Business Bosses

Bill Shorten cheated of an IR fight he could win

For months federal Labor has been bouncing around in its corner, challenging the Coalition to come out and fight on the issue of industrial relations. It's the one fight it knows it can win, after the stellar success of the 'Your rights at work' campaign that made WorkChoices the pivotal issue in losing John Howard the 2007 election.

So, in a way, the government's review of the Fair Work Act is bad news for Gillard's best prize fighters -- particularly the small but scrappy Bill Shorten, who would just love to go toe-to-toe with the Coalition's IR spokesman Eric Abetz. 

The review, which is expected to be released later today, reportedly gives Labor's IR framework a big tick. Had it found huge problems with the FWA, Labor might have eventually got a rise from angry Coalition MPs. But there's no chance now.

Tony Abbott has made it clear that this will not be the defining issue of the next election, despite many on his side of the house believing it is a key factor holding back Australia's productivity growth.

Young firebrands such as Jamie Briggs and Steve Ciobo have occasionally blurted out their frustration on the need for IR reform, but for the most part Coalition MPs have maintained a disciplined silence. 

Reports ahead of the release of the review's finding are that Reserve Bank board member John Edwards, Justice Michael Moore and workplace relations academic Ron McCallum were "not persuaded" that the FWA framework "accounted for this productivity slowdown".

We hardly needed a review to discover that -- both multi-factor productivity and labour productivity (the component directly linked to the FWA reforms) were flat-lining under the Coalition's IR regime in 2005, 2006 and 2007 (See the charts here: Who destroyed Australian productivity? April 2011, and The good news Labor won't share16 February).

Those who see a causal link between the Fair Work Act and lagging productivity growth (and our CEO Pulse survey this week shows 54% of CEOs think the Act sets up tension between wages and productivity), tend to overlook the decline in productivity in the last few of the Howard years. 

The danger with that kind of selective reasoning is that it allows the FWA to be blown out of all proportion as a cause of lagging productivity. Some of its effects are important, but not as important as, say, Australia's highly complex and incentive-sapping taxation/benefits system. There's low-hanging fruit to be had in tax reform, and the winding back of middle-class welfare, but both sides of politics lack to guts to take that message to the electorate.

Moreover, in the past few years the mining boom has given its own spin to productivity figures -- as the Australia Institute pointed out last year (The dark side of productivity reform, September 2011), when the resources sector is stripped out of the national accounts, productivity growth in the rest of the economy is pretty good.

Put another way, top-line productivity figures for the nation would increase dramatically if the two big constraints on the resources sector -- skilled labour and infrastructure -- were substantially eased. 

New wages data out today show enterprise bargaining has produced wage rises of 4.5% in the past year. That looks very high against the latest CPI headline figure of 1.2%, but given that many of those enterprise bargaining agreements were struck last year when headline CPI was 3%, it can't in itself be used as a sign of a wages blow-out. 

Actually, Bill Shorten would prefer it was interpreted that way. Then he'd have a fight on his hands -- a fight he could win out in the electorate, and one that might actually bolster Labor's dire opinion polling.

*This piece was originally published by Business Spectator.


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