PAUL KEATING: One of the reasons why real wages are falling, it's not simply because the Government is the kind of show it is, it's because the unions are just not much good at what they do these days.
The unions are just ineffective at getting real wage increases for working people. They've gone to seed the unions. This straw man thing, we'll have the union bosses. Try and find one. Try and find one that canŠ
TONY JONES: They're all going to be in Parliament, aren't they?
PAUL KEATING: No. I mean, the fact is there's been massive, when I started work I started work in Australia which was in the industrial age. I was one of the people that ushered into Australia the post industrial age. In the post industrial age the age of the collective is less and the natural role of unions is less. But as well as that may be they've also got incompetent as well.
TONY JONES: You're saying essentially the union movement is dying on the vine?
PAUL KEATING: It's dying on the vine. It's dying out of lack of passion. Its reason for existence, and general incompetence.
http://www.abc.net.au/lateline/content/2007/s1945485.htm
Paul Keating on the lead-up to the federal election
Australian Broadcasting Corporation
Broadcast: 07/06/2007
Reporter: Tony Jones
The former Prime Minister, Paul Keating, speaks with Tony Jones about the political climate in the lead-up to the federal election.
TONY JONES: Now to our interview with the former prime minister, Paul Keating.
And with the Government returning to its election-mode warnings that Labor can't be trusted with the economy, what is Mr Keating's advice to Labor on how to counter the Liberal Party mantra?
Well, Mr Keating joins me now.
Thank you for being here.
PAUL KEATING, FORMER AUSTRALIAN PRIME MINISTER: Thank you Tony.
TONY JONES: Based on the slogan that took Bill Clinton's stint into the White House "it's the economy, stupid", Labor has its work cut out for it, hasn't it?
PAUL KEATING: It has and it hasn't. I think the public are quite wise about the economy and governments now and they know that the structural changes of the '80s and '90s are working.
The real question today with the economy growing so rapidly and unemployment so low is why doesn't the tinder box go off? That is, why don't we get the big bang? The big bang in inflation and in wages back into the old dismal cycle? The answer is because of the structural changes. Nothing to do with Mr Costello's economic management. All to do with, let me explain.
When the Asian crisis came along in '97, when our national income was cut, the dollar went from 79 cents to 48. That made the "A" dollar proceeds of our exports higher and it made imports dearer. It took the shock in other words. So interest rates remain low at about 6 per cent for housing et cetera.
Now this time with this great birth of income, the dollar is doing its usual shock absorber job and going right up to take the income surge out of the economy. In other words, like getting these terms of trade is like a vodka shot, the old body jumps and the economy jumps. So to stop the jump the dollar has gone up to lower the "A" dollar proceeds. Now that's nothing to do with Peter Costello and everything to do with Labor's structural changes from the '80s.
TONY JONES: You do have some support for this rear view vision version of events, if you like, from Ian Macfarlane, former Reserve Bank governor who actually says the floating of the dollar was the big economic reform of the 1980s.
PAUL KEATING: It was, but it cost so much. Because when we'd been inflating it for 15 years above most other countries, we couldn't exchange $1 for an American dollar, we had to have a real depreciation of the exchange rate. That meant cutting it out of wages. So to get a floating exchange rate, ordinary working men and women in the '80s suffered real wage reductions to get that competitiveness. That's what's sticking to the economy today.
Just take tariffs. Bob Hawke and I wiped the tariff wall out. That means the doors are open to Australia so this wave of deflation from China, lower prices for everything, consumer goods, whitegoods, durables, computers, you name it, motor vehicles. So that means you've got that low inflation sweeping into Australia, cause there's nothing now to stop it. In the old days when you had the tariff the old goods had to jump the tariff wall and they would mostly go up 50 per cent or double in price.
Now the higher wages which are in the inefficient sector of Australia like infrastructure, transport et cetera, these are being subsidised. That inflation rate which is running at about 4 per cent is being subsidised by zero per cent coming across the wards. If you've got half the economy doing four and half doing zero, the inflation rate is two. That's where Mr Costello gets his 2 per cent from, nothing clever from him.
TONY JONES: You say that, of course,
PAUL KEATING: It's undeniable, it's a matter of record.
