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COST OF LIVING
Commenting on the announcement hy the-British Government that it was' proposed to allow* the cost of living in England to rise by 5 per cent, through an adjustment of *he prices and sub- sidies on foodstuffs, the Commonwealth Prices Commissioner (Professor D. B. Copland) said recently that there were certain differences between the posi- tion in England ind in Australia. In the first place the British Stabilisation Flan had been in operation for three years, and curing that period no doubt wage increases had taken place, so that a considerable rise in real wages had probably occurred. In Australia wages were autamaticau. adjusted to the cost of living, and since February, 1942. there had been a general wage pegging order in operation* This order limited the upward movement of wages to adjustments required to meet increases in the cost of living and to correct anomalies in the wa<"e struc- ture. Any increase in prices in Aus- tralia without a corresponding rise in wages Would react unfavourably on the level of real wages.
The second difference .between the position in England and Australia was that the Australian plan of stabilisa- tion was introduced much later, and after ? the economy had been able to absorb substantial increases in war- time cost*-. Even so-the cost of living rise in Australia at the time of stabili- sation in March, 1943. was on.y 22i per cent above the level at the beginning of the war. Some increases in costs had occurred since, particularly as re- gards imported goods and the costs of certain primary products. These nad been met by subsidies, but the subsidy bill had not grown' to anything like the relative magnitude of tl t- British subsidy bill, or even that of Canada It was understandable that some in- crease in prices might be desired in Britain in order to relieve th-; Budget of part of the subsidy payments, par- ticularly as these subsidy payments were increasing on account "of the in-
creased, costs of imported foodstuff
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One important inf er eec to be drawn
from the announcement was that the I1 British Government apparently in-
tended to move its price level up as a ; permanent post-war measure. After the last war when thé control of prices had been very much less effective, little constructive effort was made to maintain the price level at any par- ticular point. It was evident that after this war, the - British Government, with its war-time experience of price control, is _ determined to establish and maintain its internal price level at a point which would be most approp- riate to the conditions then ruling.
That would be a matter for the other democracies to co icer also. Any uncontrollable deflation would ba just as disastrous to the economic structure as a pronounced inf ation of prices. One of the most important lessons to be learned from economic administratic-î in this war was that control of thc pr^ce structure could be made effective withopt damage to private enter; 'se. It would be as- tonishing if the lessons learned in the
war were to have no effec» on the post-war- policy ip this respect. The recent announcement ot the British Government afforded a clear indica- tion that Britain *. would give the democratic worlc leadership in this most ' important demerit af economic state-craft.