Press Conference

70 Phillip Street, Sydney

Monday, 19 December 2005
11.30 am

SUBJECTS:

Workplace relations reform

TREASURER:

The Australian Treasury has released a Minute and it is available for people to read, dated the 6th of October 2005. It is a briefing on the Government’s workplace relations changes, the Work Choices policy which the Government has put forward. In the course of that briefing, the Treasury states that it expects higher employment growth from the new system and in the longer term positive effects on labour productivity. It makes the point that as you get more people into the workforce in the short term that can suppress productivity but as you have more flexible wage settings in the longer term that lifts labour productivity and of course it’s the longer term that we are interested in.

The briefing, in addition to that, notes the IMF recommendation that Australia move to enhance the labour market flexibility. It notes the OECD recommending that Australia move towards further industrial relations reform and it notes the OECD jobs strategy which finds that centralised or coordinating bargaining systems can have negative consequences on employment.

So I would welcome people reading this Minute from the Treasury, it is not a secret Minute, it has been released publicly, anybody is entitled to read it and it makes a finding that changes to industrial relations will lead to higher employment and over time lead to increased productivity. The kind of reform that Australia needs; the kind of reform that the Government is developing and the kind of reform that will set Australia up for better opportunities in the future.

JOURNALIST:

If it’s a public Minute why did The Australian have to FOI it? Why wasn’t it released immediately?

TREASURER:

Well because when it was requested it was released because it is releasable, as a public document under FOI. We don’t release all Minutes of the Australian Government. There is nothing secret about this, it has been released, you can read it and The Australian can read it; it is releasable under FOI.

JOURNALIST:

Mr Costello you told ABC radio earlier this morning that it is a public document available for the public, at that stage it really wasn’t was it? It’s only been released now.

TREASURER:

Well no. I have asked the Treasury to release it. It was released to newspapers on the weekend or on Friday and so that the public can do it I have asked the Treasury to put it on its website.

JOURNALIST:

Why wasn’t this document released earlier given that

TREASURER:

Well it was released to the newspapers.

JOURNALIST:

even

TREASURER:

A document that is released to newspapers is a pubic document and newspapers can publish them.

JOURNALIST:

The Minute was dated October you said

TREASURER

Yes.

JOURNALIST:

you have earlier denied the existence of information pertaining to public impact. Why wasn’t it realised to the public sooner than an FOI request?

TREASURER:

That is a separate issue. There was a separate report back in November of 2005 saying that there had been specially commissioned advice failing to show any economic benefit from workplace changes. The Australian Treasury not me the Australian Treasury put out a statement on the 5th of November saying that wasn’t the case and obviously this document which shows that there is economic benefit from workplace changes is not whatever was being referred to back in November 2005.

JOURNALIST:

Are you really splitting hairs here?

TREASURER:

No, not in the slightest. Here we have a Minute which was released to The Australian on Friday, I have asked the Treasury to put it on its website so everybody can have a look at it and what does this Minute find? Higher employment growth and in the longer term positive effects on labour productivity. Far from this being a report not showing economic benefits this is a report which shows there are economic benefits both in terms of employment and productivity.

JOURNALIST:

In another document that The Australian FOIed which was a fiscal group seminar by Owen Freestone on 27 th of October it shows that there is a short term negative impact, negative effect on productivity as more low productivity and lower cost labour is employed compared with capital?

TREASURER:

Yes. That is as I said, as you get more people into the workforce then the GDP per person, the number of increases in the workforce, the GDP per person is affected. But as they begin contributing to output because you have more flexible wage fixing, you get a lift of labour productivity.

JOURNALIST:

I was just wondering is that something that the Government has been up front about all along that there was going to be this short term slump in productivity before this long term benefit?

TREASURER:

Well it didn’t say slump. What happens is as you get more people into the workforce for the same GDP, GDP per person can be suppressed. But as those people join the workforce and as they have an increase in output and as they contribute to GDP, a more flexible industrial relations system lifts labour productivity. Let me make this point. More flexible wage fixing is supported by the OECD; the IMF; you have got an Australian Treasury report; the Australian Government. I know of no person who has any evidence to say that centralised wage fixation can either produce the same employment or productivity outcomes. And in fact if you look at the OECD jobs study those countries that have the most centralised wage fixation systems, countries like Germany and France , tend to have the lowest employment outcomes for developed economies and lower productivity outcomes. I know of no reputable person who is arguing the contrary.