TONY JONES: It's also a matter of record that they've been in government for 11 years and look at what we've got. Strong growth, low inflation, record low unemployment, high dollar, booming stock market, record profits, steady interest rates. Do these really sound to you like the sort of conditions that would have people clamouring for a change of government?
PAUL KEATING: Much of that existed in 1996. Five per cent growth to the year, inflation 2.5, 3 per cent. These were the conditions. I think when the economy gets, when things are good in the economy people think they can be a little more footloose in changing governments without getting hurt in the crossfire and I do think that is in the mind of the community now.
But this maintaining low inflation now is all about these structural things. Let me go back to enterprise bargaining. I removed the centralised wage fixing system in 1993. One hundred years of industrial practice gone. Nothing to do with the Liberal Party, nothing to do with the Business Council, everything to do with the Government I led and the ACTU and the leadership of Bill Keelty. The end result is that we double trend productivity so that real wages grew through the '90s at 2 per cent a year, 10 years of 2 per cent is 20. You hear Mr Costello talking about 20 per cent in real wages.
But since 2000 real wages have been going down, so the 20 per cent increase came out of the Labor Party and the Labor Party's policies. It's nothing to do with WorkChoices. Individual workplace agreements go to 3 per cent of the working community. The rest of the community are working on enterprise bargains.
So there's the exchange rate taking the shocks, there's tariffs letting the deflation in and there's enterprise bargaining giving within sector flexibility keeping inflation low.
TONY JONES: But, of course, since you've mentioned industrial relations what the Government is clearly saying is that their industrial relations reforms now are one of the key underpinning new economic reforms, and that that's being put at risk by the possibility of a Labor Government coming to power?
PAUL KEATING: Well, they're not economic reforms at all they're actually anti productive. I've made this point before, but I'll make it again.
If you go to 200 or 300 people in a factory or 200 or 300 people in a workplace and come to a three or four year bargain to the improve productivity and share it between wages and profits you've got a good chance of getting productivity from the whole enterprise. But if you just take one person at a time, bring them into the boss' office and cut their wages there's no chance of getting any productivity. That's why trend productivity is now rapidly on the way down. It was 3 per cent under me. It's now under 1 per cent. So how are we going to keep inflation low with, at the moment wages are running at about 4 per cent, productivity is under 1. This is consistent with an inflation rate of 3 per cent, or higher. The Reserve Bank knows that. That's why they've got the rates on hold.
The great lie of the Howard Government in respect of workplace changes, they are simply a set of arrangements to keep unions out of workplaces. They've got nothing to do with productivity and the quicker we move away from that kind of discriminatory structure to a truly trust based co operative sharing of work and workloads, then we get back to reasonable levels of productivity and again, reasonable rates of growth in real wages. It's no accident as you saw in today's front page of The Sydney Morning Herald and other places that the wage share in the economy has gone down, and the profit share in the last four years has gone up because wages are now in real terms, are declining.
TONY JONES: I'll come back to the industrial relations question in a moment, but I want to get back to the question that I asked you before and that is with the Liberal Party mantra you can't trust Labor, or this current crop of Labor politicians with the economy, because they don't have the experience to run the economy, how does Kevin Rudd and Wayne Swan counter that in your opinion?
PAUL KEATING: A huge market, the fourth biggest in the world in foreign exchange the size of the exchange rate every day, there are no tariff walls anymore to stop the tariff wall helping us with deflation. That has nothing to do with anyone in public life. The Reserve Bank is looking after the monetary lever.
All the Government really has to do is make sure it doesn't blow the budget. That's the final primary responsibility of the Government, and Kevin Rudd has made that as clear as day where he stands on that. As clear as day. He'll run, in fact, a more conservative fiscal policy than will Mr Costello. What's Costello really done? He's taken the money, spent most of it to leave the surplus on empty. That's what he's done. Outlays are pinned at about 24 per cent of GDP. If revenue to GDP is 26 or 27, ipso facto you run a surplus of 2-3 per cent of GDP. That's all he's done. The idea quite frankly we need those characters, what structural change has he done? The only one he claims is the GST, but it does not change behaviour. I'm not going to eat any less, you're not going to eat any less because our food is GST taxed or our hair is going to stop growing. The GST changes nothing. It's not a behavioural structural changer.
