To Create Wealth, we Need to Break the Shackles

by PETER ANDERSON From: The Australian January 07, 2014

THE fireworks that lit our skies heralding 2014 were largely the same as last year, save for major global cities with extra ambition to receive the “most spectacular” label from breathless news reporters. As the barking of dogs receded and the night sky darkened, I walked home from my midnight vantage point thinking that the next year, indeed the next decade, cannot be the same.

In the past year, as the minority parliament finalised its pre-election deals, we spent big. Huge commitments for the next decade were rung up, such as school funding, disability schemes and more superannuation. As we found out at year’s end, none were funded with money in the bank. Give or take a few million, the nation is $65 billion in the red. More promises are in the pipeline, such as expensive paid parental leave.

The problem is of our making, not just the government. If we want governments to solve every problem, we force them to spend and regulate more. The latest is a law allowing an employee to sue a business if they are bullied by another staff member or customer. It started from January 1. It will finish in a lot of unfairness, cost and red tape because a workplace law can no more control human behaviour than a teacher can stop misbehaviour in a playground, a driver prevent another’s road rage or a parent stop bullying on social media. Making another person, this time an employer, responsible for something they have neither done nor decided to do risks eating away at the confidence needed to employ and give people, especially higher risk job applicants, a chance.

Our economic fortune is tied up in resisting making new laws or spending on every good or worthy cause. The role of government and regulation needs to be limited to the essential, not the experimental. Expecting debt-ridden governments to magically produce wealth to pay the next decade’s bills is fanciful. The last time I looked, governments taxed, spent and provided the occasional service, that’s all. Wealth is generated by people, private individuals and private businesses, not governments.

Australia’s providence extends to our natural resources, and that’s where we have been lucky, but also slothful. Two resources booms in the past decade, and not much to show for it, if inadequate logistics infrastructure and national debt are pointers.

Australia’s ambition has to be to pay our way over the next decade without relying on the good fortune of high Asian prices for the resources, because those prices come and go in cycles, and the resource is finite. If we don’t pay our way, a whole generation of children born in the mid-2000s will not live under a government that lives within its means until they reach secondary school.

The task of repairing national finances is made more difficult because the private wealth generators that need to fire up, our people and small businesses, have had their competitiveness and disposable incomes compromised because of a high dollar and some bad decisions, like a carbon tax that makes household bills more expensive while making jobs less secure in trade-exposed and manufacturing industries.

The wisdom the Abbott government and its Commission of Audit need to exercise is to pare back spending while still doing enough to support the economy as it transitions through these vulnerabilities and weaknesses.

Expecting the Reserve Bank to shoulder the burden by forever lowering interest rates won’t work. Rates can only go so low, and the impact of lower rates isn’t as immediate as it once was. Our ambition must be to demand more of us, and our governments, to support private wealth creation.

Regulatory, fiscal, competition and welfare reform is sorely needed to give greater economic freedom for people to be entrepreneurial, productive and creative. Our attitude needs to laud success, individual responsibility and risk taking, not just high ore prices. Labour market reform cannot be excluded because the situation is getting worse by the day. Last May and then again in July, Labor treasurer Chris Bowen forecast unemployment to go up by about 50,000 persons in the next year. In November, new Treasurer Joe Hockey said the figure had been revised upwards, to more than 75,000 more out of work.

I understand why the Coalition is cautious on changing workplace laws. They were burnt politically in the mid-2000s, and mistakes were made. But a lesson of the 2000s is not just about getting a political mandate for reform or avoiding overreach. The economy does not stand still waiting for elections to come and go. Just ask the 75,000 more unemployed in 12 months if they are happy to wait.

Come the next election, WorkChoices will be 10 years ago and the era of almost full employment will seem a distant past. It’s equally a lesson of the mid-2000s that waiting for a single large change to workplace laws can scare the political horses. It’s sensible politics as well as fairer to make a series of smaller steps, starting now, all directed at reducing job destroying workplace regulation in a system that is well out of whack.

In April 1994 then Prime Minister Paul Keating gave a speech on workplace reform to the Institute of Company Directors. He said government and tribunal workplace regulation would have to be reduced and take a back seat to enterprise bargaining if we were to become productive and competitive. Twenty years later, the truth of that message seems lost. New Year’s Day heralded steeper bullying laws, apprentice costs, penalty rates and more union rights.

Living standards are the products of choices we make. With the Treasury in deficit, we can’t have it both ways, more government regulation and more economic freedom. This has to be a different decade, where economic freedom gets a fairer go and creates new wealth to pay the bills and create jobs. In short, we need fresh ambition to reform, ambition that lasts longer than an expensive midnight firecracker or new year spending spree.

Peter Anderson is outgoing chief executive of the Australian Chamber of Commerce and Industry.

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