The series of natural disasters that have caused so much damage in Queensland are creating new medium and longer term challenges for the Australian economy.
However the Gillard Labor Government is unable to take the necessary action needed to stop the inflationary and multiplier effect its re-regulation of the labour market is bound to cause.
Unfortunately for all of us the Government can’t and won’t say no to its trade union masters.
In recent days further evidence has appeared of just how emboldened the unions have become under Prime Minister Gillard. The golden haired boy of the Labour movement, Paul Howes, this week declared war on one of Australia’s biggest employers, Rio Tinto.
In an unprecedented series of attacks Howes said that he and his union were ‘coming after’ Rio and he made it clear that they will use the Gillard IR laws to push to increase union membership in the resources sector as the priority. This will all be at the expense of the Australian economy.
Rather than being slapped down by Prime Minister Gillard for inciting economic destruction, Howes was gushingly described as ‘a great contemporary union leader’ by his admiring Prime Minister. While Howes might be backslapped by his comrades, the 19th century rhetoric defies the fact that workers in the mining industry are in very strong bargaining positions and are remunerated quite well.
This explains why a vast majority of mining industry workers have snubbed the AWU under both Howes and his predecessor Bill Shorten and have largely chosen to stick with individual arrangements that best suit their needs.
This is all coming at the same time as a glut of recovery money is being sent into Queensland from both public and private sources which are sure to exacerbate already building skill shortages and wage pressures in our economy. The February RBA Statement on Monetary Policy makes this point very clear when it said ‘there is, however, also the possibility that the process of rebuilding and repair (in Queensland) draws in more resources than is currently assumed, with more broad-based pressure on price and wage inflation that in the central forecast.’
The result of this is pressure on interest rates.
The Queensland rebuild is coinciding with a resource sector that is already driving up demand for skilled labour. Combine this with Prime Minister Gillard’s union weighted bargaining laws and you have a toxic combination for Australia home buyers.
Businesses concerns are building and now some of Australia’s leading economists are saying that the worst aspects of Fair Work Act are making the economic dangers for Australia exponentially worse. For instance economist Steven Kates has written in these pages recently that ‘bargaining has become more difficult. Workplace flexibility is being diminished. Industrial action is harder to deal with. Direct engagement with employees is being restricted.’
Added to this, the Australian Mines and Metals Association, whose membership includes Australia’s biggest miners, released a survey in late 2010 which showed that nearly 60% of its members believe that bargaining was more difficult with at least half of this number saying that it was significantly more difficult.
This week respected international ratings agency Moody’s has warned the Government, in its ‘Australian Corporate Sector Outlook’ that wages pressures pose a major risk to the stability of the economy. Moody’s has been reported as warning of a “wages breakout” which will put “pressure on inflation”.
Even former Labor Finance Minister Peter Walsh is sounding the warning bell saying that ‘I think it’s potentially very dangerous, leading to a more general wages break like 1974/5’.
If Walsh is right, the consequence for home buyers is horrific.
Given the increasing voices of criticism from both business and economic commentators, the Prime Minster should urgently make three substantial changes to her flawed workplace regulations to prevent a wages breakout. They are:
1. She should amend the regulations to remove the excessive union power in the bargaining process, especially where they have no members, and reinstate the 1996 Reith individual agreements to increase the range of options for employers and employees to choose from and to reduce the ability of unions to force employers into unsustainable wage rises outside of sustainable productivity gains;
2. As highlighted by the Australian Mines and Metals Association, the ability of unions to pattern bargain (in direct contravention to the Prime Minister’s promise) should be removed; and
3. If the Prime Minister is serious about encouraging employers to tap into the long term unemployed pool then the disincentive of the unfair dismissal laws should be removed for small business.
Australia stands at the beginning of what will be difficult economic waters to navigate. We shouldn’t be navigating without recognising the need for change. We certainly shouldn’t be navigating them with the threat of a Paul Howes-held dagger at the heart of our national prosperity, all for some ego driven media attention.