Tuesday, 27 December 2011

Nauru


Gillard can run, but she can't hide from the Nauru backflip

PETER REITH

In the aftermath of another tragic loss of life, the Gillard Government has decided that the detention facilities on Nauru could be reopened.

For this to happen, the Government does not need to negotiate with its allies in the Greens or the Coalition. It does not need a deal with anyone. It does not need a deal with Tony Abbott. It should stop talking; it should just do it.

Labor caused the current problems by repudiating every aspect of the Howard government policy.

Labor said that the detention facility on Christmas Island would soon be a white elephant and now they are expanding facilities. They said they disagreed with Nauru, but now they say they are ready to reopen it. They said the increase in arrivals was caused by "push" factors, but now they argue the opposite. Now they say Nauru will not work without Malaysia, but Nauru worked without Malaysia under the Howard government.

At the time of the children overboard controversy, Labor was apoplectic about Coalition policy towards refugees, but Labor's Malaysian deal is tougher on refugees than anything the Coalition ever proposed. Labor was beside itself about the treatment of children but kept many in detention. Left-wingers all round the country berated the Opposition for years on its offshore processing policy, but most have largely fallen silent while Labor has incorporated parts of the Howard government policy into Labor's platform. Labor said Coalition policy was too expensive, but Labor's budget has blown out by $3 billion.

A political backflip is not necessarily a bad thing. It can be the right thing to do. For example, encouraging the US to put marines into Darwin or selling uranium to India. Paul Keating was good at backflips. Bob Menzies was not against pinching a Labor policy if it was a good one. One of the tricks to a well executed backflip is to declare that you are performing a difficult manoeuvre with élan and confidence. There is no point hiding from a backflip.

With the Nauru backflip, Julia would have been better to do it herself and try to turn the politics into a plus. Instead, she thought it was best done when she was on holiday; she might run, but PMs can't hide. She also made a mistake in trying to get Tony Abbott to give her some political coverage. He would not cross the street to help Labor and why should he? In a democracy, the Opposition is entitled to stick to the policy that their supporters voted for in the last election.

The other trick about a good backflip is to execute the flip as if you mean it. This one looks a bit hesitant because Gillard says she is considering Nauru to persuade the Coalition to support the Malaysia project. In effect she says Nauru will not work. So why do it at all?

She is going to a lot of trouble to remove 800 boat people from Australia. We will then take 4,000 refugees from Malaysia.

There is no other plan. There were 892 boat arrivals in November and more than 1,000 this month. The people smugglers could easily send 800 by early 2012. What then? No-one in the Government can say what happens to boat arrival 801.

I speculate that in the pre-Christmas discussions, Scott Morrison asked Minister Bowen to go back to the Malaysians on this point. Obviously if Australia takes five people for every one that we return to Malaysia then the arrangement has limited benefits. Why does Labor want the swap? If the Coalition agree to Malaysia and if Nauru is just a token operation and the boats keep coming, Labor will say that Nauru is a failure. This is already Labor's stated expectation. Maybe they just want to prove it; that was Minister Bowen's reason, as reported by the media, for putting up Nauru to the Cabinet when the High Court knocked out the Malaysia deal. Maybe Labor's hope is that then the Coalition will be compromised in its ability to criticise Government policy on temporary protection visas (TPVs), their policy on turning back boats, overcrowding in detention centres and the myriad of other problems caused by Labor's wrong policy and incompetence.

I remember Bob Hawke as PM tried pulling the usual "sharing the problem with the Opposition" on John Howard. He did not fall for it.

Tony Abbott is far too wily for Ms Gillard.

It is standard practice for the public to denounce both sides as equally useless and "too political", but this attitude should not apply on the asylum seeker issue.

The Coalition cannot be accused of playing politics when it has had a consistent policy on boat people for about 10 years. The Opposition should not be under attack simply because it is not prepared to change its policy. No-one can fairly say that Tony Abbott has been negative on the issue of boat arrivals. He has opposed the Government on its policy, he has enunciated his alternate policy and has been totally vindicated by events.

Labor gave up any pretence of taking the moral high ground on this issue so they should stop talking about how the Opposition needs to demonstrate good faith. Labor's use of the term "good faith" in policies on both workplace relations and boat people is devaluing the normal meaning of "good faith".

If the Government is fair dinkum in wanting offshore processing, they should immediately reopen Nauru, reintroduce temporary protection visas, restart talks on Manus Island, and renegotiate a permanent arrangement with Malaysia without the 5:1 swap limitations, but with fair protections for refugees.

Instead of talking about "good faith", Labor should perhaps show some commitment to fix the problems for which they are responsible, and then they might finally act in "good faith".

Tuesday, 20 December 2011

Forget the predictions for 2012, focus on good decisions



Sitting in a committee room in the House of Lords, the US economist Art Laffer was once asked how long would it take before the effects of a new flat tax could be assessed.

His answer was a question; if you drop a $US100 note on the Wall Street footpath, how long do you think it will take before someone picks it up? Picking up the dollars is a consequence of the dropping of the note.

Many people will make predictions for 2012 although often, like picking up Art's $100 note, the predictions are really the consequences of decisions already taken.

Take the issue of asylum seekers as an example.

When Julia Gillard's Malaysia deal failed, she predicted that boat arrivals would increase but in reality the increase in boats was a consequence of not implementing her policy. The tragedy of the last few days was shocking but, by her prediction, it was not unexpected by the Government. In fact, such events are the reason for the Labor Party adopting offshore processing as their policy even though they say that their policy can't be implemented when of course it could be implemented in Nauru. A government that was fair dinkum in wanting to pursue an offshore policy would at least give Nauru a trial which was one reason why the Immigration Minister unsuccessfully put that proposal to Cabinet.

You don't need a crystal ball to know that more boats will arrive in 2012 and public dissatisfaction with Labor's policy will grow. The Greens and the refugee lobby will next agitate to legalise the smuggling trade to stop boats sinking. In 2012, the boat arrival numbers are going to grow; that is not a prediction, it is a consequence of decisions already made.

Another reality for the Government is that Europe's problems will worsen in 2012. This is not a prediction; it is the consequence of longstanding economic policy failures of European democracies. But it will have ever greater impact in Australia as 2012 unfolds. And the issue for the Government will be how to react. We don't know how hard the tsunami could hit us but, given that Federal authorities are seeking detailed scenarios from the banks on the possible impacts of 12 per cent unemployment and a 30 per cent drop in house prices, it is reasonable to assume that we could be in for a rocky ride.

At this stage, the Government has shown no inkling of what to do and no sense of when. Neither side of politics has yet called for a contingency plan. The Government thinks it did enough with its dodgy numbers in the mid-year forecasts but otherwise Australia is awash with economic complacency and a bit of bank bashing. Of course, for the Government, contingency planning would immediately put the microscope on three big items that they can't touch, namely, the NBN, industrial relations reform and the carbon tax. For the Coalition, they would have to add industrial relations to give their plan credibility but it's off the agenda for now.

If it is good enough for the banks to consider what to do in the case of a 12 per cent unemployment rate, surely it is good enough for the Government to encourage some public discussion on what to do in the event of a major economic downturn.

For Julia Gillard, if she wants to lift her poll ratings into the 40s, which Paul Keating says is necessary for her to have any chance of winning the next election, then she needs to focus on Australia's economic circumstances. She needs to clear the decks and focus on the hip-pocket nerve. She should defer the gay marriage debate and cancel her promise to the Greens for a referendum to change the Australian Constitution. Ms Gillard will do neither and unless she can convince the public that she can manage the job of prime minister, I predict she will not last as PM.

The September 2010 agreement between the Greens Party and the Labor Party was to:

Hold referenda during the 43rd Parliament or at the next election on Indigenous Constitutional recognition and recognition of local government in the Constitution.

Julia Gillard does not have the authority or political standing to push through some potentially significant changes to our Constitution. The apparatchiks who run her politics will tell her that they don't want the referendum to be held at the same time as the next election because it will reinforce the public view that she is incapable of focusing on what is most important to the voters, namely the economy.

The alternative is to hold the two referenda in 2012. This is a complication because the vast majority of voters are not au fait with legal matters and they have a sensible level of cynicism about constitutional changes. They are often swayed by the simple question: if the bicycle is not broken, why fix it?

In addition, even if the Coalition were silly enough to support the Indigenous referendum, which is highly unlikely, there are already many voices from the Aboriginal community who oppose change. Northern Territory Indigenous MP Alison Anderson articulated a common view about constitutional recognition in these words:

It's a diversion from the real issues of education, health and housing. This is just something for Julia Gillard to go down in history with.

