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The media discussion about Gillard’s past behaviour and recent decision-making continue apace, with considerable attention on the extraordinary denunciations by Maxine McKew in her aptly titled book Tales from the Political Trenches. This and other developments suggest there is more dissension within the Labor Party about decisions than might normally be expected within a political party. Gillard’s response seems to be more policy announcements almost regardless of their merit (with more to come today) and continued visits of overseas leaders, the latest being from the Phillipines.

Also in partial defence, an article in the AFR, obviously produced by the Gillard press office, repeats the improved results in the Nielsen poll and includes relatively favourable comments from the pollster, although the accompanying graph indicates that the improvement still leaves Gillard well below her earlier ratings.

Also of some interest is an article by a prominent writer for The Australian suggesting a possible early election. As some of my colleagues know, I have been suggesting this because Gillard will be shown to be unacceptable as a leader and existing policies are being recognised as failures.

One interesting perspective by Piers Akerman, published in Friday’s Daily Telegraph, speculates that Gillard faces a Watergate type situation inasmuch as that there appears to be a ever-expanding stream of problem decisions and unexplained past-but-concerning behaviour. The decision- making certainly seems increasingly directed at favouring particular groups or individuals and focused more possible favourable results at some distant time in the future.

How long such decision-making can continue without more open internal revolts is moot. The latest in the announcement strategy is that an extra $1.77 bn (bringing the total to $11bn) is proposed to be spent on purchasing water for “environmental” release into the Murray. Despite the long drawn out consideration of “all options” by the Murray Darling Authority, Gillard announced an addition of 16% to the amount of “environmental” water proposed by the Authority. It is being presented as solving the alleged water problem in circumstances where the MDB has an ample water supply, an acknowledgement by minister Burke that “we don’t when the next drought will occur”, and no substantive justification for the addition now. Of course, the South Australian Labor Government was quickly prepared to praise the Gillard decision because it met its wishes. But there is strong opposition by the three other states involved. Also, the funds would not start to be available until 2014-15 and, it seems, that they (and the water) would be provided over a long period - to 2024-25. An attempt will be made to “set aside” these extra funds (presumably not included in last week’s MYEFO) under special legislation to be introduced next week, with the expectation that the Greens would support in the Senate.

An important development is the devastating critique of an address by labour lawyer Josh Bernstein disparaging senior business people for supposedly not understanding the need for labour market regulation. This address by Bornstein, who Judith Sloan shows in an important article in The Australian, has no understanding of how a deregulated labour market can work to the advantage of both sides, will add to the business community’s public criticism of the disastrous Fair Work Australia legislation that was introduced by Gillard as the then minister and the promised review of which by Minister Shorten has yet to announce.

Rumours are circulating that Bornstein’s address is an attempt to win himself a deputy president position on the holy of holies – the Fair Work Tribunal that excels at regulation. Minister Shorten is expected to announce two new “permanent” deputies next week. These new positions and appointments are clearly an attempt to make them before the election.

Des Moore

Slush fund silence may prove PM's Watergate

Piers Akerman, The Daily Telegraph, October 26

WHEN parliament resumes next week, attention will be re-focused on character - Prime Minister Julia Gillard's character in particular.

Her constant support for the grotesque serial texter Peter Slipper, now the second Speaker to be cycled through the most senior parliamentary office during her prime ministership, and repeated expressions of confidence in former HSU union official Craig Thomson will no doubt be raised.

But there are also matters regarding her own activities which are coming to a head.

In recent political history, it has been the cover-ups, not the alleged crimes, which have undone the reputations and careers of political leaders. Most famously, US President Richard Nixon was forced to resign in 1974 after nearly two years of questions over the Watergte scandal in which his staff had engaged in a remarkable campaign of chicanery and then attempted to cover their tracks and protect Nixon's presidency.

Whatever you might say about Watergate, it was all about politics.

US President Bill Clinton endured a flood of allegations about his conduct as governor of Arkansas when he took office in 1993, but it was his own extraordinary attempt to dissemble during the cover-up of his sexual dalliance with White House intern Monica Lewinsky that came to define his moral outlook.

Gillard is now attracting increasing attention for her role as a lawyer with Slater & Gordon in establishing what she has acknowledged was a union "slush fund" for her then-boyfriend, AWU boss Bruce Wilson, and his union associate Ralph Blewitt.

Gillard says she has answered all the questions arising from this matter but, patently, she may not have. Blewitt has told The Australian that the fund, the AWU Workplace Reform Association, was fraudulent. He has said:

"I knew there were sham transactions. I could face criminal charges. I will make myself available (to police) on that one condition that I have immunity from prosecution. My greatest fear is that I incriminate myself, but this has to come out now."

Staggering amounts of money sluiced through the slush fund but Gillard claims she knew absolutely nothing about its operation.

Now another former AWU official, Tim Daly, who headed the WA branch of the union from 1998 to 2008, has demanded a public inquiry into the secret slush fund Gillard set up for her boyfriend.

