Find below the AWU’s Paul Howes’ Press Club address of yesterday. The speech has been largely ignored by the vested interests driven business media which is a shame because it’s pretty good. Sure, there’s some contradiction in it. And a lot I don’t agree with, such as his assessment of bank re-regulation being an excuse to re-regulate everything else, or his declaration of the need for actively picking winners. But his critique of the “race to the bottom” mentality of big business and its role in our falling productivity, as well as our uncompetitive rising costs, are usefully discussed. His assessment of the media-business nexus is also spot on. I would only add that a similar relationship exists between Labor (if not the unions directly) and the Fairfax dailies, as well as the ABC. Enjoy!
Failing to plan, is planning to fail: Why Australia needs to get back in the game of picking winners
22 May 2012
AWU National Secretary Paul Howes’ address to the National Press Club
It’s great to be back at the National Press Club, and I appreciate the invitation.
It feels as though in Australia today no-one is interested in talking about the big challenges.
No-one wants to roll up their sleeves up and get on with the job.
Fighting for what you believe in is no longer interesting in modern politics.
The national conversation has become dominated by vacuous drivel about particular phrases, styles and presentation.
It’s like an inane feedback loop that builds to a conspiracy of mediocrity between our political class and the commentariat – a crime that I am as guilty of as anyone.
In this current political environment, it’s easy to forget where you’ve come from, and to lose sight of where you’re going.
This navel-gazing suits the conservatives.
It makes it easier for them to chip away at the foundation stones of our egalitarian society.
It makes it easier for billionaires and mega corporations to plunder our public resources without giving anything back.
It makes it easier to defeat the ideals that the labour movement stands for.
The time to fight back is now.
As the current custodians of the Labour Movement, we need to stand up for the great labour project.
Because if we shirk this fight, if we fail to embrace change and lead the movement back out of the wilderness
we’ll end up on the sidelines, watching as the conservatives take this country into mediocrity.
At the end of the day, it’s a fight to make sure Australians have good secure jobs.
Because that’s what the Labour Movement is all about – jobs.
Always has been. Always will be.
When we advocate for change, we do it to overcome injustice, to promote equality and fairness,
And above all, we do it to improve the lives of all Australians.
Our history is one of magnificent victories and inglorious defeats, and we can’t kid ourselves we’re not doing it tough today.
Our current woes are often blamed on many external forces.
But I agree with Bill Kelty when he said last week that we can’t just blame the media.
Because blaming the media is a distraction from the burning need for our movement and our movement alone to fix its own problems.
My point is that the Labour Movement is at its best when it is challenging the status quo.
And when you’re trying to change the nature of power, we should always expect those who hold the power to fight back.
Frankly, we’ve never really had the media barons on our side.
From our earliest days through to now they have been consistent in their alarmist reporting of the Labour mission.
Newspapers of the 1890s carried the hate and vitriol of the day in headlines foretelling the impending doom that our not-yet-formed nation would experience – if the fledgling unions and early Labor Party gained a foothold in our society.
I often refer to the annals of labour history to remind myself of how hard it was for our predecessors dealing with the press back then.
Dealing with headlines like the one in the Brisbane Courier in 1898 screaming that “Every addition to the strength of the Labor Party is a step towards the ruin which socialism brings.”
I’ll also remind you of an editorial in the Sydney Morning Herald from the year of the Labor Party’s birth in 1891, blaring that:
“Our greatest peril comes from the intrusion of the labour struggle into the field of politics – only the most extreme and violent men will control the situation.”
My message is this – toughen up – it has always been this way, it will always be this way.
So let’s not be distracted and let’s focus on what we can actually do something about – reforming our movement and developing policies that really matter to the punters.
Let’s get the political conservation back onto the important things.
Important things like where the hell is our economy going, and what is Australia’s future going to look like.
Because Australia today is a nation undergoing profound change.
We have an economy in transition, but for the majority of Australians it is unclear what we are transitioning to.
The driving force behind this change is our trading relationship with China.
The nation that once rode the sheep’s back is now riding the dragon’s tail.
Today the dragon is changing our economy through its unquenchable thirst for our mineral resources.
In the future, the driving force of change will be the transformation of China from a production-based to a consumption-based economy.
The latest Chinese five-year plan is clearly driving that transformation.
A consumption-based economy will eventually force the Chinese government to float the Yuan – increasing the buying power of Chinese consumers.
The opportunities will be enormous.
Consider this:
- Continental Asian middle-class spending will surpass that of the US, EU and Japan combined in 2022;
- China’s economy alone will exceed the US in 2020 and pass the 27-member European Union in 2027;
- The global middle class is predicted to increase to 3.2 billion by 2020, and to 4.9 billion by 2030 – with 85 per of this growth coming from Asia.