TONY JONES: It changes the amount of revenue the Government is pulling in and that goes to the states?
PAUL KEATING: That's all it is, just a revenue, before it was financial assistant grants, now it's...
TONY JONES: Any future Labour Government will keep the GST, so you're not suggesting they should not do that?
PAUL KEATING: No, no. But I'm just saying in terms of structural changes Mr Costello's changes are inconsequential. He fixed up the national accounts yesterday, can't believe his luck because all the natural structural stabilisers Bob Hawke and I put into place are still working. They're like a set of knew pneumatic rams, they adjust each week to economic conditions. All the Government's got to do is not blow the budget.
TONY JONES: I just make this point. You and Bob Hawke are barely mentioned by the current Labor leadership, why is that?
PAUL KEATING: Well, they don't like the fact that we had, the Liberals attacked us about interest rates in 1988/89 in the last election. They, in my view, foolishly failed to counter it. All they had to say was John Howard had the highest cash rate since the Second World War 21.4 per cent in 1982 and that whole campaign would have gone. But they wouldn't say it. So they now not only used the K-word they don't use the H-word.
Hawke and I have been put out to grass because we had interest rates up in 1989. That's 20 years ago in two years from now. Bear in mind this Tony, Bob and I won the '90 election with interest rates, cash rates at around 16 per cent, housing rates about 16 per cent. I won in '93 when interest rates were not an issue. They were not an issue in 1996. So how come they became an issue in 2004, or in any way an issue now? The answer is because the Labor Party's inability to get across the argument and put it.
TONY JONES: Which they still according to you aren't able to do. Here's the point. Kim Beazley seemed to have a deliberate policy of turning his back on the Hawke Keating years. His advisers now or the key advisers like Epstein are now key advisers to Kevin Rudd, is that a problem?
PAUL KEATING: They'll do him no good. Because in the end those kind of conservative tea-leaf-reading focus group driven polling types who I think led Kim into nothingness, he's got his life to repent in leisure now at what they did to him. They're back, they're back. Gary Gray lost the '96 election with me and then lost '98. He's been given Kim Beazley's best seat in Western Australia.
The Labor Party is not going to profit from having these proven unsuccessful people around who are frightened of their own shadow and won't get out of bed in the morning unless they've had a focus group report to tell them which side of bed to get out.
TONY JONES: Well you were talking about David Epstein as well.
PAUL KEATING: Well he's the same chief-of-staff now, same.
TONY JONES: This is a problem for Kevin Rudd?
PAUL KEATING: These are in my opinion no value people. Wouldn't fight, don't know how to fight, much less fighting the Liberal Party.
TONY JONES: But why? You must have some idea, why has he taken them on?
PAUL KEATING: They don't have the structure or the creativity or the passion or the belief to go and grab the prize. They don't understand a victory.
I used to call Gary Mr Two Step. He was always going to win in two steps. I said to Kim, you will win in 'the eight Kim, a Labor leader's election on the first one is always the best one, but you got to look like you want the job and you've got to get that lazy Federal organisation to get out there and help you. He would have won. He got 52 per cent of the vote and lost. The reason was Gray 's Federal office.
TONY JONES: You think it's happening again?
PAUL KEATING: I know it's happening again, but the current Federal secretary is the author of "don't fight them on interest rates" at the last election. You wouldn't put much faith in him, would you?
TONY JONES: The other key reform that we've talked about is the Government's industrial relations reforms. It's been countered immediately by a new set of industrial relations reforms from Julia Gillard. How do you think she's gone?
PAUL KEATING: Not very well. Not very well. This was a very simple change. She had to put a simple thing across. Basically what she should have said was this, "We'll register all agreements with two provisosŠ
TONY JONES: You mean AWAs included?
PAUL KEATING: Whatever you want to call them. Single enterprise workplace agreements. We'll register them all with two provisos.
We will introduce a national minimum wage with conditions for annual leave, sick leave et cetera, no agreement will be registered which denigrates from that award. And the second condition is there'll be no positive discrimination against collective bargaining or the ability of a union to represent people. There might not be either positive discrimination for a union, but there won't be one against a union. Now once you've said that you've said the lot.
