Insider blows whistle on Fair Work Commission

I don’t need to comment much on whether the current Industrial Relations system promotes economic development because in the last two weeks a quite comprehensive analysis of that has been done by a former Vice President of the Fair Work Commission, Graeme Watson.

Late last month Watson resigned from the Commission by a direct letter to the Governor-General and a separate letter to the Employment Minister, Michaelia Cash in which he said:

I do not consider that the system provides a framework for cooperative productive work place relations and do not consider it promotes economic prosperity or social conclusion.

Nor do I consider it be described as balanced.

Watson is no radical and having spent the whole of his working life in the industrial relations system he is in a position to know. It is a measure of frustration that he took the action that he did. He wanted to use his resignation as an opportunity to highlight flaws of the system. He gave it his best shake. He thought, like Samson in the Bible, he would shake the pillars of the system and bring it down on the heads of the Philistines.

It was an unprecedented action.

But the most notable reaction was the silence.

Judith Sloan, who understands the industrial relations system well, wrote a very good analysis in The Australian. Other than that I have seen little media comment. As far as I have been able to ascertain there has been no public statement from the Minister or from other more senior members of the Government responding to the Watson criticism and resignation.

Here we have a situation where one of the most senior members of an expensive and powerful government body, an insider, has blown the whistle on the failure on that organisation to serve the purposes for which it exists, in particular its failure to promote economic prosperity. No member of the Government apparently feels the need to respond.

Australia is limping along at the moment with a Budget deep in deficit, low productivity growth, with higher unemployment than we would like and apparently there is no great concern that the Institution at the heart of wage setting might be undermining our economic prosperity.

Does the Government agree with the Watson analysis? We do not know.

There are two alternatives. One is that the Government believes that the system is working well and needs no change. The second is the Government knows the system is not working well but since it has no intention of changing it, it sees no point in admitting it.

To change, things requires a diagnosis of the problem and then hard work to cultivate an appetite to change it.

We all know there is a bi-partisan agreement today on the fact that there should be no change to the Rudd-Gillard wage-fixing apparatus. It is even something that unites both the liberal and the conservative wings of the current Government.

This Country puts little focus on enhancing productivity and puts little effort into structural reform. One of the criticisms Kevin Rudd made of me when he was posing as an “economic conservative” in the lead-up to the 2007 election was that our Government had lost energy and the rate of growth in productivity was falling. I predicted his election would not improve it. It did not. In fact it killed productivity growth.

But nonetheless back in the early 2000s it was thought that slow productivity growth was an indictment on an incumbent Government - by both sides of politics.

These days there is little debate about structural reform or micro-economic reform. We do not focus on enhancing the drivers of productivity growth.

This is where the people of “ideas” become important. The political class needs people who can think and explain ideas to it, who can challenge it and nourish those who want to do something about it.

At the moment we are in a populist political cycle. Somebody needs to keep the flame alive for policy because we will have to come back to these issues – how to make our economy more productive, how to improve economic growth, how to develop economic prosperity.

Our political class is not focussed on this at the moment, but if things continue as they are it will be forced, by crisis, to re-focus on it.

Someone, somewhere, should be doing the work to be ready when they finally realise they have to do something.