It's state v commonewealth, with safety the loser

THE PM may miss the mark in pursuing her battle for uniform workplace laws.

SUCH is the bitterness between our nation's two main tiers of government that preparations for a gathering of business leaders in Canberra are being viewed with deep suspicion by the states.

The function, planned for March 8, apparently is being organised by Julia Gillard's office for the day before the next meeting of the Council of Australian Governments.

In the offices of state premiers this is being viewed as an effort by the Prime Minister to co-opt business in a stoush with the states over economic reform. She is expected to use the event to blame the states for dragging the chain on reform, and create a sense of business support for her agenda when she sits down with the states the following day. (Presented with this scenario, Gillard's office offered no comment.)

When Canberra takes on the states, the public tends to side with the federal government, seeing it as the wise custodian of the national interest tackling the parochialism of the states. But it might not play out that way this year. For most of the past three decades we have had strong national governments driving reform. Now we have one lacking authority that is taking on some popular and relatively fresh state governments.

By March, Queensland is likely to have been to the polls and if, as expected, Premier Anna Bligh loses, the Prime Minister will find herself at a table with four conservative and two Labor premiers on March 9.

The conservative states will represent about 90 per cent of the population and an even greater share of the economy. For Gillard, the ambience won't be benign.

Six weeks ago this column predicted a tough year ahead for federal/state relations and we have seen a rapid descent into open combat. NSW Premier Barry O'Farrell and Victoria's Ted Baillieu announced an agreement to forge co-ordinated economic reform. In other words, frustrated by a lack of national progress, and the stultifying influence of COAG, the two largest states began a breakaway movement.

Then we saw Western Australia's Colin Barnett publicly raise (in The Australian) his list of grievances with Canberra and declare: "I don't trust the commonwealth."

Eventually the federal government hit back, in the time-honoured way. As the nation's chief revenue raiser, the controller of the purse strings, it always has the whip hand. So the Prime Minister declared it was the states holding back reform and that if they did not lift their game she would withhold special payments.

The issue Gillard chose to highlight - the introduction of uniform occupational health and safety laws - looks doomed.

In the 2010 election debate, the Prime Minister claimed it as a reform victory. "Businesses have been complaining for 30 years that they have different obligations in different states and at the same time not every individual worker has had the same safety standards," she said. "Now, I have delivered that ... on the day we delivered it there were some public servants that had tears in their eyes because they spent all their working life waiting for someone to deliver that reform - wasn't easy but I got it done."

Not so fast, Prime Minister.

Safe Work Australia is up and running and the model laws began operating this month, with various amendments, in Queensland, NSW and the territories.

That was the easy part because Queensland, of course, has a Labor government and in NSW, the laws were welcomed as an improvement on the draconian regime that encouraged unions to launch safety complaints because they received a share of fines levied upon conviction.

But Victoria and WA are holding out against the uniform approach, and it is yet to be adopted in the remaining Labor states. Tasmania has delayed implementation for a year pending further parliamentary consideration, and in South Australia, the policy could be headed for trouble.

Business groups in Adelaide are lobbying to have the legislation - 600 pages of regulations and dozens of codes of practice - blocked by the Liberals and independents in the upper house.

The complaints about the proposals are many; expanding the role of unions to enter workplaces, complicated compliance arrangements for business, red tape reducing opportunities for subcontractors, and even the removal of the right to silence when investigations occur. Oh, and industry leaders claim none of this will improve worker safety.

Late last year South Australia's Housing Industry Association published an economic study that claimed the new safety regime would add $20,000 to the cost of a new house, cut more than 10,000 jobs, and cut $1.4 billion from the state's economic activity.

Today this column can reveal the national component of that same study by consultants Hudson Howells. It concludes the costs imposed by the model legislation on the national economy would reduce GDP by between $7.1bn and $10.6bn with a loss of between 60,000 and 80,000 jobs. With more stringent enforcement it says the costs could top $16bn and job losses rise to 120,000.

The findings are based on increased costs reducing demand and/or robbing spending from other sectors. The worst hit states would be South Australia, WA and Victoria - which tends to support arguments that those states have better arrangements now and that the national template would be a retrograde step. It is difficult to see either Victoria or WA implementing the national model and it remains in doubt in South Australia and Tasmania.

Yet there is a growing sense in some state capitals that this is an issue on which the Prime Minister and her Workplace Relations Minister, Bill Shorten, want to pick a fight with the states.

Gillard can argue that all the states previously agreed to these arrangements at COAG. She can contend that if COAG reform decisions are to be meaningful, a deal such as this ought to be honoured.

Still, it might prove a mistake to inflame this battle. The rationale behind the reform is sound but the template is flawed. Gillard and Shorten can ill afford to again be seen pushing for extended union power, and changes that will cost jobs. On March 9, the government would be better served avoiding open warfare, and negotiating a revised agreement on this, the mining tax and poker machine reform - three state government areas where Canberra has intervened clumsily.