Tony Abbott – Backflips on Work Choices

Posted on February 26, 2011


Abbott needs to step up to the plate and tackle industrial relations

JULIA Gillard last week led a tribute of Labor MPs to the Australian Workers Union powerbrokers who installed her in The Lodge.

This week, former Howard minister Peter Reith challenged Tony Abbott to support the return of individual employment contracts that helped toss the Coalition out of power.

It’s a sign that the industrial relations landscape is turning, six months after Gillard as new Prime Minister returned to Labor’s Work Choices scare campaign in the desperate last days of the August 2010 election.

It could turn further as the blue-collar job market tightens amid the combustible industrial relations cocktail of the mining boom, Queensland flood reconstruction and Labor’s National Broadband Network.

While overall wages growth remains in check, figures this week showed the mining companies are planning $76 billion of new fixed capital spending in 2011-12, a whopping 54 per cent higher than pencilled in for this financial year.

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While this will intensify skilled labour shortages, Reserve Bank governor Glenn Stevens suggested this mining construction boom could add two percentage points to economic growth over the next couple of years. This would push the economy to full capacity at the same time China’s growth and the Middle East political revolution are stoking global oil and food prices — and hence inflation and interest rate pressures. Now add a carbon tax.

Reith was the Howard minister who introduced individual contracts in 1996 and then smashed the maritime union’s control of the waterfront. These reforms extended the liberalisation of the job market and allowed businesses to promote more flexible and productive arrangements with their workforces.

Yet Reith left before Howard’s 2005 Work Choices, which removed the “no disadvantage test” while setting out a handful of core minimum employment conditions. Even though later reinstated, this allowed Rudd Labor to go to the 2007 election arguing that the Coalition would leave bosses free to strip away workers’ award-based pay and conditions.

That led to Gillard’s abolition of Australian Workplace Agreements, introduced by Reith, with the support of the Australian Democrats. Her Fair Work legislation transferred power back to the unions, the award system and the industrial relations tribunal.

This is the first big rollback of the pro-market economic reform era that began with Bob Hawke and Paul Keating in the 1980s.

Even amid the modern information age and social diversity of 2011, individual Australians do not have the right to strike arrangements with their employers that best suit them. They must be bound by collectively bargained agreements. Yet the Coalition is so spooked by the unions’ anti-Work Choices campaign that Abbott is vowing not to change Gillard’s Fair Work legislation. So Reith’s intervention represents one of the first substantial broadsides by a leading political actor of the reform era against the policy malaise in his own side of politics. Reith charged that Coalition MPs “have been told not to speak about industrial relations”.

“If we don’t take the lead soon and if there is no real legislative change before just after the next election then Australia will have been going backwards for nearly a decade,” he said.

The political debate will portray Reith as an anti-worker industrial relations warrior. Yet he drew on impeccable reformist arguments from Productivity Commission chairman Gary Banks that, among regulations with pervasive effects, industrial relations was “arguably the most crucial to get right”.

The incentives people faced to use their skills in workplaces throughout the economy underpinned its overall productivity, Banks argued in a speech late last year. “It is therefore vital to ensure that regulations intended to promote fairness in Australia’s workplaces do not detract unduly from their productivity,” Banks continued, particularly amid the structural pressures of a mining boom. Yet Banks also noted that Howard’s Work Choices and Gillard’s Fair Work have been exempt from even a cursory regulatory impact examination.

“If we are to secure Australia’s productivity potential into the future, the regulation of labour markets cannot remain a no-go area for evidence-based policy,” he warned.

Analysts Scott Ryall and Andrew Johnston, at institutional stockbrokers CLSA, are providing some of the evidence, suggesting that the skilled labour shortages being generated by the mining boom, Queensland flood reconstruction and the NBN are now colliding with Gillard’s new industrial relations regime. This is accelerating cost blowouts and delays in mining boom construction projects. They suggest that “the increase in power to unions is only just becoming apparent”, particularly in the resources sector where Reith’s AWAs previously had been relatively widespread.

In a research report, Ryall and Johnston suggest that Gillard’s Fair Work Australia tribunal is union-friendly; employers can no longer walk away from union negotiations to pursue AWAs; employers have lost the rights to negotiate non-union wage agreements; unions can relatively easily drive the bargaining process after getting just one member in a workforce; and the new regime is encouraging a ramp-up in “protected” strike action.

They note that labour cost increases have accelerated in the natural resources sector, where casual daily pay rates for offshore construction (such as on liquefied natural gas projects in Western Australia) have jumped to $1800.

This offshore wage blowout threatens to migrate onshore. Aluminium producer Alcoa had been subject to “hundreds of mini-stoppages” in WA, despite offering a 17 per cent pay rise over the next three years.

Strike threats had extended outside the resources sector to businesses such as Crown Casino and Australian Air Express.

“Unions have grasped the opportunity,” Ryall and Johnston conclude. “Labour cost increases will be exacerbated by unions reinvigorated by legislation that removed AWAs and allowed protected strike action to be used strategically.”

This was the power shift that was on show at the AWU’s 125th anniversary celebrations on the Gold Coast last week. Gillard led the tributes to the AWU’s octogenerian godfather Bill Ludwig and his 29-year-old consigliere Paul Howes. She named more than a dozen Labor MPs who had made the trek, including deputy PM and Treasurer Wayne Swan (who claimed AWU membership back to 1974), assistant Treasurer and former AWU secretary Bill Shorten, Broadband Minister Stephen Conroy and factional bosses Dave Feeney and Don Farrell who helped orchestrate Kevin Rudd’s demise in June last year. Maritime Union of Australia boss Paddy Crumlin was a head table guest, reflecting the AWU’s strategic alliance with the union Reith took on in the 1990s.

The PM joked she was on a Valentine’s Day date with Howes. And she thanked Ludwig “for letting us have” son Joe as a Labor MP and minister in Canberra.

Howes was more direct about the AWU’s demands. Following Swan’s mining tax attack last year, Howes attacked Rio Tinto for frustrating the AWU’s membership drive in the aluminium industry and for paying non-union workers in Tasmania less than unionised workers in Victoria. Rio Tinto’s chief executive Tom Albanese was “sucking out the blood, sweat and tears of blue-collar workers”, he said.

The high-profile Howes demanded that Gillard abolish Howard’s “evil” Australian Building and Construction Commission; maintain NSW provisions that allow unions to prosecute employers under her national occupational health and safety system; and protect his union’s members in steel, aluminium extrusion, glass and timber products from cheap Chinese imports. The AWU is not a ratbag union but it ought to be smarter than this pre-reform protectionist agenda.

Asked about Reith’s comments, Abbott lamely responded that his former colleague was a mere “citizen” whose views would be noted. Gillard claimed her Fair Work regime was “working as we wanted it to”. It was “an enterprise-based bargaining system which enables businesses to respond to the need to drive productivity”.

Abbott needs to show it is really a mechanism for restoring union power that is propping up a Labor Prime Minister.

It is reckless amid Australia’s biggest mining boom. And it now is being exposed as global instability fuels a 1970s-style surge in food and oil prices.

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