PANEL DISCUSSIONS
HOSTED BY SUSAN WOOD

In response to Ged Kearney interview

SUSAN WOOD
We are back with the panel, and I promise they will not be taken off air, unless you start fighting amongst yourselves.

ROD ORAM - HZ Herald Columnist
We’ll be very well behaved.

SUSAN Never had that happen before. [SATELLITE LINK LOST WITH AUSTRALIA] I am reliably informed the problem was at the other end. They just cut us off for some reason, actually. Interesting, Matthew, I was thinking of you listening to Gen Kearney there talking. Basically, I think she was saying that the way to prosperity for workers is through unionism.

MATTHEW HOOTON - Political Commentator
Well, she did, but then she also went on, which is amusing in its own way, to present a very bleak picture of life for many Australian workers who are casualised and on contracts. So she was doing her job as a union leader talking down the industrial system in Australia, as you’d expect, and, yes, she seems to think that unions and their bargaining power is what has driven the wages up. Although she was far more complex than that.

SUSAN Unionised nation - Australia - 25 per cent higher wages. Explain why they earn so much more.

MATTHEW She went and explained some of them. I think it is true that Australia had a more careful economic reform programme through the ‘90s and the 2000s. Basically, the Hawke-Keating and Bolger-Richardson and Lange-Douglas Governments all implemented roughly the same policies, but I think it’s true that it was done more carefully in Australia, more progressively, with fewer transition costs and in a way that kept people supportive of economic reform. Whereas we kept jumping ahead, then stopping, then jumping ahead. And, of course, she also mentioned the mining issue, which has just been a massive boom for their economy for many, many years and has done a huge amount to push up wages, particularly in Western Australia.

SUSAN Rod?

ROD Three-quarters of the gap between Australian wages and NZ wages are due to the capital employed in the respective businesses. This was a big breakthrough in understanding by the IMF and the OECD in 2002. That means that Australian companies invest much more in plant and machinery and technology than NZ companies.

SUSAN Because that is one of the drivers of productivity: investment.

ROD Absolutely.

SUSAN Investment, ideas, and there’s a third driver that’s just popped out of my brain.

ROD Now, the unions, ironically, did play a role in that. Because it’s hard to fire people in Australia, employers are more likely to add machinery, not employees. Here in NZ, we’re much smaller companies, and it’s much easier to fire or hire people, by and large, NZ businesses tend to expand by adding more people rather than machinery. Now, it gets very complicated, because you’ve got two very different sized economies, so it’s easier for Australian companies to do that than NZ. But it’s that capital intensity which explains three-quarters of the gap.

SUSAN What I didn’t get to ask her was the politics, and I was about to ask her when we were so rudely interrupted. What she’s fearing about Tony Abbott, because we know this is a very different government from the one they have had.

DR JENNIFER CURTIN - Political Scientist
Yes, I think the thing about Tony Abbott was he will take some care with revisiting work choices, because it came back to bite Howard so appallingly. I do think we have to be careful about talking about Australia as a unionised country because their unionisation rates are not that much higher than ours. What really matters there is the way in which unions were engaged in the process of economic reform in the ‘80s through Hawke and continuing into the ‘90s-

SUSAN Let me just interrupt you, because we’ve got the satellite back up, so let’s get back to Ged Kearney.

******************

SUSAN There you go. There you have it. Jennifer, what they are concerned about with Abbott - fair, do you think, from their perspective?

JENNIFER Oh, up to a point. I mean, I don’t think he’ll go carte blanche back to individual contracts. He will seek to undermine the awards system somewhat and try and restrict perhaps union entry into workplaces a little bit, but really it’s the collective bargaining framework and the awards system that’s been working for Australian workers to date. That’s really where I see the difference. It’s not so much about the rate of unionisation, which is around 20, 22 per cent. It’s not a significantly highly unionised country.

SUSAN What we did learn from Tony Abbott this week in his conversation with our Prime Minister, John Key, during that flying visit - very focused on the economy, isn’t he, and getting it back where they believe it should be.

ROD Yes, but it’s a very curious one, because it’s very much focused rather on small business, in many respects, and then larger business, and it’s not dealing with any of the great structural issues, such as, thanks to China, Australia’s massively overinvested in natural resources, and a lot of those projects weren’t economically viable because they’re based, for example, on the coal price, which is un-reattainable.

SUSAN We know what it’s done for Solid Energy.

ROD Yeah. And yet the exchange rate still remains high, which is absolutely massacring Australian manufacturing. And the very crucial thing is that Australia earns a smaller part of its wealth from international trade than NZ. So, we’re about 30 per cent of GDP as exports, but Australia’s only just over 20. So I know this sounds counterintuitive, but there’s a lot of actually very inefficient industry in Australia which is just focused on, albeit a slightly larger home market than us. But there’s a lot of economic problems there. There’s real Dutch disease going on.

SUSAN Which matters to us greatly because they are our nearest and dearest and biggest trading partner.

MATTHEW Yes, and it was interesting that little faux pas about ‘guest workers’.

SUSAN Whoa.

ROD Ouch.

MATTHEW You know, how to win friends and influence people. Anyway, but I think that was useful, because it does reveal- I think we see CER differently from the way the Australians do. For us, CER is the number-one thing. It gave us free trade completely and free trade and labour, and I think we saw it as almost like the EU, that we really were becoming, in an economic and labour market sense, one country in the way that it’s happened in Europe. Whereas they just see it, I think, as another free-trade agreement. Yes, an important one, but they don’t see us as partners in the way I think that we do. We have drifted apart of the years. Our foreign policy has gone in different directions.

SUSAN We will leave it there, panel.

ENDS

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