And Warren Mundine, former ALP president and Indigenous leader said of the latest proposals:

I feel strongly about this – it's a hundred steps too far… I am opposing it and will campaign to oppose it.

There is zero chance this proposal will ever be accepted and if presented will only annoy the public at the waste of holding the referenda.

The local government proposal is also doomed from the start. It has been put twice before by Labor governments and resoundingly thrashed. Local government is a creature of the state parliaments and a mini bill of rights for councils is either just tokenism or a grab for more federal power. In 1988 the vote was one of the largest 'no' votes ever recorded in the history of Australian referenda.

Like many things in politics in 2012, these outcomes are not so much predictions than the obvious consequence of factors and widely held opinions already well known based on Australia's long experience with referenda and economic management.

A lot of bad decisions have been taken in 2011 and earlier, including the carbon tax, asylum seeker policy, fiscal policy, industrial relations and others. And they all have consequences, so forget the predictions, forget about Nostradamus and let's hope that in 2012 more attention will be paid on making good decisions in the national interest.

Merry Christmas and Best Wishes for 2012.

Tuesday, 13 December 2011

Why Europe might go broke and how it will hurt us


 

Peter Reith
I never had much time for David Cameron. When he first became opposition leader in the UK, he was soon pandering to the greens and he tried to undercut a Tory tax policy group of which I was a member.
I was also unimpressed when one of his closest colleagues told me how Cameron would not sit next to Margaret Thatcher at a Tory function because he did not want to be seen to be associated with Thatcherism.
I may have to change my mind. By rejecting the latest European rescue plan it seems that Cameron has finally had to accept the Thatcher view about Europe.
Taxation without representation is anathema to democrats and transaction taxes are not the answer to Europe's problems. Cameron was right to say no.
The reality is that politics and economics in Europe leave a lot to be desired. It is not nearly as supportive of free enterprise as Australia. Its economic performance has been mediocre for decades. And European attitudes towards basic democratic values are different to ours.
I worked for six years in London in the European Bank for Reconstruction and Development (EBRD), which is owned by about 60 governments, but run by Europeans. The best thing I did whilst I was at the bank was to persuade Wayne Swan that Australia should sell its shares and leave the bank. Sadly, although the decision was publicly announced, Swan later changed his mind and Australia remains a member of the EBRD.
I believe that my reflections do not reflect a partisan Liberal or Labor view. I found that when I spoke to Australians from different party political interests, but with similar experience at the EBRD or other international banks, our views were remarkably similar.
Quite often at an EBRD board meeting, I would say "if this were a meeting of the Australian Cabinet, my boss, the PM, would say 'I doubt that this proposal would meet the barbecue test'". A lot of things that happened at the EBRD fell into that category. My UK and US colleagues were of a similar mind.
The EBRD was established to promote democracy and free markets. Its mandate was to facilitate the establishment of private banks and other private sector businesses in the countries that were liberated by the fall of the Berlin Wall. The idea was that once the banks were operational then the EBRD would withdraw because otherwise, instead of helping the new private banks, it would be competing against them.
By the time I left the EBRD, the bank was clearly in breach of its mandate to not compete with the private sector and it was operating in countries like Moldova that had no intention of becoming democratic. But no-one was prepared to force the bank to abide by its own constitution. The truth is that over time, the EBRD was captured by its management and the board and shareholders were bystanders. The incentives for directors were to take their tax-free income and enjoy themselves. When I caused a fuss by demanding better governance rules for directors, a European colleague took me out to lunch and said "Peter, we have a good life here in London. You should spend more time improving your golf". He was not joking.
The directors of the EBRD were nearly all public servants from treasury departments. Most knew little about banking. They were experts at self preservation. Most had sauntered from one international bank to another.
The trick was to start out in the developments banks unit of the home treasury. Then get a job as alternate director at, say, the Nordic Investment Bank, and follow up with the Council of Europe Development Bank in Paris and brush up on your French. Next, get a promotion to the EBRD in London, and finally, cap off the career as one of the nine vice presidents at the European Investment Bank (EIB). The EIB has a nice pension deal. Meanwhile the departmental pension was still being topped up even though directors were getting a double dip at the EBRD.
When I first arrived, the bank was opposed to transparent reporting of perks. The Belgian executive director even said on one occasion, that if the bank reported his salary in the annual report, as some of us proposed, he would make sure the report was never released in Belgium. The same attitudes to accountability are evident in Brussels and other European institutions like the EIB. Democratic supervision and accountability is so weak it is worthless.
I note that the new president of the European Central Bank is Mario Draghi who wasportrayed by Mike Carey in last week's Drum as a Goldman Sachs person because he had a job there for three years. Personally I do not see conspiracy in his history. I see unaccountable bureaucracy.
Draghi is one of a large number of bureaucrats who have spent their life on the merry go round of the European and international banks circuit. Mr Draghi has held board level positions or higher at the World Bank, the Bank of Italy, the Bank for International Settlements, the International Bank for Reconstruction and Development and the Asian Development Bank. They are all government quangos.
These institutions are, in essence, autonomous self perpetuating organisms unresponsive and unaccountable to anyone except themselves.
The British euro sceptics and Margaret Thatcher were right all along. There is a democratic deficit at the centre of Europe and, as we have seen already in this latest turmoil, the Europeans have no compunction in turfing out an elected government and installing a technocratic alternative.
So the bureaucrats are largely running the policy and none of them are too interested in free enterprise. Europe is weighed down with deficits. And no-one has been prepared to fight for the policies that might lift productivity and provide the revenue to pay the interest on their debts.
Europe has failed to face the reality of its economic situation for decades, so it is not obvious that they will do so anytime soon.
In organisations with little sense of responsibility or accountability, issues are normally avoided. When decisions are forced onto the board table, then those who disagree do not hesitate to obstruct the outcome.
This happened at the EBRD when the US, Australia, Canada and others, albeit in a minority on the board, pressured the EBRD to limit its jurisdiction. Consequently, there was a public declaration that the EBRD would concentrate on those countries with the greatest need. Within weeks, the eurocrats were undermining the decision. They were relentless and successful in overturning the decision without reference to the shareholders. They would not accept a decision that threatened their cosy existence. From my experience, even if decisions are made by the Europeans in response to their financial crisis, which I doubt, then there is no reason to be confident that the decisions will then be implemented.
Capitalism and free enterprise have their problems and so does democracy. But despite many imperfections, these concepts have lifted billions of people out of poverty and given them a taste of freedom that very few have enjoyed in the history of the world. The model depends on public participation from both consumers and citizens. It also depends on systems that provide incentives for good behaviour. The system best known to achieve that is a free market.
The incentives for the eurocratic elites in Europe are not sufficiently aligned to the public interest. This is a basic fault at the ERBD, in Brussels, in the EIB and elsewhere. The idea of a united Europe is still a good one and the free movement of people and capital within competitive markets is worth pursuing. But, based on my experience at an international bank run by Europeans, they are going to have to reengineer their political and democratic processes a lot more than they realise.
Sadly, in the meantime, Europe's problems of civil unrest and poor economic performance are going to impose economic hardship on a lot of innocent bystanders, including Australia.

Tuesday, 6 December 2011

IR panels re-established: unspoken and unquantifiable



I never kept a diary as a politician but I did squirrel away a few things that caught my eye. The quote below definitely grabbed my attention.

The background was that in 1999, I sought legal advice on an idea of mine to impose conditions on universities so that, if they did not meet federal industrial relations (IR) standards, then the Howard Government would cut their funding.

The advice came from a well respected Queen's Counsel and his junior. The opinion canvassed what possible legal action might be taken to thwart the Commonwealth in the event my policy concept was actioned.

The barristers said:

It may be expected that proceedings would be taken in the Federal Court. A number of the judges, formerly sitting as members of the Industrial Relations Commission, who are regularly assigned to workplace relations matters have backgrounds which may be fairly said to be on the non-employer side of industrial relations work. We make no suggestion of any real or apprehended bias. Nonetheless, and while the scope and operation of section 170NC remains so unsettled, our expectations of the likely outcomes of disputes on these issues must be informed by various unspoken and unquantifiable considerations relating to the forum of determination. We expect that the Commonwealth might be less at risk on appeal than in trial proceedings, particularly trial proceedings in Melbourne. Nevertheless, however, these considerations make us more anxious, and less settled, in our conclusions.

This advice was not the first time I had cause to look more closely at the judiciary. In 1996, the IR policy (drafted by me) proposed the abolition of the Industrial Relations Court (IRCA). To my surprise, during the 1996 election, the Chief Judge of the IRCA attacked the policy on radio, as described by Dr John Forbes in an article for the Samuel Griffiths Society.

