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Today’s media saw more suggestions for changes to the administration of the Fair Work Act and an attack by former PM Gillard on the recent critique of the current regulatory arrangements by Henry Ergas.

The increase in the unemployment rate to 6% (seasonally adj) provided a spark for critics. The fact that employment (s adj) has now also ceased to grow over the past twelve months  adds to concern about the deterrent effects of FW in circumstances where the economy is still growing at 2.0-2.5% pa. With this cessation also occurring at a time when the working age population is increasing at just under 2% pa, the drop outs from the labour force are substantial. However, explanations of the cessation by the Reserve Bank and many economists focus more on slow-downs in growth of particular industry sectors, such as mining and construction and manufacturing, than on the regulatory effects.   

That Gillard has emerged publicly in the letters column (see below) may indicate she is trying to help her friends at the ACTU. But like Shorten she is making heavy weather of it in using former pro-union judge Wilcox as a supporter of the replacement of the ABCC. Her claim that FW allows freedom of association “overlooks” the inability in practice to conclude individual contracts and her defence that unions are subject to governance under FW is laughable given the example of its handling of governance of the Health Services union.

Des Moore

Jobless jump sparks call for IR reform

Article by Jacob Greber, Economics correspondent published in the Australian Financial Review,
February 14, 2014

Treasurer Joe Hockey has insisted the government can still repair the budget deficit without derailing the economy despite facing the worst unemployment in more than a decade.

Business groups demanded the government do more to free up the labour market, including cutting penalty rates that cause many cafes and restaurants to shut on weekends and holidays.

Mr Hockey indicated he would rely on record-low interest rates and infrastructure spend by the states, financed by a multibillion-dollar privatisation program designed to “recycle” public capital into job-creating projects.

Official figures on Thursday showed the jobless rate jumped to 6 per cent in January – higher than during the global financial crisis and a level not seen since early 2003 when the China boom was in its infancy.

The economy shed nearly 92,000 full-time jobs over the past year and overall job growth has stalled.

Burchell Wilson, the chief economist at the Australian Chamber of Commerce and Industry, said it was “entirely regrettable” that substantial workplace reform had been put on the back-burner by the Abbott government until after the election, a reference to its decision not to change the Fair Work Act.

“Australian workers in Australian workplaces will continue to suffer until the elements of the Fair Work Act that are impeding productivity and employment growth are addressed,” he said.

The figures will add to the pressure on the government to act on job losses following the high-profile decision by Toyota Australia and General Motors Holden to stop making cars. The opposition also raised 1300 positions lost at mining services group Forge, which was placed in administration.

Mr Hockey pointedly didn’t initially list industrial relations as one of the policies needed to restore the economy to its long-term average growth rate needed to reduce unemployment.

He said restoring the Australian Building and Construction Commission was vital for a rollout of “the infrastructure that’s going to drive a more productive economy”.

Mr Hockey highlighted an article in Thursday’s Australian Financial Review by Grocon Group chief executive Daniel Grollo, who accused construction unions of using blatant threats and spurious safety claims to bully employers.

“The challenges that builders have is enormous,” Mr Hockey said.

The surprisingly high unemployment – which confounded economists’ expectations for a sharp rise in hiring in January – triggered the steepest drop in the dollar in three weeks as investors bet the Reserve Bank may need to reconsider a decision last week to scrap its so-called easing bias.

The currency traded at US89.39¢ late on Thursday compared with US90.27¢ before of the labour data came out.

Some economists said if the weakness in January and December continued there was a chance the jobless rate could climb above the government’s forecast peak of 6.25 per cent, which is due by mid-year.

Others, including Paul Bloxham at HSBC Australia, cautioned that the data was increasingly becoming the “weak outlier” among a range of more positive indicators, including a strengthening housing market, rising retail sales and improved business conditions.

“The weight of evidence suggests that domestic demand was lifting in the fourth quarter and into January as the economy rebalanced away from mining-led growth,” he said.

He said the labour market tended to lag behind the economic cycle by two to four quarters. He said the jobless rate would need to be heading lower before the Reserve Bank would consider raising interest rates and a peak in joblessness was likely by mid-year.

“Although today’s numbers suggest that the risk is that this could take longer to occur,” he said.

Restaurant and Catering Association chief executive John Hart – a member of the government’s business advisory board – said the jobs data showed there was a clear downturn in services industry hiring, a key source of employment during the resources boom.

“If you look at the growth of the past two to three years a lot of that was in the services sector, a lot of which has been impacted by some of these issues like penalty rates,” Mr Hart said. “We’re becoming more of a services economy and if we get these dampeners on the services sector they bite really hard.”

