‘Unintended consequences’ is one of those marvellous expressions which, when translated, simply means we have no idea what will happen after we change the rules. Australia’s new industrial laws fit that description beautifully because there seems to be a very good chance that, rather than hurt average workers, the real victims will be investors.
So far, and despite forecasts of chaos from the union movement, all’s quiet on the industrial relations front since the law was passed a couple of weeks ago.
There are no indications of mass sackings, wage cuts and an end to weekends around the barbecue – and why would there be when the labour market is screaming full employment, and there is a chronic skills shortage.
It is the state of the labour market that fascinates Briefcase, and seems to have been the forgotten factor in the debate over the new IR laws, prompting a few idle thoughts about what happens to a market that is already stretched and suddenly gets the power to act more freely.
In other words, how far can it stretch? And, if employers are struggling to find workers today, what happens when more jobs are created by laws which make it easier to hire and fire?
Rather than produce the chaos forecast by the unions it is possible that labour, especially skilled, hard-working, dedicated labour, is actually entering a period of nirvana.
Never a column to normally consider the bright side of life (because it’s always easier to be gloomy), Briefcase wonders whether anyone has thought through the effects of the new IR laws on a tight labour market.
One effect, surely, is the opposite of what the unions predict – in that employers will do all they can to retain their best workers, including pay them more.
In a free market, and that is what the new labour laws seek to achieve, skills flow to the highest (and best) bidder. A century of rigid controls is lifted, and workers are free to move, and employers are free to adjust the size of their workforce in the same way they adjust the inventory levels, capital and debt.
If we were in a period of high unemployment this would be very bad news for average workers.
But we’re not, and everyone seems to have overlooked this fact. We are in a period of low unemployment, perhaps the best conditions in 100 years as the world clamours for our raw materials, and looks like clamouring for decades to come.
In these circumstances the price of labour rises, it doesn’t fall.
Which leads Briefcase back to its opening suggestion – that investors, rather than workers, have more to fear. This line of reasoning revolves around a belief that rising labour costs are inflationary, and that the primary attack on inflation is higher interest rates, and higher interest rates mean lower asset prices.
The property market in most eastern capitals is already feeling the pinch of falling property prices. Perth will eventually catch up with this phenomena, especially if rates ratchet up a notch or two, which is something the federal government would not oppose at this early stage of its current three-year term. Better to get the bad news out of the way quickly and have rates trending down at the next election.
The stock market, also close to an all-time high, is starting to factor in higher inflation and higher interest rates, as can be seen in the return of gold as an alternative investment.
Accurately predicting exactly what will happen in 2006 is impossible, but it is fairly certain that the scare campaign run by the union movement will prove to be one of Australia’s biggest smokescreens, a statement that can be tested by this simple question.
What employer sacks, or downgrades the pay of his workforce, at a time when he can’t even find enough employees to do the work he has on hand, let alone bid for more?
Correct answer: a complete idiot who shouldn’t be in business in the first place.
Cutting the Argyle diamond royalty from 7.5 per cent to 5 per cent brings to an end one of the shabbiest aspects of the dreadful government led by disgraced former premier, Brian Burke.
It was Mr Burke, in league with Alan Bond and the late Laurie Connell, who extracted the original high royalty from the Argyle partners, and also extracted a range of other benefits, and effectively nobbled the entire stockbroking community of Perth.
Readers with long memories will never forget the way Mr Bond sold a stake in Argyle to the WA government’s purpose-designed vehicle, the WA Diamond Trust, and even arranged for his mate, Mr Connell, to do the valuation which, surprise, surprise, found that all was fair and reasonable.
If Mr Connell’s fee for valuing a 5 per cent stake in Argyle was not bad enough there was the arm-twisting of brokers, who were forced to put their names to the WADT prospectus, and the fact that early dividends from the trust were actually capital returns. In other words, you paid your money, costs were extracted, and then you got some back.
Fortunately for the reputation of WA, the diamond trust eventually disappeared, as did Messrs Connell, Bond and Burke, and now the sky-high royalty has been reduced to more normal levels, a decision of Premier Geoff Gallop’s that should be praised.
After Argyle, what now for that troublesome iron ore tenement called Shovelanna, which Rio Tinto allowed to lapse through a paperwork filing error?
It seems to Briefcase that, by agreeing to a reduced royalty at Argyle, the state government is showing remarkable common sense, a scarce commodity in government.
If the same common sense is applied to Shovelanna then Rio Tinto’s position is secure because the weight of evidence appears to support the use of a ministerial waiver, if only because the thought of 10 years of legal action is too horrible to contemplate – especially as the government would be joined to the action, and there are better things to do with government funds.
“Where there is money, there is fighting.” Marian Anderson