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Aug 30, 2012

Why Shorten must win the Grocon battle

The CFMEU tactics are a bald play for power ahead of a potential Abbott government. If they win, it's back to the "rust belt" 1980s. Rob Burgess of Business Spectator looks at the state of play.

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The muscle flexing going on at Grocon building sites is a reminder of how good we had it during what Tony Abbott calls the “golden age” of the Howard government.

In those days we could afford as many of these title fights as we wanted, and the economy would grow nonetheless. The mother of them all, the Patrick’s waterfront dispute, even made pretty decent TV.

But we can’t afford it now. Look at the competing forces in the economy, and it quickly becomes clear that a major escalation in building costs — Grocon says it’s losing $370,000 a day just at the site in Melbourne’s Lonsdale Street — is a golden-age-luxury we can’t afford.

Australian Mines and Metals Association director Minna Knight yesterday warned that this kind of dispute would deter inward investment, including $260 billion in resources projects.

That claim is a bit overblown, but when Knight’s comments are put alongside falling commodity prices, it’s easy to see how much damage the CFMEU can inflict on Australian growth. Overseas investors, including our biggest miners, must revise their forecasts not only for iron ore prices nearly 40% off their peak, but for the risk of rolling industrial action.

The abolition of the Australian Building and Construction Commission has clearly emboldened the CFMEU, whatever its leaders say, and industrial relations minister Bill Shorten has the urgent problem of breaking up this dispute to keep some kind of fig leaf over Labor’s embarrassment.

But his is not the biggest problem. While Tony Abbott is happy to say the ABCC “cop” must be put back on the beat, there is no ducking the fact that industrial action under an Abbott government would return to something like the “golden age” disputes John Howard and Peter Reith fought.

Why? Because at heart these battles are not about workers’ rights — other than workers’ right to be part of a potent power bloc in Australian politics. While the Gillard government hangs on, the bald power plays of the CFMEU leadership will at least be heard in Labor boardrooms. Under Tony Abbott they will not.

The risk is that in just over a year’s time, a perfect storm will blight the economy — tumbling commodity prices, ravaged public finances, increased labour costs putting an extra brake on infrastructure projects, and industrial anarchy. If that combination arrives, the Australian economy would look more like the early-1990s than the full employment growth story of today.

The big difference is that in the early 1990s, the “golden age” lay ahead of us. For some time I have argued that only the opposite looms for us now: a top heavy demographic profile with burgeoning health-care bills, the golden goose of the resources sector rapidly being replaced by overseas geese or just being hit by softening demand (hence the dropping prices), and in particular, a public debt position that we simply will not be able to address in years ahead.

The Keating public debt that John Howard heroically paid off during mining-boom mark-one, was smaller than the 10% of GDP our federal government now owes. When the state debts are factored in, we’re well above 20% of GDP, and that’s before our private debt bubble in the housing market is considered.

Whether or not Knight’s predictions are correct for the resources sector, an incoming Abbott government will be slashing public spending, and public service jobs, to try to balance the budget just as unemployment is naturally rising anyway. The vicious circle of slowing business activity, slowing tax revenues, and rising unemployment will do its work, and we won’t be back in the golden age of the late-noughties — more the “rust belt” blight that characterised the Victorian economy in the late 1980s.

The CFMEU leadership won’t be worrying it’s pretty tattoo’d head over that kind of scenario — union leaders, if not the workers, prosper during times of mass unemployment.

The onus is now on Bill Shorten to prove that Labor can smooth over the Grocon dispute without the ABCC. If he does, Abbott will take the blame for the coming industrial shocks. If he doesn’t … what does it matter? The unions will get the power they crave, and their members, along with the rest of the country, will suffer the consequences.

*This article was first published at Business Spectator

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42 thoughts on “Why Shorten must win the Grocon battle

  1. Frank Campbell

    Yes, Fredex, Crikey is looking increasingly schizophrenic since its Kohler associates were bought by Murdoch.

    But the ideological fault lines were there all along.

