Treasury slams Labor's workplace plans

LABOR'S industrial relations changes are likely to trigger job losses and higher inflation that will ultimately create "wage-price spirals" and drive up interest rates, according to Treasury's official analysis of the plan to scrap Work Choices. The Treasury critique also finds that limiting unfair dismissal laws will cut jobs, increase red tape for small business and make it more difficult for people to move from welfare to work.

The disclosure of the highly critical economic assessment of the plan to scrap John Howard's Work Choices laws came as Wayne Swan insisted that fighting inflation and taking price pressures off working families were the Government's prime budget objectives. The Reserve Bank also warned yesterday of the danger of a wages breakout forcing interest rates higher, putting the Government on notice after Victorian teachers this week won a massive pay rise from the state Government that could trigger follow-up claims.

Treasury's assessment of the Prime Minister's industrial relations blueprint before last year's election is contained in an executive minute dated April 18, last year, which is the subject of a Freedom of Information claim. The minute, obtained by The Australian, is a response to issues raised one day earlier by Mr Rudd in a speech to the National Press Club in Canberra, which he used to flag the industrial relations changes Labor would make in government. The analysis, delivered to then treasurer Peter Costello, looks at Labor's key workplace reforms, including the abolition of Australian Workplace Agreements; the restoration of guaranteed penalties, overtime and holiday pay; linking wages to living standards; and changes to the unfair dismissal laws.

ABC television reported last week that Treasury had rejected part of a separate FOI request for advice about whether Labor's workplace changes would cause higher inflation. The decision came despite Labor promising more openness in government, including reform of FOI laws. According to the secret Treasury advice, the department, under Treasury secretary Ken Henry, concluded that the abolition of AWAs and the return of guaranteed penalty rates would cut jobs, put "upward pressure on prices", create more "flow-on" wage claims from sectors such as mining to less productive sectors and allow unions to "bid wages up above their market level".

The Treasurer yesterday said he was not concerned that Labor's industrial relations changes would undermine his anti-inflationary budget "because our industrial relations policy has wage rises based on productivity". The Government would "bring down a responsible budget", he said. "We are going to build a strong surplus to fight inflation." Commenting on the Victorian teachers' pay rise, he said any wage rises had to be based on productivity gains. Labor's workplace changes were led by Julia Gillard, now Deputy Prime Minister and Employment and Workplace Relations Minister.

In his speech in April last year, Mr Rudd said Labor would deliver "a productivity lift" and "create a new balance between fairness and flexibility in the workplace, and in doing so, restore the rights of working families to have proper access to penalty rates, overtime and shift allowances". "Our laws will abolish AWAs - and we will do so without apology," he said. "Our laws will return the right to basic working conditions, like penalty rates, overtime and public holiday pay."

Although it has pushed through laws to scrap AWAs, Labor has allowed a form of private contracts for workers on more than $100,000 a year after pressure from employers, particularly the mining sector, and will allow current AWAs to expire over a period of five years. "The core question for Australia's long-term economic prosperity is how we rebuild our flagging productivity growth," Mr Rudd said in the speech. "This is the only way we can continue to improve living standards once the mining boom passes."

Mr Rudd cited Dr Henry's framework for economic growth - "the 3Ps: population, participation and productivity". But the Treasury analysis of the abolition of AWAs and the move to protect penalty rates, overtime and holiday pay found the changes would lead to "reduced flexibility". "This reduced flexibility, together with forcing business to pay higher rates of pay during certain hours of business, is likely to lead to lower levels of employment," the minute says. "The shift to a more centralised wage system might reduce employment and increase inflation. For example, higher unit costs, either through higher real labour costs, lower productivity, or a combination of both, will place upward pressures on prices, which effectively lowers real disposable incomes, consumer spending and thus employment. The rate of flow-on of wage increases from high-productivity firms and sectors to low-productivity ones may increase. Reinstalling union power will raise the ability of unions to bid wages up above their market level."