He told The Australian earlier this week that the fund was unprecedented in its operation, its secrecy and the large amounts of cash it raised. "It will be messy and it will be harmful for some people, but an inquiry is necessary to prevent these things from ever happening again. I am loyal to the AWU and the Labor Party (he has been a member for 35 years), I just don't like crooks. I think that one of the crooks is now prepared to tell the truth," he said.

"The fact is that when you have companies paying off unions in secrecy, the workers have no chance. There has been a great reluctance to get to the bottom of this very serious matter for 17 years. The slush fund (in the way it worked) was corrupt, there is no question about it, but I have a nagging concern that people still don't want this all to come out."

A senior forensic accountant, John Lourens, who has conducted an examination of accounts and legal records associated with the slush fund, estimates that at a minimum, the AWU financial swindle involves a misappropriation of $880,663.

That's in 1995 terms.

The amount would today run into the millions.

Founding partner Peter Gordon, one of Gillard's fellow partners at Slater & Gordon, was sufficiently alarmed by Gillard's lack of disclosure about her work for her boyfriend that he stated two months ago that her relationship with partners "fractured, and trust and confidence evaporated".

The file which Gillard maintained on her work for her boyfriend has now disappeared.

But with such large sums of money involved and such public admissions from Blewitt, and such an open call for an inquiry from Daly, Gillard's claim to have answered all questions looks ever more self-serving and even more threadbare.

The reputation of Slater & Gordon, a public company, is now being dragged into the public arena.

While Gillard may make specious claims about Opposition Leader Tony Abbott's attitudes toward women, they remain totally unsupported and refuted by any number of women and men who have known and worked with him since he was in his late teens.

At no point has Abbott attempted to dismiss his student behaviour as the actions of a "young and naive" student. Gillard, on the other hand has used that excuse as a plea to ignore her questionable work on her boyfriend's account when she was a partner with one of the nation's largest law firms.

On April 29, Gillard asked Thomson to quit the ALP and move to the crossbench, claiming: "I do believe a line has been crossed here and because a line has been crossed, I have acted." Thomson was to subsequently claim he had been offering to move to the crossbench for months.

At the same press conference, Gillard said she had asked Slipper to stand aside for a further period while investigations continued into criminal charges of Cabcharge misuse and a civil charge of sexual harassment continued.

"I understand the matters concerning Mr Thomson and Mr Slipper have caused Australians to become concerned about standards in public life today," she said.

So while matters concerning her past remain unresolved and subject to calls for further inquiry, the question of standards in public life must remain - unless the line that Gillard believed Thomson crossed has been mysteriously moved. Or is it that in this world of Macquarie Dictionary's convenient sexist redefinition, there are different lines men and women cross?

Gillard gains traction with older voters

AFR 27 Oct 2012, Edmund Tadros (NOTE: I have never seen an article by this chap)

The Young and the PolledAS Prime Minister Julia Gillard is enjoying a surge in popularity among older voters, a group which had previously been the most critical of her performance.

While Ms Gillard’s overall net approval rating has been rising since June, the fastest and most significant improvement has been from voters aged 55 and above.

The older group has moved from a net approval rating of about 10 points below voters aged 25-39 and 40-54 to a rating in line with the two younger groups, a Weekend Financial Review analysis of Nielsen data back to the 2010 election shows.

Looking at trend data, Ms Gillard and Opposition Leader Tony Abbott continue to have negative approval ratings – more people disapprove of their performance than approve – but Ms Gillard is on a steep upward trajectory while Mr Abbott is on a downward path.

Since the middle of the year, Ms Gillard’s net approval rating by the 55 and over group has jumped from about minus 30 to about minus 15.

During the same time, Mr Abbott has suffered a slow but steady decline in his net approval rating across all ages.

It is now about minus 20.

Nielsen pollster John Stirton said the rise in Ms Gillard’s net approval rating among older voters was significant. “For most of the period since the last election she has been the least popular among those over 55,” Mr Stirton said. “In the surge of popularity the PM has had in the past few months the trend has been more marked among older voters.

“It will be interesting to see if this pattern holds up over the next few months.”

Mr Stirton said that each of the four age groups in the poll was weighted according to the size of that group in the general population.

This made the 18-24 year old group the smallest and the most volatile, while the 55 and over group was the largest and most influential on the overall poll figures.

An earlier analysis showed men and women differed in their views about the leaders.

It is difficult to say exactly what has caused the elderly to so quickly shift their opinion about the Prime Minister but seniors’ lobby groups point to an accumulation of factors.

Michael O’Neill, chief executive of over 50s lobby group National Seniors Australia, said key factors seemed to be Mr Abbott's scare campaign about the carbon tax and a perception that Ms Gillard had been treated disrespectfully.

“It’s partly the carbon tax, which had been painted in all kinds of ways [as] close to the end of the world,” he said. “To some extent, it’s a recognition that she is now more legitimate and there’s a stoicism to the older generation that I don’t think is there with other groups. That would ring a bell with them.”