- In 2009, China and India comprised just 5 per cent of global middle-class consumer spending – but in 20 years, they will comprise 41 per cent of that spending.
As this transition takes place, we will need to be producing the goods and services that Chinese consumers want.
Imagine the potential if Australia was well positioned to take advantage of that awesome buying power on our doorstep.
But by failing to plan for this day, we’re effectively planning for failure.
It’s time to take control of our own economic destiny.
We need to be doing the spade-work now – investing in the growth industries that will support Australian jobs, and underpin our future prosperity.
***
The upcoming Olympics is a classic example of how Australia actually does industry planning well.
We set national objectives – like finishing in the top five of the medal count.
We pick winners – focusing on areas where we have a competitive strength, like swimming.
We invest in R & D – engaging the best sports scientists, and supporting our elite athletes through the Australian Institute of Sport.
Government support is justified on the grounds of national interest, the importance of sporting success to our common identity.
When it comes to the Olympics, we don’t get hung up on esoteric arguments about the purity of global competition.
In sport, Australians play to win, and we don’t apologise for being successful.
But when it comes to our income and job-generating industries, we expect them to stand or fall on their own two feet.
Public investment in industry capacity is considered taboo.
Have we become a nation that is too scared to take a punt on ourselves?
Maybe if they gave out gold medals for manufacturing we wouldn’t be so squeamish.
Well, the AWU doesn’t want to see Australian industry lose. We want Australian industry to win.
We want Australia to rediscover its industrial policy vision.
We have the opportunity to leverage our great resource gifts by adding value to them, and developing our champion industries.
It should be clear that Government has a role to play in securing our economic future – but Canberra policy makers seem stuck in the mind-set of passive government.
Now is not the time to be passive.
Australia’s manufacturers are being hit by: a record high dollar, that is roughly 50 per cent above its post-float average, high input costs driven by surging commodity pricesand increasing competition for labour.
This is occurring at the conclusion of a period when Australia has become a high-cost country relative to our competitors.
The problems in manufacturing and in the services sector are being hidden in the national accounts by the resources boom.
We have effectively let the market pick winners for us, and the market has bet everything on a horse called the resources sector.
The end result will be a hollowed-out economy, suffering from the dreaded effects of Dutch Disease.
If the free market ideologues were right, then there would be no reason for Australians to be struggling.
And yet despite the resources boom, most Australians don’t feel better off.
In fact, most Australians aren’t better off.
Recent polling found that 66 per cent of Australians believe that they, personally, have not benefited from the mining boom.
Our members live in this real economy.
Ours is a union that makes real things and works on the front-line of the national economy
from local government workers, to the health sector, to manufacturing, construction, mining and everything in between.
Our members see shifts being cut back, factories being closed – while their fuel costs, electricity bills, and rents continue to rise.
Our members have been part of the roughly 130,000 jobs that have been lost in manufacturing since 2008.
In the Labour Movement, we cannot ignore this reality.
We have to fight to save manufacturing.
Not just because it was the cornerstone of our economy in the past.
But because manufacturing – like resources, agriculture and services – will be one of the cornerstones of our economy in the future.
***
I want to set something straight.
You won’t find anyone in the Labour Movement who is more pro-resources and pro-mining than me.
Well, bar Martin Ferguson …
I’m a dig it up, chop it down sort of guy.
But I’m also a realist.
I recognize that the resources boom is having a perverse affect on the rest of the economy.
While the boom may be enriching the country, 98 per cent of Australian workers are employed in non-mining sectors.
Currently manufacturing and mining represent about 9 per cent of GDP.
Employment in manufacturing is roughly one million, while employment in mining is around 200,000.
So while the resources sector may be going gangbusters, we can’t allow the national economy to become a one-trick pony.
I’m not going to pretend that the policy challenges of a changing world are simple, or that there are easy answers.
Nevertheless, there are three key issues which need to be put front and centre in our national political conversation.
They are:
- The need for a competitive exchange rate, and more competition in the banking sector;
- The need for cooperation between industry and government on industry development plans, and the courage to pick winners.
- And the need for a business environment that drives innovation and genuine productivity growth.
Let’s start with the exchange rate and the banking sector.
The Australian dollar was trending well above parity for some time, but has recently fallen to just below.
A few weeks ago I made – what I believe to be constructive – comments about the RBA and exchange rates …
Of course, I’m always one to give credit where credit is due – and I warmly welcome the RBA’s belated move to cut the official rate by 50 basis points.
But here’s the rub:
We have to ask the question: with the growing power of the banks, has the RBA actually lost control of monetary policy?
The banks are acting as a de-facto cartel and are aggressively exercising their control over the market – and this power has consolidated since the GFC with the take over of banks like St. George and Bank West.
