Find below a good speech by Innes Wilcox of the Australian Industry Group on where we find ourselves in terms of labour market flexibility. There are lot’s of good points in this speech to consider. There is little doubt that Australia’s real exchange rate, including labour costs, has inflated to a dangerous point.
Having said that, with little or no effort being placed on remedying the bloated dollar, taking the European road of looking for increasing competitiveness via internal deflation comes with its dangers.
I was not a fan of the Work Choices legislation, believing it swung too far in favour of big businesses which, for the most part, sits atop economic rents derived from rampant oligopolies. In this context, weakened labour laws threatened to take us down the US road of a hollowed out middle class.
But, equally, I think it clear that the pendulum has swung too far back, handing unions too much power, especially when coupled with the demands of the mining boom.
If I have criticism of this debate it is that it tends to ignore the needs of small business, which is where flexibility is most needed. The unfair dismissal laws afflicting small business are draconian.
In sum, this speech is a useful contribution to the debate we must have about how to restore productivity growth to Australia.