‘Fair’ IR laws must not detract from productivity

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‘Fair’ IR laws must not detract from productivity

The chairman of the Productivity Commission, Gary Banks, has warned that regulations to promote fairness in Australia’s workplaces must not ‘detract unduly’ from their productivity.

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The chairman of the Productivity Commission, Gary Banks, has warned that regulations to promote fairness in Australia’s workplaces must not ‘detract unduly’ from their productivity.
 
And he said workplace relations reform could not remain a ‘no go area’ for policy making.
 
In a speech to economists in Sydney, Banks said industrial relations regulation is arguably the most crucial factor in productivity to get right.
 
‘Whether productivity growth comes from working harder or working “smarter”, people in workplaces are central to it,’ he said.
 
‘The incentives they face and how well their skills are deployed and redeployed in the multitude of enterprises that make up our economy underpins its aggregate performance.’
 
Vital
 
‘It is therefore vital to ensure that regulations intended to promote fairness in Australia’s workplaces do not detract unduly from their productivity. Getting the balance right is challenging and requires careful ex ante assessment and ex post review.
 
‘This is particularly important in the context of structural pressures, given the premium they place on flexible, adaptable labour markets. However, regulatory changes (in both directions) have generally been exempt from even the cursory obligations of regulation impact statements.’
 
‘If we are to secure Australia’s productivity potential into the future, the regulation of labour markets cannot remain a no-go area for evidence-based policy making.’
 
Timely warning
 
Peter Anderson, chief executive of ACCI, said Bank’s warning on the need for a suite of economic and regulatory reforms that boost national productivity is a timely warning that our nation cannot afford to simply rely on future prosperity being delivered through the resources boom.
 
‘We have to strengthen the capacity of private businesses across all economic sectors and not just rely on mining and resource companies, otherwise our living standards will go down faster than the Australian cricket team did in this week’s Adelaide test,’ Anderson said.
 
He said that Banks’s direct observations on industrial relations echoed industry concerns at unions demanding wage rises without productivity trade-offs, and at the Government and Opposition who both took a no-change IR policy to the August Federal Election.
 
Short-term populism
 
‘These considered warnings by a respected independent public agency about the risk to productivity and competitiveness from workplace over-regulation, excessive government spending, short-term populism and poorly thought-out climate policy cannot be lightly ignored,’ Anderson said.
 
‘This is especially so in light of yesterday’s ACCI–Westpac Survey of Industrial Trends which shows business willingness to invest being constrained by weakness in financial and export markets.’
 
‘If the Government is to walk the reform road, as it proposes, it needs to do so by navigating around the potholes of overregulation and inconsistency in policy that the Productivity Commission alludes to.’
 
Up the ante
 
Anderson said Banks’ speech ups the ante especially on industrial relations, climate change and next year’s tax summit.
 
‘In each area rash Government policy can easily detract from productivity and the need to grow economic activity beyond simply the resource sector,’ he said.
 
‘As we shortly turn the page from 2010 to 2011, the Productivity Commission’s warnings should be compulsory Christmas reading for Government and Opposition, given that 2011 is the year of the tax summit, the year the Prime Minister seeks to price carbon, and the year unions will push further wage rises as current agreements expire.’
 
ACCI’s 10-point Jobs and Growth Reform Agenda can be found online.
 
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