    Crikey is an incoherent gaggle of ex-bureaucrats, corporates, castrated Marxists and climate zealots. Bewildered Old Labour stalwarts flounder in the wake.

    Crikey has never had the slightest comprehension of corporatism.

    Peter Martin’s piece reflects Murdoch corporatism, in which unions are tolerated only as a device to ensure a domesticated labour force. Martin never says what the Grocon dispute is about. Martin never mentions the fact that Australia (especially Victoria) was in the early 90s in the grip of a severe recession. All Martin does is to raise the spectre of tattooed union thugs smashing the economy. In fact the occasional eruptions of ritual violence in the building industry tell us more about the corrupt building industry than unionism or the economy as a whole. Martin knows that unionism is a shadow of its former self, but cynically inflates the rubber bogeyman.

    The Grocon dispute is neither a cause nor a consequence of Australia’s past economic malaise, and is irrelevant to the next crisis of local capitalism.

    Look at Martin’s nightmare: “a perfect storm will blight the economy — tumbling commodity prices, ravaged public finances, increased labour costs putting an extra brake on infrastructure projects, and industrial anarchy”

    Nothing remotely original or new there. Except for the odd one out. Yup, “industrial anarchy”.
    Who needs Rottweiler Reith to scare the horses when you’ve got Peter Martin?

  2. margaret moir

    More anti union & Mr Abbott Speak total doom and gloom. The Unions and members have proved their loyalty and commitment to our country I do wonder if big business can say the same with downsizing sending increasingly more jobs off shore leaving the govenment with the bill for the unemployed. Who was it and what media supported the idea that convinced the community the governments shouldn’t own income generating assets purchased with our own taxpayers dollars. The profits to benefit the whole community. If the government still owned Telstra, had our own state banks (run pre deregulation of banks) we owned our own power and water all the essential services. If we had to pay more at least the taxpayer on the roundabout would have benefitted. How about exploring who really has benefitted from globalisation and the deregulation of our banks our markets. Maybe it would be enlightening to all to have a exhaustive look in simple positive vs negative explanation. Now that would make a story tired of Mr Howard being portrayed as the be all and end all. WE should be supporting a govenment that is trying to address important long standing ignored issues left in the too hard basket. Big tobacco and the damage to health being addressed, the need to have understanding if the teaching methods in our schools are effective (very important for our future) the fact that the river system was in serious distress but up river continued to draw water regardless of the impact down river. The fact that dental health is important and may save money in the long run. I am excited by the NBN that the govenment / the taxpayers will own it and it will pay for itself and hopefully enable business more opportunites to work outside the cities. The endless issues with health / hospitals very difficult but this unusual govenment has taken it on and is attempting to bring about resolutions when the Howard govenment on all of these issues important to ordinary people did little or nothing. Thank you for the opportunity to have my say we truely are a lucky country and hope it will with the determination of the ordinary people and a govenment that will look first to the interest of his own people as well as all who contribute our country will continue to be great. Forgive me if I have miss understood what you have written.

  3. Scott

    Well, according to this :-
    , the net debt in 1996 was 96 billion in the red.
    I don’t think it is chinese whispers.

