What do new disclosures reveal about Coalition IR policy?

Wage bargaining conditions may well change under a coalition government. AAP

Two unexpected disclosures have refocused attention on the Coalition industrial relations policy before the election.

The first was further detail from workplace relations shadow minister Eric Abetz about limits on wage claims and bargaining in an interview with The Australian.

The second was a comment on by Liberal candidate Ann Sudmalis that “any workplace relations legislation is on the table after the election, not before” and that “it will be reviewed after the election and that has been made perfectly clear to everybody”.

Both revive previously dormant questions about what a Coalition would do in workplace relations.

Limits on wages and bargaining

Senator Abetz’s interview foreshadowed legislative amendments to force employers and unions to prove they have engaged in an “appropriate discussion and consideration of productivity” before any pay rises above inflation pay rises. In another interview he repeated his choice of growth in the consumer price index as the threshold.

This is the first time a quantum has been specified regarding the level of acceptable wage increases under a Coalition government. At present the inflation rate is 2.4%, while the labour cost index is growing at 3% and wages under enterprise agreements at 3.4%. So this restriction would apply to the majority of negotiated wage increases.

The previously issued policy had already mentioned that workers would not be allowed to strike, or have an agreement approved, if the Commission was not satisfied that the parties had engaged in meaningful discussions about productivity; but it had not specified a value for the maximum acceptable wage increase.

It is a remarkable proposal, as it returns wage bargaining to a situation like that existing over two decades ago.

For a brief period after the Commission approved the introduction of enterprise bargaining in October 1991, it had played a key role in the vetting of agreements for productivity and wage increases.

Yet all parties tired quickly of this. Employers, unions and the government all felt it slowed the adoption of bargaining, and led to a third party intervening in matters that were rightly the preserve of employers and workers: what outcomes in terms of wages and productivity were most suited to the conditions in that enterprise? The direct parties were in a much better position to determine these than the Commission.

So with widespread support in June 1992, the Government removed the Commission’s power to vet agreements for productivity and wage increases, as the participants were “accepting greater responsibility for finding their own solutions”, and introduced the “no disadvantage test” for agreements. The latter remained until removed by WorkChoices in 2006 (before being reintroduced and strengthened as the “better off overall test” under the Fair Work Act). But no government sought to take responsibility away from the parties for determining workplace productivity and wage increase outcomes, until now.

The Coalition, which for many years sought to “prevent unwarranted interference by third parties in agreement making” (a phrase used by Minister Abbott when introducing a 2004 Bill), plans to now promote such interference.

The size of the impact on employee wages is hard to predict, though clearly the intention is to depress them. It depends on the form the new legislation takes and how the Commission interprets it. However, if the Coalition follows the precedent set through its previous period in government, we might expect that few people appointed to the Commission will be from a worker background.

What else is to come?

Excitement over the revelations by Senator Abetz and Ms Sudmalis arises in no small part because industrial relations is a topic on which the Coalition wishes to remain silent. When challenged by Mr Rudd in the second debate that he had previously said the Howard government’s industrial reforms were its “finest achievements”, Mr Abbott dismissed this with “I’d like to see the quote”. He could have found it in Hansard, where he had begun a speech “by reminding members that workplace reform was one of the greatest achievements of the Howard government”.

Hence it was no surprise when reports indicated senior Liberals were “aghast” that Senator Abetz had been “freelancing”, contrary to the “agreed strategy of keeping industrial relations off the front pages of newspapers during the campaign”.

Coalition candidates, especially in Sydney, have repeatedly declined interviews and public appearances, perhaps to avoid a repetition of the 2011 comment by Liberal MP John Alexander that penalty rates for working nights, weekends or overtime “cannot be a good thing”. These were the main benefit lost by many workers through “agreements” in the WorkChoices period, so reviving the issue was seen as reviving the idea of WorkChoices.

WorkChoices is a topic about which the Coalition is very sensitive. As Mr Abbott said when he became Leader of the Opposition, “The phrase WorkChoices is dead. No one will ever mention it ever again.” Now the Coalition emphasises that “16 members of the shadow cabinet were ministers in the last government” when citing its credentials on asylum seekers and debt, but not industrial relations. Yet the current shadow treasurer was the second minister in charge of WorkChoices and Senator Abetz wrote the main government booklet extolling the virtues of WorkChoices.

So it is noteworthy that Senator Abetz last week reiterated his view that “there are a lot of job losses… because of penalty rates”. He carefully added that “whether penalty rates are or are not at an unsustainable level is ultimately to be judged by the independent umpire.” That is, rather than legislating to reduce penalty rates (which it did not do under WorkChoices anyway), the Coalition would likely make submissions to the Commission supporting employer bids to reduce or remove penalty rates in awards.

The post-election landscape

Observers have been sceptical of claims WorkChoices is “dead, buried and cremated” before this election because no mention was made of it before the 2004 election, before it was introduced. Afterwards Prime Minister Howard said that voters should have been aware of it as their intention to overhaul the workplace “has been very well known for a long period of time”. It was not an aberrant policy they got wrong, it was “an article of faith for the Coalition”. As one Coalition frontbencher reportedly said as recently as 2012, “it’s in our DNA to do something about industrial relations”.

Yet political considerations dictate that, if it wins a small majority in the House of Representative but not control of the Senate, a Coalition government could not reintroduce WorkChoices in the same form as previously.

Other means would have to be found to achieve those underlying objectives: to reduce penalty rates, wage increases and worker and union bargaining power.

One prong would be the “back to 1991” approach to wages and bargaining.

Another would be submissions to the Commission, aimed at cutting or abolishing penalty rates, and likely supported by legislation to give greater priority to “productivity”, “costs” or “employment” considerations, along with strategic appointments. Reducing the safety net could make it unnecessary to repeat WorkChoice’s abolition of the “no disadvantage test”.

Some changes aimed at reducing union bargaining ability have already been flagged, and some of these differ from (and go beyond) WorkChoices. Other policies will only be put “on the table after the election”, as Ms Sudmalis said. Expect changes to “individual flexibility arrangements” to give them some of the characteristics of WorkChoices’ Australian Workplace Agreements, as requested by employers, but with some differences to enable a claim of “not WorkChoices” to be sustained.

Even if the objectives are the same, it will be essential to use different methods.

If, however, the Coalition wins control of the Senate, as it did at the 2004 election, then it is impossible to predict what will happen.