Industrial reform will be PM's Everest – it won't resemble Hawke's Accord

Industrial reform has been the unspoken, unthinkable problem at the heart of the Australian economy for more than a century.

The Prime Minister, having secured public confidence by his deft handling of the Australian response to the COVID-19 pandemic, is now moving to convert that advantage by reforming our industrial landscape. Scott Morrison has chosen Everest.

He does not need to do this. History may have condemned him but in any case, politics being what it is, he would have still survived while doing little more than basking in our enviable international ranking. He has made an enormously courageous decision.

Morrison’s determination is not a new ambition for a Liberal prime minister, but it is one that none of his predecessors, including John Howard, succeeded in achieving. You will recall Howard’s moves to reform penalty rates and industrial arrangements cost him government, Malcolm Fraser was too broken by the Whitlam dismissal to even try, while the Menzies-McEwen solution was to keep raising tariffs every time employers complained their labour costs were pricing them out of the market.

The late Neville Wran once observed to me that only Liberal governments could take on the industrial system because Labor was too compromised, but that ignores the remarkable contribution of the Hawke era. Like Howard, who commissioned the Campbell review of the Australian economy, Bob Hawke read its report closely and, once installed in the Lodge, systematically set about implementing it.

Morrison’s advantage lies in much of the ground-work having already been done by Hawke: a floating exchange rate, deregulated banking and vastly reduced tariffs all needed to be in place to force industrial reform. It is also his disadvantage. Hawke's were welcomed reforms that brought immediate benefits – cheaper clothes and mortgages – and softened opposition to labour market deregulation.

What has Morrison got to offer? There is now increasing discussion about protecting essential industries such as pharmaceuticals, including with new tariffs. Protecting one industry inevitably leads to the protection of others. The path to uncompetitive wage levels from there is clear unless we opt for a highly mechanised, small workforce model. Even then, there is the risk of a handful of essential industry workers dictating overall wage levels.

I recall in the 1970s that the two men who operated the control tower in Port Adelaide could go on strike and bring the entire port to a standstill, and the solution invariably was a generous real wage rise for the entire South Australian stevedoring industry.

Morrison, like Hawke, has taken advantage of the times to start reform planning. In Hawke’s case, the times were really about him. Within months of coming to office he convened an economic summit and made sure he chaired every day of this televised event.

The people were in no doubt about his commitment and desire to bring traditional enemies together. He not only had the co-operation of a unique duo of trade union leaders in Martin Fergusson and Bill Kelty, who knew exactly what had to happen. Hawke also enjoyed remarkable connections with the country’s business leaders, which enabled him to coin the term national consensus. As a young reporter in the national press gallery, I watched in awe as this faith translated into reform after reform, all with the support of the union movement.

Our current Prime Minister, despite his own extensive networks, does not have the Hawke advantage of lifetime friendships. Yes, he has cannily begun building a relationship with Sally McManus and the ACTU that bypasses the Labor opposition, but he cannot hope to build in months the friendships that took Hawke years. Fortuitously for Morrison, the level of unionisation is not what it was in 1983, but he must still manage it.

Do not underestimate the importance of faith in what lies before us. Transport magnate Peter Abeles told me he paid Hawke’s mortgage and his children’s school fees. Other business leaders allowed him the run of their hotels. In today’s world, it is true that this would not be acceptable, but it speaks volumes for the depth of the affection and trust in which Hawke was held by both unions and business for the decade or so before he became prime minister.

Hawke had the Campbell review with a clear roadmap to make the economic case; Morrison has the dramatic unknowns of a post-COVID world economy. Hawke had certainty in stable economic times; Morrison has uncertainty in a time of great fear. Different circumstances dictate different paths.

Working with the ACTU, Hawke devised the so-called “social wage”. A set of new government benefits and measures, including superannuation, would offset the restrained real wage growth they knew was necessary if Australia was to survive in the new world of free international trade without widespread domestic unrest. Fortunately, the Fraser government had left the coffers in good shape.

With the government now straddling the enormous COVID debt required to prevent Australia from sinking into an economic depression, Morrison’s opportunities for trade-offs are very different. He is correct in wanting to enrich his industrial reform proposition with improved productivity through greater vocational training investment. This has especially been a feature for Labor governments such as Hawke’s and Gillard’s, which understood the maths of wage rises without productivity improvements. But they largely failed.

This is a salutary lesson for a new reform movement. The history of Australian productivity improvement has been more tied up with product innovation than with building skills.

Morrison’s determination to achieve nation-saving industrial reform is a huge credit to him. It has only been achieved once before, in 1983, in a century of centralised wage fixing. But 2020 is not 1983 and Morrison will be making his way in a very different world. COVID is his opportunity and his greatest threat.

Pru Goward is a professor at Western Sydney University and a director with Taylor Fry, data analysts and actuaries. She is a former minister in a NSW Liberal government and a former sex discrimination commissioner.