By Josh Gordon
If you believe Peter Reith, Ted Baillieu is a reformist premier with a bold agenda to revitalise Victoria's flagging labour productivity rates and slash construction costs by tackling militant unions.
Writing in The Age this week, Reith lavished praise on Baillieu and his NSW counterpart Barry O'Farrell for shrugging off the WorkChoices stain and ploughing ahead with what he said were badly needed industrial relations reforms to tamp down wage pressures in the construction sector.
Illustration: John Spooner.
Abbott should take a leaf out of Baillieu's book, Reith opined. ''In the same way that Baillieu and O'Farrell have put aside fears about the bogyman, the next federal government also needs to be pro-reform.''
Such claims - while entertaining - are fanciful. In the distant past, Baillieu did throw his weight behind the former Howard government's ill-fated WorkChoices policy. He was also Victorian Liberal president during the Kennett-era, which ran what could be described as an aggressive reformist agenda.
Just last week, he warned that Victoria risked being priced out of major projects by soaring construction costs, arguing that generous pay rates and conditions won by workers at the Wonthaggi desalination plant had ''migrated'' to other projects. Yet far from flexing reformist muscle to put Victoria back in the race, Baillieu's solution was to announce another government review to examine industrial relations rules applying to building firms tendering for government construction work. Hardly a display of political mojo.
In particular, the government will consider new rules for state-funded building projects, stipulating that contracts will only be awarded to companies that give their workers freedom of association rights to join or not to join a union. Such a move, if it eventually happens (draft guidelines will be released by the end of the year for public comment), is hardly going to stop Victoria being priced out of major projects by soaring wage costs. Nor would it have a dramatic impact on the state's poor labour productivity.
As Grattan Institute economist Saul Eslake points out, 84 per cent of Victoria's economic growth over the past five years has come from population growth - well above the national average. Victoria's labour productivity is now lower than every state except Tasmania and South Australia. Addressing productivity concerns will mean finding a source of growth other than jamming in more people.
Rather than union militancy, construction costs in Victoria are being pushed high as resource-rich states such as Western Australia soak up thousands of workers heading their way to take advantage of higher wages.
The state government may be able to limit pay increases for teachers, nurses and public servants, but when it comes to the construction industry, Victoria is not in a strong bargaining position and no amount of industrial relations reform is going to change that.
Low productivity has much do with the structure of the state economy, which has relatively high shares of industries such as manufacturing, farming, forestry, retailing and health care that tend to generate less wealth per person (at least according to the statisticians). The average mining worker was, for example, last year generating almost $250 worth of production an hour, compared with less than $50 for construction, forestry and retail workers.
Earlier this week I asked Attorney-General Robert Clark whether Victoria's approach to industrial relations could be characterised as ''reformist''. Clark, who has broad responsibility for industrial relations, was clearly reluctant to be dragged into Reith's broader agenda to undermine Abbott. But he was also dismissive of the reformist label.
''I characterise it as being a practical, commonsense approach,'' he said. ''Clearly the Victorian government is concerned about mounting costs and pressures within the building and construction industry here in Victoria. We therefore are going to review the code of practice in industrial relations principles to ensure we have principles that get the best possible value for money, productivity out of Victorian construction projects to which government is a party or is funding.''
Unlike previous state governments, the Baillieu government is showing little interest in using the R word. There is no brains trust discussing how to address looming problems linked to strong population growth such as overburdened transport networks. There is still no coherent infrastructure plan, no tax plan, no environment plan.
Treasurer Kim Wells six weeks ago belatedly ordered his department to get to work on an infrastructure plan for Victoria after being told the state could lose billions dollars of investment and thousands of skilled workers. Wells claims his department has now ''spoken to nearly every single very large contractor in this state'' with a clear message that the government will be targeting the investment in tough economic times to boost productivity. But don't expect any action soon: Wells said the government's immediate priority is to implement its election commitments, which are heavily focused on law and order.
Solving Victoria's problems will require much more determination than a mere review examining the 12-year-old ''code of practice'' for the Victorian building and construction industry. It will require genuinely tough decisions.
Josh Gordon is The Age's state political editor.
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