Don’t expect reform from Gillard’s ministry: Kohler

There is no reason to think the ministry announced on Saturday will be a reforming one.

The election result clarified that the opponents of reform – that is, economic modernisation resulting in greater productivity – are ascendant. The Greens increased their vote and won control of the Senate, while independents promoting subsidies for regional Australia won control of the House of Representatives.

Everything that’s happened since then, including the announcement of the Gillard ministry, reinforces that.

So it turns out that the great project of modernising the Australian economy that began with the floating of the dollar in December 1983 did, in fact, end with the start of the credit crisis and the election of the Rudd government in late 2007.

Now there is to be a tax summit at which the most important indirect taxes – GST and resources rent tax – won’t be discussed, workplace relations has been downgraded and lumped with education (or rather “skills”), the focus of climate change policy will apparently be the protection of coal industry jobs, and infrastructure, including the NBN, is all about promoting equality between urban and regional areas.

Perhaps the reality will turn out differently, but every bill will now have to be negotiated with implacable opponents of reform: the Greens and the country independents.

How did this happen? In my view the key event in ending Australia’s acceptance of economic reform was Kevin Andrews introduction of the Workplace Relations Amendment (WorkChoices) Bill into Parliament on November 2, 2005, and its passage through the Senate exactly a month later.

The Howard government’s first pass at amending Australia industrial relations laws in 1996 was excellent: it simplified awards, expanded enterprise bargaining and individual contracts, restricted unions and outlawed closed shops.

Eight years later productivity was improving and the system was working well, but sometimes taking a step too far is worse than taking no steps at all.

The WorkChoices bill in 2005 ruined the consensus around industrial reform by removing the no disadvantage test, watering down unfair dismissal and attempting to cut out the unions entirely.

It was a disastrous piece of impatience that was still reverberating through the 2010 election campaign. As a result the new Minister for Jobs, Skills, and Workplace Relations, Chris Evans, is hardly likely to try anything courageous.

The focus of ‘reform’ will be on building infrastructure, especially the NBN, which seems to have been instrumental in getting Julia Gillard appointed Prime Minister because she promised to start building it in regional areas and to ensure there is only one national wholesale price.

So the power of the country independents will ensure that despite the fact that people are moving to the cities in large numbers, and that’s where the bottlenecks are, the bush will get a disproportionate share of infrastructure spending.

It seems likely that tax reform will be a sham. It was pre-empted by the announcement in May of a new resources rent tax and its modification in discussion with the big miners. The revenue has now been now been committed to new spending – election promises no less – so it stays, and no further shift from income to consumption taxes is to be contemplated.

The other great reform project that lies in our future is carbon trading. Heaven knows what we’ll end with there.

The new minister has declared that his job is not to destroy the coal industry and that he wants to bring common sense to the debate; the Greens want a tax; the independents apparently don’t want anything.

It looks like the next three years will be the opposite of the proverbial duck: active and noisy above the surface, but nothing doing underneath.

This article first appeared on Business Spectator.