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Labor's unlikely IR saviour


9 September 2011

Until yesterday, it seemed that the one issue on which the Labor government was immovable was the design of Gillard's Fair Work Act. "It's working", the government has consistently howled. "If it's not working, it's the employers' fault" has been their coordinated mantra.

Suddenly things have changed. This week, Treasurer Wayne Swan and Industrial Relations Minister Chris Evans both stated change is needed. This comes after a few weeks of constant calls from the 'big end of town'.

First the Productivity Commission referred to problems on the workplace relations front. That started the debate. Then the head of the Reserve Bank, Glenn Stevens, was aggressively slapped down by union leaders for daring to hint that lack of workplace flexibility was a problem (Unleashing an IR witch-hunt, August 30).

The former head of BHP, Don Argus, and current chief executive Marius Kloppers both spoke out against the existing system.

Then early this week, Australian Industry Group leader Heather Ridout set out a request for detailed changes. Ridout's call for change is politically significant. She was the chief business representative partner with Gillard in designing and selling the Fair Work Act. For Ridout to turn so decisively signifies a final major collapse in Labor's relationship with its business backers.

This hasn't happened because the business leaders have an ideology. It's occurring because bad industrial relations experiences are impacting on the ground after close to a decade of comparative peace. For example, BHP has been hit with major strikes. Leighton Holdings has suffered corporate infighting, much of it related to differences in how to fashion and implement industrial relations strategies (Leighton's divisions are adding up, September 5).

Just yesterday, Woodside forced the construction unions---the CFMEU and AMWU---into court undertakings to not conduct illegal strikes. This happened after Woodside started damages actions against 1350 workers who stopped work for nine days at the oil major's Pluto LNG project in Western Australia in 2010. The strike was over accommodation arrangements, not pay. Woodside secured a $2.1 million penalty against the unions over the strike. Yesterday's court undertakings cover not just Pluto but also Woodside's Browse LNG and North West Shelf projects. This won't secure peace though.

I warned in August that there were danger signals flashing over Australia's resources boom because of bad industrial relations situations (IR backpedals over the boom, August 12). I demonstrated that the expansion of the resource boom has not yet been locked in. The big kick-up in construction of new resource projects, from a workforce demand perspective, does not happen until early next year. This can be delayed.

There's genuine concern amongst resource executives that their many multi-billion dollar construction jobs will be plagued by 1970s-style industrial disruption.

Leighton's mess at the Victorian desalination plant stands as a beacon of what's gone wrong under Gillard's FWA. It's not an isolated case, as Woodside and BHP's experiences have shown, along with problems I anticipate for the giant $43 billion Gorgon project. Expect plenty of other examples to emerge unless Labor does some quick and dramatic reforms to the FWA.

But the reforms will need to be deeper than internal Labor tribal politics may allow. Take one example: the FWA is so complex that even the government's primary workplace policeman, the Fair Work Ombudsman, ran into trouble. In negotiating an agreement with their own staff, the Ombudsman has been forced to give undertakings relating to conflicting annual leave clauses. If the policeman can't negotiate FWA complexity then how can anyone else?

The Fair Work Act requires wide and deep review to avoid inflicting substantial damage on Australia's resource-boom driven prosperity, let alone the rest of the economy. However, here's where the politics becomes weird.

To achieve FWA reform, Labor will need support from the Greens in the Senate. This won't happen. The radical left construction unions fund the Greens and are in alliance with them. These two-timing unions play heavy internal Labor politics while controlling the Greens and will stop any real reform.

Gillard and Swan might try a fiddle with light reform but this won't satisfy big business. The multi-billion dollar exposures they and Australia face don't allow for political, half-hearted attempts. The game is critical and serious. Time is short.

The only path to real change can come from a Labor/Right alliance with Tony Abbott's Coalition. I said the politics was weird!

To deliver for Australia, the Labor/Right factions would need to do a deal with Abbott to politically screw over the Labor/Left/Green partnership in the Senate, thus securing passage of reform legislation.

It may seem unlikely, but it's the only way to achieve substantial reform of the FWA.


From the Business Spectator, September 2011.

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