  4. geomac62

    In a speech to the Liberal federal council that was pitched to positives rather than negatives, the Opposition Leader said he had been part of a good government that inherited a $10 billion budget black hole and turned it into surpluses. Gratten article in the AGE .
    By the time of the 1996 Election, unemployment was high, but at a lower rate than at the previous 1993 Election, and interest rates were lower than they had been in 1990, but foreign debt had been growing.[3] The Keating Government was projecting a small budget surplus. Following the election, an $8 billion deficit was confirmed. Wikipedia
    The truth is that taxation as a proportion of the economy is lower now than it was under John Howard’s government. The tax to GDP ratio, 23.7 per cent when Labor came to office, is now 21.2 per cent.
    According to figures that came across my desk yesterday, had the ratio remained at the 2007-08 level that Labor inherited, tax receipts would have been $21.4 billion higher in 2012-13 than they are projected to be.
    Returning the Budget to surplus would not be an issue. The Government would not only be looking at a surplus of $22.9 billion next financial year, but would have been back in the black by more than $3 billion in 2010-11. Oakes sunherald
    After John Howard won he ”uncovered”, with suitable gasps of feigned surprise, the $8 billion ”Beazley black hole”, resulting in some serious cost-cutting in the 1996 budget and the ”charter of budget honesty”, which required the Treasury and Department of Finance to provide an independent report on the fiscal and economic outlook during an election campaign, and independent costing of the policies of the major parties. SMH article
    So do we have a 90 or a 8/9/10 figure ? The link has two figures as well for 95/96 one of -11 mil and another of 96 mil for general net debt while the former is general cash revenue and cash balance .
    Your assumption about the first home buyers grant is incorrect . It was introduced because of the massive fall in the building industry , a stimulus . Many homes were rushed through to beat the GST and conversely many were put off after its introduction for the same reason , GST . As with any handout to the private sector be it health , education or homes the price went up in ratio to the handout because it could . Health insurance like private education fees go up every year without fail over and above the CPI .

  5. Scott

    “Your assumption about the first home buyers grant is incorrect ”

    Not according to this

    As for your other question, there is a difference between a deficit (or negative underlying cash balance which is a loss on the Income statement…your -11 billion) and debt (which is a liability on the Balance Sheet)

    They are related somewhat as deficits usually need to be financed by increased debt but they are not the same thing.

  6. John Bennetts


    As a union member of 40+ years and a construction site manager of somewhat shorter duration, I feel qualified to answer your question, at least in part.

    There are two types of unions – those for employees, and those for employers. The former Industrial Relations Act defined them as such. These organisations are supposed to be the negotiating representatives of their members. Both engage in industrial action, both lobby politicians, both run advertising campaigns at election time.

    Grocon will have received and be receiving advice from many sources, including corporate and industrial lawyers. Ditto, the CFMEU. Grocon can pretend that they are suffering grievously due to the current turmoil. CFMEU has a history of promoting confrontations such as we are now seeing, partly as some kind of advertisement to their membership that they, the members, are relevant, and that militarism is a way to achieve their goals. I don’t agree with this, but consider it to be street theatre.

    The real and lasting wins and losses will, as always, take place in negotiations and courtrooms. The purpose of the theatre, on both sides, is to bring the other party to the table and to deny them the upper hand in negotiations.

    Back to my own union membership: I have never taken a day off on strike, my union is very low key and professional, it is a large union with wide coverage and plenty of members. You will never read about it in the press, because confrantation is not their style. They have provided me with advice which has assisted me in my private negotiations with two employers in my earlyier days. They also coordinate and advise, in conjunction with other unions, during corporation-wide enterprise bargaining. This is about as close to the ideal as you will find.

    There are certainly true twits on both sides of major disputes such as the current CFMEU/Grocon one. I share your concern for the role of the police, although what they are doing is what they enlisted for and trained for, so I don’t feel sorry for them.

    The bigger the project, the bigger the stakes. It’s no surprise that the largest infrastructure and mining projects in the land are often where things come to a head. The trick is for the true decision makers to get together and hammer out a deal. What the hot-heads from both sides do is ultimately irrelevant… as, for example, the current CEO of Qantas will soon be irrelevant, despite having pulled off the greatest and m ost disproportionate dummy spit of anybody in the Australian industrial arena for generations. It is, in the final washup, not the size of the dummy or the distance it travels, but the number on the accountant’s bottom line. This goes for employees’ unions as much as it does for employers and CEO’s.

    Frequently, it is the side that spits the dummy first and furthest that ends up getting the worst of the negotiations. Patience counts.

    As for only 15% of the population being union members… who, in their right mind, would contemplate joining the HSU today? I wonder what percentage of employers are active in THEIR union? Less than 15%? The figure is somewhat irrelevant. What matters most is how good the representatives are at devising strategy and around the negotiating table.

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