Labor Shows Its Lack of Credibility

14 June 2006

The Australian Financial Review

By Katie Lahey
Chief Executive
Business Council of Australia

In 2004, business expressed serious concerns with the Labor Party's proposed policy platform to reregulate the labour market.

These concerns centred around Labor's plans to expand the role and content of awards, reduce employment contract flexibility, and increase the role of third parties.

At that time, the Business Council of Australia sought to actively engage the Labor Party to explain its concerns and the importance of continuing workplace-relations reform to sustaining job growth, productivity improvements and economic prosperity.

The announcement that Labor intends to abolish Australian workplace agreements (AWAs) and unwind the recent reforms means these messages have not been heard – and seriously calls into question Labor's reform credentials and its directions in workplace reform.

Let's make it clear. Aside from political expediency, there is no policy or economic rationale for Labor's proposed changes.

Nearly every piece of credible, independent research shows most of Australia's economic gains in recent years – including productivity increases, wages growth and greater flexibility for workers and employers – are linked to changes to free up our workplaces.

For example, BCA-commissioned research by Access Economics last year found that 315,000 more jobs had been created as a direct result of labour market reforms over the past two decades.

AWAs have played both a direct and an indirect role in this outcome.

AWAs were designed to be flexible, allowing employers and employees scope to respond to commercial changes quickly and without the lengthy processes associated with a centralised system.

They have provided another important instrument, in a range of opportunities for employers and employees to agree their workplace terms and conditions.

It is no accident that the mining and communications sectors have the largest take-up of AWAs and displayed among the highest rates of productivity improvement since the mid-1990s.

Removing AWAs or replacing them with a reregulated system is simply the wrong move, when all the evidence says such a step will weaken the link between productivity and reward, and impose costs on businesses which rely on them.

Labor's announcement also points to a lack of strategic vision for workplace relations policy.

Simply carving out one part of the system, without offering any real explanation or policy alternative on how workplace productivity might be further improved in its absence, underlines a serious lack of policy integrity.

As we said in 2004, there is general consensus on economic goals, namely sustained strong economic growth, the creation of high-wage and high-skill jobs, low unemployment and strong income growth. The question is how to get there.

We are still no clearer on what Labor's plan to achieve these goals is.

The overall direction to more – not less – flexible workplace relations provides the best opportunity for Australia to remain competitive and successful.



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