Strong employment with low inflation is the surprising consequence of WorkChoices (which economists predicted either the strength of employment growth or the decline of inflation in recent quarters?)

This will prolong the China boom which, with Australia’s traditional system of Labor relations, would already have blown up in our faces. (The new rules allowing easy skilled labour immigration have also played an important part.)

Instead of the traditional wage explosion, jobs are growing fast, wages are growing moderately and inflation is falling again after threatening to surge well past the RBA’s comfort zone.

Old Labor values union rorts well ahead of overall economic efficiency. Kevin Rudd has produced a partial blueprint for a partial rollback of WorkChoices. The ALP convention will feature fierce debate on this matter.

Rudd’s proposed abolition of the Arbitration Commission along with several related agencies could be a ripper added reform. But, alas he plans not further deregulation but instead real re-regulation. Damn the entrepreneurs, damn the workers! Comrade, we must keep our union bosses on side!

Veteran commentator PP McGuinness concludes:

… there is a fair chance that even an incompetent Government might be rescued by the direction that Labor is taking. Perhaps now the business community might start thinking seriously where its interests lie. There is an old saying, sometimes attributed to Lenin, that capitalists will be prepared to sell you the rope with which to hang them. Will the business community, with which 85% of the work force has more in common than with the cynical and power-mongering apparatchiks and bullies of the unions, stand aside and simply watch?

Surprisingly strong employment and surprisingly low inflation have kept Howard and Costello in the political race. How New Labor sorts out its inherent conflict with Old Labor on this point will be more important than any other issue for the outcome of the 2007 Federal election.

This is not to forget the big economic benefits that are at risk.

Read more at Henry Thornton.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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