He added: “Not to make too much of it, but the death of her father humanised the prime minister a bit more.”

Mr O’Neill’s insights are based on the research and polling of the 200,000-strong membership of National Seniors plus his regular conversations with members.

A perception of perseverance also showed up in research by Shelly Stone, policy co-ordinator at the Australian Pensioners and Superannuants League. Ms Stone said the elderly members she had spoken to felt the personal attacks on Ms Gillard were distasteful.

“There was a perception that the continuing personal attacks on the PM were unwarranted,” Ms Stone said.

In addition, after it was revealed shock jock Alan Jones said Gillard’s father had died of shame they felt “the boundaries of acceptability had been irrefutably breeched”,” Ms Stone said.

“It seems that heightened people’s awareness of the PM as a daughter, a person.

“This, it appears promoted empathy for the PM, not only due to the loss of her father, but regarding people’s perceptions of the way she had been personally treated.”

But despite the Prime Minister’s personal improvement rating, Labor trails the Coalition in the two-party preferred vote 48-52 per cent.

Rebecca Huntley, research director of market research company Ipsos, said the data suggested “we don’t want this government any more, but we don’t want Tony Abbott”.

The Australian Financial Review

Rudd vital in election run-up: McKew

AFR 27 Oct 2012, James Massola

Maxine McKew says Kevin Rudd ‘lost his job because he was not part of the Labor tribe’ in her new book Tales from the Political Trenches.

Labor must bring back former prime minister Kevin Rudd from the political wilderness ahead of the next election and harness his talent, former ABC journalist and former Labor MP Maxine McKew says.

Ms McKew said her book, Tales from the Political Trenches, should be viewed as the “second draft” of history, telling the Weekend Financial Review she expected Prime Minister Julia Gillard to lead Labor to the next election but the party must reach “some sort of settlement with Rudd”.

“He is popular and we [the ALP] are stuck on a primary vote of 32 or 34 per cent. They should find a way to use his talents,” she said.

“The attacks on Rudd by cabinet ministers in February have had no impact on either the voting public or caucus MPs who still welcome him to their electorates.”

Ms McKew’s book re-opened the scars from the removal of Mr Rudd as Ms Gillard rejected claims in the book on Friday that she had been involved in planning the coup and used internal research to help her unseat the former prime minister in what Ms McKew has described as a “professional hit” by a “disloyal deputy”.

(NOTE) “I’ve dealt with these issues on the public record . . . I haven’t got anything to add,’’ Ms Gillard said.

Ms Gillard said in February she decided to move against Mr Rudd on the day of the coup, while she had no “specific knowledge” of internal polling.

Also in the book, former attorney-general Robert McClelland reveals Small Business Minister Brendan O’Connor, a Gillard ally, showed him internal “research” on Mr Rudd in the week before the coup, while former defence minister John Faulkner criticises the “political bastardry” of officials using internal research to destabilise Mr Rudd.

Infrastructure Minister Anthony Albanese reportedly warned Mr Rudd to watch his back in May, a month before the coup took place, while Ms Gillard reportedly pressured Mr Rudd for months to abandon the emissions trading scheme.

“I do not believe that Gillard can be seen as a passive player,’’ Ms McKew writes, upbraiding Labor’s “faceless men” for cementing a narrative about a dysfunctional Rudd office and then orchestrating the coup using the internal polling.

Mr Rudd had “lost his job because he was not part of the Labor tribe”.

Ms McKew is also critical of Mr Rudd for his “colossal misjudgment in April 2010” when he ditched the emissions trading scheme and for his “extravagant rhetoric”.

Opposition Leader Tony Abbott said on Friday that Ms McKew had been a staunch Labor person who felt “dudded” by the Prime Minister.

The Australian Financial Review

McKew book laments ALP's wasted opportunity

PATRICIA KARVELAS, The Australian, October 27, 2012

LABOR's loss of belief has accelerated under Julia Gillard's minority government and the party risks being dumped by voters after two wasted terms with John Howard's legacy still supreme, according to one-time Labor MP Maxine McKew.

In a scathing account of the Prime Minister's rise to power, she says Labor has wasted the chance of a generation.

"Having got rid of John Howard," she writes, "how the hell have we managed to ensure that it is the Howard legacy and not a reformist Labor legacy that is still central to the national narrative?

"It is a bitter fact for my side of politics that the Howard years are still with us."

In Tales from the Political Trenches, former journalist McKew is critical of Ms Gillard's record as a minister, attacks the rollout of the stimulus package and says Labor is run by factional nobodies who tried to control Mr Rudd and retaliated when he wouldn't take direction. . .

In the book, former Labor Prime Minister Paul Keating lambasts the "factional Tintookies" in the federal Labor caucus, saying "we have them to thank for the fact that Rudd blinked on the CPRS (Carbon Pollution Reduction Scheme)".

Mr Keating concludes the factional leaders are to blame for forcing Mr Rudd to dump the emissions trading scheme, which proved fatal to his leadership.

