Foreign workers are a test of Labor's maturity

JULIA Gillard's loss of nerve over the Gina Rinehart foreign workers deal betrays lack of policy conviction, extreme sensitivity to pressure from the trade unions and the vulnerability of her leadership.

On Rinehart's Roy Hill project that involves employment of 1700 overseas workers and 6700 Australians, Gillard has finished in another untenable position -- she backs the policy yet has signalled her reservations to the unions and other critics.

Gillard is trapped between best policy and self-interested politics. The Prime Minister looks weak and unable to provide leadership on the pivotal economic issue of resources boom management.

There are two consequences from the shambles of past several days. First, the foreign worker policy is proceeding with its ministerial advocates more resolute than ever and determined to defeat the scheme's critics.

And, second, a new and populist campaign to halt or limit foreign workers has been ignited that combines both Left and Right with the unions, sections of caucus led by senator Doug Cameron, the Greens and some of the independents, notably Bob Katter and Andrew Wilkie, ready to fight and stir public opinion.

This is a dangerous moment for Australia. Any sensible person listening to Katter yesterday would have felt a chill of alarm as he invoked every sentiment and prejudice against foreign workers -- that this was about "the most fundamental change in Australian society" for a century, that it meant giving "plum jobs" to foreigners, that Chinese money was involved, that it meant "smashing unionism" and that Australian workers would be replaced with "lower-paid foreign workers", diminishing hard-earned award standards.

Obviously, not everyone opposing the policy shares all Katter's views.

There is one certainty: this battle has just started. The lack of political and policy authority within the higher reaches of the government means the fallout could be volatile.

Gillard has equivocated at the exact moment she should have been resolute.

The broader Labor constituency is divided on this issue.

Gillard now has a serious problem: a split between the national economic interest and the emotional heartland of the industrial movement. The unions, Greens and independents are mobilising. They sense a crusade in the cause of Australian jobs -- yet "Aussie jobs" is supposed to be Gillard's theme.

Presumably Gillard will seek to reconcile the two positions by saying the mechanisms being created will guarantee that foreign workers enter only when Australians cannot fill the jobs.

This concession mechanism was unveiled yesterday. On a motion from Cameron the partyroom endorsed creation of a new caucus subcommittee with authority to monitor and report on implementation of the new enterprise migration agreements to ensure Australians are preferenced for jobs.

It will probably amount to an exercise in window-dressing. The risk is that too much red tape might kill the concept.

Yet Immigration Minister Chris Bowen's policy remains in place. Bowen retains the power to authorise EMAs for foreign workers. The guidelines stay in place. Bowen will keep approving EMAs as required and he says estimates are "somewhere between 10 and 30 projects" meeting EMA standards. Over time, this would mean tens of thousands of foreign workers.

The policy begins with Rinehart as exemplar because foreign workers are essential. Bowen explained: "Mining companies tell me that their biggest challenge when financing their major expansion works is convincing financiers that they will be able to source enough skilled labour to finish the project on time and on budget." So the EMAs are tied into project financing.

The truth is the foreign worker policy has been debated for years going back to Kevin Rudd's leadership. The EMA concept was recommended in 2010 by the National Resources Sector Employment Taskforce chaired by Gary Gray who was appointed by Rudd. Last Friday Gray said: "We have spent a number of years looking at how we might design this idea."

EMAs were endorsed by cabinet in the 2011 budget context. Bowen issued the guidelines in September 2011 and the Roy Hill project applied either late last year or early this year.

Bowen's office discussed the Roy Hill issue with Gillard's office the week before last and a brief was provided to the PM's office yesterday week.

The damage done to Gillard and her government last week by Australian Workers Union boss Paul Howes has been significant. The AWU is supposed to be supporting Gillard, so what was Howes thinking?

Last Friday he denounced the Roy Hill decision, saying: "Whose side are we on? This is a big win for Gina Rinehart, it's a big win for Clive Palmer and it's a big win for Twiggy Forrest." ACTU chief Dave Oliver said it was a "very poor decision".

Howes' comments implied the government had lost its marbles. This could only reflect on Gillard. The implication was that Gillard had lost control of her government. Howes felt the decision to assist Rinehart's project was in conflict with Labor's class-warfare political campaign against Rinehart and Palmer.

Yet any notion that Labor should discriminate against Rinehart in policy terms because she was a Labor political target would be untenable.

In fact, the folly of Labor's class-warfare campaign is exposed -- its electoral tactic of attacking mining bosses is contradicted by a required resources policy that necessitates assisting their projects.

Nobody doubts the significant divisions in the government over how to manage the EMAs. Gillard was trapped -- she had no option but to back her ministers, Bowen and Resources Minister Martin Ferguson, yet she felt compelled to appease union protests by distancing herself from their decisions on Roy Hill.

Bowen is running hard. He told the parliament: "This project is vital for Australia's future and this agreement is vital for delivering it. The money needed to be raised for this project is $9.5 billion. That needs to be raised on international markets and that makes this the biggest single debt-raising to occur on the planet this year. To get that finance, Roy Hill needs to reassure its investors that it is able to complete the project on time and on budget."

All ministers want to preference local workers for jobs. The truth, as Gray says, is that the unemployed are reluctant to cross the Nullarbor. The deeper truth is that the explosive investment in the resources sector makes a new foreign worker policy essential. This is a decisive test of Gillard's leadership and Labor's maturity.