Treasury said Work Choices was "expected to allow a more expansionary monetary policy setting and result in higher rates of employment". Mr Rudd's promise that Labor would "ensure a minium wage, set by the independent umpire that keeps track with living standards" drew the conclusion from Treasury that "linking wages growth directly to living standards (headline inflation) may expose the economy to wage-price spirals - higher inflationary outcomes leading to higher interest rates". Treasury said Labor's plan to lower the limit for unfair dismissal claims from employers with 100 to 15 employees was likely to cost jobs.

Last night, Ms Gillard said it was impossible the Treasury analysis could cover Labor's policy because "Forward with Fairness" was not released until the Labor conference a week after Mr Rudd's press club speech. "This is a document of the former government and it can't be an analysis of Labor's policy," she said. "Take, for instance, the example of setting the minimum wage, which doesn't reflect Labor policy."

The first tranche of Labor's workplace laws, dealing with the abolition of AWAs, has passed through parliament. The second tranche will be introduced after July, when the Coalition has lost control of the Senate.

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The Fascist instinct is never far beneath the surface with the Left

Freedom of the press? Who cares about that?

Believe it or not, Perth has become the toughest environment in the country in which to practise the public service of journalism. The boom state has become the goon state, where standover and intimidation against the media is the Labor Government's weapon of choice. Police raids by armed officers on busy newsrooms, secret telephone tapping, grilling of reporters by Corruption and Crime Commission investigators that can't be reported - or even whispered to wives, husbands or, incredibly, bosses and employers - are becoming commonplace.

The days of the cabinet leak are over. Clarification: the days of the leak not organised by the Government Media Office are over, particularly those that have the potential to cause electoral pain to a Government led, ironically, by the former journalist Alan Carpenter. It is a sign of the times that many senior working journalists in WA take it as a given that their mobile phones are being, or have been, bugged. Evidence given to the CCC over the past two years confirms that what would have been a silly, paranoid suggestion only a matter of years ago is now an undeniable possibility.

Wednesday's raid on The Sunday Times newsroom by armed officers was overkill bordering on the ridiculous. The Department of Premier and Cabinet wants the CCC and police to catch those responsible for leaking a relatively innocuous yarn about Treasurer Eric Ripper wanting more taxpayers' money for advertising should the Government go to the polls early.

Several other senior journalists at the paper - and at least three at The West Australian, two at commercial television stations and one at the ABC - have over the past two years been dragged into the CCC's St George's Terrace HQ or confronted at home and told to answer questions under the 2003 CCC Act. If they refuse, they can be arrested.

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Hospital bathroom birth 'cover-up'

The notorious Royal North Shore Hospital again

The grandmother of a baby girl born in a Sydney hospital toilet with the umbilical cord around her neck, has accused the hospital of a cover-up. Nick Patsidis yesterday said hospital staff were "too busy" to treat his wife Cathy Patsidis or administer an epidural when she went into labour on Monday morning and gave birth in the toilet of a nursing suite.

However, Royal North Shore Hospital (RNSH) has denied any wrongdoing in its treatment of Cathy Patsidis. It said two experienced midwives had helped deliver her healthy baby after a "precipitous labour".

Nick's mother Maria Patsidis today accused the hospital of lying. She said she was afraid her granddaughter would die in her arms. "Everything was a lie. Whatever they said - they're just trying to cover themselves up," she told Fairfax Radio Network. "It wasn't (a quick labour). The midwife who was standing on top of Cathy should have known what this was. She didn't call a doctor, she didn't call anybody. "This midwife is holding her legs together and my son opens her legs to let her baby come out. "What if Nick didn't do that - the baby had the (umbilical) cord around its neck. "I will never forget - what I saw was something you would see out of a horror movie."

Maria Patsidis said the family felt the need to speak out to prevent the same thing happening to other families. "We had to come out and talk about it because this is happening in our hospitals - this is 2008," she said.

