While Scott Morrison drops hints about a deal with the unions to boost Australia’s economy, the unions say a modern Prices and Incomes Accord is not on the table. But one of the original scheme’s architects, former ACTU boss Bill Kelty, has a plan of his own. By Mike Seccombe.

Finding agreement on economic fix

ACTU secretary Sally McManus during a March roundtable  with Attorney-General Christian Porter, and union and employer representatives.
ACTU secretary Sally McManus during a March roundtable with Attorney-General Christian Porter, and union and employer representatives.
Credit: AAP Image / Joel Carrett

Australia will need to rely on the initiative of a Labor government, says Bill Kelty, if it is to be saved from the worst economic consequences of the coronavirus.

No, not a prospective Albanese government. That’s not the one Kelty is talking about. The former Australian Council of Trade Unions (ACTU) secretary and former Reserve Bank board member is instead harking back to the one he worked with, the Hawke government.

Kelty’s focus is superannuation, the prospect of dipping into the huge pot of money Australia has accumulated over some 30 years.

Before the Hawke government reformed Australia’s retirement income regime, Australia’s super pool was tiny and largely limited to public servants and white-collar employees of large corporations.

Now super funds hold close to $3 trillion in assets; $2 trillion if you exclude self-managed funds. And, Kelty says, they are the key to ameliorating the coming economic crisis.

“If you had to invent something for coming out of it, you’d invent this,” he says.

Kelty’s recovery plan would see the government issue “national recovery bonds”, to be bought by the Reserve Bank, which would then sell them into the market, primarily to the superannuation funds.

“Our $260 billion extra deficit is fundable by the super funds relatively easily,” he says. “If the Reserve Bank buys them, and then the super funds buy them, they’re still only 8 to 10 per cent of their total assets. Earning 2 per cent.

“It doesn’t reduce the performance of the funds, who are long-term investors anyway,” he says.

And there you have your long-term source for investment in infrastructure and of capital for companies.

But tapping the super funds is only part of Kelty’s prescription. He also advocates a modest increase in the minimum wage, maybe 2 or 3 per cent, phased in over the next year. He would continue JobKeeper beyond its currently scheduled cutoff date of September 27 but restructure the scheme to make it fairer. He would put more resources into job-training schemes, phase in better pay for jobs such as teaching and nursing and tweak the industrial relations regime to encourage enterprise bargaining.

Some elements of this plan are controversial. The ACTU’s call this week for a $30-a-week increase to the minimum wage was quickly slapped down by business groups.

The union also wants to see job security improved by “ending forced casualisation, outsourcing, offshoring, continuous rolling contracts and overuse of labour hire”. It advocates halving the casual workforce and replacing it with two million new permanent jobs. Its eight-point recovery plan also advocates more infrastructure spending, more resources for education, training and community support, further government payments to low-income households and an expanded safety net.

Employers, by contrast, want to entrench casualisation and have further “flexibility” in the labour market. A detailed wish list of reforms put out this week by the Australian Industry Group began with a quote from its chief executive, Innes Willox, calling for “fresh thinking and a new approach, aimed at boosting productivity, growing jobs, encouraging investment and restoring economic growth”.

But the “new” agenda that followed looked remarkably like the old, pre-Covid bosses’ agenda, as did the union agenda and similar proposals from Labor.

We have yet to see much detail from the government about its plans for recovery. One thing that was established beyond doubt this week, though, is that when it comes to the vexed issue of workforce casualisation – Australia has one of the highest rates among developed nations, about 30 per cent – the government is firmly behind employers’ demands.

In a landmark ruling, the Federal Court held that a Queensland mine worker, employed as a casual on a series of rolling contracts over three-and-a-half years, should actually have been considered a full-time employee, given his work was “regular, certain, continuing, constant and predictable”.

He was thus eligible for various entitlements including annual leave, sick leave and carer’s leave.

The decision could set a precedent for a million other workers and, according to some estimates, cost employers $8 billion.

Attorney-General Christian Porter immediately flagged the prospect of the government intervening in an appeal or, failing that, making changes to the Fair Work Act.

Amid the squabbling though, there are some points of commonality: the need for a better-educated and trained workforce, for one.

Even before Covid-19 forced the closure of Australia’s borders, cutting off access to skilled workers from overseas, our vocational education and training system was in desperate need of help.

A report last year by the education-focused think tank the Mitchell Institute found Australia was facing a shortage of qualified workers across a broad range of areas including childcare, aged care, mental health, nursing and trade apprenticeships. All states had cut funding; misguided federal reforms to VET encouraged dodgy private training colleges.

