New laws will stall the recovery

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Robert Gottliebson

With the exception of some good commentary in The Australian newspaper, almost all the reporting on the Australian industrial relations revolution has been concentrated on the victory of Kevin Rudd and Julia Gillard in overturning WorkChoices. But as the months roll on and we approach 2010 it will become apparent that the new industrial relations environment is probably the most dramatic domestically driven event we have seen in this country for a long time (the China boom and the global financial crisis were externally driven).

What Gillard and Rudd have done is set up a complex act that means all enterprise agreements will have to have the involvement of unions if they are to have any stability. Union power is embedded at every stage of the act. It is possible to bypass unions if you undertake a series of individual agreements, but that is also being monitored very carefully. While that mechanism may be available for smaller enterprises it will be difficult for big companies.

Unfortunately, four of the five major non-government unions are militant and all of them have equal access to a company’s workforce. For the past decade the emphasis of management has been on improving shareholder returns. In the environment ahead, for many groups protecting the business against difficult unions and adapting to the situation will take precedence. Shareholders will occupy the back seat. It means companies will be much more careful about hiring labour and that outsourcing, particularly overseas outsourcing, will rise dramatically.

The seriousness of this change is underlined by the fact that normally after a recession companies become much more lean and hungry and make a lot of money on the rebound. That rebound profit growth will now be harder to achieve, particularly as the simplification of awards usually means the highest and worst provisions are being adopted nationally. With this comes widespread implementation of weekend penalty rates in restaurants and hotels, which will decimate the employment of young people. Therefore the rise in unemployment that comes with the financial crisis will not go away with a recovery because labour has been made so much more costly. An extended Australian downturn with high employment will cause a much higher level of bank bad debts than is currently being experienced or is likely in the next year or two.

The Howard government's commercial building laws reduced non-housing building costs by about 15%; I believe those costs will now rise by about 15% and probably more in 2010 and 2011. That rise covers infrastructure projects and all forms of commercial building. Because these forces have only just been unleashed these are early predictions. Hopefully common sense will prevail and the outcomes will be better than now look likely. We are going to have to monitor the longer-term situation to fine-tune investment strategies but here are a few initial ideas.


Toll roads that are not too highly leveraged will win because their revenue is tied to CPI. Higher unemployment may stunt toll revenue growth but overall such CPI-linked established infrastructure will be winners.
Owners of properties that have income streams not affected by an extended downturn will be winners because the cost of replacing their building will escalate.
Groups that employ a lot of labour and are vulnerable to changes in consumer patterns will be endangered, and that includes retailers and possibly banks, although bank share prices have been hammered because of the global crisis.
The fall in the weekend leisure industries, the result of higher labour costs, will mean those young people who can’t get jobs will have much less money to spend which affect those enterprises that sell to them including liquor, clothing, low-rent accommodation and perhaps mobile phones.
It will be almost impossible to erect a major new resource project in Australia unless there is a very sharp rise in mineral prices. The revenue of big mining companies like Rio Tinto and BHP is governed by demand from China and if that recovers the groups will do well particularly if supply is restrained. But it needs to happen because in coming years their costs will rise and productivity will fall as the unions declare “pay back time”.

The large global miners will gain insulation from these trends via their overseas operations. Of course a falling American dollar and a rising Australian dollar does not help the Australian dollar value of resource shares.

No one could have predicted that when Rudd came to power that he and Gillard would take the industrial relations laws back a decade or two at a time when the rest of the world is moving in the other direction. I find it hard to believe that it has happened.

One day people will realise how destructive rudd and Gillard will be to our economy
 
There are so many things wrong with that i dont know what to say except it is Robert Gottliebson.

"For the past decade the emphasis of management has been on improving shareholder returns."

=Making the rich richer and the poor poorer.

Would not expect any less from this nutter
 
Is the making the rich richer or is it making the more people richer? Seriously 15% extra cost on production is going to prevent the companies to hire that extra labourer.
 
Zep link said:
Is the making the rich richer or is it making the more people richer? Seriously 15% extra cost on production is going to prevent the companies to hire that extra labourer.

Only to increase the profit margins to make sure the rich get richer for doing nothing
 
who is more likely to buy a $400,000-$800,000 dollar boat the rich or the poor? It might sounds ridiculous to you but i work across the road from Riveria and down the road from Maritimo. These guys laid off thousands of jobs. So that the poor don't even have jobs.

without was is said above, explain to me how and 15% increase cost in production create jobs? Because i can see how no increase can help maintain and create jobs but for the life of me i can't how a 15% increase in cost does.
 
I dont believe there is a 15% increase in production coming considering all suppliers are in the same boat, but it had to be written in there as otherwise the entire rant would have had no backbone at all.

Manufacturers no have incrased powers in their raw material prices, many have started freezing salary increases as well.

Where is the 15% coming from then if its not to make the rich richer?
 

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