TONY JONES: I want to explore how on earth you would do that in a moment, but first of all you don't think they should have scrapped AWAs, that's a pretty critical issue?
PAUL KEATING: AWAs as they are now have to be scrapped because they have a bias against the right of an individual to talk to another individual about their wages. I mean, show me any democracy worth having Tony and I'll show you one where people can meet freely and talk about conditions at work and be represented by a union. That's the poison in the AWA. That's the only point of the AWA. It's got to go.
But the Liberals in their stupidity not taking and annealing the enormous change I introduced in 1993. That is, I was the guy who had to get the ACTU in a headlock and pull its teeth out with a pair of pliers. But it was like administering, pulling a set of rotten teeth out. This is comparative ways justice which couldn't last.
Fortunately they had a great leader in Keelty who understood that. But having got enterprise bargaining up, having got away from centralised wage fixing, haven't had 20 per cent real growth in real incomes, 2 per cent in low inflation, why on earth would you touch it? Why would you go now and try and wreck that consensus to have the Labor Party come back with something that will take them further back than the legislation I put in place in '93? If that happens, business has got John Howard to blame for breaking that consensus.
TONY JONES: You believe Julia Gillard's reforms will take Labor further back?
PAUL KEATING: Let me make this clear, the Liberals decided that they wouldn't use the conciliation and arbitration power.
Under that power of the constitution you always needed a commission who tested capacity to pay and comparative wage justice. They've now used the corporations power and the High Court for the first time has validated its use. That means a Federal Government can now legislate the wage and the conditions.
TONY JONES: You're talking about a Federal Labor Government using the corporations power to create what, a minimum wage and conditions?
PAUL KEATING: Make a minimum national award by legislation. Now it can have a group which recommends it. You can call it some commission of some kind to give you recommendation. But effectively the Treasurer or the minister for Labor could carry as an act of Parliament the national minimum award. Now once that's done what are we worried about with AWAs?
The people getting them in the mining industry are on $150 and $200,000 a year. They aren't down on a $30 or $40, 000. If you get your national award into place and get enterprise bargaining and the right of people to do collective bargaining you're home and hosed?
TONY JONES: Let me make this straight, you're advising a future Federal Labour Government to actually legislate for wages?
PAUL KEATING: Yeah sure. For minimum wages, including annual leave, sick leave, the six, say, minimum conditions. And if these, and to reserve the right of people to collectively bargain. Once you do that, who cares about the AWAs?
TONY JONES: You know what's going to happen here. You're going to be called a centralised wage fixer. You're going, people are going to say this is a Marxist idea going back to the central government setting wages?
PAUL KEATING: No, no, no. There's always been under my policy which was the enterprise bargaining model there was always a safety net. The enterprise bargaining for those who could get one and for women and kids in retail that couldn't get it, a woman working part time in Woolies she got it under the safety net.
The safety nets now are the National Wage Case and the National Wage Case has gone because the commission has gone. But the Government can have Mr Harper and the Fair Pay Commission, but it's got no commission power it's really the Commonwealth Government. That's the point I'm making. It's not me saying it, it's the High Court saying it.
TONY JONES: Essentially you're saying you don't need an arbitration commission to be brought back at all?
PAUL KEATING: No, you don't need it. It's finished, gone. Howard destroyed that. Capacity to pay gone, enterprise bargaining upset.
Thank you Mr Howard. Business will rue the day they ever heard of WorkChoices. Rue the day.
TONY JONES: Do you think a Federal Labor Government would ever have the courage to do what you're talking about?
PAUL KEATING: You've got to protect people on the bottom rung of the ladder so you do it by setting up an authority, Julia Gillard's given it a name. They make a recommendation and that becomes a new national minimum wage.
TONY JONES: But how would you change it from year to year with inflation and so on? Would you create new legislation each year?
PAUL KEATING: No, you'd hear the economic case, what you can afford to pay, what the productivity was, the usual stuff you would have heard before the commission.
The difference is Tony, under the arbitration power, the conciliation and arbitration power under the Constitution written in 1900, you need it under the Act that commission, now you don't. Howard put the match under the commission. That's gone. That structure's finished.
TONY JONES: One of the startling political things you're saying here is that the deputy leader of the Labor Party, the spokesman for industrial relations has got it all wrong?
