Opinion

Paul Bongiorno
Malcolm Turnbull, trade deals and penalty rates

Malcolm Turnbull generated much excitement when he used a Mafia-inspired metaphor to describe his relationship with the man he eliminated, Tony Abbott. “There’s nothing personal,” he told 3AW’s Neil Mitchell. “Nothing personal; it’s just business.” But the fact remains the new prime minister is yet to really get down to business, or at least the business of governing. Sure there’s been plenty of repositioning, much of it welcome if continuing good polls are a guide. But as one of his senior backbench colleagues says: “He’s yet to take a tough decision.”

As the redoubtable Queensland premier Joh Bjelke-Petersen was fond of saying, “If you don’t want to upset anybody, do nothing.” That luxury can’t have much time left, although not everyone is convinced Turnbull realises it. A case in point is the issue of penalty rates. On the one hand, he suggests the rates are a historic relic and we need a more flexible, dynamic, 21st-century economy, giving Labor just enough ammunition to run a sky-is-falling campaign. On the other, he frustrates some of his MPs by then saying, “If you want to get the support of workers and of unions, industrial representatives, to changes like that, then inevitably you would have to persuade them that in net terms they are better off.” Some read that as him being prepared to sit back and wait for change to just happen. The Coalition’s business backers are pushing for more.

Six backbench Liberal MPs have spoken in favour of a more robust approach. One of them, Victorian Russell Broadbent, says businesspeople in his regional seat, particularly in hospitality and tourism, claim weekend penalty rates are killing them. This anecdotal argument is curious because they also told their local member they are really only busy at weekends. One idea is to drop penalty rates on Saturday and Sunday but raise the base rate across the week. That would leave the casuals or part-timers you hire for the busy days much worse off. An attempt to do that in South Australia foundered when it was put to the real test. 

Treasurer Scott Morrison says he doesn’t want to leave people worse off. He describes as innovative a proposal to give people a tax credit in return for a lower rate of pay. But no indication if he is inclined to adopt it. Like his prime minister, he is softening up the electorate for something. Labor thinks it may well be a three-card trick to cut wages. He disdains such talk. Morrison is in grave danger of outdoing Turnbull in the statesman stakes. He told the ABC’s Fran Kelly, “industrial relations, workplace relations in this country, for far too long it has been this pitched battle between unions and business, capital and labour, and frankly that is boring and it is not helpful”. 

Morrison says we need to have a mature discussion. But is there a grown-up way of cutting the wages and conditions of four million Australians who get weekend penalty rates? They are mostly in retail and hospitality and are among the lowest paid. Ironically, the cafe and restaurant sector has been growing at twice the rate of the rest of the economy. And not all are whingeing. Ten Eyewitness News interviewed a busy cafe manager on this week’s Labour Day holiday in New South Wales who said if you’re going to employ a staff member and they’re sacrificing a day off that everyone else is getting, they might as well get compensated for it. He even suggested customers are happy to pay a surcharge on Sundays and public holidays.

Rather than penalty rates being a historic relic, they appear to be embedded in the culture of the country. They have certainly been a feature of industrial awards for more than a century, in times of strong and weak employment. Labor’s Bill Shorten says other more significant factors are affecting the jobs market.

The Labor-aligned McKell Institute has published analysis that suggests regional and rural Australia would be hardest hit if penalty rates were scrapped. Millions of dollars would be lost to local economies. People would not have enough money left after paying for essentials, such as utilities, to spend in other shops and businesses on the main street. 

Shorten raised eyebrows when he suggested that for people on $40,000, $50,000 and $60,000 a year, penalty rates are the difference between whether or not they can afford to send their kids to a private school, and whether or not they can afford to sustain a mortgage. He later clarified he was not talking about exclusive private schools, but even if he was, there would be plenty of aspirational parents who could identify with the sentiment. And this worries some Liberals. One told me he suspects the opposition leader was making a play for these voters in the same way John Howard used to.

While the prime minister and his treasurer are in the phase of keeping everything on the table, they leave themselves open to attacks such as this from Shorten: “The Liberal Party has no plan to lift wages. All they want to do is increase the GST, increase the cost of going to university, increase the cost of going to TAFE and cut the wages of workers.”

But helping the government fill the vacuum was the signing earlier in the week of the 12-nation Trans-Pacific Partnership. Turnbull waxed lyrical: “Any deal like this is of enormous benefit to us. It is a gigantic foundation stone for our future prosperity.” Australia is now part of the world’s largest regional trade agreement, covering about 40 per cent of the global economy thanks to the inclusion of the United States and Japan. It will mean “more jobs absolutely”, though the PM did not attempt to quantify them.

Turnbull was full of praise for Trade Minister Andrew Robb. Buried in the past was Robb’s betrayal of Turnbull in the 2009 leadership coup, or the fact he was an Abbott ally right up until the death knell. “Andrew’s extraordinary job for Australia” appears to have saved the Pharmaceutical Benefits Scheme and denied US drug companies the right to keep up the price of expensive new biologic medicines for as long as they were demanding.

It all sounds terrific but we only know as much as the government is prepared to tell us. It will be at least a month before the text is released. The near decade of negotiations have been shrouded in obsessive secrecy. What we know is thanks to WikiLeaks publishing three of its draft chapters. They sent shockwaves around the region. National sovereignty on a range of issues appeared to be hostage to the interests of the US and its giant corporations. 

Labor cautiously welcomes the multilateral deal but is anxious about the detail. It is convinced many of the claimed benefits are overblown. And the opposition is not alone. The Productivity Commission is sceptical of exclusive trade deals: “Diverse preferential trading arrangements add to the complexity of international trade and investment, are costly and time consuming to negotiate, and add to compliance costs of firms and administrative costs of governments.”

The Greens and most of the senate crossbench are decidedly hostile. Independent Nick Xenophon calls it the Trans-Pacific Dud. “If this is such a good agreement for Australia then why all the secrecy?” he asks. The investor-state dispute settlement clause would allow foreign firms to sue Australian governments if decisions harm their bottom line. There are safeguards but the senator says this has not prevented US firms bringing cases against partner countries in the past. Philip Morris is currently pursuing Australia in a Singapore court under similar dispute resolution provisions over our plain-packaging cigarette laws. The cost to taxpayers defending their government’s right to legislate in the interest of their health is estimated to be about $50 million.

Analysis by Fairfax Media economics writer Peter Martin adds to the scepticism on the job-creating worth of these trade deals. He put a blowtorch to Robb’s claims the China–Australia Free Trade Agreement would add 178,000 new jobs by 2035. He says even the government’s partial release of a report on the deal shows this to be a gross exaggeration. Its modelling produced a total of 5434 new jobs, a long way short of the ballyhooed headline number.

Team Turnbull has not been shy spruiking the trade deals forged since the last election as its major achievements. No doubt it only exacerbates Tony Abbott’s bitterness. But the fact of the matter is these preferential trading arrangements, whether sealed by Coalition or Labor governments, have not delivered the promised benefits.

Xenophon spells it out: they have led to much worse trade imbalances with partner countries. The Singapore deal, signed in 2003, has left us with a trade deficit of $8.9 billion, growing at 15 per cent a year. The Chile deal, completed in 2009, produced a trade deficit of $954 million, growing at the same rate. And the US deal, sealed in 2005, has gifted a $22 billion deficit growing at 4 per cent annually.

Good business for somebody, of course. The Mafia would be proud.

This article was first published in the print edition of The Saturday Paper on Oct 10, 2015 as "The ultimate penalty". Subscribe here.

Paul Bongiorno
is a columnist for The Saturday Paper and a regular commentator on ABC Radio National Breakfast.