JOURNALIST:

Treasurer should the low income earners of Australia be concerned about the short term negative impact and how does that sit with the government’s claim that no worker will be worse off under these changes?

TREASURER:

In relation to the changes from the Industrial Relations Commission to the Australian Fair Pay Commission, their entitlements are preserved. That is, what you have you keep. The Australian Fair Pay Commission

JOURNALIST:

that is if they keep their job. In the short term don’t these changes mean that there may be job losses in the short term

TREASURER:

There won’t be job losses, in fact the finding is that there will be employment growth.

JOURNALIST:

In the long term.

TREASURER:

No, no, we have got to be very careful about that. Higher employment growth is expected. The second point is in the longer term, positive effects on labour productivity. Nobody has said there will be a short term decrease in jobs.

JOURNALIST:

How long is the short term in terms of slowing wage increases?

TREASURER:

Well it’s a mathematical proposition. If you have the same GDP but you have more people in the workforce, productivity is lower. It’s lower until such time as those people boost GDP. And what we are interested in here is we are interested in boosting GDP. We know that a more flexible wages system, all of the international evidence is to that effect gives you a larger productivity and gives better job creation opportunity.

JOURNALIST:

How long is the short term?

TREASURER:

Well I am not going into that. What we are interested in here is changes, I am not saying that the bill was passed, when did they pass a couple of weeks ago. I doubt that you would have noticed measurable effects yet, but over time in the years which lie ahead you will see measurable effects. Industrial relations changes over the years will mean that our structural unemployment rates goes down and our productivity goes up.

JOURNALIST:

Treasurer, the Department has released a statement to say that they hadn’t prepared a report on the economic impact of the changes. Has in fact anyone looked at the economic impacts of the changes and provided a report that may or may not have been available to the Senate?

TREASURER:

Oh yes the OECD, the IMF have done many reports and they are the premier world bodies. They have done many reports on the fact that more flexible wage settings lead to higher employment and better productivity. They can do this because they can measure countries against each other. You can measure for example outcomes in Britain against outcomes in France and Germany .

JOURNALIST:

Kim Beazley has called on you to resign, how do you respond to that? For lying to parliament.

TREASURER:

Well Mr Beazley produces no reputable economic case in favour of centralised wage fixation. Mr Beazley is a puppet for the trade union movement. He is opposed to every change in industrial relations over the last ten years. And Kim Beazley said the last lot of changes which the Government introduced would cut wages. We now know that real wages have increased 14 per cent under this Government. Kim Beazley said the last lot of changes that the Government introduced would lead to higher unemployment. Unemployment has fallen from 11 per cent under Kim Beazley to 5.2 per cent. Kim Beazley has no economic credibility. He was Minister for Employment at a time when unemployment peaked in Australia , he was the Deputy Prime Minister at a time when wages grew by miniscule amounts. He opposed the changes which have lead to a 14 per cent real increase in wages. He opposed the changes under which we have now got 5 per cent unemployment. He is opposing changes in the future and other than re-echoing the words of the trade union movement has done no serious thinking on industrial relations over the last 10 years.

JOURNALIST:

Well what about the accusation that you lied to parliament?

TREASURER:

Plainly wrong, plainly wrong.

JOURNALIST:

Do you think you deceived parliament?

TREASURER:

Plainly wrong, absolutely not. The Australian Treasury issued a statement on the 5th of November 2005 and I refer you to their statement, a statement which I confirmed in the parliament from the Treasury.

JOURNALIST:

Treasurer

TREASURER:

Last question.

JOURNALIST:

The Department put out a release saying that they didn’t do economic modelling. One of the documents The Australian received was a briefing note from Senate Estimates which says that Treasury made some indicative estimates of the employment effects in order to compare various award adjustment scenarios and did some modelling on the effect of growth on award wages. What, see, they either have or haven’t done some economic modelling.

TREASURER:

Well all I can go on is what the Treasury says. If you have any further questions I ask you to refer those to them.

JOURNALIST:

(inaudible)do you know if the Minute was provided to the Prime Minister’s office as well?

TREASURER:

I wouldn’t know, I wouldn’t know. The Minute is available, I’d urge you to read it, I urge you to read it very, very carefully and I think you will see that the Minute, far from suggesting the industrial relations changes would be bad for the economy, suggest that they’ll be good.

Thanks very much.