Complacency and conflicts cast shadow over economy

In opening remarks to the Senate select committee on COVID-19, Reserve Bank governor Philip Lowe noted that as economic recovery got under way, there would “be a shadow cast by the pandemic”. “As a country, we will need to turn our minds as to how to move out of this shadow,” Dr Lowe said on Thursday, before reprising a signature rallying call. “A reform agenda that makes Australia a great place for businesses to expand, invest, innovate and hire people would certainly help,” he said. The three-stage removal of restrictions will reanimate commerce and get people back to work. Yet the gnawing feeling is the crisis will ease only somewhat, but the moment for making our economy more dynamic will be lost as leaders in government, business and unions revert to the old ways. The long shadow over the nation is complacency, political paralysis and living in the permanent, febrile present.

This week, Scott Morrison tried to break this inertia through an appeal to industrial amity, seeking to facilitate a new compact in the workplace to create jobs. The parties have their work cut out in reviving an enterprise bargaining system that chugs along, delivering neither flexibility nor the productivity enhancements that lead to profits and higher wages. It’s possible for a grand bargain of sorts, where unions achieve gains on job security and employers win from less complex rules to how work is done. As the Prime Minister said on Friday, in answer to a question about the deal-killing “better off overall” test, the reform process is geared to getting people back to work in a nation where a million people are jobless, millions are on reduced hours and more than three million are on JobKeeper. How can anyone be better off if they lose their job because of a tribal power wrangle?

Reform proposals from unions and employers will be stress-tested by government officials to measure their effect on productivity and job creation. This restores enterprise bargaining to its original intention, and even echoes the Accords of the Hawke-Kelty era. Consensus out of the government’s five reform working groups may even force the ditzy Senate crossbench to back legislation in the national interest. Yet we fear Labor will play its customary spoiling role, as it defines itself by what it is against rather than what it is for. Anthony Albanese will soon get a chance to show if he is truly committed to dialling down the conflict in the mission of employment, or whether his short-run interests are in destroying a fragile peace.

One way to break the gridlock is via national cabinet, which has served us well and will be retooled for reform of the federation. On Friday, Mr Morrison delivered the eulogy for the Council of Australian Governments; COAG was, as many said, a place where good ideas went to die. Again, the new focus will be jobs. The skills compact announced this week is a key component, with states receiving more money for vocational education and training if they meet performance targets, as they do now for public hospital funds. There must also be a concerted push to remove excess regulation, which Dr Lowe warned was holding back economic vitality. He said we’d simply “meander along” post-crisis if we didn’t tackle this red-tape creep, much of it imposed at state level.

The underperformance of this tier of government has been exposed by the pandemic, with redundant state border closures harming domestic tourism and commerce, presaging a rapid slide into deep debt. It also has been the arena for mindless partisan obstruction. NSW Premier Gladys Berejiklian proposed a wage freeze, not a cut, for public servants to preserve jobs, saving $3bn. It’s a way of sharing the pain, given the private sector — from hospitality to media, banking to construction — has been savaged during the shutdown. The budget savings may help to further ease costs on companies, such as licence fees or payroll tax. Yet Labor and minor parties vow to block this prudent move. For what, exactly? A sound bite? Some solidarity theatre? A rural boondoggle? Little wonder it has been so difficult to build coalitions for economic reform, or that the baksheesh has proven so costly.

Medically, the nation is still on track. But it’s a grim landscape for would-be change agents. In truth, Mr Morrison is not remotely a radical, but a pragmatist. He’s working within existing structures, trying to take the heat out of issues with a middle-of-the-road consensus model. But he has the right mindset and values, and recognises the primacy of business in leading the recovery. Premiers and chief ministers need to join him in this project, because they actually control much of the machinery required to get the job engine running, or wilfully keep in place many of the disincentives to expansion and innovation companies face. National cabinet, with its singular agenda of jobs, can get blood flowing for fast growth; its predecessor had a tendency to coagulation. Such lethargy saw us come into this calamity with a neglected supply-side to-do list and falling living standards. Australians, untouched by recession for three decades, shrugged their shoulders, and the political class obliged by fighting over third-order issues. We now owe it to our young people and millions of displaced workers to move out of the shadow of the old ways and regenerate.