Article from: The Australian
Michael Stutchbury, Economics Editor
March 12, 2009
JUST as the "Great Recession" ratchets up unemployment, the Rudd
Government is making it less attractive to employ labour.
This is economic madness, a self-inflicted policy wound that will weaken
Australia's defences to the crisis.
The Government knows it is making the job market less storm-proof in
the face of what Kevin Rudd yesterday again described as a "global economic
cyclone". But it figures its political interests are best served by shifting the
blame for its share of the damage. Or perhaps it will seek to limit the
short-term damage by piling more debt on to taxpayers.
Ominously, Julia Gillard's workplace laws -- which outlaw statutory
individual contracts, promote union collective bargaining, welcome back
compulsory arbitration and expose small business to more litigation over
"unfair" dismissal -- represent the first peeling back of the pro-market
reform program that has underpinned Australia's modern prosperity.
Yet Gillard has brilliantly boxed in the debate, dismissing reservations as
"spitting in the face of the Australian people" who voted the Government
into office during the boom times. Like the White Witch of Narnia,
she petrifies all who challenge her will.
The Opposition treats John Howard's Work Choices as a toxic asset that
must be erased from its policy balance sheet. The Liberals cower in the
foetal position, lest the Deputy PM outs them for "mincing" or, worse, s
upporting Work Choices. Warned by Gillard they could get "injured",
chief executives are vulnerable to being roughed up over their salaries.
The business lobbies have been allowed out of their naughty corner as
long as they behave themselves. The favourites have been duchessed.
Great Australian exporting companies, such as Cochlear, will be forced
to negotiate "in good faith" with relics such as the Australian Manufacturing
Workers Union.
The Government's political trick has been to distort the will of the voters to
"get rid of Work Choices" into restoring the institutional power of Labor's
industrial wing. The Fair Work bill does much more than get rid of Howard's
individual work contracts and shore up minimum conditions. It seeks to
reregulate the setting of wages and conditions above that safety net. The
form of that reregulation benefits the unions, and hence Labor, but damages
the competitive flexibility of business.
In one of Gillard's few political missteps, or perhaps a calculated bargaining
ploy, the bill makes trade union officials the licensed inspectors of the new
workplace laws, empowering them to march into businesses and open up
the personal employment records even of those workers who they can't
count as members. Gillard has responded to such privacy breaches with
another layer of bureaucratic oversight, even suggesting that union inspectors
will be "good for business" by policing competition from rogue employers.
Unlike Gillard, who cut her teeth as a labour lawyer, Rudd has no union
attachment. But the Prime Minister lacks a party power-base. And the
whole exercise wedges Malcolm Turnbull between "working families" and
his small business constituency. The charge that the Coalition -- and Peter
Costello in particular -- would bring back Work Choices could re-elect the
Government. The Opposition has become the issue.
Yet, while Gillard's political strategy has been brilliantly executed, it doesn't
invalidate the laws of economics. The Government's inability to regulate for
"job security" will become more exposed by each month's job numbers,
possibly beginning with today's February result.
After bottoming at 3.9 per cent, the current 4.8 per cent jobless rate will rise
to at least 7 per cent. The Australian jobs fallout from the global crisis has
been delayed as business held on to its workers until after Christmas.
But job advertisements slumped 10.4 per cent in February, the biggest monthly
drop ever for a series that began in 1975. "Significant job losses are imminent,
" concludes Morgan Stanley's Gerard Minack on the basis of how the ANZ job
ads series lead the employment numbers by a few months.
Rudd knows that Australian households enter the recession bearing too
much debt supported by over-inflated house prices. Job losses will increase
the rate of mortgage defaults, threatening to make household deleveraging
more disorderly, hitting bank balance sheets and deepening the recession.
Gillard is right that the global crisis will be the main driver of rising
unemployment but wrong that her revived system won't risk extra job losses.
On Monday's 7.30 Report, Gillard argued: "We published a comprehensive
regulatory impact statement that went through the economic arguments
about our Fair Work bill, the employment costs arguments. And what that
impact statement points to is the same thing that we pointed to when we
designed the policy and I pointed to when I brought the bill into the parliament,
which is it's flexible, it's fair, it's about decentralised wage setting in workplaces,
making deals that suit that workplace, driving productivity growth.
That is good for the businesses involved and it's good for the national economy."
With respect, that's garbage. There is no comprehensive regulatory impact
statement, only a cut-and-paste pretence of one. There is no serious
evidence to support Gillard's claim that her new laws will boost productivity
and its hard to imagine how they could do other than the opposite.
If there is any Treasury modelling, Gillard yesterday refused to release it.
The Government's economic advisers -- the Treasury and the Productivity
Commission -- are not allowed to be heard on how reregulating one of the
economy's most important markets will dull Australian business's competitive
edge for years to come. That will hardly be fair for working families or those
thrown out of work.
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