"In my day they wouldn't have got near the door," he says in the book. "I regard all these people as lesser mortals. They don't get the message. They don't have the vocation, and high political art is a vocation."

But McKew is also critical of Mr Rudd's first term. "As a government, we didn't care much about a genuine contest of ideas," she writes.

McKew says that when the leadership challenge was on, in her electorate of Bennelong "they knew Rudd, but who were these other characters whose names were suddenly all over the airwaves as supporters of Gillard?

"Labor senators like Don Farrell and David Feeney barely registered with the average voter, yet here they were, seemingly at the centre of things," she writes.

"Farrell is from South Australia, where he is the flag carrier for the Shop, Distributive and Allied Employees Association. He's been in the Senate since mid-2008. Feeney, a right-wing powerbroker from Victoria with a background with the Transport Workers Union, took up his Senate seat at the same time.

"Karl Bitar, the transplanted NSW supremo and national secretary of the party in 2010, was also part of the push against Rudd. And there were two others taking aim at the PM: Mark Arbib and Bill Shorten."

McKew claims that by supporting Mr Rudd she had locked herself out of ongoing support from Labor's bosses."I knew my fate was sealed. I operated on the principle that the whole idea of factional fealty was arcane and had rebuffed an early offer to join the NSW Right.

"It meant that I set myself apart from the Sussex Street machine, and that had been noted."

She mocks Ms Gillard's credibility, claiming the Prime Minister cannot be trusted because she was deceitful and planned to overturn Mr Rudd.

"On 13 February, 2012, along with three-quarters of a million other ABC viewers, I watched as Julia Gillard traded away a bit more of her credibility in an astonishing interview on Four Corners. No girlish giggles this night, only short, sharp responses."

She says Ms Gillard showed polling favourable to her to one unnamed MP and must have known a speech was being drafted for her to take over the leadership in her own office.

"Gillard exercises top-down control over her office. "Her forensic attention to detail sets her apart and her careful planning of every career move is legendary."

In February Ms Gillard said she had "no specific recall' of having sighted figures from pollster UMR or any other research, but McKew quotes a senior government MP who has a "very precise recollection".

"This individual was in the Deputy Prime Minister's office in the days prior to the coup. Gillard produced the UMR documents, by now two weeks old, and went through the detail and emphasised Rudd's deficits," McKew writes. "The MP now sees this as a 'conspiracy against Rudd'.

"He was aware that right-wing factional chiefs had been caucusing around the leadership. There had been meetings the week before the coup in the parliamentary offices of South Australian Senator Don Farrell.

"Separately, Arbib had decided that Rudd's position was terminal and that it would be impossible for him to win another election.

"According to some, Arbib was pushing for a quick strike, lest Rudd head off to Yarralumla and seek the Governor-General's imprimatur for an election."

McKew says Mr Rudd eventually decided that most of what he was hearing from Mr Arbib was "classic NSW-style lunacy and cut him out. By June he was not returning Arbib's calls".

But McKew says Mr Rudd is culpable as well. "Where he needed to charm, he scolded. Instead of cultivating loyalists among backbenchers, too often he ignored them. He is a leader who makes few allowances for people who don't share his own obsessions or can't work to his timetable," she writes.

McKew says Ms Gillard has never had a future policy agenda, "only a plan to knock off" Kevin Rudd.

"The voting public saw it for what it was; a brutal grab for power and they've never forgotten it."

Labor MP endorses Howard labour plan

PATRICIA KARVELAS The Australian, October 27, 2012

A LABOR backbencher has called for the expansion of a Howard-era program that allows welfare recipients to keep more of their payments if they are prepared to undertake temporary work, after he produced a study to show it had been a huge success.

Andrew Leigh, member for the ACT seat of Fraser and an economist, has co-authored a study with Roger Wilkins from the Melbourne Institute of Applied Economic and Social Research on the study that shows the Working Credit program increases employment rates and earnings for individuals on income support.

Associate Professor Wilkins said that, while estimates depended on the evaluation method used, most showed the proportion of unemployment benefit recipients who gained employment in any given fortnight rose about two percentage points.

He said there had been an increase in the percentage of single parents employed of between five and 10 percentage points in a fortnight. About 30 per cent of single parenting payment recipients report earnings each fortnight.

"Most estimates of the effects on the level of earnings of income support recipients show an increase in average fortnightly earnings of between $10 and $80," Professor Wilkins said.

Dr Leigh said he wanted to see more help for the long-term unemployed. "I'm pretty passionate about anything that reduces long-term unemployment," he said. "The scarring effect of joblessness grows over time, and long-term unemployment is strongly linked to serious disadvantage.

"So while the government has done quite a bit to reduce long-term unemployment . . . and while there clearly aren't rivers of gold flowing into Treasury, this (Working Credit) is the kind of policy I'd like to see expanded when fiscal circumstances allow. There are few higher priorities for me than reducing long-term joblessness."