There was a more spectacular Wilcox appearance in February 1996 at the height of a federal election campaign. In what the national daily termed an "extraordinary intervention", the learned gentleman gave "a series of interviews" in which he roundly criticised the Coalition's plans to amend "unfair dismissal" laws. His Honour's contribution to the political hurly-burly provoked Peter Reith, MP to express his "absolute amaze[ment] that a Federal Court judge ... should deem it appropriate to make a political entrance into the ... campaign on behalf of the Labor Party".

In April, 1998 Wilcox presided at an appeal to the full Federal Court in the Patrick Stevedores - MUA litigation. It was an opportunity to rebuke journalists for mentioning the career of the trial judge (North J) as an advocate for trade union parties.

The reason for the abolition of the IRCA was the Coalition's view that IR should not be treated as a standalone, separate specialist jurisdiction. IR should be managed by judges with a broad perspective and all we asked was that the legislation should be interpreted in accord with normal legal principles.

After the IRCA was abolished, a de facto panel emerged in the Federal Court. Unusual in the legal profession, there was some publicity about this issue following a case involving BHP and AWAs. The facts of the case involved employees in WA and yet the union sought an injunction, not in WA, but in Victoria where a judge of the Federal Court issued an injunction.

The H R Nicholls Society in 2000 had voiced its similar concerns about the Federal Court as follows;

The Federal Court has about 50 judges: nearly three-quarters of whom were appointed by the last Federal Labor Government.Moreover, ten of the judges (all appointed by the last Federal Labor Government) were part of the previous Industrial Relations Court.Many of these ten judges were also union barristers prior to appointment.Despite the Industrial Relations Court having been effectively abolished, these ten judges have largely operated a 'de facto IR Court' through the administrative mechanism of the Federal Court "industrial" docket system.Admittedly, this has changed somewhat in the last few months, with commercial judges, such as Goldberg, Finklestein, Merkel and Kenny sitting on industrial cases.This change is so recent that the Federal Court internet page still reflects the system which has applied in Victoria since the disbanding of the Industrial Relations Court of Australia---namely, that Justices Ryan (Panel Co-ordinator), Marshall and North comprise the industrial docket. It is premature to ascertain whether these recent changes will disband the 'unofficial IR court'.

As expected by the H R Nicholls article, in late 2000 or early 2001 this unofficial IR Court was disbanded. Thus, for example, Justice North was free to deal with the Tampa dispute in mid-2001, and other (mainly commercial) judges began to deal with industrial matters from then on.

However, sometime since 2001, the Federal Court re-established IR panels in Melbourne and Sydney.

I do not know when that occurred exactly (perhaps as recently as the last few years), but I would like to know when and how the panels were resurrected and what views were expressed at the time on the issue?

The situation now is that there are various panels in different states according to the Federal Court webpage which states as at November 1, 2011;

The NSW, Victorian and Queensland registries have established panels of Judges to hear and determine particular types of matters. Details of these panels are set out below. A proceeding involving a panel matter will be allocated to a Judge who is a member of the relevant panel.

Thus, only panel members handle IR matters. So, in a sense, the panel operates like a separate Court within a Court. The concept of a separate Court for IR was expressly overridden by the Parliament through its act of abolishing the IRCA. Last week, I spoke to a Deputy Registrar of the Principle Registry at the Federal Court who not only confirmed the existing two panels and their operation but also advised me that the existing panel system is about to be broadened to a national panel for IR cases.

It would be in the public interest to have a better understanding on how the IR jurisdiction is being managed.

In my view, it is not unreasonable to hope that the Federal Court might give an explanation of the reasons for this change to the way the jurisdiction is managed. It would be interesting if the Court could also explain why the new panel is not contrary to the expression of opinion by the Parliament in 1996.

I understand that the Judges who have managed IR matters outside Melbourne and Sydney have provided a satisfactory service. So, if they are now likely to be precluded from the new panel, it would be interesting to know why.

Given that there have only been two panels to date, it is reasonable to infer that the reason for the formation of a national panel has nothing to do with the workload of the Federal Court. But I am not aware in any detail, of the workloads generated in the Federal Court by IR. It would be interesting to compare with other jurisdictions like admiralty, intellectual property, corporations law, competition law and native title.

Given the latest rise in the number of industrial disputes in Australia, is the Court expecting an increase in IR matters coming to the Court? It is also relevant to ask if the panel will be closed to judges other than those already appointed and if there are to be new panellists who will appoint the new panel members? If prior experience of industrial matters is a pre-requisite to membership of the panel, why is that so? Is IR that difficult?

Many, if not most, courts work on the basis that judges handle a variety of work; it gives them a broad view of the principles that apply to judicial work. It encourages a broad perspective and, whilst some specialisation can be useful, a balance of judicial work is sensible. It probably suits the judges to have some variety as well.

Of course, there are some jurisdictions that have stand alone arrangements like the Family Court. And some Courts have a separate panel for commercial matters, although these arrangements seem to reflect the need to manage large numbers of cases.

The good administration of the Courts is primarily the responsibility of the judiciary, but that is not to say that the public does not have an interest in developments in administration. Certainly, in the case of IR, the Parliament has shown an interest and that interest is best accommodated by clear statements on changes or proposed changes, particularly on matters that have already been the subject of parliamentary and public discussion.

Tuesday, 29 November 2011

Labor's pro-union system isn't working



I was on a panel with Jeff Lawrence, Secretary of the ACTU, last week to discuss industrial relations.

Jeff comes across as a genuine sort of bloke and we had a robust discussion. Even if we spent hours debating various points, Jeff would not be moved from his basic position on how the labour market should operate. But that is not to say that public discussion does not have an impact.

In his speech, Jeff criticised the H R Nicholls Society (HRN), which was founded in 1986. This was water off a duck's back. The Society was named after Henry Richard Nicholls, the 82-year-old and widely respected editor of the Hobart Mercury. Henry wrote an editorial critical of the President of the Commonwealth Court of Conciliation and Arbitration. He was charged with contempt of Court, found not guilty and became even more celebrated in Hobart for speaking his mind about a person in authority.

The HRN was far more influential on the Labor Party than any union or Labor official could ever acknowledge. The HRN played a key role in Paul Keating's conversion to the concept of enterprise bargaining. Keating was driven to his advocacy of enterprise bargaining by the high unemployment (it reached 11.4 per cent at the end of 1992), his awareness of the destructiveness of militant unionism and the force of the intellectual argument for a more deregulated labour market.

There were many advocates for reform including economic rationalists within the Labor government, some business groups (although not those who were committed to the IR club), some state governments, and advisers from treasury and the Reserve Bank. But the key individuals like Charles Copeman, Ray Evans, Des Moore and John Stone all gave the reform a lot of intellectual fire power and they were key players in forming the HRN.

No wonder that 25 years after its formation, a secretary of the ACTU is still complaining about the HRN. It's not because it was intent on making workers worse off as is the usual ACTU response to any reform; Jeff's real complaint is that it was so successful.

The Coalition IR policy was also influential. Its "Fightback!" policy was launched in November 1991. Keating's oft quoted speech to the Australian Institute of Company Directors was April 1993, just after the 1993 election when he attacked the Coalition's IR policy. Fightback! was, in many ways, more radical than any labour market reform proposals then or since.

When first launched on November 21, 1991, Fightback! was incredibly popular. It triggered the downfall of the then-treasurer, John Kerin (on December 9, 1991) because he was simply not up to challenging the Fightback! agenda. It finished the political career of prime minister, Bob Hawke and opened the door for Keating to become PM on December 20, 1991.

Gareth Evans once said that opposition gave him a condition now best known as "relevance deprivation syndrome", but actually Fightback! proves that an opposition worth its salt can dominate policy, remove a PM and a Treasurer and set the country on a better path simply by the strength of its policy.

So the economic turmoil post-1989, described by Keating as "the recession we had to have" was a spur to reform. The calls for reform were acknowledged by Keating whereas the calls for reform today are dismissed. Not just by Labor but, so far, by the Coalition.

To be successful, governments have to be responsive to genuine matters of concern. Some issues can't be ignored. Ignoring an issue is still making a decision, albeit by default. Keating did not ignore the obvious. If Gillard fails to address this issue it will be her biggest mistake yet.

The calls and the reasons for change are already loud. Paul Keating set the scene last Sunday when he said that the economic turmoil we may face coming from Europe is the biggest challenge he has seen in his time in politics. David Murray, chairman of the Future Fund, says that the reregulation of the labour market is repeating the mistakes of Europe.