Australian Council of Trade Unions secretary Dave Oliver said cutting services in the May budget would add to unemployment. “Reduced spending or increased taxes in these conditions will make a bad situation worse,” he said.

Opposition Leader Bill Shorten said some 60,000 full-time jobs had been lost since the Abbott government was elected in September.

“This week has been one of the worst weeks for Australian job losses in a very long time,” he said.

The collapse in hiring over the past year – while partly a function of decisions taken by businesses under the Labor government – is a blow to the Abbott government’s hopes that its election last year would bolster business and consumer confidence.

A faster than expected worsening in the jobless rate increases short-term budget pressures as more people claim welfare and fewer workers pay taxes.

The figures came out hours after the International Monetary Fund warned the government it would struggle to rein in the developed world’s biggest forecast spending surge, with the economy still too fragile to weather deep and immediate federal spending cuts.

Mr Hockey vowed his plans to return the budget to surplus had not been derailed by rising unemployment.

“The suggestion that we’re going to go on a [stimulatory] spending splurge is not right,” he said. “We can have fiscal consolidation without harming growth.”

He indicated the government would rely heavily on the Reserve Bank to keep the official interest rate at or close to the current record-low 2.5 per cent, as well as a focus on micro-economic reform.

“There are many levers here and we want to be in a position to use all of them,” he said.

Mr Wilson, from ACCI, said: “The fact industrial relations reform has been put on the back-burner until after the next election is entirely regrettable.

“Companies need the flexibility to change their workplace practices and lift labour demand.”

Coalition to ALP: get out of the way

Article by Adam Creighton and Sid Maher published in The Australian, February 14, 2014

Unemployment rate

Graphic: Viki Sizgoric Source: The Australian

TONY Abbott has seized on the worst unemployment figures in 10 years to demand Labor stop blocking the government’s repeal of the carbon and mining taxes and its industrial relations agenda as business urged the Reserve Bank to put rate cuts back on the table.

Unemployment hit 6 per cent — its highest rate since 2003 — sparking a furious political battle over the state of the economy and who was to blame for rising jobless numbers.

The Prime Minister and Joe Hockey demanded the opposition stop blocking its measures in the Senate, but Bill Shorten said the government had no plan to fight for Australian jobs and one job had been lost every three minutes since the Coalition had been elected.

The Australian dollar slid almost a full cent to US90c yesterday as economists’ prediction of a healthy increase in employment last month proved hopelessly wrong. There are now 720,000 unemployed, the highest number since 1998.

Labor attacked the Coalition’s employment record since winning office in September as mining services company Forge Group entered voluntary administration and announced 1300 jobs would be lost days after Toyota announced it would cease carmaking in Australia from 2017.

“Our hearts go out for the thousands of Australian households this week, having to deal with the fact that they’re not sure about where their next job will come from and they face the prospect of unemployment,” the Opposition Leader said.

Unemployment had reached its highest level in a decade, Mr Shorten said, and more than 60,000 jobs had been lost since the Coalition took office. “The Abbott government has got serious questions to answer,” he said. “What is the plan of the Abbott government?”

Mr Abbott hit back, arguing that Labor’s own budget figures projected an unemployment rate of 6.25 per cent in the first half of the year and demanding the opposition get out of the way of the Coalition’s legislative agenda.

“I very much regret the fact that unemployment is edging up,” Mr Abbott said. “This is bad news — none of us like it.”

He said the opposition could hardly blame the government for the consequences of Labor’s own policies.

In the case of Forge, Mr Abbott said Labor should “unshackle” the businesses the company depended on for work by allowing the government to repeal the carbon and mining taxes. These were like “daggers aimed at the heart of the West Australian economy”.

“Get out of the way and let the cure be put in place,” Mr Abbott said.

The Australian Bureau of Statistics said the nation’s unemployment rate had risen from 5.8 per cent in December to 6 per cent last month, the highest level since 2003. The Treasurer said the rising unemployment rate was “broadly in line” with government projections, and blamed Labor’s legacy of below-trend economic growth. He said improvement would take time.

“If we want to get the unemployment rate down, not only from 6 per cent but from 6.25 per cent, which is the current forecast, we need to improve the growth rate of the economy. We need to have structural change and we need to get our plan through,” Mr Hockey said, nominating restoration of the Australian Building and Construction Commission, and the repeal of the carbon and mining taxes.

ACTU secretary David Oliver called on the government to reconsider drastic spending cuts.

“If the Abbott government serves up a slash-and-burn budget in May as promised it will throw more Australians out of work and on to the dole queues,” Mr Oliver said.