Introduced by the Howard government in September 2003, Working Credit is open to most workforce-age welfare recipients. The program allows people with accrued credits to earn additional income without reducing their benefit entitlement. Credits are accrued in fortnights in which earnings are less than $48, up to the maximum Working Credit balance of 1000. Credits are "used up" when earnings exceed the applicable income test "free area" -- $62 a fortnight for Newstart Allowance. For example, a recipient of Newstart Allowance with 500 credits can earn $562 for one fortnight only without losing any benefits. The program therefore creates increased incentives for welfare recipients to undertake temporary work.

"Our findings clearly show that Working Credit improves labour market engagement of income support recipients, and this is highly likely to improve their longer-term employment prospects," Professor Wilkins said.

"We conclude that Working Credit compares favourably with other labour market programs."

IR Club's recipe is no way to grow

Judith Sloan, contributing economics editor, The Australian, October 27, 2012

WHEN I read that well-known labour lawyer Josh Bornstein had attacked this newspaper for its coverage of industrial relations, I wasn't surprised. What did surprise me was his lack of civility and unsubstantiated claims on the link between labour-market regulation and economic outcomes in Australia.

He made some deeply offensive remarks in his speech, which he no doubt thought were amusing. He told us, for instance, that "when litigating against any of the following - Steven Amendola, Freehills or Stuart Wood QC - my client is always right". How droll, or not.

And then there was the attack on this paper's editor-at-large, Paul Kelly. In referring to an article Kelly had written about the link between industrial relations and productivity, Bornstein used the adjectives "simplistic, misleading, lazy and hopelessly partisan". Funny that; those adjectives actually apply to Bornstein's speech.

He claimed that the debate about the impact of industrial relations is "enough to make a cretin weep". I wonder who he was referring to? Take it from me, Bornstein might be a successful, street-fighting lawyer but he ain't no economist. His speech contains a number of complete howlers.

Bornstein is a fully paid-up member of the IR Club. He would probably even accept that label. He came to prominence when he acted for the maritime union in the 1998 waterfront dispute involving Patrick Corporation.

The IR Club is a uniquely Australian creature. Its members believe that the labour market is special and like no other; that workers always have less power than employers; and that special laws and tribunals must operate to tame the potentially harsh impact of market forces on workers.

Take Bornstein's idea that individual employment contracts mean that employees have no bargaining power and are paid lower wages.

According to the Australian Bureau of Statistics, "the proportion of employees with their pay set by an individual arrangement has increased by 3 percentage points in the 10 years to May 2010, from 34 per cent to 37 per cent". In fact, the incidence of individual arrangements is only slightly below that of collective agreements.

But here's the fact that Bornstein should have checked. Considering only non-managerial adult employees - so Marius Kloppers and Alan Joyce are not included - a higher proportion of employees on individual arrangements (11 per cent) earned more than $50 an hour than employees on collective agreements (8 per cent) in 2010.

So much for the idea that those on individual arrangements have no power in the labour market.

Another topic that gets Bornstein going is the link between productivity and industrial relations regulation. He claims that any connection between the Fair Work Act and productivity is merely a case of "jumping on the bandwagon" and that people should "check their facts". His views on this topic are closely aligned with those of the Labor government - no surprises there. The Labor government is replete with IR clubbers.

Even though less than one-fifth of workers now belong to a trade union and the percentage in the private sector is down to 13 per cent, "union official" is by far the most common former occupation of Labor federal parliamentarians. In fact, almost 70 per cent of Labor frontbenchers are former union officials. This figure is quite extraordinary.

The uniformity of background produces a very unhelpful form of group-think, which is completely uninformed by any practical experience of actually running businesses. The quality of government decision-making is badly affected by this skewed distribution of the background of Labor politicians.

The government's refutation of any relationship between the re-regulation of the labour market and any negative economic consequences actually has an ironic side. If this were really the case, why not advocate a minimum wage of $100 per hour?

And forget the unfair dismissal provisions in the law, why not mandate that all employees have jobs for life?

At this point, the government would no doubt argue that an appropriate balance has been struck through the Fair Work Act, overturning the draconian and unbalanced Work Choices. One of the troubles for the government is that not everyone agrees and there are solid reasons for this dissenting view.

As time has gone by, more business leaders and business groups have been prepared to speak out, to condemn the FWA for its negative impact on flexibility and costs. It is just a pity that more of them did not have the courage to bell the cat earlier.

Michael Chaney, the well-respected former managing director of Wesfarmers and now chairman of National Australia Bank and Woodside, this year stated unequivocally: "I believe the Fair Work Act is a sleeper that represents a serious threat to productivity."

According to Bornstein, however, Chaney is a "serial offender". Of what? Telling the truth, I suppose.

Macquarie Bank and Origin Energy Chairman Kevin McCann has also pointed out that "inefficient work practices are delaying the construction of key projects". And former Future Fund chairman David Murray has made his views very clear: "You can't have a market economy where there is an over-regulated market for labour. The Qantas dispute is symptomatic of a labour market trapped in history."