Tony Shepherd, the head of the BCA, says that he sees "industrial relations as probably the biggest single issue facing Australia" and "The FWA has some quite serious flaws which need to be remedied" (AFR November 25, 2011).

The Productivity Commission has produced a compelling case on the retail industry to demonstrate problems that are apparent across the economy and the Reserve Bank has nominated labour market reform as a key issue.

In addition, disputes like Qantas's are demonstrating the growing militancy of key unions whilst employers are struggling with the consequences. Jeff Lawrence says that employers are to blame.

In the case of Mermaid Marine as reported last week, union members went on strike for 14 days. They gained a 27 per cent increase in pay and crane and waterside workers will be earning around $180,000 pa, including allowances and superannuation. The chairman said his company had acted in good faith, but were still burned by the strike. He said "Ultimately this [the Act] will have an impact on Australia's competitiveness as it becomes increasingly expensive to do business here" (AFR November 25, 2011). This sort of comment has also come from BHP, Rio Tinto and senior people, like Michael Chaney, amongst others.

But still the Labor Government can only respond with the usual empty comments. Minister Evans said that employer comments are just the "same rhetoric that they've done for years".

Minister Evans is under pressure from the unions to reregulate the labour market even more. He has not announced who and how the Fair Work Act is to be reviewed. It will be amazing if he does not have a good idea of the outcome of the report on the day he announces the details of the Review.

An independent review would be the more sensible approach to adopt. The prospects are that the operation of the act will be an even bigger issue next year. An independent review could serve a useful purpose in finding a way ahead and also for placating the unions if they do not like the outcome.

Some important agreements will be up for negotiation in 2012. Big employers like Woolworths, Telstra, Wesfarmers, Toll Holdings, Qantas and Virgin, OneSteel, Leighton Holdings and Origin Energy will all be sitting around the table looking to settle new agreements for the 560,000 employees covered under these existing agreements.

These negotiations may not, and should not, necessarily lead to industrial action, but the rising numbers of days lost to strikes during 2011 suggest it could be a difficult year. And the ACTU is urging unions to push for what they call job security clauses and what management sees as attempts by the unions to run their business.

The one thing that is certain is that the public can see more and more that Labor's pro-union system is not working and something needs to be done to rebalance it. Let's hope that reform makes a start in 2012.

Friday, 25 November 2011

Speech to CEDA Melbourne


Aspects of a bad year in 2011 and worse to come
Peter Reith
At CEDA in Melbourne 25 November 2011

2011 has been a bad year for industrial relations. The system of labour market regulation that was built from 1990 to 2007 is being deconstructed day by day.

Of course Jeff Lawrence will say otherwise. In fact he will probably say what he always says. He will start with “WorkChoices” which is his catch-all phrase that means nothing to most people. Then he will move into a really sophisticated argument like the one he put in response to the Productivity Commission’s detailed case on the retail sector. He said that “punishing workers” would not solve the problems in the retail industry’.

If Chris Evans the IR Minister was here he would say as he did on 27 July, that “the Act is delivering positive results” (The Australian). I challenge him or Jeff to put up or shut up. This is my hard ABS data – where is yours? Real per capita GDP growth under the Coalition from June 1996 to Dec 2007 was 2.4%; under Rudd and Gillard from December 2007 to March 2011 it was negative -2%. The real average non-farm compensation per employee was 1.65% pa under Howard and negative .4% under Labor. On these figures alone, if the Howard Government delivered “punishment” Labor must be running a torture chamber.

During the 1990 to 2007 period, especially under the Coalition, the concept of enterprise bargaining was turned into reality and it demonstrated, in practice, that an effective and productive system would enhance productivity, lift real wages and give more people the opportunity to work. The new system was accepted in concept by both sides of politics despite union objections. In 2007, the ALP returned to government and, in payment for political services rendered, the union movement was rewarded with a set of wide-ranging legislative changes that have given the union movement significantly increased industrial muscle. The employer group AiG has identified 60 separate new provisions in the Act designed simply to give unions more control in the workplace. The consequence is a broad attack on enterprise bargaining and the results have been poorer productivity, poor wages growth and rising union militancy.
1. INCREASING MILITANCY
The rising level of industrial action is a direct consequence of the Fair Work Act. This was obvious well in advance.  I made this point at the start of the year at CEDA’s February conference;
For me the biggest issue by a wide margin is labour market reform. It is the worst of the policy regression since Labour’s election in 2007 and the costs of the ALP’s framework are going to become more obvious as 2011 progresses.
Union militancy is on the rise even though the unions have had the Rudd/Gillard Government legislate a reregulation of the labour market to rebalance the system in the favour of union bosses.
An example of this militancy has been seen in Victoria in the last few days. FWA held that the industrial action by nurses was putting patients at risk and yet the union was still intent on defying the order. This is 1970s style industrial relations. The ANF has about 40,000 members but only about 4000 voted on the motion for action. So we have a hard core group calling the shots. It is a microcosm of the labour market more generally where union membership is down to about 14% but the unions are demanding a big say in the management of Australian companies and , in turn, in the Australian economy.
But militancy is not the only symptom of a system that is failing. There have been many adverse developments through 2011. In no order of priority, they include;
2. THE INTRODUCTION of the legislation to abolish the ABCC
3. RISING NUMBERS OF UNFAIR DISMISSAL CASES
The problem of “go away” money is back.
4. THE LABOR GOVERNMENT supporting the unions before the High Court in a matter for the AEU involving a union member at the Bendigo TAFE. As put to me by one expert, if successful this will ensure that union officials are protected against penalty for slander of employers or employees, offensive language or any other inappropriate conduct or misdemeanours except workplace assault or theft.
5. EASIER TO STRIKE
The JJ Richards case which allows unions to take industrial action without first sitting down to negotiate is still in the Courts. If upheld this will mean a minority can take action despite the views of the majority and without a log of claims. This blatantly breaches the promise by Kevin Rudd that, under FWA, strikes would be a last resort and only where bargaining had commenced.
6. ADMINISTRATION IN FWA

The administration of the FWA has also come under the spotlight and raised serious questions about how the provisions of the Fair Work Act are being implemented. The HSU case is still under examination after nearly two years. You would have to wonder why FWA has not fulfilled its obligations.
Lack of transparency by FWA in the reissue of right of entry permits is another development. This allows that a person who has lost their permit can apply to have their permit reissued but without the right of the interested parties being first notified that the matter is coming to FWA. This denies interested parties the opportunity to put a case.
7. COALITION DUMPS INDIVIDUAL AGREEMENTS
Tony Abbott abandoned long standing Coalition policy when he announced the Coalition no longer supports individual contracts and thereby closing off, for the time being, a key reform needed to overturn labor’s policy
8. STATE IR; A MIXED PICTURE
At the State level, whilst Premiers O’Farrell and Baillieu have started to address some of the issues they face, in WA the Liberal government is not prepared to change any of the laws put in place by the Labor party and which in some cases is even more pro-union than the Fair Work Act. The WA system covers about 450,000 people outside the reach of the federal corporation’s power. In Queensland, the Bligh Government is likely to be defeated but the LNP look unlikely to do anything to give greater flexibility for their small business and tourist businesses.
9. TERANG AND THREE HOUR MINIMUM
There has been no resolution or reform of the three hour minimum rule which inhibits jobs growth across many industries and stops young people from having the experience of after school work.
Three children lost their jobs in Terang in 2010 because their employer, a local cooperative, had committed the awful crime of letting three children work for an hour and a half after school from roughly 3.30 pm to 5.00 pm when the business closed. The award specifies that employment must be for a minimum of three hours.  Instead of the children getting their job back, FWA went after the cooperative for not paying the children for the one and a half hours that were not worked! This issue is not just about children working after school: it effects working arrangements across many industries. It is a major issue for the tourist industry. Queensland business owners were telling me in Brisbane this week that this rule and others mean that the industry is denied the flexibility they need to run their business.

10. FWA HINDERS TOURISM AND RETAIL
Andy Georges runs the well known restaurant, Il Centro, in Eagle Street, Brisbane on the waterfront. He told me this week that the award system is destroying his business. Due to award changes he is facing wage increases for each of the next 4 years just to comply with award amalgamation and without regard to cost pressures on the tourist industry. Except for Christmas day, he told me that he would not be opening on the other public holidays over Christmas because he can’t make the business pay its way when he has to pay $50 an hour just for cleaning dishes.
As the Productivity Commission demonstrated in its report earlier this year, the retail sector is badly served by the Gillard laws. Labor will not and cannot ever respond to the compelling evidence produced by that report. And, for many in the retail sector, like the tourism sector, the real wage increases, as demanded by the amalgamation of awards, are being imposed incrementally over the next few years. So there will be more pain for many businesses in 2012 and beyond and more jobs will be lost.

