanent reductions in the rate of inflation. The inflation‐target based monetary policy is shown to be associated with, but is not shown to have caused, a reduced impact on inflation of changes in the level of activity.