Bonfire of dead rules to drive Australia's recovery

A Liberal prime minister has temporarily brought back big government, locking down normal Australian life to keep the virus at bay and backstopping the economy with massive spending interventions to preserve its productive capacity. Some hope this will be the model for the post-virus future too.

But there is no ideological big-government signal in the emergency supports that were put in place because the market was forced to shut down to limit people-to-people transmission of the coronavirus. Only so much can be robbed from the future by building up debt now. And, in contrast to JobKeeper, free childcare and other supports, there is also a bonfire of bureaucratic regulations, rules and restrictions to ease the operating burdens on businesses struggling to work in a shuttered economy.

Reserve Bank governor Philip Lowe this week agreed that, yes, the budget props will need to be tapered off carefully, rather than abruptly. That’s partly because his own monetary policy has been pushed to its limit. But getting the economy out of the shadows of COVID-19 will require the economy’s supply-side to be sharpened, said Dr Lowe, to promote business innovation, investment and hiring.

In the past two decades, Australia has tended to respond to every problem with new regulation, he told parliamentarians responsible for many of these rules. Now Dr Lowe fears the habit is stifling the dynamism needed to restore prosperity.

Australia needs companies prepared to grow their way out of the recession, he said. Over-regulation risks a “meandering” economy that will struggle to re-employ the nearly 600,000 Australians who lost their jobs last month.

Rules eased since the virus hit include those for liquor licensing, truck curfews, local content quotas for free-to-air TV, construction rules, continuous disclosure for company directors and even the "shrinks in the boardroom" regulatory overreach.

In the workplace, industrial awards have been adjusted so that businesses do not break the law by allowing their employees to work from home in a world in which, as Atlassian co-founder Scott Farquhar says, the nine-to-five work day is dead.

Once in place, these burdensome rules become difficult to dislodge even if they belong to a world long gone – like the penalty rates put in place before the 24/7 service economy, the internet and globalised supply chains.

Far from radical

The citadel of such needless regulatory legacies is Australia’s century-old industrial relations system.

This week, Scott Morrison became the first Liberal leader since the political disaster of John Howard’s WorkChoices to put workplace regulation firmly on the table for reform and to invite the trade unions to pull up a chair.

The agenda likely to be pushed by Mr Morrison and Industrial Relations Minister Christian Porter is far from radical. As urged by The Australian Financial Review, the obvious reform is to return to Paul Keating’s enterprise bargaining system that provided a legal framework in which managers and workers could negotiate their own arrangements to help grow their businesses.

But enterprise bargaining effectively collapsed after the Rudd-Gillard government’s Fair Work Act brought in the misleadingly-named better-off-overall test, which included legalistic line-by-line scrutiny to check if just one worker might not actually gain in the new agreement – even theoretically.

As interpreted by the Fair Work Commission, this robbed enterprise bargaining of its purpose: to promote innovation and productivity at the workplace. The result, tellingly, has been wage stagnation.

After welcoming Mr Morrison’s industrial relations initiative, Dr Lowe this week noted that “the way we tax consumption, income and land is not optimal for growth”.

The Prime Minister has been less keen to get out in front on tax reform. That might be the job of states such as NSW and Victoria in Mr Morrison’s pandemic-inspired national cabinet as it supersedes Mr Keating’s Council of Australian Governments, or COAG.

Six months ago, the Prime Minister was derided as "Scotty from marketing". But spinning a credible and compelling case for the measures needed to build a more productive Australia, and spreading the responsibility for doing so, could just as well be labelled as the political art of finally getting things done.