11. MORE RESORT TO ARBITRATION

The changes wrought by judicial decisions, FWA rulings and legislative amendments are on going. This week the Government announced a new tribunal to set pay rates in the trucking industry; under the guise of a special need in the case of “poor safety”. This new body will have arbitral powers for a vital industry sector. We used to have separate tribunals and separate deals for particular industries like coal industry tribunal.
The new proposed specialist tribunal will obviously be stacked with former union bosses will put up the cost of transport across the Australian economy. It is a very bad idea. I note the opposition has yet to comment on the matter in line with its tactic of not talking about IR. The Federal Minister said (AFR 23 Nov 2011) that the special need for this tribunal had been recognized as far back as the mid ‘70’s. He was right; his proposals are taking Australia back to the 1970’s.
The same hankering for arbitration was behind the special arbitral powers provided in the FWA for the textile industry. The Coalition did not oppose the Fair Work Act generally or in regards to this provision; presumably they were worried that they might be seen as not sufficiently supportive of low paid workers. This relates to the matter currently before FWA. This issue is not about equal pay as falsely claimed by various politicians. It is about how much governments are prepared to pay. There are issues about what these workers should be paid but the use of arbitration was always the wrong venue for the decision making. This is very obviously still the case because Julia Gillard has put up some cash and flick passed the issue to the States.
12. QANTAS
Under FWA the unions have been able to run a guerrilla campaign against Qantas. This is not good faith bargaining; there is nothing fair about announcing strike action, then rescinding the announcement with the intention of damaging Qantas with loss of revenue whilst ensuring employees do not lose any pay.  Qantas only acted after having endured 15 months of a union guerrilla campaign, and in the face of threats of more industrial action. Qantas finally fought back with a lock out.  The Government sought to use the FWA and thus opened the door to arbitration. This outcome was inevitable in the sense that the legislative process finally left the employer with no choice. There is no prospect that the union will abandon its claim that the union should have rights to manage the business. The union is hoping that eventually it can force Qantas to meet its demands. The suggestion of industrial action over the busy Christmas period is just another indication that the union will not hesitate to defy the law and fight Qantas until they have a win.
13. ACTU DEMANDS MORE POWER FOR UNIONS
A key union objective now is to seek further legislative change. The ACTU and TWU have a script. The union has had a tactic of slowly baking Qantas; this is the antithesis of good faith bargaining. So their latest script is to say that Qantas is not acting in good faith and a new regulatory regime is thus needed to put Qantas and all employers in their place.
Ged Kearney, ACTU President, said on Tuesday (the Australian 23 November 2011) that employees were facing “a new wave of employer militancy that is threatening the livelihoods of working Australians”. She thinks Qantas is aggressive but Qantas did not initiate strike action, they waited patiently for 15 months until they had no choice and then the ACTU whinges that the company tries to defend itself.
Lock outs are not common because it is a big step for a company to close its business or hire alternative staff. And the resort to arbitration is not easy because very few companies can demonstrate that the industrial action is having an impact across the economy. A recent full bench FWA decision held that a third party losing $3.5m a day was not suffering enough damage to suspend industrial action.
The first step in the campaign to further weaken employers has been to fashion the facts of the Qantas dispute to support the case. Next it will be to pressure Labor at the national conference in early December. Provisions to force contractors to mirror union agreements are being pursued to produce uniform conditions thus enhancing union monopolies in the labour market. They also serve to undermine employer and employee relations thus also reinforcing union control even though the unions can only attract 14% membership in the private sector. The claim includes more arbitration “where an employer engages in ‘surface’ bargaining..... and in ‘first contract’ situations”.

14. REVIEW OF FAIR WORK ACT

The government is required to hold a review of the Fair Work Act earlier next year and it seems beyond doubt that any serious review e.g. by the Productivity Commission would reveal the inefficiencies and loss of productivity promoted by the new Act. The government has ruled out a Productivity Commission review and is yet to tell us who will conduct the review. The review is now likely to be a platform for union demands.

Despite being told by employers since the introduction of the Act that changes were desperately needed and with the Minister stating that there will be no changes and everything is working fine, now that the unions haven’t got what they wanted in the Qantas dispute, change is all of a sudden possible to stop employers responding to industrial action.

If 2011 was a bad year for industrial relations, then it is likely that things will be even worse.
15. GIUDICE TO RETIRE: WHO IS NEXT?
Labor will appoint a new head of Fair Work Australia. The government has placed a national advertisement calling for applicants. Now that is a joke and a waste of taxpayer’s money. Why would they bother? Nine out of ten appointments made by Labor so far have had a disposition to the union cause. Kevin Rudd promised that Labor would not try to stack FWA. That promise has not just been ignored; it has been decimated.
Mr Justice Bromberg is the name being mentioned on the street as Mr Justice Geoff Giudice’s replacement.
I recommended Giudice’s appointment. I had a concern that Labor in office might have tried to sack him or not reappoint him (as they did with Jim Staples) so I fought to have him also made a federal court judge. By this means, he had some security in the job. He has played a straight bat. I thought he would do a decent job and he has. He had previous experience of the jurisdiction and his basic view about the role was to interpret the legislation as he thought appropriate in accord with established legal principles. You can’t ask for much more than that. You could not say that of some of his predecessors. He also has refrained from lecturing on political economy as has been the wont of others.
I should also say that I was always reluctant to appoint more people to the Commission. The more you appoint the more work they make for themselves. This is an iron rule in government and when this rule is ignored you end up with more red tape and regulation. I note that in the Qantas there are to be three benches with three people each to arbitrate the issues. I wonder if any of them would know how to run an airline? One thing is for sure, it certainly provides a lot of people with work at government expense.
2012 could be very bad if Labor is re-elected and then starts to repay the unions with more powers for union interventions in the management of the economy. If Tony Abbott is elected Australia will clearly be better off in a number of vital policy areas including the abolition of the carbon tax and fiscal policy. But at this stage we do not know what he will do in office and we do not know what road blocks he might face in the Senate.
What we do know is that if there is little public debate about these vital issues, then the public will say, what is the problem? If the public are not told about the problems then they can’t be expected to be great supporters of reform. Neither side of politics are confronting the reality that poor productivity is a consequence of a poor labour market and our system is not fit or purpose. It needs to be changed.



Tuesday, 22 November 2011

Gillard's Polls


Julia Gillard should not get too excited just because her poll results are a fraction better.

Maxine McKew, former Labor MP and former long-time ABC commentator, injected some reality to the current assessment of the PM's political standing when she said in last Sunday's Age ( 20 November 2011):

"There is no doubt ...Abbott has cut through with a clarity that people are finding compelling and comprehensive".

Of course the PM looks like she will finish the year in slightly less dreadful strife than has been expected. The Queen's visit, attendance at APEC, abandoning Labor's policy on uranium sales to India, supporting free trade and agreeing to the stationing of US marines in Darwin are positive steps for an Australian PM. But, not very positive, when the background of these decisions are better understood and especially if the implementation falters.

The three issues, marines, free trade and uranium are not new.

Support for selling uranium to India was announced by the Howard government before 2007. Labor, under Kevin Rudd, reversed that policy, so Julia Gillard, as a senior Cabinet Minister, has been part of the problem. But at least her backflip and inferred recognition of Labor's past mistake is welcome.

Apparently, this initiative was encouraged by the US. The US could see that Australia needs to improve its standing with India and the removal of the uranium issue paves the way for better Australia-India relations. In turn, Australia can play a more useful role in regional security matters. India's population is expected to exceed Chinese population by mid-century and as India is also a democracy, the relationship with India is going to become ever-more important. Australia needs to work harder on the relationship and a prod from the US has done PM Gillard no harm whatsoever. Labor is slowly being dragged to accept that the use of uranium for power generation is not the taboo subject that it has been for too long. Maybe one day, the sale to India will be seen as opening the option for Australia to buy American nuclear powered submarines.

The concept of free trade in our region is also not new. It was at the core of APEC's Bogor Declaration in 1994 which set the objective of free trade by 2020 with some meeting the objective earlier by 2010. In the meantime, of the nine parties interested in the proposed Trans Pacific Partnership, most already have free trade agreements with Australia. It is good policy to promote free trade but back at home the Gillard Government is funding foreign car companies with taxpayer monies in breach of the spirit of free trade now championed by her government.

