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.