Labour laws a barrier in new Asian century

THE issue in the Qantas crisis cannot be averted - it is whether Labor's "fair work" industrial relations model is workable for Australia with a high dollar and more competitive pressures on industry in what Labor calls the coming Asian century.

This contradiction is embedded in Labor as a political institution. Because it goes to Labor's identity it transcends any Julia Gillard-Kevin Rudd leadership struggle.

Labor's post-Work Choices industrial model boosts union statutory powers and the issues over which unions can bargain while its economic model specifies a more flexible, pro-market and productive structure for success in the globalised age. Can such competing aims be reconciled? How does this work? Are more union power and greater union expectations compatible with economic success this century? This is the underlying issue in the Qantas dispute.

Labor says it is. But Labor must prove the answer is affirmative for its economic policy to work and for its structure as a party to remain viable. The stakes, in short, are immense.

A generation ago the Hawke-Keating government recruited trade union ties to a formal Accord that became an instrument to advance economic reform. The Accord was a remarkable innovation: a policy and political plus. That age is over.

The evidence is that Labor under Rudd and Gillard cannot answer this re-occurring question: how does Labor in 2011 convert its structural ties with the trade union movement into another economic policy and electoral plus? There is only a great silence about this from Gillard's government despite the ministerial talent in its ranks.

Perhaps Bill Shorten with his Hawke-type links to both unions and business can provide a future answer.

In response to the Qantas dispute Gillard made two over-arching arguments. First, she slammed Qantas for "extreme" action, signalling that a lock-out and grounding of planes was rogue corporate behaviour unjustified within her "fair work" system (though it was legal).

Second, she stood behind new power arrangements, bargaining processes and principles in the Fair Work Act confirming that this industrial settlement replacing Work Choices now defines modern Labor.

This week, moreover, Labor introduced legislation to abolish the Australian Building and Construction Commission established by the Howard government as recommended by the Cole royal commission to end intimidation and illegal behaviour on worksites.

The ABCC is hated by the unions. As proposed by Workplace Relations Minister Chris Evans, a new regulator with lesser powers but part of the "mainstream Fair Work system" is being created.

The construction industry has "significant concerns" about this move. The Australian Industry Group says "damaging and unproductive" practices are returning to the industry and without a strong regulator costs for "industrial lawlessness will again be priced into construction contracts". Warnings lights are flashing from multiple junctions.

Evans said of the Qantas row he was "unapologetic" about the power shift in the system. "We deliberately changed the laws from Work Choices to give employees more rights," he said. "Job security is a key issue for working people and Labor stands for allowing them to negotiate with their employer about that issue. We're proud of that and we are not going back to the Liberals' Work Choices approach."

Union chief Tony Sheldon acknowledged the obvious about the union campaign: "You could not do it under the mechanisms available under Work Choices." Exactly.

Gillard knows the imperative for economic reform yet she is a Labor tribalist on union ties. A former IR lawyer and author of the Fair Work Act, she was backed for the leadership last year by the Australian Workers Union. Earlier this year she declared that "strong unionism and a strong Labor Party go hand in hand."

Sounds great. The true believers applaud. But is it true any more? Where, pray, is the evidence today that strong unionism equates to success for Labor? The claim is false: witness the way the NSW union movement destroyed the state ALP government over electricity privatisation. The record so far is that Gillard's laws have created a permanent schism with business, are keeping productivity in its cage and have alienated the small business and aspiration class. Check out the Labor primary vote and then try to argue there's no problem between Labor and the unions.

A fortnight ago Paul Keating, champion of the Accord, told me that Hawke-Keating pro-market reforms had created a "new society" and Labor's mission was to be "the party of the new society". Keating's right. But Labor doesn't get it. His lament is that Labor has failed to evolve in this direction. The truth is that Labor lacks a strategic vision that informs daily policy. The problem is systemic.