Total employment grew at the slowest pace in two decades last year and the economy has shed 10,000 jobs since the September federal election, making the government’s pre-election promise to create one million new jobs over the next five years much harder.

“This should put a rate cut back on the table in terms of the RBA’s thinking,” said Burchell Wilson, acting chief economist at the Australian Chamber of Commerce and Industry.

Total employment fell by 3700 to 11.46 million over the month to January — following losses of almost 23,000 in December — while unemployment rates rose in all states except NSW and South Australia.

“The only bright spot was that average hours worked jumped sharply in January and have been increasing for several months,” said Justin Fabo, head of Australian economics at ANZ.

UBS chief economist Scott Haslem said the new figures should ease concern the recent strong turnaround in housing activity, retail sales, house prices and business confidence — and higher than expected inflation — would lead to rate increases from record lows of 2.5 per cent.

The Reserve Bank has appeared to rule out further interest rates cuts this year and has prepared financial markets, which are factoring in interest rate increases over the next 12 months, for a long period of stable rates.

“There’s little doubt such weakness makes it too early to dismiss the chance of the RBA cutting further,” Mr Haslem said.

Economists said unemployment was typically slow to catch up with the rest of the economy.

“Business conditions are at a 34-month high and forward order books have been expanding — indicators that would support employment growth provided they are sustained,” said Savanth Sebastian, of Commsec.

The government will need to preside over jobs growth of almost 18,000 a month the next few years to achieve its target.

Dyson Heydon faces challenge of industrial anarchy

Article by Roger Gyles published in the Australian Financial Review, February 14, 2014


CFMEU members rally outside a Grocon construction site in Melbourne. Photo: Luis Ascui

Dyson Heydon is about to receive a severe culture shock. Just appointed as royal commissioner into trade union corruption, he will move from the cloistered halls of the High Court of Australia, via a short period as an arbitrator behind closed doors, to the glare of a controversial public inquiry into a murky world.

His past will be scrutinised for indiscretion or bias. He will be criticised – perhaps even denigrated. He may receive threats and he and his family may require security. He will move from litigation with clearly defined issues, rules of evidence (as to which he has written the leading text) and an onus of proof, to an inquiry with broad terms of reference, no rules of evidence and no onus of proof.

He will have to navigate the requirement to give procedural fairness to affected persons imposed by decisions of the High Court and the necessity to avoid interfering with the course of justice in cases commenced or about to be commenced.

He may be tempted to retreat to the safety of conducting a series of quasi-court trials, rather than letting the inquiry follow where it leads. He should have sufficient flexibility of mind to resist that temptation.

The focus of the terms of reference upon corruption and trade union governance is welcome: the propensity for industrial anarchy in the building industry has been demonstrated by previous royal commissions and inquiries. The causes and remedies are well enough understood.

The law should be enforced against all those who breach it including contractors and developers. Those funding construction, directly or indirectly – particularly governments and financial institutions – should have strict codes of conduct and sanctions with teeth, including blacklisting of contractors who are complicit in activities which affect the time and cost of building and construction. The will to act has been missing.

Links to organised crime

Cases of corruption have been thrown up by the previous inquiries and by subsequent investigations by the NSW Building Industry Taskforce and the Australian Building and Construction Commission while they operated. What is new is that the recent allegations appear to have been made or supported by internal union whistle-blowers from three states, and some involve organised criminal elements and senior union officials. Those allegations raise the issue of corruption in the building industry to another level.

Any form of corruption involving trade union officials is bad enough, but that involving organised crime cannot be tolerated. Those who are making corrupt payments will be rightly caught up in this.

Furthermore, there are serious governance issues involving the finances of other trade unions and officials which should be investigated.

Trade unions have privileges and obligations under state and federal legislation. They have duties to their many members. Their conduct directly and indirectly affects businesses and their employees, the economy and members of the public. Australia’s international reputation as a place to do business is lowered by their poor behaviour. Trade unions and trade union officials have significant influence over the Labor Party and thus the political system.

This commission provides the opportunity for light to be shone on the governance of registered industrial organisations free from the restraints of the current law and practice by a commissioner who is not part of the usual political or industrial relations world.

Roger Gyles, SC, is a former Federal Court judge. As a barrister he was royal commissioner into the NSW building industry and special prosecutor of bottom-of-the-harbour tax frauds. He is now chairman of Transparency International Australia, an anti-corruption NGO.

RDOs used as an IR ‘weapon’

Article by Mathew Dunckley, Lucille Keen and Ben Potter published in the Australian Financial Review, February 14, 2014

Expensive equipment sits idle when construction workers take their 26 RDOs a year, according to a calendar negotiated with building unions, particularly the Construction, Forestry, Mining and Engineering Union. Days off are often clustered around holidays.

