After the repeal of the Remuneration Act, the Muldoon government held talks with the Federation of Labour (FOL) and CSU about wages policy. The government proposed tax cuts instead of a wage increase.
The PSA and other unions rejected this ‘wage/tax trade-off.’ The CSU said it was lopsided because workers were asked to take pay cuts equal to their tax cuts while employers and the self-employed would get tax cuts without making any sacrifice. In June 1982, Muldoon announced a 12 month wage/price freeze. This was followed with tax cuts which were generous for high income earners but paltry for the lower-paid. The Court of Appeal upheld a CSU challenge to the validity of the wage freeze. The next day, the government passed legislation to legitimise it.
The FOL and CSU launched a campaign against the wage freeze. Protest meetings were held around the country. In October 1982, 55,000 workers attended a lunch-time rally in Auckland which was addressed by FOL president Jim Knox and PSA president David Thorp. The union campaign to break the freeze was unsuccessful. It was extended in June 1983 and February 1984. Wage negotiations did not resume until the end of 1984 after the Lange Labour government was elected.
Source: Bert Roth, Remedy for Present Evils: A history of the New Zealand Public Service Association from 1890, New Zealand Public Service Association, 1987)