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NSW electricity privatization

Former Labor Party Prime Minister Paul Keating gives a lashing below to opponents of the moves in NSW to privatize the electricty supply. Despite the howls from unions who fear that their members might have to work for a change, it seems that reform will go ahead

So the lemmings at the Labor Party conference have given the Premier and the Treasurer a bruising. Well may they come to regret it. Governments are hard enough to put in place; keeping them there is even harder. The Premier, Morris Iemma, and his Treasurer, Michael Costa, are as honest a pair of souls as NSW politics has had, but more than that, they want to actually do something; in this case, to break the back of electricity reform in this state, stymied now for over a decade.

Iemma, having won a difficult election for Labor, should have enjoyed the support of this conference rather than its naked obstructionism. Bernie Riordan, the state president, may be a conscientious barracker for his electrical trades constituency but he is a woeful party president, someone who does not understand that the president's main task is to manage the party to keep it supportive of the Government.

I was state party president between 1979 and 1983. I took the job to see the Wran government remain in office amid chronic factional strife while, at the same time, paving the way for the federal Labor Party to defeat Malcolm Fraser. I did not take the job to press personal causes or to indulge my authority. But I had helpers. Barrie Unsworth was running the Labor Council and Graham Richardson was running the party. Both were attuned to their responsibilities to the state government in office and the federal party in the wings.

These days the Government in Macquarie Street has no helpers. The party president indulges himself as a microeconomic expert while the Unions NSW secretary, John Robertson, sees his role as providing T-shirts to protesters. Intellectually, both these men know that from the day the National Electricity Market, established by the Keating government, went into operation in 1995, there was no economic or commercial reason why any state would retain state ownership of power generating capacity.

When lights are turned on in NSW now, much of the electricity is provided by private electricity generators in other states. Indeed, electricity prices in the national grid are priced every 30 minutes, so competitive is the national electricity market. Yet the debate over the weekend was had as if the National Electricity Market, all down the east coast of Australia, does not exist. Electricity generation has been around now for about 120 years. It is truly industrial archaeology; anyone can build a station and the capital is almost available at your local bank. And that is without tapping the $1200 billion of Australia's superannuation savings.

A state, these days, simply does not have to burden its balance sheet with expensive lumps of these old technologies. The fact is, the sole thing worth owning in electricity is the reticulation system, the poles and the wires, which of their essence form a natural monopoly. And a monopoly that importantly has the link to the customer. And a central feature of the Iemma Government's proposals is that the distribution network and the transmission grid not be sold. This is where the Laborness of their proposals is most striking.

Riordan and Robertson complain the Premier and the Treasurer developed their plans more or less exclusively. Whatever validity there is in that criticism, the criticism should have fallen away once the Premier told the parties he was prepared to bring the Government's proposals before the state conference for a full debate. That amounted to the ultimate in consultation.

Critics will say that I am writing in these terms because of my association with Lazard Carnegie Wylie, a company chosen to co-advise the State Government on its privatisation proposals. But what motivates me is seeing the last block of the Keating government's electricity reform program into place. It is already in place in Victoria and in South Australia and to some extent in Queensland. But the biggest state, NSW, has since 1995 been the standout.

Riordan's previous foray into this issue was a decade ago when he downed Bob Carr and Michael Egan. Then the power stations were worth $35 billion. A decade later the price discussion for the same stations is about $15 billion. That is, $20 billion in lost value; $20 billion that could have been spent on education, health and vital new infrastructure. A vast sum even by national government standards.

The Iemma Government's proposals represent a dramatic and important microeconomic reform to the infrastructure base of the largest state and hence to the nation. The NSW economy represents just on 40 per cent of national gross domestic product. This is why the federal Treasurer, Wayne Swan, said over the weekend he supported the reforms, because "they go to the heart of the COAG agenda". Dead right. More than that, they go to the very kernel of the Rudd Government's federal-state reform program.

The irony is that it is Iemma who is seeing this important part of federal policy into place while the NSW industrial obscurantists are doing their best to retro-rivet the largest state to the 20th century. What is more, they are determined to do it by jettisoning the parliamentary seats of individual state MPs who won their places in difficult circumstances without much help from them.

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