The banks have effectively decided that they don’t need to listen to the RBA or anyone else when it comes to the setting of interest rates.
The same brazen banks are reliant on Government policy to protect them from competition, and to protect their profits.
And yet we allow them to impose their own will over an important lever of macro-economic policy.
The other day I heard Mike Smith of the ANZ try to liken banking to baking.
He explained that if the cost of flour goes up, then so does the cost of bread.
And so if cost of borrowing goes up, then so does interest rates.
Well I don’t know how long it’s been since Mike went to the bakery but that’s simply not how things work when your grabbing your morning loaf.
That’s just not what happens with most industries that operate in the real world of genuine competition.
If the cost of inputs go up, they have to wear that cost as best they can … otherwise they will lose market share to a more efficient competitor.
You can’t just pass on the cost to the consumer with a shrug of the shoulders.
But of course – you can if you’re a bank.
Because our banks live in a very protected, regulated little world with very little genuine competition.
I find it hard to swallow that the banks are now opposing government assistance to other industries.
After all, they themselves were the beneficiaries of the largest industry assistance program in the history of this nation – in the form of the Bank Guarantee.
We don’t disagree that the Bank Guarantee was necessary, or that it was good policy, but the point is this:
If banks benefit from government regulation and support when things are going bad, then why shouldn’t they be subject to tight regulation and oversight when things are going well?
And if industry assistance is a good thing for the banking sector, then why isn’t it also a good thing for other critical industries?
It’s time we re-examined our banks, and put an end to the protection racket that allows banks to record massive profits while sacking staff and gouging consumers.
It’s time we had a bank that served its customers, and not just its CEOs at $2,000 an hour, $18,000 a day, $90,000 a week, for miraculous achievements we are never told about.
It’s time for an active government to pull the financial services sector back into line.
***
The second big issue is about planning and picking winners.
I was interested to hear Joe Hockey’s argument that we should be learning from the Asian model of social welfare.
There are obvious inconsistencies here with the Coalition’s steadfast support for middle class welfare, but there are also inconsistencies with the Coalition’s approach to industry policy.
The Asian model of social welfare is intrinsically linked to the Asian model of economic development.
Our Asian trading partners have strong, active Governments. Sometimes too strong.
They have the freedom to pick winners, the freedom to invest in growth industries, the freedom to aggressively promote exports, and the freedom to plan for growth.
The example of South Korea is particularly instructive about how a country can choose its own economic destiny.
Korea has risen from a small agricultural economy in the mid 20th Century, to the 15th largest economy in the world today.
It is a technological superpower with market leading companies such as Samsung, LG and Hyundai.
The success of Asian economies such as Korea didn’t happen through the ideological miracle of economic bushfires, where the conditions need to be just right for their creation naturally.
They were deliberately built through considered and targeted government policy – picking winners and planning for long-term growth.
The Samsung story itself is incredible.
Driven by Government-sponsored credit and policy vision, Samsung now accounts for more than ten per cent of the country’s GDP.
We should remember that Korea was hard-hit by the Asian Financial Crisis in 1997.
The conglomerates like Samsung and Hyundai were in the middle of this economic storm, and they took a buffeting.
The Korean government, however, didn’t throw away the lifeboats.
They took on some water, but they held firm … and in just a few years time Korea resumed its place as the world’s fastest growing economy.
In fact, GDP per capita has tripled in Korea since 1997.
The Korean experience shows how active governments can deliver economic growth.
In fact, it shows that governments should be in the business of industry planning.
We have to get over our phobia of picking winners, because you simply can’t win if you’re not in the race.
***
The third big issue is the need for a sensible discussion, indeed a productive discussion, about productivity.
It is no secret that many Australian industries are being shown up by more productive competitors.
Productivity growth in 2003-2007 was the worst since the 1970s.
But frankly, we need to stop thinking of productivity as a race to the bottom, and start thinking of it as a race to the top.
We need to stop talking about the cost of inputs, especially the cost of labour, and focus back on outputs.
After all, that is what productivity is all about.
It’s about the output of each unit of production, not the cost of each unit.
For just once, I would like to hear one of these captains of industry, like Leigh Clifford and Jac Nasser, talk about real productivity growth …rather than fantasies of the creation of a peasant workforce in this country.
A peasant workforce not unlike those who made your i-phones at Foxconn in Guangzhou – not assembled by highly productive processes, but rather assembled by an unlimited supply of cheap disposable labour.
It has been 20 years since we have had a genuine discussion about real productivity growth in this nation.
In the 80s we tackled the issue head on, and we found solutions that resolved the problem.
In the same way as the conservatives killed productivity in the 1970s, and under Howard in the 2000s, they’re killing it again today.
