Institute for Private Enterprise

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Labour market
deregulation — follow up

20 December 1998

Subscribers will by now have received a copy of my report on The Case for Further Deregulation of the Labour Market, which was presented by Minister Reith on 27 November to the Labour Ministers Council. then I have given a presentation to the Economic Society Victorian Branch) and to a seminar at Melbourne University's Institute of Applied Economic and Social Research. So far, the general thesis has been well receive and criticisms/queries have either been fairly minor and/or expressing doubts about the likelihood of the proposals being implemented politically.

I have also had a 1000 word article published in the Australian Financial Review and there has been some press coverage. Copies of these are attached, together with an article I wrote for the Australian Bulletin of Labour for a series it ran in its December issue on The Future of Work. This article is relevant to the debate about unemployment and the (false) perception which many try to convey that there is gloomy outlook for employment which can only be improved by government intervention.

My aim will be to keep the debate on labour market reform going through short articles and notes on various pertinent topics. I want particularly to focus on the misconception that deregulation would lead to greater income inequality and an"under-class" of 'working poor' as in the US. As part of this 'campaign', I have established a web site containing material on labour market deregulation and aim to build that over the months ahead. The site also contains material on other subjects. It is titled "" and those with the equipment are welcome to 'hit' it.

I am also hoping to produce a video that focuses on the accepted rationales for regulation and for maintaining our tribunals, and that brings out the flaws in such rationales and some of the stupidities of the 'system'. If any subscribers are able to help with the funding of such a video, please contact me. I am trying to raise about $20,000 to make it a quality product.

As to the prospects for additional labour market reform, that may improve as the economy slows in 1999. Notwithstanding the surprising resilience of domestic demand to date, I remain of the view that we will be lucky to avoid a recession as commodity prices continue to fall and that feeds through to lower business investment. Housing also appears to have peaked. Thus, while I have revised up my forecast growth for 1998-99 from 1.5 per cent to 3.25 per cent, I have retained the 1.5 per cent growth forecast for 1999-2000 compared with the Treasury's revised forecast of 2.75 per cent.

That implies a sharp rise in the unemployment rate in the second half of 1999 , which could provide a window of opportunity for radical reform. Note that the conclusion of the OECD Economic Survey of Australia released on 18 December — that "there is still a long way to go to arrive at an entirely deregulated and highly flexible industrial relations system" — implies that an entirely deregulated system would be desirable. However, one of the problems is that the Government is conveying the impression that the recently improved performance of the economy is all a direct result of its policies and that not too much more needs to be done. The fact is, however, that we are starting a fair way behind even most European countries and there is a long way to go to get to best practice. The Government has not taken political advantage of the backward steps taken by Labor in regard to economic reform. In 1999 it needs to appeal over the heads of the Senate to the people and really expound the philosophy of further reform.

It remains only to wish everyone a very happy Christmas and a prosperous New Year. This has been a very busy and, in some respects, satisfying year for me. Here's to an enterprising 1999!

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