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Coalition’s reform gun misses target

By Des Moore - posted Tuesday, 7 June 2005

Following the coalition’s failure in the Budget to reverse the unwarranted expansion in government spending since 1996, its weak-kneed changes in workplace regulation confirm that its reform gun fires few pellets, leaving the main targets largely intact.

The dodging of substantive workplace reform suggests an inability to espouse the liberal cause. Prime Minister Howard has seemingly forgotten that his 1992 alter ego (he was then Jobsback shadow minister) proposed more extensive changes from a much less favourable political situation. Opposition ranting that deregulation would make workers worse off should not have evoked responses centred simply on the large increase in average real wages since the 1996 changes. A liberal should have said that a freer labour market would be fairer because it would help those at the bottom of the income scale to gain jobs and their own incomes.

The Prime Minister’s many undertakings to effect extensive reform raised expectations of pronouncements of increased employment. Indeed, government ministers rightly emphasised this would happen if employers and employees had relative freedom to settle employment terms.


Unfortunately, most of the machinery of restrictive employment regulations remains, as does much scope for troublesome judicial intervention (although which courts will handle the interpretation of legislation and agreements is unclear). Unsurprisingly, therefore, the Coalition makes no claim for increased employment rates. Budget forecasts of slower growth in employment in 2005-06 (and apparently no increase in workforce participation out to 2008-09) will not be upwardly revised.

Sadly, clichés proselytised by a politically powerless Opposition and a union movement representing a diminishing minority of workers have largely won the day. The “worse-off” scare, based on unsubstantiated assertions of an imbalance of bargaining power between employers and employees, has frightened the Government into retaining special employment regulations, promoting union bargaining rights and increasing to three the number of bodies laughably described as independent umpires.

True, the determination of the minimum wage and the 24,000 other existing wage rates now set under awards (but to be reviewed by a task force) have been transferred from the economically-ignorant Australian Industrial Relations Commission (AIRC) to a new fair pay commission modelled on Britain’s scheme. But there the recommended minimum wage rate continues where it started, that is, at an employment-deterring 43 per cent of full-time median earnings. FPC appointees will not be allowed to make an absolute reduction in any wage rate. Their parameters will presumably include Workplace Minister Kevin Andrews’s commitment to “reasonable and sustainable increases” in the minimum. In short, there will be little scope to reduce the minimum relative to Australia’s more employment-deterring median of 58 per cent.

By failing to abandon the minimum wage, or at least requiring its reduction to the Organisation for Economic Co-operation and Development’s (OECD) low of 33 per cent of the median, the government’s reform horse has fallen at the first hurdle. Almost all those two million, mainly unskilled, Australians who say they would like a job (or increased hours of work), but who cannot legally offer themselves at a wage lower than the current minimum of $24,000 a year, will still struggle to penetrate the job market but will be eligible to receive taxpayer-funded social benefits ranging from $10-13,000 a year.

The much-touted welfare-to-work program will be ineffective and, as budget estimates show, welfare spending will increase further from already record high levels.

The harsh reality is that, whether negotiated individually as new Australian workplace agreements or collectively under the now-to-be optional award system, employment agreements still have to comply with many legislative requirements besides the minimum wage. These include the provision of annual, sick and parental (including maternity) leave, as well as maximum hours of work and (for larger businesses) severance pay. The application of the unfair dismissals regime to fewer businesses, and the conversion of the award system to an option, are improvements - but why retain such special regimes and outdated processes at all? The retention of even an optional process for collective agreements is unnecessary and simply encourages unions to push employers into making unjustified concessions.


Indeed, with the AIRC continuing to have some (unclear) form of jurisdiction over industrial disputes and the right to strike inexplicably retained, albeit under a secret ballot, employers will not easily escape union action.

Finally, the allocation to the AIRC of responsibility for further simplification of awards is simply laughable, given the commissioners’ record in ignoring former Minister Reith’s attempts at reform.

While the legislative requirements will be less restrictive than at present, and while the more restrictive State legislative and judicial intrusions will (if the legislation is constitutionally well-founded) be avoided, the benefits will be limited. The continuation of extensive regulation, extending even to wage rates, indicates the Coalition has lost its way and its nerve.

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Article edited by Margaret-Ann Williams.
If you'd like to be a volunteer editor too, click here.

First published in the Australian Financial Review on May 27, 2005.

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About the Author

Des Moore is Director, Institute for Private Enterprise and a former Deputy Secretary, Treasury. He authored Schooling Victorians, 1992, Institute of Public Affairs as part of the Project Victoria series which contributed to the educational and other reforms instituted by the Kennett Government. The views are his own.

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