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Thursday, 13 March 2008
Page: 1704

Dr SOUTHCOTT (10:55 AM) —I rise to speak on the Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008. Right now the Australian economy may be at a turning point. Under the previous government we saw an economy where unemployment fell from 8.2 per cent in March 1996 to the point where in January this year it was 4.1 per cent, the lowest unemployment rate since November 1974. Without changing anything, because the budget settings and the labour market settings are all still intact, we now have the lowest unemployment rate since November 1974. The Treasurer himself has said that we have a tight labour market. When asked what that meant he said, ‘It’s tight—very tight.’ We also have a participation rate at 65.2 per cent, which is the highest on record. Shortly, in about half an hour, we will see what the unemployment figures were for February 2008. But what we see from the government is an unstated policy of slowing the Australian economy. There will be a cost to that. The cost will be a rise in unemployment, a rise in the number of people who are out of work, and we may see today the first rise in unemployment for a long time. We may be at a turning point. That makes it very important to make sure that the labour market settings we have are going to contribute to increases in productivity, are going to allow for strong jobs growth, are going to keep downward pressure on inflation and are going to be able to provide for wages to rise without damaging the economy.

It is surprising that there has been no modelling—or no modelling that we are aware of—of the economic impact of this legislation. Only on Tuesday this week in a hearing of the Senate inquiry into this bill, the department stated that in terms of wages, productivity, inflation and employment they had done no modelling on the impact of this bill. This is a very serious thing. Last year Econtech did an analysis for the Australian Chamber of Commerce and Industry, and they found that the industrial relations reforms since 1993 in toto had contributed to a decrease in the structural unemployment rate of at least 1.77 percentage points. It had also, over that time, increased labour productivity by 1.4 per cent. It is very important that, with any changes to the labour market, we do not go back to the bad old days when we had a centralised wage-fixing system, because that contributed to no real rises in wages and very poor productivity outcomes.

As a result of the low unemployment rate and the strong economy, it is absolutely critical that we provide flexible employment conditions for employees. Flexibility in employment arrangements was recognised by the former coalition government and is critical to the continued growth of the Australian economy. It is critical to Australia remaining competitive within the global marketplace. Australia faces a number of challenges in the future. These challenges include skill shortages, the ageing of our population, much slower workforce growth in the future, uncertainty in global financial markets and the rising price of things like petrol.

After almost 16 years of the economy expanding, there are a number of capacity constraints which may place additional pressures on inflation. This is not a surprise to anyone. The former government was well aware of this. We faced the challenge of how to grow the economy fast. We were in a position where we were able to have unemployment below five per cent, to have the economy growing strongly and to have inflation within the two to three per cent band. The Assistant Governor of the Reserve Bank of Australia, Malcolm Edey, indicated in his talk to the Committee for Economic Development of Australia, CEDA, on 19 February, that evidence has arisen regarding very high recent wages growth. Mr Edey believes this played a role in the recent rise in inflation. The Australian Bureau of Statistics wage price index for the December quarter, published on 20 February 2008, clearly indicates higher wages growth. Bureau figures show a rise of 1.1 per cent in the last three months of 2007, contributing to an annual increase in the index of 4.2 per cent. Whilst that level is still below the 4½ per cent viewed by the Reserve Bank as the danger level, Labor must ensure that undue upward pressure is not placed on wages. In a context where inflation is running high, it is very important that we do not do anything which is going to lead to a wages breakout, because that would be very damaging to the economy.

There is also evidence that union pressure may further exacerbate this wage pressure. The unions are campaigning for additional wage rises above CPI in order to counter increases in the cost of living. Sharan Burrow, for example, spoke on ABC radio to lobby on behalf of the ACTU for wage increases equal to 3.8 per cent, which is above the current CPI level. This gives a clear indication already that the unions have not heeded the government’s call for the restraint needed to reduce inflationary pressure and that they will continue to place pressure on the Labor government for these wage rises. That is why it is very important for us to know what advice the government has received about the economic impacts of these changes to workplace relations. What are the impacts on inflation? What are the impacts on productivity? What are the impacts on jobs growth? What are the impacts on unemployment?

Without flexible employment provisions, we will see an exacerbation of inflationary pressures, which will lead to increased interest rates, higher rent and higher grocery prices. Any increase in wages will be absorbed by higher prices as a result, leading to the situation that we had under the previous Labor government where there was no real rise in wages. The coalition is committed to the Senate inquiry, as this will ensure the appropriate scrutiny of this bill. It will also outline any likely consequences that may arise as a result of these changes. Changes of this magnitude cannot be rushed in without due consideration being given to their impact on employees, employers and the broader Australian economy as a whole. Whilst Work Choices is no longer opposition policy, the opposition are firmly committed to ensuring flexible employment conditions are available for Australians. This is absolutely critical to our future competitiveness and to providing jobs for people who want them.

As such, the opposition support the introduction of the new individual statutory agreements proposed by Labor in this bill and strongly encourage Labor to support our proposed amendment. This amendment proposes an extension to the usage of individual statutory agreements, removing the global expiry date of 31 December 2009, thereby creating a more flexible situation for employers by granting them additional time to prepare for these changes. By extending the duration of ITEAs to five years from the date of approval, business has more time to prepare for the changes. As the no disadvantage test applies to these agreements, workers are provided with a safety net, whilst employers will benefit from having more time to prepare for the changes. The provision of the no disadvantage test provides an assurance to Australian employees that they are employed under fair conditions. This is a very reasonable amendment. We believe that there is a need for choice in agreements. Some people will have a common-law agreement; for some people, a collective agreement will be more appropriate. But it is absolutely critical that we do not go back to the bad old days when we had labour market arrangements which contributed to unemployment being much higher than it needed to be and productivity being much lower than it needed to be.

I think it is also critical that we know what advice the government has received as to what will be the impact of this legislation on inflation, on productivity, on economic growth, on workforce growth and on unemployment. My concern is that any winding back of the clock on industrial relations to where we were in 1993 will have a detrimental economic impact on this country. As I said before, the Econtech report that was commissioned by ACCI last year is the definitive work on economic modelling of labour market flexibility. What it showed was that the increased flexibility of the labour market saw rises in labour productivity and a reduction in the structural unemployment rate.

So the opposition has some concerns about this, principally from the point of view of what the economic impact of these changes will be. We will see what they are. As I said, we may be at a turning point now, because the government has an unstated policy of reducing growth. As a consequence we will see an increase in unemployment—we will see an increase in the numbers of people out of work. That will have an enormous human impact for those people who will be affected by this government’s policy. Having made my remarks and indicated my support for the proposed amendment, I thank the House.