Howard, Keating, Hawke and labour market reform

One of the posts that I’ve had in the back of my mind since I started at Troppo is a ranking of the PMs of my (adult) lifetime.

Readers of this column will not be surprised to learn that I think that Hawkie was the only really good PM in my lifetime.

In any event as I say in this week’s column, when it comes to political style the more I think of John Howard, the more I think of Paul Keating. Keating ventured into culture war, but did so in a self indulgent and arrogant way which means that he not only lost the war he started, but set the stage for what turns out to be a huge reaction against his own preferences.

I reckon if you want to fail, go into religion, not politics.

In any event, the column is probably a bit unfair to Keating in one sense, and that is that he did manage to pump out some quite good policy during his time in government. But he was very much a stop-start pollie. One big statement after another. And Keating’s lack of a sense of process actually set the stage for a lot of the outrages that Howard has subsequently perpetrated.

His ads for his labour market programs, with Bill Hunter clambering around slag heaps talking about how great it was to be an Aussie (that’s from memory and I may need correcting on it), were the template for any number of Howard (and ALP State) Government propaganda campaigns.

I recall being incredulous when John Dawkins told me of some plan to start a hare running to distract attention from some disaster. It seemed to me crazy and likely to create the Whitlamesque impression of ‘one disaster after another’. I suppose the idea was not completely unknown to the Hawke Government, but it was rare. I don’t remember it. Again, that kind of emphasis on improvised media management seemed to be born in the Keating years.

IR reform as an improvised mess. It didn’t have to be this way

The more I think of John Howard’s political style, the more I think of Paul Keating’s.

Both fought for the ‘middle ground’ but by fomenting division rather than uniting people. Both preferred political gestures to political process. So neither delegated well. And both were culture warriors

Former speech-writer Don Watson said Keating had “the metabolism of a cornered rat”, being unable to get excited until “the stakes were very high, preferably a matter of life and death.” Thus he went from one policy enthusiasm to another rather than steadily building his position. Howard is similar. (And has likewise been likened to less truthful members of the rodent kingdom!)

If you’re thinking “that’s just how politicians are”, Bob Hawke’s political style is a sharp contrast on all counts.

Howard’s proposed IR changes illustrate my point. They’re an impromptu mess.

A government that took office promising to cut red tape in half (and then introduced a mountain of new tax paperwork) is reforming IR regulation with a 687 page bill that it expects Parliament to pass in a few weeks.

It’s supposed to enhance workplace choices but not if the Government doesn’t like your choice. You can swap two weeks’ leave for more cash, but you can’t even offer to trade less cash for re-instatement of your current protections against ‘unfair dismissal’. If your union suggests it, it can be fined $33,000.

I asked the Government’s WorkChoices hotline if this was true. A quite senior officer responded: “How would I know? The bill is 687 pages long”. That’s choice for you. In fact clause 101 D of the bill empowers the minister to ban any other choices made in agreements he doesn’t like them.

But the big problem is that as the dole is withdrawn and tax is paid on wages, those going from welfare to work still often see around forty cents in each additional dollar they earn. Yet we’re still pre-occupied with cutting the 48.5 percent marginal tax rate for high income earners.

So, as right-of-centre labour market economist Professor Mark Wooden put it recently

Ultimately, creating more competitive wage structures for low wage workers without damaging the incentive to work requires a fusion of welfare, tax and labour-market policies. Simply changing the way minimum and award wages are set will make little difference.

Over the last nine years the Government has introduced major reforms in tax, IR and labour market programs. But it’s never properly addressed the interactions between them.

It didn’t have to be that way. In 1998 five economists proposed integrating tax, IR and welfare with a compensated minimum wage freeze. As real wages fell with inflation, low-wage working families would be compensated with gradually rising tax credits (effectively cash in their pockets). Blair and Clinton used tax credits to improve working family finances and incentives to work and of course their own popularity.

The five economists’ plan would have reduced unemployment by around one percentage point, creating around 150,000 jobs (and perhaps double that) amongst those who need jobs most the young and the low skilled.

To keep fiscal costs down at a time when government revenue was scarce, those without family dependents would have gone without compensation.

The unions opposed the plan because it was premised on a piece of economic commonsense the unions deny that relatively high minimum wages like ours don’t price people out of jobs. The Opposition did what oppositions do endorsing the pleasure (the tax credits) without the pain (the minimum wage freeze).