With the Qantas dispute exposing the vulnerability of Labor's laws, Tony Abbott was handed a gift. What did he do? He declined to accept it. Abbott could have used the Qantas crisis to mobilise opinion against Labor's anti-productivity IR system. This is exactly what the Coalition needed to do. Will Abbott ever get a better chance? Probably not.

But Abbott launched instead a phony political campaign against Gillard for not stopping the grounding of planes when presented with the Qantas fait accompli. Abbott blamed Labor for the shutdown, not Qantas. Few people will buy that stretch.

The sustained misguided tactics of the opposition are now an issue of serious concern. Reluctant to treat issues on merit, it assumes Gillard is finished and wants to force the leadership change to Rudd hoping the result will be an election.

There is a risk for Abbott in such highly dubious tactics: the opposition looks more negative and destructive than ever, readier to abandon sound principles. It has trashed the executive's power to negotiate offshore processing. It surrendered its chance to expose the flaws in Gillard's bargaining system. And it launched a bizarre attack at week's end on Labor's provision of more credit to the IMF. With Europe in financial crisis you have to ask: what the hell is the Coalition playing at?

Wayne Swan wrote to G20 finance ministers proposing an increase in the IMF's financial resources given current global uncertainty. Contrary to Coalition claims, this is not to bail out Europe; nor does it increase the tax burden on Australians. Abbott will rue these accusations he has made.

The Coalition has a long history as a supporter of the IMF. Former treasurer Peter Costello was a champion of the IMF. During the 1990s Asian crisis, Australia and Japan were the only two nations contributing to all three of the IMF Asian bailout packages (for Thailand, South Korea and Indonesia).

This became a matter of financial pride and soft-power triumph for Australia. The point, again, is that Abbott's shoot-from-the-hip style is taking him further from Howard government principles.

The prospect cannot be dismissed that Gillard has prevailed over Abbott in the politics of the Qantas row. There is a chance in coming weeks Labor's primary vote will lift to 31-33 per cent. Yes, that's hopeless, but it means a slight recovery at a low base. If it happens, it will reflect poorly upon an opposition that has gone in harder than ever against Gillard, only to get negative results.

The enduring message of the week is business alarm about Labor's "fair work" laws and the absence of political resolution to reform them. The common corporate concern is the issue Qantas chief, Alan Joyce, identified at the heart of the dispute: the ability of Qantas to manage and achieve better productivity.

Gillard's laws allow unions to include a host of job security, contracting and policy issues in the bargaining process and pursue them with stoppages that disrupt the company with little damage to workers.

It is not that union leaders are extreme. The problem, to this stage, is not a wages breakout (that belonged to the old 1980s industrial model) but workplace laws that inhibit productivity and corporate strategies now essential to meet financial and competitive pressures Australia faces.

Labor's internal problem is acute yet rarely confronted: its historical structure privileges trade unions whose interests overlap less than ever with the wider community. Trade union coverage has fallen to about 15 per cent of private sector workers. The story of recent state ALP governments, with NSW conspicuous, is that union power within Labor is a dead weight for policy and political success. Former NSW minister Frank Sartor, in his new book The Fog on the Hill, says: "Since the 1990s, ALP-affiliated unions in NSW have devolved into a sectional interest that was able to wield power over the Labor government at will and gradually strangled the government's ability to govern."

Sartor offers chapter and verse. Who can contradict him?

Yet Labor clings to its union ties. Perhaps it is the homing instinct. In a way such tribal loyalty is admirable. Early this year Labor's "wise men" review by former premiers Steve Bracks and Bob Carr and veteran senator John Faulkner recommended many reforms, but one idea was untouchable: guaranteeing unions 50 per cent of numbers at state ALP conferences.

Bracks said: "This partnership has been our bedrock in the past and it will be in the future." Gillard agrees. But such declarations of faith are meaningless unless Labor makes its union ties work for economic policy and, if it cannot, then such ties will cripple the party.