PM Gillard has also taken a lead from the US on stationing marines in Darwin. John Howard did a great job in promoting our close ties with the US. Coalition ministers advanced the idea of stationing marines in Darwin to US counterparts prior to the 2007 election. PM Gillard has now taken another step. It is in Australia's interest that our military alliance with the US should be renewed and expanded. Our military alliance is not aimed at any country. It is aimed at ensuring that we have the military capability to meet any contingency. The defence of Australia must be the highest priority of any government. Working closely with our allies can only enhance Australia's defence. If one day in the future, there was a benefit in having a US base on our soil, then the latest arrangement will be seen as a step on that road.

Pinching your opponent's policy can be a good idea if the policy is right but it does raise the prospect that some voters might think that if Labor keeps implementing Coalition policy then voters might as well vote for the Coaltion.

And whilst good policy usually ends up as good politics, when the stench of hypocrisy is so strong, it is hard to believe that the public will fall for the spin of the last week. And, in the medium term, if nothing is agreed on free trade, then the pall of failure will only encourage disappointment. The PM has partially followed the Coalition on asylum seeker policy and yet failures on implementation have left her floundering.

Many in the Labor Party will also be confused about Labor's views on issues now abandoned by PM Gillard. President Obama has not closed Guantanamo Bay. If John Howard was still PM, Labor would have demanded that Howard raise the issue with Mr Obama. Of course, with Democrat president Obama, the matter was never raised. Likewise, the PM could have told him that the US was on the wrong side of history on the climate change debate, but that point was merely ammunition against Tony Abbott, not the US president.

The current, and probably temporary, lull in the carbon tax debate has helped Ms Gillard. Her carbon tax policy undermines her poll results for various reasons including the obvious fact that Australia is way out in front of international opinion on the issue so nothing we do will make any discernible difference to the world's climate. In contrast, her recent forays on more practical policy issues have seemingly had an impact for the PM and thus suggest that the PM's obsession with the carbon tax has been a negative for her. As soon as she moved off the carbon tax she has looked more confident.

In the meantime, it takes two to tango in the polls. The Opposition has dumped long-standing policy on superannuation, raised questions about fiscal policy, opened a new front on anti-dumping that might undermine free trade and squibbed on IR policy. Few, if any, of these Coalition policies have generated widespread support and some initiatives, undertaken without party room support, have met with strong internal resistance.

If Gillard can keep off the carbon tax, especially over the summer break, she will deny Abbott his negative campaign and unless he can go on the front foot, her polls will lift again. But a little lift here and there, especially whilst Labor's primary vote remains disastrously low, is not a substantive response to the political drubbing that the PM has suffered in 2011 at the hand of a very effective Opposition Leader. The chances are that he will continue to cut through and PM Gillard will need to announce many more Howard policies if she wants to remain in the Lodge.


Tuesday, 15 November 2011

Onus of Proof


In developing policy on free trade and workers compensation, political parties have recently turned to the tactic of switching the burden of proof.

The burden of proof is probably best known in criminal law where a switch would mean that instead of the police having to show that an offence was caused by the defendant beyond reasonable doubt, defendants would have to show that they are innocent.

It is an approach that, if adopted, would offend the long standing principle that you are not guilty unless proven otherwise. Even in civil cases, where the test is "the balance of probabilities", the onus of proof is still on the complainant.

In my view it would be unfortunate if this principle were to be slowly eroded.

The Greens recently introduced a bill into the Federal Parliament to provide a particular benefit to firefighters. Normally, if you have a claim for workers compensation you have to demonstrate that your injury is the result of something that happened at work. The legislation now going through Parliament is that the insurers have to prove that the injury was not caused at work. The argument, accepted by the Government at the request of the Greens, in favour of the proposition is that the cause of some injuries to firefighters can be difficult to prove.

Surprisingly, despite expressions of concern from his own backbench and employer groups, Mr Abbott, himself a voluntary firefighter, decided to support the Greens' initiative. The benefit is provided for one group of firefighters; the country firefighters missed out.

I am not sure about this proposal. Any scheme from the Greens needs to be looked at closely. My instincts tell me that the proposal should have been subject to much more rigorous evaluation. That review should have examined the rationale of overturning the onus of proof and what other groups might now make the same claim.

The onus issue has also arisen in free trade policy.

Neither Labor nor the Liberals have an unblemished record in support of free trade. Whitlam severely slashed textile tariffs in the early 70s. Bob Hawke in government promoted free trade and moved to reduce tariffs over time whilst still propping up the motor vehicle industry through the Button car plan. John Howard was encouraged by the Dries to adopt a more liberal trade policy, but it is fair to say he was keener on industrial relations reform.

Julia Gillard talks about free trade and Craig Emerson, the current Trade Minister probably believes in free trade but actions speak louder than words. Labor has spent a small fortune in propping up the car industry at the behest of the unions.

Talk of a new trade deal, the Trans Pacific Partnership, is welcome but it was accompanied by outright hostility by the Greens and clear misgivings from the unions. You would have to be a supreme optimist if you think the deal might ever be consummated.  And, I note the comment in The Age, "But Australian officials at the APEC summit said any pre-existing free trade agreements would hold sway, with neither provision being put at risk". So, that means no extra access to the US for our farm produce. That's not much of a deal. And I doubt we would get much from Japan either.

Before John Howard became leader I was worried that he would be weak on protectionism and, looking back at my notes at the time, my fears were proved correct when, as PM, Howard pushed through a special deal to continue propping up the car industry. I told Cabinet, a few weeks before the decision, that I had been to a car factory in South Australia and the person in charge admitted that the business could not operate as effectively as possible because of the trade unions.

As far as I was concerned the Cabinet decision ensured that this state of affairs would continue and was contrary to the thrust of our general economic policy. Peter Costello and Alexander Downer were also advocates for free trade and we thought that the decision was a bad one. In contrast John thought it was one of his better decisions and kept saying so for months after the decision.

Tony Abbott's recent decision to change the onus on dumping reminds me of John Howard on protectionism before our election win in 1996, although John offered the reassurance that came with his generally pro-market values. My worry is not immediately the dumping decision, but what it says about the policy of an incoming Abbott government. Of course, anti-dumping provisions are allowed under WTO rules, but they have been often misused for protectionist interests. So any free trader will look very closely at anything called "anti-dumping".

Abbott proposes a change of the onus of proof so that importers have to prove that they are not dumping. Apparently this new approach will be handled by the Industry Department. Of course the culture of that department is well known. It would have been more reassuring if that responsibility was with an agency that has a pro-free trade approach.

The scheme supported by both sides of politics for decades has been that complainants have to show that the imports are being sold for less than cost. My personal view is that if someone wants to sell me something at less than cost then I usually buy it. The issue is more complicated than that, but millions of Australian shoppers are always looking for a bargain and that attitude is a good starting point when considering anti-dumping.

The changing of the onus in both these examples will have consequences. It is a pity that more consideration has not been given to this tactic.

Next time we hear a political party advocate a change in the onus I hope a proper consideration of all the issues will be triggered and then conducted with a lot more intellectual rigour than has been apparent in these two examples.

Tuesday, 8 November 2011

Gillard's 'annus horribilis'


It is folly to consider Australian politics and economic management without appreciating what we could soon face from overseas.

At no time in my political career have we experienced anything like the economic Sword of Damocles which hangs over us today in the form of Europe's economic and political crisis.

Greek sovereignty finally met the bailiff in Cannes last weekend. The Italians have been forced to let the number crunchers check their finances and maybe soon we will be hearing that Italy's finances are even worse than previously thought. Italy could then be on its knees economically and politically.

Meanwhile Julia Gillard in Cannes gave the Europeans a lecture about economics. It would be laughable if not so serious.

The Rudd/Gillard Government is about to push through its carbon tax which will put Australia at a competitive disadvantage, it has overseen waste on a grand scale and then she said to the Europeans that the economic challenge is all about jobs whilst back at home secondary students have been prevented from working after school by her Fair Work Act (FWA).

The worry is that Gillard is just as much out of her depth at home as abroad and worse still, the Australian policy debate is mired by complacency when we should be doing everything we can to guard against European collapse.

At least a moment to reflect on our situation is coming very soon.

Q&A had its final panel for 2011 last night, the Parliament will soon finish the Spring session and politicians are looking forward to the Christmas lull and summer. Of course a flood or a cyclone could bring politicians back to work, but otherwise Parliament not sitting allows some quieter time for reshuffles, to draft some new policy and maybe reconsider strategy for the new year.

This year is no different. It is an opportunity for both sides of politics.