And the Government? Back then it was shy of creating losers. And once the ALP advocated tax credits, the Government opposed any policy with the same name, however different its specifications or context.

I reckon that then and indeed now it was not just the right way to go economically. It was also smart politics. Remember Bob Hawke, who got through far more difficult economic times than Howard, with a similar record of electoral success?

He sold Australia wage restraint by convincing Australians that their sacrifice was necessary, that it was fair, and that it would help build better lives for their families and their community which it did.

Howard could have done the same. He still can. There’ll be no shortage of losers from his IR change particularly if the economy slows. Yet the recent revenue bonanza could have allowed Howard to fund a ‘no losers’ wage-tax trade-off. And he could have run it longer than the budget would have allowed in 1998.

I reckon it would make him unassailable as PM as Hawke was during good economic times in 1985 and Menzies was all those years ago. (Both PMs were unashamed to pinch their opponents’ best policies).

Australians want governments that know where they’re going and steadily work towards their vision. They don’t want improvised bits of class warfare cobbled together the moment a Senate majority comes into view.

It’s bad economics. It’s bad leadership. And as a few worried Coalition back-benchers and Senators are realising, it’s bad politics.

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Cameron Riley
2022 years ago

Good article. I enjoyed the comparisons of PM style.

2022 years ago

Yet another illustration of the old saw that truth is stranger than fiction. A six hundred page bill to simplify the IR legislation! On the upside, it is well short of the 10,000 pages of tax law.

A different way to go would have been to introduce a two page bill to eliminate the unfair dismissal laws, then when it turned out that the sky does not fall down on that account, other moves could have been addressed with slightly less hysteria.

The most damaging element of the old sytem , the minimum wage, stays in place under the new system. Who really cares about the slow, the inexperienced and the unskilled? No wonder the intellectually handicapped are grossly over-represented in prison.

2022 years ago

Actually I am a bit disappointed with John Howard, I would have expected an offspinner to do better.

2022 years ago

But then some would say that he could have used some coaching with his bowling as well. Perhaps Nicholas and I could offer him a package, we would guarrantee to lift his bowling performance and his IR lego as well. Especially the linkage of tax, welfare and wages.

Homer Paxton
Homer Paxton
2022 years ago

Another quality article nicholas. Well done.

the only way to deregulate the labour market is to introduce more regulation.

I have a friend who is very happy with his EBA with the union.
The refotms have been manifold and the workers have been justly rewarded.
his main problem is how to circumvent the law now!!

Nicholas Gruen
2022 years ago

Homer, Please elaborate. (You can elaborate about how good my article is if you like, but I actually mean please elaborate on your friend’s situation. I’d love to know more).

Homer Paxton
Homer Paxton
2022 years ago

can’t too much as he law advisors are still going through the 1300 odd pages but it does appear he cannot have a collective agreement despite he and the workers wanting it.

he is now getting to the tricky part of getting advice which isn’t advice as lawyers cannot advise on illegal manouvers!

My guess is that he will have an EBA bur it will simply be ‘AWAs’ which are all the same IF that is legal.

A bit stupid but such is life

2022 years ago

Interesting article – I wonder how well John Howard has set the country up for the longer term and will be viewed in 30 years time. He’s dodged bullets well but then it’s rather much easier when there hasn’t been a recession for 14 years.

How well have the opportunities been used? Tax is a complete mess. What about the state of the tertiary education system?

Glenn Condell
Glenn Condell
2022 years ago

Fine analysis Nic, thanks.

Steve Edwards
Steve Edwards
2022 years ago

Very interesting Nicholas, but I’m surprised you didn’t take up the more obvious comparison with John Howard – Malcolm Fraser.

They are both lying frauds who have contempt for free enterprise, and both have successfully turned the Liberal Party into the party of electoral bribes, over-regulation, and incumbent corporations.

2022 years ago

saw hawkie on the big screen at an SBS thing a few weeks ago debating the IR ripoff.
He was great,got stuck into these aresehole business spokesmen,made them cower as he called a spade a fucking shovel.
If he was ALP leader they would be a shoo in at the next election,how ironical that would be.

2022 years ago

theres a tertiary education system? and i wasted all those years at university…