A rolling calendar of construction site shutdowns is being used as an industrial weapon by building unions, according to the peak building body.

Master Builders Australia chief executive Wilhelm Harnisch said the system of rostered days off (RDOs) was a massive drag on the industry.

“RDOs are used as industrial weapon in disrupting the construction process at critical stages,” he said.

It added to the cost of projects because sites and equipment sat idle, with downstream issues “banking up”.

The construction industry largely works to a 36-hour standard week.

This is structured through an eight-hour working day where employees are paid for a 7.2-hour day. The remaining time accrues towards a paid day off.

That totals 26 RDOs a year, which are taken according to a calendar negotiated with building unions, particularly the Construction, Forestry, Mining and Engineering Union. They are often clustered around holidays.

In Queensland this Easter, for example, construction sites will close on April 17 and not reopen until April 29, due to a combination of RDOs and public holidays. Victorian sites will also close on April 17 and reopen on April 28.

Employers can negotiate to have work done on these days, but face demands for stiff penalty rates. Mr Harnish said the lack of flexibility in the RDO calendar created problems for the construction industry.

“Other sectors have adopted more flexible work arrangements that are yet to be considered or adopted by the building and construction industry,” he said.

“It is a vastly different work environment to that of an office worker: that needs to be taken into account.

“But discussions about creating flexibility at times when work can occur need to be had. At this point in time it’s been a bridge too far for discussion.”

One option floated by a construction industry insider was for RDOs to be taken at one time when a project is finished. This could be paid as a lump sum or as a continuation of salary. This would also provide a genuine incentive to get jobs finished.

An absolutely crazy anachronism

“They are an absolutely crazy ana­chronism,” said one senior construction industry figure with experience in several countries. He said employers were reticent to push for change on the issue, and accused them of suffering “Stockholm syndrome”.

“They don’t understand what is good or bad any more.”

He said it would be better if the RDOs were abolished in favour of a higher rate of standard pay or a regular overtime agreement, because that would be better for a project than ­having expensive equipment sitting idle so regularly.

A Victorian government report leaked this week claimed the un­productive culture of the state’s building sites, for example RDOs, was escalating construction costs.

Victorian Planning Minister Matthew Guy, who has been a ferocious critic of the CFMEU, played down the importance of RDO shutdowns.

“It is not about the days worked, it is about productivity on the days that are worked,” he said. “It is productivity improvements we should be focusing on, rather than the number of days they turn up.”

He conceded that RDOs could be part of that broader discussion around site productivity, with the state’s construction costs high by international standards. That did not need to “threaten anyone’s RDO”.

The CFMEU did not respond by deadline.

The Productivity Commission is investigating construction costs as part of an inquiry into infrastructure.

In a submission to its inquiry, the Independent Contractors Association accused the large construction companies of operating a cartel with labour unions that restricts competition and pushes up prices.

Those firms presented themselves as “victims of a system that forces them to use unacceptable and anti-competitive labour arrangements which create inflated costs”, but the reality was that those companies benefited from that anti-competitive behaviour because the prices kept out smaller rivals, the submission said.

The ICA submission derides the public clashes between big employers and the union as distracting “circus acts”.

Laws and Fair Work

Letter by Julia Gillard published in The Australian, February 14, 2014

HENRY Ergas (”Devotional eulogies only entrench thuggery”, 10/2) misled readers by claiming that while in government, I was “not swayed” by the recommendations of retired judge Murray Wilcox in formulating the legislation to replace the Australian Building and Construction Commission with the Fair Work Building Industry Inspectorate and that I “modified the definitions of lawless behaviour in the industrial relations laws to make it more difficult to prove”. I commissioned the review by Mr Wilcox and overwhelmingly enacted his recommendations, including his recommendations on the offence provisions.

Professor Ergas claimed that in the Fair Work Act I did “virtually nothing to police (the) internal governance” of unions. This claim is also untrue. The provisions relating to internal governance of unions in the Fair Work Act were the same as in the Liberals’ Work Choices legislation. These provisions were strengthened in 2012 with the tripling of existing penalties, additional disclosure requirements on remuneration and greater investigative powers for the regulator.

Professor Ergas further claims “Gillard’s laws thus trampled on freedom of association, which entails the right not to be represented by a union”. I refer him and your readers to the freedom of associations provisions of Division 4 of the Act, which includes more effective remedies in relation to breaches than ever before. The Fair Work Act protects freedom of association including the right to not be a member of a union and not to be represented by it.

Public policy debates are best informed by the facts.

Julia Gillard, Adelaide, SA

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