Tuesday, 20 March 2012

Labour market needs reform now more than ever

Paul Keating made the claim that good policy equals good politics. It may not have been original but regardless of party political views, it is an approach that serves the national interest.

The trouble with a lot of today's politics is that too many people start by worrying about the politics before they consider the merits of good policy. The better approach is to first focus on what would make good policy and then worry about how to manage the politics.

A lot of Australian politics is about economic management. An opposition party wanting to win an election needs to make sure that they have the policies that will also win the election after next and beyond. Good policies need to be implemented early in the first term of a new government if it is going to last more than one or two terms.

Labor's strongest pro-reform team in the last 30 years was Hawke and Keating. Their early reforms to deregulate the financial markets, to float the dollar and to cut tariffs gave the Hawke years a solid economic foundation. Keating was elected prime minister because Hawke was judged as inadequate to meet the challenge of the Coalition's Fightback! policy.

Fightback! was the next instalment of reform; Keating should have pinched Fightback! But instead, to win the '93 election, Keating had to abandon his best policy proposals. He opposed the introduction of value-added tax he had earlier advocated and he spelt out a new approach to labour market reform but then capitulated to the unions on implementation.

In 1996, the Howard government moved quickly to balance the books by cutting Labor's massive debts and to significantly improve the operation of the labour market. Both reforms paid handsome dividends and underpinned the longevity of the Howard years. One very obvious thing about the Gillard Government is that despite all the spin about reform it has undertaken very little real economic reform. As a result it has already shortened its likely tenure in office.

One of Keating's best policy initiatives was the speech he gave to the Institute of Company Directors in April 1993 when he said:

Let me describe the model of industrial relations we are working towards.

It is a model which places primary emphasis on bargaining at the workplace level within the framework of minimum standards provided by arbitral tribunals. It is a model under which compulsorily arbitrated awards and arbitrated wage increases would be there only as a safety net.

This safety net would not be intended to prescribe the actual conditions of work and most employees, but only to catch those unable to make workplace agreements with employers. Overtime the safety net would inevitably become simpler. We would have fewer awards, with fewer clauses.

This idea of labour market reform, sponsored by Keating, died with his departure from the parliament in 1996. It was then the Coalition's challenge in the face of Labor opposition. In 1996 the Howard government confronted the challenge but 16 years later the opposition to reform still haunts Australia's economic prospects. The unions' 2007 campaign highlighted the difficulty of campaigning on labour market reform. But instead of attacking the bogeyman of WorkChoices straight after the 2007 election, many within the Coalition simply acquiesced in Labor's assertions of how incredibly potent the union movement were in removing the Howard government.

This was a huge tactical mistake. There were various reasons for the loss in 2007 and certainly one of them was the fact that the Howard government had been in 11 years. The obvious tensions between Peter Costello and John Howard were also no help to Howard's re-election campaign.

What the Coalition has forgotten is that the WorkChoices bogeyman is nothing new. The bogeyman was alive and well in the period leading up to the '96 election but the Coalition never walked away from labour market reform.

In reflecting on the election, veteran journalist, Peter Charlton said in the Courier Mail on March 30, 1996:

Prime Minister John Howard made industrial relations the major difference between the two parties in policy terms, as the advertisements in the last week of the campaign showed.

Unlike the situation in 2012, in the 12 months leading up to the 1996 election, the Coalition was constantly taking the fight up to the Keating government on labour market reform. The Coalition had a clear view about unfair dismissal, the need to reform to the Trade Practices Act and other key elements of the changes that were necessary to correct the imbalance in the system. In contrast today the Coalition remains largely silent on the question of industrial relations reform.

If you have a good policy you can win the debate. In 1996, having hammered the Keating government over unfair dismissal law for many months, in the last week of the campaign, the Keating government finally gave way and announced that it would review the unfair dismissal law if Labor were returned. We won that debate because we never gave up on our small business constituency. At no stage did John Howard announce that he would not have individual agreements. He made it clear that our policy was to tie wage increases to productivity and thereby lift living standards. As Bill Kelty admitted after the March 1996 election, "the community and also their own membership had rejected the Accord". The ACTU's folly is now being repeated with demands for wage increases without productivity, more arbitration and the reappearance of a 'them versus us' mentality.

In many respects the challenge for Australia on labour market reform now is even greater than it was in 1995/6. In 2012 the system is going backwards. Union militancy is on the rise; in the latest statistics strikes are the worst since 2004. Choice of agreement making has been cut. The ACTU is pushing for more arbitral powers and the system has been widely re-regulated. And poor workplace practice is starting to impact on the resources sector which is maintaining our living standards. Keating's concept of a simplified award system has been trashed with Gillard's modern awards. Australia's productivity performance is poor and living standards are clearly under threat. Small business is discouraged from employing people and the Government has been stacking the industrial tribunals with its own people. The scandal within the Health Services Union has basically been buried by the system. The former head of Fair Work Australia retired without mentioning the scandal and the new head is yet to make any comment and it is unlikely that he will. FWA is refusing to cooperate with the police in Victoria and New South Wales.

It is never too late to advocate good policy. Whether it is Gillard or Abbott, the need for genuine labour market reform is becoming more pressing every day in the national interest.

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