The main solution to our drop in living standards is to spend a lot more in government handouts.
That is one likely impression left by our election debates.
Some demand instead a return to the fundamental reforms of 1981-96, which built our current and now lagging prosperity.
Those earlier fundamental reforms were forced on the unwilling by economic crisis.
Inflation reached a high of 11.35 per cent in 1982, and 9.05 per cent in 1986. Unemployment a high of 10 per cent in 1983, and 11 per cent in 1993. There were serious labour relations troubles.
Our problems are nothing like that today. The Reserve Bank predicts inflation perhaps reaching the 2-3 per cent target in the June quarter, and unemployment to average 4.2 per cent.
So how do we restore productivity growth in the absence of the economy vaporising before us and forcing our hand?
Some lessons can be learnt from the earlier reform period.
1984-93 – Jawboning employers and trade unions
The ‘Accord’ between the ALP and ACTU was a key guide to all policies of 1984-93 (Bob Hawke/Paul Keating ALP). Employers were not party to the ‘Accord’ and instead emphasised the National Economic Summit, held in Canberra, 11–14 April 1983.
The National Economic Summit outcomes included an agreement that the public sector would not be a ‘pacesetter for the private sector’ in wages and conditions, which was a major change in approach.
Government and institutions introduced ‘award restructuring’ which helped industry remove more restrictive practices in demarcations between trade unions and the like.
The Industrial Relations Reform Act 1993 introduced a strong emphasis on enterprise bargaining which has continued until today.
Leaders in both the ALP government and trade unions forced the Act through despite considerable internal opposition.
Coalition Reforms
In 1996 the new Coalition government, led by John Howard, built on these reforms with the Workplace Relations Act 1996, which introduced individual agreements into the Act for the first time, enforced simplification of awards, and emphasised enterprise agreements.
The Australian Democrats gave the Coalition a majority in the Senate, although they required significant amendments. They reintroduced a ‘no disadvantage’ test for agreements against awards, which the Coalition did not then support.
The Coalition then won an election on the basis of tax reform in 1998.
Other reforms
There were many other reforms under both periods of Government, such as the lowering of tariffs, and the National Competition Policy of 1995.
Tariff reforms were successful but not easy. There was a large reduction in the clothing manufacturing sector, and similar effects in half the economy. Industrial relations reform meant introducing enterprise bargaining and lessening the idea since Federation that movements in the minimum wage system would distribute wealth. New competition reforms upended business-as-usual restrictions across the economy.
What made reform possible
I have already mentioned the economic crisis, which threatened to vaporise the economy. This convinced the ALP and trade unions, who forced reform through.
There was obvious low-hanging fruit such as high tariffs and anti-competitive restrictions. Labour restrictions were a major problem. Many will remember frequent ‘industry’ strikes.
Finally, both the ALP and Coalition had access to a Senate majority which improved legislation.
We have instead a progressive Senate that will not favour economic reform, and the possibility of a hung, unreasonable Parliament stressing a smorgasbord of other issues.
How to change now
We cannot simply replicate the earlier reform period. The low-hanging fruit of the reform period is largely gone.
Many also now see the economy as a magic pudding to be used to fund social causes. Or they see restricting economic development as a social good.
These attitudes may dominate the next Parliament.
However, both sides of politics show a willingness to intervene to support the economy. The Albanese government saved the salmon industry in Tasmania, while the Dutton Coalition supports streamlining approval of new mining.
The most mentioned targets for change to improve productivity are taxation reform, mining approvals, government waste, housing, and labour relations reform – the last three stressed by the Opposition.
There is, however, a vacuum of agreed policy changes – although there are directions such as reducing income tax and company tax and streamlining mining approvals. Great conflict is promised on just about all of them.
The Opposition proposes a review of new Albanese government Better Pay measures such as ‘same job, same pay’ orders, and multi-employer bargaining. It will reintroduce the important building industry ‘watchdog’. A new Albanese government may build on its Better Pay reforms, although few changes have been announced.
The Better Pay changes were vigorously opposed by employers and the Opposition. All passed Parliament and are now being carefully ‘road tested’ by the trade union movement which supported them.
The government has suffered little electoral harm from them to date. The coverage of enterprise bargaining has increased: ‘The number of employees covered by an agreement as at 31 December 2024 is the highest since the March quarter 2014.’
Any new government will have to deal with likely predominance of anti-reform opinion in Parliament.
Nevertheless a new government of whatever complexion should introduce a tripartite or other review to identify ways of simplifying our complex labour laws. Further, the review should identify current labour barriers to efficiency and productivity, but not by simply repeating unsuccessful past proposals. It should aim to protect not undermine worker entitlements.
Government waste and streamlining mining approvals can have detail added when a new government has access to ‘the books’, while tax reform needs to be filled out in a similar manner.
Any change will need to be positive in nature and demonstrate an awareness of proportionality. A hostile environment will jump on mistakes.
I do not think we are in an equivalent to the last glorious summer before the Great War. But they did not think so either.
Reg Hamilton, Adjunct Professor, School of Business and Law, Central Queensland University