They’re killing it through ideological distractions, rather than focusing on: investing in infrastructure and capital stock, encouraging R&D and innovation, lifting our training performance and most importantly, building more productive workplaces through collaboration on the shop floor.
Business, unions, academia, and the bureaucrats need to sit down together to collaboratively solve our productivity challenges.
I’m up for that discussion.
I’m up for making the hard calls that need to be made to drive change.
Instead of talking at each other, let’s see if we can talk with each other, and come up with the solutions that are in the national interest.
***
The high cost of doing business is a reflection of Australia’s rising cost of living.
This is where high-level government policy meets the kitchen table, as it always must.
Our official inflation figure might be hovering around 3 per cent, but think about this:
For the year to the end of March, the cost of electricity rose by 9.9 per cent, water and sewerage rose by 9.3 per cent, childcare rose by 9.7 per cent and petrol rose by 5.9 per cent.
These costs are tied up in everything that Australian families do: heating their homes, watering their gardens, having someone to watch their kids and filling up the car on weekends.
And then there’s the cost of housing.
Over the past ten years, housing prices increased by 147 per cent, while incomes rose by just 57 per cent.
Today nearly one in ten home-buyers spends at least half their disposable income on housing.
And one in four Australians aged 24 to 34 live at home with their parents.
For a generation of young Australians, the dream of home ownership is out of reach for the first time in nearly 100 years.
Counter-productive policies such as negative gearing and the first-home owner’s grants have pushed up demand – without doing anything to increase supply.
These policies have pit young families against big overseas property investors.
Australians are increasingly being pushed into massive mortgages to get a foothold in the property market.
Many families are now living on credit … but that just leads to more pain, with banks charging outrageous interest rates, and slugging consumers with hidden fees.
Credit card interest rates of 20 per cent and above are simply unconscionable, and it angers me that nothing has been done about it.
I can tell you unequivocally that the cost of living is a major issue for our members.
It’s at the heart of the anger they feel while trying provide for their families.
They are reminded of it constantly in the media, but they no longer know who is on their side … who is fighting their battles in Canberra.
They are the people who are being left out of the national conversation.
But what I know is this: nothing will drive a family faster towards poverty than a week, a month or a year without a wage.
No one gets rich on the dole.
***
I was privileged to hear both Paul Keating and Bill Kelty speaking at the ACTU Congress last week.
Listening to those titans of Labour reminded us that a strong united Labour Movement provides Australia’s best hope of navigating turbulent economic times.
Equally, Kelty reminded us that our values as a Movement are the values of Australia’s working men and women.
That means balancing the need for economic incentives with a sense of community responsibility.
The conservatives will talk about “mutual responsibility” when it comes to welfare payments for people in poverty,
But they do not accept that the same principles of incentive and responsibility should apply to the business community.
In the AWU, we don’t have a problem with people making money.
We’re not “anti-wealth”. We’re not “anti-growth”. We’re pro it.
We believe in growing the pie for everyone.
But unfortunately, many Australians feel that while the pie may be growing, the slices for the Clive Palmers of the world get bigger and bigger
while the crumbs for everyone else get smaller and smaller.
A proper balance between incentive and responsibility means providing public investment to support private sector growth
and where appropriate, sharing some of the risk.
Every large company in Australia has in some way benefited from the policy settings of government.
But people and businesses who enjoy success from our economic structures also have a responsibility, an obligation, to put something back.
***
When I’m out on the shop floor with our members, I’m inspired by their commitment to their union and to each other.
Our members keep the flame of collectivism alive.
They inspire me, and they give me confidence that Australia can rise to the challenges of the future.
They understand the economic ground is shifting.
They understand that change is nothing new – our economy has gone through many transformations in the past.
But what is absent this time is a clear path for working Australians – what will happen to them over the next ten to twenty years.
That’s the job of our society’s leadership – to map out a path for how our country survives.
To explain where we’re going, and how we’re going to get there.
It’s also the job of the Labour Movement.
We have to provide the leadership.
The leadership that says if you’re a Qantas worker in Melbourne, it’s not OK for you to lose your job because of power-plays between royal families of Dubai and Abu Dhabi.
The type of leadership that says – jobs above all else is what we are about and sacrificing generations of working people in parts of Tasmania, because of an ill-informed debate playing out in the eastern suburbs of Sydney, is not OK.
And to say that – even if it costs us politically in the short term – we must always stick to our principles and morals, and not be tempted by new fads which take us down the path of narrow based populism.
We have to provide our vision, our pathway, our plan that will deliver secure jobs for Australians – not just profits for the captains of industry.
We must find the strength and the courage to take control of our own economic destiny.
And we must be prepared to fight for it.
