NO.071

SWAN’S EMBARRASSMENT ON IR REFORM

Wayne Swan today claimed in the Financial Review that there is no evidence

that industrial relations reform will lead to higher productivity. He says that

“the industrial relations well is dry.”

Mr Swan blithely ignores the advice of every reputable source of advice on

economic management. For example:-

1. Reserve Bank of Australia

In his latest Testimony to the House Standing Committee (February 2005), the

Governor of the Reserve Bank stated on the topic of how to boost Australia’s

productivity performance that:

“The biggest thing in this area is industrial relations reform.

There must be a lot of things that still can be done.”

“From my own experience in the Reserve Bank, as we have changed

things and reduced our size and, I think, increased our productivity enormously,

one of the things that stood out was that there were a lot of benefits and

rules which were of some benefit to employees—but a very small benefit—but

were extremely costly to the employer, which means that there is a classic

opportunity for a win-win situation as these things are resolved.”

2. OECD

Under the heading “Further reforms to labour market legislation would

also encourage employment”, the OECD state in their latest Economic Survey

on Australia (February 2005) that:

“To further encourage participation and favour employment, the

industrial relations system also needs to be reformed so as to increase the

flexibility of the labour market, reduce employment transactions costs and

achieve a closer link between wages and productivity.”

“The Government is now in a position to address these issues and

should proceed as soon as practicable.”

3. IMF

In its latest Article IV report on Australia (November 2004), the IMF stated

that:

“The government agenda of proposed amendments to the Workplace

Relations Act continues to simplify procedures, increase labor market flexibility,

and link wages and work conditions to productivity.”

“However, the wage bargaining system needs further simplification,

including a reduction in the overlap of the federal and state award systems

and a diminished role of the award system in setting the minimum wage, which

has contributed to a relatively high unemployment rate for low-skilled workers.”

4. Access Economics

In an Access Economics report titled ‘Workplace Relations – The

Way Forward’ (February 2005), Labor’s economic modellers of choice

state that:

“Flexible labour markets… provide job opportunities for more

people, ensuring that the best worker is found for each job. Productivity

rises, as do wages and output.”

“…we can do better in the future – better structured

workplace relations policies can support productivity and business competitiveness,

boost job growth, lower unemployment, as well as raise average incomes and

help clamp down on the black economy.”

“…the sectors with the most flexible workforce arrangements

have seen the fastest productivity gains. More flexibility equals faster productivity

growth, both directly and by strengthening the positive interaction with other

reforms.”

CANBERRA

9 August 2005