Liberal Labour reform
One of the first acts of an Abbott government should be to repeal the Labor Party's Fair Work Act. Industrial relations reform has a strong political rationale and serious policy merit.
Following the 2007 federal election it became conventional political wisdom that industrial relations policy was a no-go zone for the Liberal Party. After all, the much-loathed WorkChoices legislation had contributed in a significant way to the party's loss of office after 11 years in power.
While it is certainly true that WorkChoices hastened the Liberal Party's demise in 2007, it is far from clear that the political response in 2011 should be to abandon the field of workplace relations reform.
In the 2010 federal election, opposition leader Tony Abbott was forced into an awkward promise to do precisely nothing in the field of labour market reform under pressure from Labor Party scare tactics and grilling from journalists. From this came his now infamous pledge that WorkChoices was 'dead, buried and cremated.'
But surrendering the battle before the industrial relations war even began in the last election had two serious consequences that Abbott must avoid before the next election, due in 2013. Firstly, by declining to prosecute the obvious failings of the Fair Work regime, the Liberal Party allowed the ALP to escape reasonable criticism of their workplace policies, and gave voters the impression that they were not causing major headaches for business and impacting on economic efficiency.
Secondly, in the minds of many voters, the Liberal Party has a deep-seated commitment to labour market liberalisation, so a promise to do nothing in this area has little credibility. Voters who doubted the opposition leader's sincerity had only Labor Party talking points about a return to WorkChoices as a guide to what the Liberal Party would do if it won office. By contrast, had Abbott outlined a sensible and moderate reform package, he would have been able to more credibly deny charges of a resurrection of John Howard's laws.
The economic case for industrial relations reform is strong. Productivity is the single most reliable measure for predicting increases in living standards. If productivity is rising, incomes soon follow. In fact, there's no other sustainable way of increasing national wealth. But after strong growth in the 1990s, productivity growth has been lagging for ' the best part of 10 years, and has slowed to a crawl in last few years. It would be fanciful to attribute all of this slowdown to stagnant industrial relations laws, as productivity is affected by many economic factors. But it would be equally foolish to argue that substantially re-regulating the labour market has absolutely no impact on productivity.
After all, the Fair Work Act not only overturned the 2005 WorkChoices laws, but also features of much earlier - and less controversial reforms. For example, Fair Work eliminated statutory individual agreements, a policy introduced by industrial relations minister Peter Reith in 1997, which were obviously not egregious enough to prevent the Liberal Party winning elections in 1998,2001 and 2004. In effect, Labor has returned Australia to an industrial relations era of the early 1990s.
The signs of strain from this system are now becoming apparent. High profile disputes such as the battle between unions and management at Qantas highlight the way in which the union movement has been emboldened by laws which tilt the system substantially in their favour. Appalling stories of over the top salaries and ridiculously generous conditions at worksites like Victoria's Wonthaggi desalination plant demonstrate that taxpayers are bearing the cost of a system that pays little heed to economic reality. We know from cases like that of students employed at a hardware store in rural Victoria - who were denied the chance to work two hour shifts under the laws - that the system is costing jobs.
And the business community is becoming more vocal every day of the increased compliance costs, the embedded disincentives to hire and the inflexibility that characterises the Fair Work Act.
Let's not lose sight of the moral component here either. Why shouldn't employees and their employers be able to negotiate agreements that they believe are mutually beneficial? Why should a third party like a union, or a tribunal of Fair Work Australia, be able to tell a small business how they should spend their money and who they should employ?
Australians should be grateful that we don't suffer under the perennially high unemployment that besets Europe. Even in good economic times, countries like France and Germany have belaboured under the strain of unemployment rates of almost 10%. This isn't just economically inefficient and expensive for taxpayers, but has a very real personal cost. We know that unemployment is associated with a whole range of social ills and that the dignity of work is an extremely effective tool for combating them. One of the reasons Australia has traditionally enjoyed lower unemployment and less of its associated costs is because of our relatively liberal labour markets. But the current rigid system puts that at risk, particularly if we see the second global economic slump that many predict.
Ultimately, you can't shackle a 21st century economy with a 20th century industrial relations system without negative economic consequences. If Labor won't reform Fair Work, it falls for Tony Abbott to do so. The only question is, is he up to the task?