The chorus of individual business voices has been joined by expressions of disappointment and criticism from all the business groups. While the Australian Industry Group was late on the scene to raise doubts about the legislation - Julia Gillard had cleverly hoodwinked this business lobby during the drafting of the FWA - there is now no group of businesses the government can rely on to support its law.

The impact of the re-regulation of the labour market is very different on small and large business. The extent of award coverage is much higher among small business; awards are most prevalent in accommodation and food services, retail trade, and health care and social assistance.

For small firms, the provisions of the modern awards constrain their ability to engage workers in a number of ways. The most important are the high penalty rates that apply to non-standard hours and the premium (now 25 per cent) that must be paid to casual employees. The fear of being hit with a claim for unfair dismissal by an ex-employee also weighs heavily on small-business owners.

The number of unfair dismissal claims has skyrocketed, and walk-away money is now common. The number of cases is now running at more than 14,000 a year, nearly double the number before the enactment of the FWA.

Sums of between $2000 and $10,000 are being paid to ex-workers so employers can avoid fronting the tribunal, irrespective of the merits of the case.There is a widespread perception that most members of the tribunal, who are overwhelmingly from a trade union background, favour the ex-employee in these cases.

And a note to Bornstein: the conclusions of the literature on the economics of unfair dismissal laws are very clear. Such laws are damaging to overall employment, but particularly damaging to the employment of marginal groups. They also reduce hours of work and training.

For big business, the stakes are different. Their workers will generally be covered by collective agreements and the main issue is the scope for trade unions to usurp the right of managers to actually manage workplaces. FWA includes more than 100 pro-union provisions that previously did not exist in the law.

Some of the recent high-profile disputes have essentially revolved around the scope for unions to impose their will on aspects of workplace management. In the Qantas dispute, for instance, the unions wanted to restrict the company's right to use labour-hire employees and to dictate the terms on which labour-hire and casual employees were engaged.

Similarly, in the just resolved dispute affecting the BHP Mitsubishi Alliance coalmines in Queensland, a key sticking point was the right of the union to appoint to sites safety representatives whose wages the company would pay. This dispute took two years to settle, with more than 1000 instances of approved industrial action.

Unsurprisingly, the incidence of industrial disputes has increased since the FWA became law. The number of working days lost in the June quarter this year was the highest since the June quarter of 2004, eight years ago. And the number of working days lost per 1000 workers was 83 per cent higher in the year ending June 2012 compared with the year ending June 2011.

To be sure, there has been no return to the bad old days of rampant industrial action 25 years ago. But a dramatic fall in the incidence of industrial disputes is characteristic of almost every country around the world.

And for those who like to make international comparisons - Bornstein tells us that he is a fan - recall that during the Thatcher years in Britain, working days lost due to strikes fell from nearly 30 million in 1979 to just under two million seven years later. Somehow, I don't think that those who support the FWA have much time for Maggie Thatcher.

Of course, the harder heads in the government know that there are fundamental weaknesses in the FWA. But very few have been prepared to state their views publicly, with the notable exceptions of Martin Ferguson and Simon Crean, ironically both ex-ACTU.

According to Resources Minister Ferguson: "If we are not conscious of the cost of delivering projects in Australia, compared to for example the Gulf, or Indonesian waters, then those further expansion opportunities will disappear. The workers involved in the projects might think they're smart now. But the pipeline in the future will disappear. So that means all of us will lose, and Australia as a nation will lose."

In all of this, the relatively new Workplace Relations Minister, Bill Shorten, is maintaining the pretence that all is well with the FWA. If there are any problems, it is because Australia has poor quality managers who are not prepared to bargain.

The carefully selected panel that reviewed the act did "the right thing" by echoing the Shorten view. It concluded there is "no convincing evidence that the FWA has impeded productivity growth. Most of the diverse sources of productivity gains are unconnected or only loosely connected with changes in the workplace or with bargaining between employees and employers."

The real problem for the government is that sluggish productivity growth remains a central economic problem. The fortuitous increase in the terms of trade has papered over the crisis in productivity.

But it is not just productivity that is causing problems. Rising unit labour costs are rendering Australia an increasingly uncompetitive place in which to invest and do business.

With the terms of trade now trending down, rising living standards will only be achieved if productivity can grow. This point has been acknowledged by both the governor of the Reserve Bank and the secretary to the Treasury. We can see this in the first chart, that productivity made a much smaller contribution to income growth in the 2000s than in the 1990s.

Were it not for the rise in the terms of trade in the 2000s, the annual increase in average income would have been about one-third lower. In future, rising incomes will become increasingly contingent on improvements to productivity.

There is no doubt that productivity is an arcane topic for most members of the public, and its measurement is an even more esoteric topic. We know that the best measure is multifactor productivity in the market sector measured over the course of a business cycle. But even so, compositional changes to the economy can have an important bearing on the economy-wide figures.