“What’s happened with vocational education and training has been a very sad saga over the past decade,” says Peter Hurley, a policy fellow at the Mitchell Institute.

Ten years ago, annual funding for vocational education and training was $8.17 billion, which rose to $10.23 billion in 2015, under the misbegotten funding reforms, then fell to $7.67 billion in 2018.

“You got lots of enrolments but not necessarily a good education, and you got a blowout of the budget,” says Hurley. “The vocational education and training system ended up worse off at the end of it than it was before those reforms were embarked upon.”

In general, though, there doesn’t seem to be much agreement on what workforce reforms need to be undertaken to respond to this economic downturn.

“It doesn’t seem like anyone has changed their minds, instead advocating for ‘reform that I like’,” says Danielle Wood, budget policy and institutional reform program director at the Grattan Institute.

And this brings us back to where we started, with Bill Kelty and the Hawke government.

In the early ’80s, as now, the Australian economy was in crisis. The circumstances were different: inflation was then running at 11.4 per cent; now the greater threat is deflation. Then wages were growing like Topsy; now they are stagnant. But there are parallels. Australia was deep in recession and unemployment was at 10 per cent.

The government of the day, led by Malcolm Fraser and his treasurer, John Howard, had no idea what to do. In fairness, they were not the only ones, with “stagflation” a major problem across many developed economies.

Labor won the 1983 election with a promise to get all sides together to find a solution. And so was born the Prices and Incomes Accord.

In return for moderating wage demands from workers, the union movement, led by Kelty as ACTU secretary, agreed to an increased range of social benefits, including greater family payments and access to childcare, and, vitally, Medicare.

There were seven iterations of the accord in all, which did much to make Australia what it is today, encompassing tax reform, industrial reform, industry policy reforms and more. And, of course, the universal superannuation system that now holds assets worth close to twice the country’s annual GDP.

They pulled it off, says Kelty, by ignoring what he calls the “crazy right” and “crazy left”.

“The crazy right always attacks: the big safety net, super, the wages system – they call it ‘flexibility’, but it’s just code,” he says. “The crazy left run around attacking capital and don’t want to talk to employers and think employers are the enemy. We went straight through the middle.”

He makes the negotiations sound rather more collegiate than they were, but the accord achieved big results.

This ancient history gained renewed relevance this week when Scott Morrison gave a friendly interview to The Australian. The resulting story began: “Scott Morrison will urge a new industrial compact between workers, employers, unions and government to boost employment and forge a remodelled economy after the pandemic …” It sounded a bit like a plan for an accord.

What followed was scant in detail – although it foreshadowed more to come – but left the impression Morrison was hoping the various parties would come together of their own volition. The prime minister was complimentary of the role the unions have played. “They have engaged very positively,” he told the Murdoch paper.

Indeed, they have. The unions agreed to the suspension of some workers’ safeguards – on a strictly time-limited basis – to help us through the immediate crisis, so long as the government also suspended its various legislative attacks on unions.

Speaking to The Saturday Paper a couple of weeks ago, ACTU secretary Sally McManus described it as a six-month “ceasefire”.

The unions also suggested an alternative to the flat-rate payment the government adopted under JobKeeper. This was the model put in place in Denmark, a tripartite agreement with government subsidising wages up to 75 per cent, while employers paid the rest and workers sacrificed some of their leave entitlements.

“It was all worked out in the good way the north Europeans do, where they sit down with business and with unions and with government and say, ‘Okay, we’ve got this problem, what are we going to do about it?’ ” McManus said.

“That type of social compact … our country has just, you know, drifted further and further away from being capable of doing that. Maybe we would have been in the ’80s … certainly not now.”

But McManus’s comments came before Morrison’s accord-esque musings to The Australian.

Asked this week, if any such idea had been raised with them by government, or whether they would countenance it, ACTU president Michele O’Neil was definitive.

“We are not talking about an accord,” she said.

She was diplomatic, saying the union movement was always prepared to talk to employers and government about change.

Bill Kelty says McManus is right. Positions have hardened on both sides since his day. He says the “crazy right” agenda of attacking unions, workers’ rights and the social safety net has been a feature of this government since Tony Abbott’s prime ministership.

Given the track record, Kelty says, it’s no wonder “half the union movement says, ‘Fuck it’, if co-operation doesn’t bring respect”.

According to the political veteran, Australia shouldn’t hold its breath waiting for a Morrison-convened accord to carry us through the economic crisis. The unions are firm: it’s not on the table.

And so, it seems, the ceasefire has ended early, with the industrial relations tussles that have long vexed Australia sending everyone running back to their corners.

This article was first published in the print edition of The Saturday Paper on May 23, 2020 as "Bond buy rescue".

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