Unions problem won’t go away, even with Labor in opposition

Australia is a high-cost, low-productivity investment destination. As business writer Robert Gottliebsen said this week: “There is now a deep fear in world markets about what is going to happen to Australia.” We are blessed with resources but cursed with a “union problem”. The mining boom is over; will we be able to change our ways?

The typical Australian worker is not a militant unionist champing at the bit to go on strike. Of our 10.3 million employees, perhaps less than 12 per cent in the private sector are union members. Typically, the average Australian worker is diligent. High property prices have us mortgaged to the hilt, and anxious about job security.

So why, then, does Australia have a union problem? Is it because our power structures are owned or unduly influenced by unions? Perhaps our union problem comes from our institutions, rather than our people. Have you ever considered how an overseas investor may see us?

Our political system is virtually a duopoly. We have two big parties and our unions own one of them. In 1891, a group of protesting shearers stood under a tree at Barcaldine and resolved to exert union control over society by forming a political party. Today, this control is felt even when the party of the unions is not in government. For example, the opposition is blocking a free-trade agreement with China.

We kid ourselves that the unions don’t own this party but merely have influence over it. The level of the influence is often a source of complaint but the ownership is always ignored. Even politicians holding positions in the party like to pretend they are in charge, but in reality these people are chess pieces, to be replaced at will. Several years back, Kevin Rudd, our prime minister at the time, was replaced when a union boss went on late-night television to announce it.

Our unions have their own retirement funds. This was organised by the party of the unions about two decades ago. At last count, in June, our retirement savings pool was worth $2 trillion. The party of the unions made retirement savings compulsory and our system favours money being funnelled into the union-owned funds. About five million workers contribute at least 9.5 per cent of their income to union-owned funds, which in turn invest in our stockmarket, buying shares in our big companies, which employ many of these workers.

Many of these companies are inefficient and unproductive with very high fixed-cost bases, thanks to poor management of enterprise bargaining, which is a concept the unions’ party introduced to Australia about two decades ago. Despite the inefficiencies, share prices in our companies are inflated by the money pouring in from the retirement funds.

Gottliebsen recently pointed out: “Across 143 listed corporations, revenue in financial 2015 grew just 0.4 per cent, while expenses rose 3.1 per cent, leading to a 32 per cent decline in profit.” The latest enterprise bargaining data shows that large companies in the private sector are still delivering wage increases of 3 per cent a year. It doesn’t look like these companies are well run.

Despite all their legislative advantages, union membership is at record lows. Union revenue, though, seems to be increasing. We allow unions to harvest income directly from the business sector.

Unions are income tax-exempt and, further, are allowed to own and operate businesses that are also income tax-exempt. Unions are allowed to use wage bargaining processes to generate income streams for themselves and their businesses. For example, a union can use a bargaining process to make an employer purchase insurance products for each one of its workers, from a union-owned company, without disclosing this to anyone.

Our infrastructure is ageing but we struggle to upgrade it. Experts estimate our infrastructure costs 30 per cent more than it should. Our biggest building companies have formed cartels with unions and we are now the most expensive construction destination on the planet. Any time a large project (road, building, mine, railway line) is built, the builder (the principal contractor) participates in organised, corporatised corruption. A union contract for the wages of employees that don’t exist yet is signed. These employees, even when they do exist, will never be employed by the principal contractor because all aspects of the project will be subcontracted out.

When the principal contractor puts the project out to tender, companies (subcontractors) that express interest are given copies of the contract. They are told they must adopt it and to price their bids taking the inflated wages into account. Their copy must be signed by the unions or they will not work on the project.

The unions often demand to be “looked after” in exchange for their signature and employees of the subcontractor are signed up as union members without their knowledge or consent.

Right now, we are having a royal commission into union corruption and these cartels are being dissected. Several people have been arrested, yet the unions refuse to recognise the royal commission. They keep demanding it be shut down. Most of us think that unions should pay tax and be subject to the same laws as the rest of us, but this concept incenses them.

Now Australia has a new Prime Minister with a track record in commerce. This week, the unions were granted an audience with him to share their ideas about how Australia’s many problems might be solved. You have to laugh.