This is why the figures that were presented during the week by Richard Blandy in this newspaper are so compelling. By confining his analysis to manufacturing and considering international comparisons, Australia is close to a basket case in terms of productivity performance. We stand alongside Spain and Italy. The standout performers, by contrast, are South Korea, Finland, Sweden and the US.

Blandy's figures also point to an alarming loss of competitiveness in Australian manufacturing. This year, unit labour costs in manufacturing, measured in US dollars, were highest in Australia out of a group of 10 large developed economies.

Other international comparisons also show that Australia is performing poorly. The second chart points to Australia's stellar performance in the 1990s, when multifactor productivity grew by 1.6 per cent a year on average, only to crash to a dismal 0.4 per cent a year in the 2000s. This is in stark contrast with the outcomes for Japan, Britain and the US.

At this point, the Treasurer or Workplace Relations Minister might be inclined to throw in another international comparison - our relatively low unemployment rate, which stands just above 5 per cent. While it is true that unemployment is low here in comparison with a number of countries, note that unemployment in South Korea is 3.4 per cent.

Unemployment is also low in Singapore, Hong Kong and in parts of Scandinavia.

The reality is that the labour market in Australia has actually been pretty soft ever since the FWA became fully operational. The fact that unemployment has hovered at the 5 per cent mark is mainly because of falling participation, which is in turn reflected in the decline in the ratio of employment to population (see final chart).

No one is saying that the explanation for Australia's poor productivity performance is all about industrial relations. Indeed, the regulation of the labour market is best seen as an intermediate, but crucial, factor that can either facilitate or impede firms' responses to competitive pressures and capacity to innovate.

Without some action to wind back the excessive re-regulation contained in the FWA - the Coalition should take note - we will be faced with a real bind as the terms of trade head lower. Unless businesses can become more competitive, we are likely to see unemployment rise and income growth stall.

While a number of European countries are finally realising the very high costs of over-regulating their labour markets, Australia has decided that too much regulation is never enough. At some point we are likely to ask: how could we have got it so wrong?

New Murray plan 'just smoke and mirrors'

Sarah Martin and Lauren Wilson, The Australian, October 27, 2012

JULIA Gillard's revised plan to save the Murray-Darling river system has been rejected by key basin states and irrigators, who say it is a "smoke and mirrors" announcement that should not be rushed into law.

In a deal struck with the Labor state of South Australia, the government announced yesterday a $1.77 billion water recovery fund to return 450 gigalitres of water to the river system by 2024.

The 450GL will be recovered through infrastructure work to increase water flows, and is in addition to 2750GL earmarked for return to the system in the Murray-Darling Basin Authority's plan.

South Australian Premier Jay Weatherill said he would drop a threatened High Court challenge as a result of the deal, saying the combined 3200GL promised for the system would ensure a healthy river.

Key crossbenchers indicated support for the new river policy yesterday, but Coalition governments in Victoria, Queensland and NSW lined up to condemn the latest revision of the plan.

Victorian Water Minister Peter Walsh said Labor's announcement was a "stunt" and warned that additional water could trigger substantial flooding.

"The Prime Minister (is) off on a fantasy trip with South Australia promising measures that other basin states cannot and will not accept," he said.

NSW Deputy Premier Andrew Stoner accused federal Labor of trying to "buy off" the South Australian government. Queensland Natural Resources Minister Andrew Cripps said: "The Queensland government is not willing to participate in a negotiation process if there will be an increased impact on Queensland communities."

Federal Environment Minister Tony Burke said he was confident of overcoming resistance from the states to sign off on the final Murray plan before the last week of federal parliament, which begins on November 26.

"There are final details that I'm still working through with my colleague water ministers from different jurisdictions on the plan, but I have no doubt we will be in a situation where there is a basin-wide plan signed off this year," he said.

Mr Burke said MPs could block the Murray-Darling Basin plan in the lower house or Senate, but he had no indication from the opposition, the Greens or the crossbench that they would move to disallow the plan.

NSW regional independent Rob Oakeshott urged the government to proceed without state support. "This is going nowhere if we are going to make a decision based on the selfish interests of the states," he said.

Fellow NSW independent MP Tony Windsor said the announcement aligned with recommendations of his parliamentary committee, but said key questions still needed to be answered including whether environmental works should precede on-farm savings.

Greens' leader Christine Milne and environmental groups called for more water to be returned to the environment.

"By capping possible flow return at 3200GL, we are condemning the Murray-Darling Basin to a bleak future," Wilderness Society campaign manager Peter Owen said.

The opposition - which is yet to declare its position on the long-running reform - yesterday raised questions about Labor's ability to deliver the additional water. "This is really into the never-never land stuff," the Coalition's water spokesman, Barnaby Joyce, told ABC News 24.

The Australian Dairy Industry Council's chairman Chris Griffin said the announcment was "smoke and mirrors".

"Where's the money to buy the flood easements, build levee banks and repair roads and eroded river banks after each flood?" he said.

