The Great Regression: Albanese takes Australia back to the 70s

the industrial relations reforms of the 1980s are being dismantled and centralised control painfully reconstructed under the albanese government. by pru goward.

First published in the Financial Review.

Welcome folks, it’s Back to the Future time, Canberra’s longest-running industrial relations game.

The Mining and Energy Union Queensland is the latest winner; this time the prize is extra pay to BHP’s contract miners, recently awarded under the same-work-same-pay provisions of the Albanese government’s first round of industrial changes. The Fair Work Commission determined BHP is now obliged to pay BHP Operations Services’ contractors, which provides (some) miners to its Queensland mine sites, the same as its permanent and highly unionised staff. The prize takes $28 million off BHP’s bottom line.

Now, the Federal Court has rejected BHP’s application not to commence the extra pay until the full Federal Court hears the substantive appeal to the FWC’s decision, so the money has already kicked in. If the full court rejects BHP’s appeal, it will no doubt extend to BHP’s other contracting companies.

In fact, since the FWC’s judgment goes further than most had expected, it will mean the end of contract labour on mine sites and probably elsewhere. With that goes Australia’s remaining labour market flexibility. For companies with international competitors, like agriculture, mining and airlines, another nail in the coffin.

I won’t bore you with the 1890s or 1920s, but for those who remember the 1970s, with their strikes, wage explosions, and ever-rising inflation, the Albanese government’s industrial relations agenda will be eerily familiar. Bob Hawke, then ACTU president, helped destroy the Whitlam government with his pursuit of productivity-free real wage increases through centralised wage-fixing.

Wisely, Hawke was not about to repeat that mistake in government, and a decade or so later, he and Keating led the country to enterprise bargaining. Years of prosperity, maintained by Howard’s steady hand, were Australia’s reward.

Yet, after a decade of struggling productivity, a stagnating dollar and a tottering standard of living, the heirs to the Hawke-Keating golden years are turning their back on the only return to growth. Wilfully and wantonly, the reforms of the 1980s are being dismantled and central control painstakingly reconstructed.

The Great Regression, a report I wrote with the Menzies Research Centre, shows just how far the pendulum has swung. In little more than three years, the federal government has implemented a raft of changes (61 industrial relations amendments in a mere term) designed to increase real wages and union authority, irrespective of the consequences for investment, growth and productivity. Multi-employer bargaining, expanded union right of entry, tighter controls on labour hire and the abolition of the construction watchdog all point in the same direction: away from workers and their employers having choice and flexibility over conditions of employment and towards greater union and centrally arbitrated control.

Fewer opportunities for employees to do better, be more productive, and enable economic growth. Fewer opportunities for investors to enable economic growth.

It is a remarkable reversal. The Hawke and Keating governments dared to loosen the grip of centralised wage-fixing because they wanted Australia to do better. The importance of allowing individual firms to succeed on their own terms, to take risks and prosper, was understood. So was Economics 101; wages can never be one size fits all. Enterprise bargaining also required employees to negotiate directly with employers, so strikes almost disappeared. Everybody won.

What a rude shock the last year has been for Australians; commuters dealing with transport strikes for the first time in decades, a Woolworths strike, nurses and teachers on strike, maritime strikes, airport strikes and the TWU threatening future chronic disruption.

The consequences are hurting. Australia has endured 10 quarters out of the last 11 with either stagnant or falling per-capita GDP. Productivity growth has flatlined. Labor ministers persistently dismiss the link between productivity and wages as a “falsehood”. Crazy stuff which puts us all at risk from higher inflation, interest rate pressure, jobs moving offshore.

If proof was needed of the consequences of this for the low-paid workers who make up much of Labor’s voter base, look no further than the sugar hits of enormous minimum wage increases without productivity offsets. These have put enormous strain on household budgets, especially the households of those very same minimum wage earners. Ask any shop assistant.

Treasurer Jim Chalmers may call it reform; this is reform with many losers. Take the proposed expansion of union-run portable leave schemes, which would shift vast sums of entitlements into union-controlled funds, taking commissions. Unions now have the monopoly on financial management of our entitlements, all without any process to determine whether they are best to do it. A win for unions but an economic loss for the country.

Industrial relations are about more than pay packets and leave entitlements. They are, and have always been, about the balance of power between capital and labour, between risk-taking investors and those working the jobs which come from investment. Governments are there to make sure this critical balance works in favour of the national interest; not for next month’s polls, but for the country’s prosperity.

The return to the centralised industrial control of the 70s, with wage rises to keep the mob happy, can only end in unemployment and an investment flight. BHP has warned as much. There is no longer that famous Australian tariff wall to hide behind and, as US data now shows, even if there were, Australia would be the poorer for it.

The Great Regression risks locking us into chronic stagnation instead of economic growth. Stagnation is well under way; the full Federal Court’s decision will decide its speed.

Pru Goward is lead author of The Great Regression, a new report published by the Menzies Research Centre. She is a former Liberal NSW government minister and sex discrimination commissioner.