Tony Abbott has sensibly put a lot of time and effort into attacking the carbon tax but other issues still need to be addressed. He cannot afford to underestimate Julia Gillard, not because she is a good PM but because an army of bureaucrats can provide firepower to make anyone look half respectable. And a little practice can significantly improve appearances.

Julia Gillard has had an "annus horribilis" and I personally think that she is simply not up to the job. But Labor currently has no-one else because as PM, Kevin Rudd was unbearable and the unions decided he had to go. So despite everything, Julia Gillard seems set to remain at least until February 2012 and I will need to look up the plural for "a.h".

Bill Shorten can obviously smell opportunity. Last week he promised that he "never ever" wants to be PM and by the weekend he was manoeuvring himself into Cabinet as the new Minister for Industrial Relations. From Bill's point of view, it is a good thought.

If Abbott senses that this could happen he could think of outflanking Gillard with a reshuffle. He could bring in some of the younger MPs and he could put a strong performer up against Shorten in the lower House. The unions are already demanding more from Labor to deal with "extreme" employers and regardless of reshuffles, the Coalition needs to be determined to contest union demands for further pro-union "reform".

Of course Abbott has other issues. The summer break is a good time to get on top of other policies. Allegedly Andrew Robb was kept out of the loop on the superannuation decision and press reports suggest he was unhappy. Apparently the Coalition's Expenditure Review Committee still operates so the process should be observed. Lack of due process should not be allowed to eat away at the Coalition's credibility as better economic managers.

Industrial relations is back on the agenda not because of Labor's scare campaign and not because of the occasional column by critics, but because the underlying legislation is not working and because both employees and employers are feeling the consequences. The hip pocket nerve is a vital political sensor. Julia Gillard promised that her Fair Work legislation would boost productivity but productivity in Australia is languishing. Poor productivity diminishes wages and thus living standards.

The Qantas dispute has reinforced the need for a better system. This is not rocket science. It has been obvious most of this year that the economy is going to slowly burn as a result of the Fair Work Act.

The Qantas dispute has just given the issue greater prominence. If it was not Qantas it would have been some other dispute.

The ramifications impact on both sides of politics. Most Labor politicians are union members and come from the ranks of union apparatchiks. They owe their political careers to union politics so they get very excited at the prospect of working for their factional overlords. But 2011 is not 2007.

In 2011, recent polls put the Coalition close to par with the ALP on who is best to handle industrial relations, scandals within the Health Services Union are ongoing, real wages are stagnant and strike action by militant unions is now more obviously a problem.

In my view, this presents an opportunity to go on the front foot.

Currently Coalition supporters have only heard one policy from Tony Abbott on IR and that was his statement of opposition to individual contracts. No wonder that people are uncertain what he will say next. He should not leave these doubts to grow. A limited announcement before Christmas could be well received. Some considered initiatives like better rules on bargaining would help.

Labor's "good faith bargaining" has clearly not worked. It can't be difficult to demonstrate that a union official who calls for customers to not fly with Qantas is not practising good faith bargaining. Kevin Rudd promised that industrial disputes would only be a "last resort".

Surely the Coalition could win that debate? And not to leave them out, he could offer small business an exemption from unfair dismissal, a tightening of right of entry rules and the return of the Australian Building and Construction Commissioner.

Graham Bradley, on behalf of the Business Council of Australia (BCA), has given Tony Abbott some perfectly sensible and practical suggestions on how to respond to the Qantas dispute. They are not ideology. The BCA was recently described as "pathetic" by the Liberal Party President but actually the BCA's public call for amendments for reform of the FWA are a godsend for Tony Abbott and he would be missing a good opportunity if he does not embrace their approach.

An announcement, not of the full policy, but of some elements would be a good idea before Christmas. And if Abbott consulted on this mini-package with the employer groups, his MPs and even some Labor supporters of Keating's reforms, like Michael Costa, he might also project a willingness to listen that would do him no harm at all and would give him a strong start for the new year.

Monday, 31 October 2011

Arbitration


The public understand workplace relations partly by observing strikes and the level of disruption caused by unions.

This is understandable but reducing strikes is just the tip of the policy iceberg.

Some still think that the waterfront was one of the best things about the Howard government. And it was but actually, the even bigger change made by the Howard government was the change to the legislation in 1996 because that made the waterfront dispute possible and the changes improved the system for employees and employers in businesses and industries all round Australia. Under the Howard government the number of disputes fell to record lows, employees enjoyed increases in real wages, unemployment dropped and more people joined the workforce.

However one dispute, whether Qantas or the waterfront, can be very important by demonstrating how recent legislation like the Fair Work Act can impact on behaviour more generally in Australian workplaces.

On Saturday night, in a special hearing before Fair Work Australia, Qantas acquiesced in termination of the Qantas dispute apparently on the grounds that arbitration is a better option. Qantas CEO Alan Joyce has been saying that a mere suspension of industrial action by both sides would advantage the union. Qantas wanted an end to the cloud of uncertainty discouraging customers from booking flights. As Fair Work Australia considered this issue, and as I wrote this column, there was no doubt that the dispute will embolden militant unions to take further industrial action. That has already happened against BHP, and recently Customs and Toyota and others have been under threat. I expect the unions could soon be ramping up their attack on the resources sector.

Then, early this morning Fair Work Australia ordered an end to all industrial action by both the airline and the unions. Qantas will be back in the air and its workers back on the ground as early as this afternoon.

As soon as I heard premiers Baillieu and O'Farrell calling for government intervention, I had the awful thought that Australia could soon be on the rocky road back to arbitration. Later that Saturday morning, I noted that Professor Judith Sloan had blogged a similar view. I shuddered when I realised that senior Liberals including Tony Abbott were publicly encouraging PM Gillard to intervene and thus take the first steps to compulsory arbitration. I had not realised how quickly matters would develop and by the afternoon, Qantas announced the lock out. By Sunday morning Tony Abbott was saying that the Government should use all of the powers under the Fair Work Act. The Act includes a power to arbitrate. The Coalition should be supporting Qantas but instead Abbott says he does not take sides. Hawke supported Ansett and Howard supported Patricks. Reagan opposed the air traffic controllers and Maggie Thatcher confronted the coal miners. Abbott said of the dispute that "it is not a policy problem, it is a competency problem". These comments are obviously inaccurate. Of course PM Gillard is incompetent, but Tony only said that because, as everyone knows, the Abbott Coalition no longer has a policy on industrial relations.

Australia has not used compulsory arbitration since the Fraser years and earlier. Until this weekend, compulsory arbitration was part of our economic history. Neither side of politics have supported arbitration since the late 1980s. It represents a system that was largely discredited for having depressed Australian living standards by failing to promote better and more productive workplace relations. It was a system that was supposed to advantage workers with a fair day's pay for a fair day's work. But it did not work and, together with the policy of protection, it became a drag on Australia's success.

The point about compulsory arbitration is that it is premised on the concept that ultimately the responsibility for sorting out how people in a business manage their affairs should be determined by a government agency, Fair Work Australia (FWA) and not the people in the business. The people best able to understand the needs of a business are those working within the business. A governmental third party can never equal or do better than private sector participants. More importantly, only the people within the business can really have the necessary motive to promote the success of the business. Good businesses spend every day trying to improve. It is a dynamic and continuing process. Only within the enterprise will you find the motive to compete with competitors to deliver better goods and services to consumers. That competition includes the competition to have good workplace relations. To my knowledge there is hardly a successful modern economy anywhere that believes that compulsory arbitration is a good idea. Even the communists in China now accept that competition is the way to lift people out of poverty. Free enterprise and capitalism, with all their many faults, reward success achieved through competition to meet the demands of consumers. Of course, modern societies temper this approach by legislating protections for employees and consumers but the engine of our economic society is competition and the freedom to compete.

The reality is that under Labor's legislation, the unions have more power. And Labor is dragging Australia back towards arbitration. There is no question that the reregulation of the workplace has triggered this dispute and, as John Howard said fairly recently, this policy will have to be overturned. Only the Coalition can do that because Labor is hopelessly compromised by the unions. The Coalition should not be saying this dispute is not about policy. This dispute is all about Labor's policy. At a minimum, the Coalition needs to have a policy that includes restrictions on the right to strike to matters pertaining to the employer/employee relationship, strikes should be used only as a last resort, the JJ Richards case should be overturned, the bargaining rules should be tightened, exemptions should be given to small business for unfair dismissal and individual agreements should be reinstated.

I can't say I predicted this dispute but I and others and many people in business have for months been saying there are growing problems with Labor's legislation. The Coalition and the Government need to stop pretending that Gillard's system is OK. It is not and needs to be changed before it does a lot more damage.