Early Poll is Laborís Best Hope of Saving the Brand

Chris Kenny, The Australian, October 27

TALK of an early election began the day after the 2010 election. Those supporting an early poll have been dismissed as anti-democratic whingers, unable to accept the inconclusive verdict or Julia Gillard's deal to form government.

Yet after two years of chaos and controversy it seems clear an early general election might be best for the economy, public accountability, and even the Labor Party.

For a variety of reasons the government may well look to an early poll. As this week's budget update and mining tax revelations showed, the surplus prediction is shaky. Economists suggest the forecast is unlikely to survive next year's budget preparations.

Given the political store the Prime Minister and Wayne Swan have placed in the surplus promise, they might prefer to head to the polls before it proves elusive.

A pre-budget poll might also capture what sense of momentum Labor has been able to muster. Polls suggest the ALP primary vote has been lifted from the carpet. If the government has any faith in its arguments it will believe it can build on that trend in a campaign..

Also the ongoing scandals of Peter Slipper and Craig Thomson do daily damage to Labor's standing. The government can't afford to (nor, in my view should it) shun the votes of these MPs in parliament. Yet every day it relies on them, it is further tainted.

The way to resolve the fate of both MPs without pre-empting legal processes is to allow the electorates to have a say. The courts can worry about the legalities in their own time - voters will decide the consequences whenever they get a chance.

Then there is the leadership question. Kevin Rudd continues his chicanery, drawing attention when he can. In the end, only a (perhaps extended) election campaign can cut him out and galvanise the party behind its present leader. And if she fears another challenge, Gillard can thwart it by visiting the Governor-General.

After all, she can always use the obvious national interest arguments for an early election. In a period of global economic uncertainty the domestic political impasse has made matters worse. Investors have been left to second-guess on-again and off-again carbon pricing initiatives since 2007. Mining investments have started to slow for a range of reasons, but the mining and carbon taxes have been a factor. Only a poll can clarify the situation - at least for a few years.

But to judge the effectiveness of the current parliament it is best to look at the PM's own criteria. When she seized the job from Rudd, Gillard identified three priorities: border protection, climate change and the mining tax.

In minority government Labor has repeatedly claimed success by boasting of its ability to marshal hundreds of pieces of legislation through parliament. But if we look at the pieces that count - its own identified priorities - it is a very different story.

On border protection, the situation goes from bad to worse. The year's 200th boat arrived this week. Lives have been lost, more are at risk, thousands of people are in detention, the border protection budget has blown out by more than $1 billion and there is no sign of improvement.

After denying the role of its policies for years, the government came up with a preferred plan - the Malaysia solution. But it required legislation, and the government didn't even put it to a vote in parliament because it knew it could not get it through the House of Representatives. This was a humiliating display of impotence - lacking the ability to carry its own policy in the chamber that forms government. Denied its policy, the government this year revived the bill, without the Malaysian element, to begin its reluctant version of offshore processing.

The mining tax has been a manifest failure - and not just because it is yet to raise money. Remember its major justification was to assist the non-mining sectors of the economy by funding a cut in the rate of company tax. But the government could not win support from the Greens, so the tax was introduced without its main reform credential, the company tax reduction.

Climate change policy is the only one of Gillard's three priorities that she has been able to usher decisively through parliament - but she has delivered the opposite to what she pledged. Having categorically promised before the election not to introduce a carbon tax, the PM has imposed one. This, again, was at the behest of the Greens.

This is an extraordinary record. Three priorities have become two failures and one reversal.

Most parliaments are expected to force compromise, but any realistic evaluation of Labor's mandate on these issues shows the parliament is not working.

An election would resolve it.

Given the government is determined to focus on the opposition, a campaign would also suit its agenda. It would force the Coalition to release its policies and explain how it intends to deliver the foreshadowed cuts to government expenditure.

The quality of the political debate has become risible. Instead of discussing the government's priority areas or debating a serious economic reform agenda, we are reduced to gender wars.

Devoid of a narrative, consumed by scandal and having trashed the Rudd economic record, the government is more than happy to focus on Tony Abbott. Instead of wooing voters, it seeks to scare them away from the opposition. And the Opposition Leader seems incapable or unwilling to step back and head for higher ground.

An election will either elevate the debate or terminate it. Either would be a blessed relief for voters.

On current polling, Labor would lose. For all the above reasons, none of this is likely to improve by prolonging the soap opera for another six months.

It remains in power on the votes of two former conservatives whose electorates never expected them to install Labor; a discredited former Speaker who was elected as a conservative; and an MP suspended from Labor who has been found by Fair Work Australia to have corruptly misused hundreds of thousands of dollars for which he is facing civil proceedings and ongoing criminal investigations.

The future of the ALP would be better served by putting an end to the daily brand damage and presenting its case for re-election. If it needs to regroup in opposition, then the sooner the better. It must make a generational leap away from the contemporary leadership conflagrations.

It is difficult to identify any loser from an early election, except the bank balances of those MPs who are grimly holding on.

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