PAUL KEATING: She hasn't got it all wrong but she doesn't quite understand I don't think the difference between the centralised system I inherited, the old rigid system of compulsory arbitration and comparative wage, the leapfrogging which always gave us system and the enterprise bargaining system of 1993. Such a revolutionary change.
Now I think the Labor Party accepts the revolutionary change like it's old homework. Instead of that she lets the Liberals target her saying she wants to go back to the old centralised system which she does not want to do. Basically a policy is ok providing that she makes clear that things have to be subject to national minimums and that workplace agreements, whatever you want to call them, can't bar unions on job sites.
TONY JONES: Let me ask you this, because you mentioned earlier that you actually had to put the ACTU in a headlock and pull out their rotten teeth one by one. Are you saying essentially that she's in the sway of the present ACTU and she's put this policy together and this is a union inspired policy. You need to pull more teeth now?
PAUL KEATING: One of the reasons why real wages are falling, it's not simply because the Government is the kind of show it is, it's because the unions are just not much good at what they do these days.
The unions are just ineffective at getting real wage increases for working people. They've gone to seed the unions. This straw man thing, we'll have the union bosses. Try and find one. Try and find one that canŠ
TONY JONES: They're all going to be in Parliament, aren't they?
PAUL KEATING: No. I mean, the fact is there's been massive, when I started work I started work in Australia which was in the industrial age. I was one of the people that ushered into Australia the post industrial age. In the post industrial age the age of the collective is less and the natural role of unions is less. But as well as that may be they've also got incompetent as well.
TONY JONES: You're saying essentially the union movement is dying on the vine?
PAUL KEATING: It's dying on the vine. It's dying out of lack of passion. Its reason for existence, and general incompetence.
TONY JONES: So why should the Labor Party link itself so directly to a union movement that you describe like that?
PAUL KEATING: I don't think they should.
TONY JONES: So what should they do?
PAUL KEATING: Basically keep unions, look, any Labor Party that turns its back on a collective group of people is no Labor Party at all.
But that doesn't mean to say they have to become apologists for lolling about. I mean you take the instance, the liquor allied entertainment restaurants, entertainment industry in this country since the '80s. It's been massive. Unionisation hasn't happened. There's some of it there, basically hasn't happened. Why? Incompetence.
TONY JONES: If you're right and if your vision is correct then you're talking about a new Labor that doesn't have unions attached to it?
PAUL KEATING: You have Labor with unions attached to it but not ones where they're calling the shots anymore than they call the shots on me when I introduced a 1993 labour market reforms to junk centralised wage fixing.
TONY JONES: But that was my point before, you think they're calling the shots now?
PAUL KEATING: No, they're not calling the shots now, that's only Costello Howard talk. Silly what's his name, the "Shrek" whoever he was on the television this morning. What's his name?
TONY JONES: Joe Hockey.
PAUL KEATING: Yes, Joe Hockey. That stuffs all palaver.
TONY JONES: Paul Keating, we are nearly out of time, but I mean, you realise you've set the cat among the pigeons, don't you?
PAUL KEATING: What cat amongst what pigeons?
TONY JONES: There's quite a few, we haven't got time to go through them all right now. I presume that you've made these points because you want to see change.
PAUL KEATING: I tell you one thing Tony, the Labor Party will do no good running away from the great structural reforms of the '80s and '90s under Bob Hawke and me.
Our model is a model Tony Blair tried to pinch and run calling it the third way. I noticed Wayne Swan talking on the television tonight saying he'll form a Labor Government. As if there were 30 of them. There's only two main ones, in the recent period, that's Hawke and mine and we're the ones who did the changes. Everything in those national accounts yesterday, everything, that is the growth in the economy and the low unemployment, the reason the system is not blowing, the tinder box has not taken off is because of the float, because of the tariff changes and because of the IR changes, structural changes. That's why they're there. Not because of any superior management by Mr Costello. You know this pat line tonight about you wouldn't put an L plater. God, he's the greatest L plater of all time.
TONY JONES: Not anymore, he's been there for 11 years.
We'll have to call a halt to this now Paul Keating. We could probably go for the whole evening, but we can't. Thank you very much, it's been fascinating to talk to you again.
PAUL KEATING: Thank you.