Friday, January 10, 2014

Reality is yet to reflect optimism

According to Dun and Bradstreet's (D&B) business survey, firms are optimistic about 2014.

But, following announced departures of Ford, Holden and Sydney's Kurri Kurri aluminium smelter, this year brings serious concerns about the ongoing viability of other key businesses, including Toyota and the Point Henry aluminium smelter.  A strong Aussie dollar, rising energy costs, and poor labour productivity have caused these disappointments.

The dollar is now off its peak level.

And the Abbott Government is attempting to reduce energy cost penalties caused by the carbon tax and other such policies.  Labor opposes such measures and, indeed, the Rudd/Gillard Government left poison pills to impede other energy cost reductions.  These include institutions such as the $10 billion Clean Energy Finance Corporation which appears determined to continue wasting money to thwart the Abbott Government's policies.  The Commonwealth seems reluctant to simply cut off these bodies' access to funds.

Another obstacle to restoring a strong economy is entrenched trade union power aided by labour laws and judicial appointments.

Australia is unique in having a ''Fair Work'' Commission that controls the employment terms and conditions of almost every worker.  The Commission has increasingly become a vehicle for providing jobs, at $350,000-$600,000 a year, for union leaders and their lawyers.  Many of these appointees bring with them their anti-business ideology.  Partisan appointments have also steadily infiltrated the 40 judges comprising the Federal Court.  One third of those appointed by the Gillard/Rudd governments were ALP stalwarts.

The industrial relations system resulted in Holden's factories being loaded with productivity-sapping union controls, which impaired the carmaker's ability to operate efficiently.  Furthermore, a compliant management has allowed union extortions to bring wages that are twice the level seen in other workplaces.  Even with governments funding almost 30 per cent of investment, the labour cost penalty has strangled the firm, with workers preferring redundancy rather than the conditions prevailing in the US and Germany.

Critical to Toyota's survival are exports to affiliates overseas.  To restore competitiveness, management asked its workers to vote on a package of 22 cost savings, none of which involved cutting wages.  In a similar situation, Boeing's employees in Seattle, voted in favour of survival.  But allowing democratic decisions by workers was too much of a risk for Australia's unions.  They took court action before Mordy Bromberg, one of the ALP friendlies appointed by the Gillard government.  Judge Bromberg refused to allow workers to vote on the management's proposal, thus probably signing the death warrant for the last Australian car assembly plant.

With aluminium smelting, Australia was once an ideal location and could recover that position if energy taxes and regulations were removed.  Smelting too however has a cost-padded labour force.  Union heavy Paul Howes, in an attempt to deflect blame for a future closure of Port Henry, claims to have agreed to ''quite good efficiencies'' over the past couple of months.  This is probably a case of too little, too late.

These developments suggest it was the Coalition's election victory rather than genuine underlying improvements that were behind the confidence expressed in D&B's business survey.  Much needs to be done to translate these hopes of the business community into reality.

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