Labor has no grasp of Australia’s need to compete

The resources industry got Australia through the pandemic and delivered Jim Chalmers’ temporary budget surplus. More importantly, the forward-facing low carbon mining industry – such as rare earths, lithium and copper – that Australia hopes will take over from coal and gas will face much tougher global competition. Yet Labor chooses to push it in completely the wrong direction.

Uniquely rigid system

The crucial starting point is that Australia has a uniquely rigid workplace system that prescribes how, when and where jobs are done. Any flexibilities that survive in this framework are important.

The government is using the distorted language of “closing loopholes” to talk about its changes. But it is really tightening the regulatory screws even harder, slamming the door on flexibilities that are normal in other industrialised countries – or, as BHP puts it, tying businesses in knots.

The most economically damaging parts of the bill are the same job, same pay rules aimed at outside labour hire firms on worksites, and the redefining of casual work. The first will arbitrarily lift wages with no link to productivity, job experience or the dozens of other factors that make up wages. Redefining casualisation will force employers, including small business, into a complex 15 tests of casual work status at regular intervals.

In both cases, the burdens of proving they are not affected all fall on employers. Labor’s hope will be that labour hire firms, essential to mining companies for specific work packages or ramping up capacity quickly, will just give up if they are confronted with perhaps hundreds of different terms and conditions.

The government assured the Australian Resources and Energy Employer Association that legitimate outside service contractors would not be caught up in changes aimed at labour hire firms. The Australian Hotels Association backed the changes after the threat of back payments and fines for misdefining casuals was reduced. But AREEA also made it clear that it had read the room on Labor’s political determination to get its way on industrial relations matters.

The rest of the bill, including the redefining of casuals, will be debated in February. Another independent member of parliament, lower house teal Allegra Spender, argues that flexible work in casual jobs, temporary jobs, independent contracting and the gig economy has been essential for getting people into the workforce and in managing the rising cost of living. It’s taking a sledgehammer to workers to threaten this, she says.

In the bigger picture, it is difficult to see how Australia’s most fundamental economic problem of declining productivity can be reversed unless workplaces are made more flexible, not less. Yet Dr Chalmers dismisses any reform in that direction as “scorched earth”.

The government’s strategy of throwing subsidies at favoured industries is no substitute for bad policy settings across the whole economy. BHP says its plan for a $2 billion copper hub in South Australia is now harder to justify. Australia has a rapidly growing lithium sector, but it must compete against Chile, Argentina and Bolivia, where extraction methods are easier.

Now a government bent on ignoring Australia’s broader competitiveness is just adding to the costs.