Tuesday, 25 October 2011

Submarines


If Stephen Smith wants to replace Prime Minister Julia Gillard he would be in a stronger position if he did a better job in his portfolio.

As he has only been Defence Minister since September 2010, it might be a bit harsh to judge his efforts so far, but he has one very big issue that seems to be dragging.

The main issue for any defence minister is to ensure that Australia has done everything possible to be able to defend itself against direct armed attack. The security of our country is the highest priority of any government. A strong defence force is our most important insurance policy to maintain our security and so there is no acceptable excuse for not paying the premium.

The Minister's job is to ensure we have "the ability to conduct independent military operations in the defence of Australia by way of controlling the air and sea approaches to Australia, and denying an adversary the ability to operate, without disruption, in our immediate neighbourhood".

For that reason, the Government's 2009 Defence White Paper stated that one of its main priorities was "a significant focus on enhancing our maritime capabilities".

And at the centre of that wish list are 12 new submarines to be built in South Australia in Australia's biggest ever defence project. To me, this seems particularly ambitious; especially without looking at the alternatives. The existing six Collins class submarines, ordered by a previous Labor government, have been disappointing from the start. It is not obvious why Labor wants to risk a repeat of that experience. The Navy has struggled to even have enough crew, submarines have been too regularly out of service and in the Minister's own words (ABC TV July 20, 2011),"There are longstanding maintenance and sustainment difficulties with our Collins class submarines". And now he says he can't start on the new project until he knows how long the existing submarines will last.

An interim report is due in about six weeks with the final due March 2012. But I am not sure that isn't a smoke screen. The Minister has not encouraged any informed public debate and tried to keep the Opposition and the public in the dark.

The Australian Strategic Policy Institute has recently been quoted as saying that the wish list for military hardware is already a long way behind schedule.

There are various options to enhance our submarine fleet. One option is to buy off the shelf, but that has been ruled out. The Navy always says our needs are unique so we have to build our own submarines. Certainly, we need boats that can travel long distances quickly and remain, for substantial times, undetected. The Europeans build diesel submarines and some have substantial capabilities. They would be cheaper and maybe more practical and reliable. Even if they could not meet all our requirements, perhaps in stronger collaboration with the US, we could have an even stronger submarine force.

These issues are nowhere properly canvassed by the Government; they want the assembly done in SA and that is that. But the options should be discussed. In addition to the European option, another option is to buy nuclear submarines from the Americans but "the Government has ruled out nuclear propulsion for these submarines".

I presume Labor's reason is purely political. Labor agreed to a new nuclear reactor in Sydney a few years ago for medical and research purposes. But today any mention of the word 'nuclear' is just not possible for a Government in bed with the Greens. But sensible discussion about the defence of Australia is too important to be subject to a Green veto.

Nuclear propulsion instead of diesel does not mean Australian submarines would carry nuclear weapons. Nuclear powered boats can travel further and faster so whilst 12 boats are needed if using diesel propulsion, some lesser number may be more than adequate with nuclear propulsion. All these cost differences need to be examined. Servicing a nuclear reactor would mean that we would have to have an arrangement with the US for maintenance as we do not have substantial nuclear technology in Australia. A joint submarine base with the US in Australia would be good for Australia.

And there is no rational reason for us to be too shy about a nuclear-powered ship when, as the White Paper says, Australia has been relying on the nuclear deterrent for years and, under successive governments, has acknowledged the value to Australia of the protection afforded by extended nuclear deterrence under the US alliance.

Working with the US also fits our national interest to work closely with our principle ally. There is nothing new about Australia working closely with the US; Australia already has extensive arrangements with the US in situations where costs are prohibitive for us to operate alone, eg. space-based assets and some sensitive special technologies.

Of course, if we are to build the submarines ourselves it will end up as an open cheque book and the cost will escalate. In the White Paper, the Government says that all purchases should be subject to the principle "that military-off-the-shelf and commercial-off-the-shelf solutions to Defence's capability requirements will be the benchmark against which a rigorous cost-benefit analysis of the military effects and schedule aspects of all proposals will be undertaken". But this will not apply to the biggest ever defence project where the estimates are anywhere between $36 billion and $70 billion.

From the same people who gave Australia pink batts and school halls, there is every reason to have misgivings about how this project will be developed. If it ends up with cosy union deals, like the desalination plant in Victoria, the cost to the taxpayer could be astronomical and the boats might end up no better than the Collins'.

It would be in everybody's interest, including his own, if Minister Smith was a lot more open about the critical decisions yet to be taken on this project so vital to Australia's long term security.

Wednesday, 19 October 2011

Migration Policy


Chris Bowen should seriously think about quitting the Gillard Ministry. But not out of political spite or disregard for Julia Gillard.

He needs to go because by staying he is killing off his political career, for no good reason. Even before the weekend Cabinet leaks showed he was rolled by the left and PM Gillard, it was obvious that he has a policy of offshore processing that he knows he can't implement; so why go on? What is the point of being a minister if you are disallowed from implementing the policy you have just confirmed?

The only other option is for Gillard to do the right thing and move him to another less controversial portfolio. She owes him for everything he has had to put up with as Labor's policy has crisscrossed the road like a young footballer on the way home from the local pub having won the grand final.

It is ludicrous for a Government to announce that its policy is offshore processing and then say it can't be implemented. This is as much nonsense as its earlier excuses; like the push factors that were later dropped and pull factors substituted. Then we were told Nauru could not be used because Nauru had not signed up to the UN convention. That was Labor's first reason for not using Nauru. Of course the real reason then was that it could not be admitted for 'political' reasons, namely because it was John Howard's policy.

Labor's latest answer, after Nauru signed the convention, is that it won't work now because the circumstances have changed but again, that is only said as an answer to the fact that Nauru worked under the Coalition.

The issue will not go away. After four years in office, this is Labor's legacy, a policy they say they cannot make happen. Blaming the Opposition will only rile the public more.

And by Christmas there will be a lot more boats. The Gillard non-policy is an invitation to come by boat. Her position is that this is undesirable but her only response is to blame the Opposition. This non-policy is not tenable. Governments are elected to govern. If a government can't govern, then it should resign or call an election.

Many of the new arrivals will need financial support from Australian taxpayers. Many will struggle to find a job and have the dignity of work. Australia's unions will never allow them the opportunity to enter the labour market; too many changes would be needed to give the flexibility needed for these people to get a job. In time, these people will have rights to bring in family members and they are likely to also struggle to find work and will also end up on the unemployment benefit.

When Labor was in office under Hawke and Keating, the immigration program was poorly run and we ended up with a lot of unskilled workers who spent years on unemployment benefits. This was not good for them or the economy. The situation was remedied by the Howard government reforms and opposed by Labor.

A poorly run immigration program undermines community support for more migrants.

Australia has a once in a lifetime chance to make the most of our resource sector but we need qualified people for that purpose. Instead Labor's disastrous handling of the boat people issue has undermined public support for a strong migration program at exactly the wrong time. The repercussions are already tangible. The latest figures show that population growth has slowed to 1.4 per cent and the Age reported (30/9/2011) "KPMG demographer Bernard Salt yesterday attributed the slump in net overseas migration to Julia Gillard's move to distance herself from former prime minister Kevin Rudd's 'big Australia' policy". A policy of encouraging migration to Australia has been bipartisan mainstream policy for many years.

Under PM Gillard that policy position is being weakened boat by boat.

If Labor's stated policy is offshore processing then Gillard needs to pursue that policy. She needs to announce how she intends to implement her policy. The weekend leaks suggest that Bowen acknowledged that reality and wanted to put Tony Abbott's position to the test. Bowen's test must have been to trial Nauru so that if it did not work, his Malaysia solution could be resurrected.

Instead, the PM now says the situation is not her responsibility.

The term "responsibility" is much used by politicians. Both sides attach much credibility to the term, safe in the knowledge that it is "ill-defined" as described in Australia's Commonwealth Parliament by Reid and Forrest. This authoritative work was commissioned for the centenary of Federation. The authors also make the point that "Thus the extent to which the government is held 'responsible' will depend upon the demands of the elected Houses of Parliament and their constituent members; at the same time the actions of both the legislature and executive will be strongly influenced by the challenge of periodic elections and the attitudes of the electors".

The attitude of electors on both the unpopular carbon tax and border protection policy suggests that an election soon would resolve widespread community angst on both policies and allow Australia the chance to avoid the costly and divisive wrangling that seems set to plague Australia for some years ahead. It seems that Chris Bowen's presentation to the Cabinet was realistic and focussed on advancing the Government's policy. He can now do no more, so he should move one way or another. If the PM can't follow his lead, she should call an election or resign.