DAVID PEETZ. An industrial relations furphy.

Nov 18, 2016

The media excitement surrounding the theatrics of former Senator Bob Day and current Senator Rod Culleton seemed to obscure the real issues facing the federal government’s industrial relations legislation.

The government failed to put bills re-establishing the Australian Building and Construction Commission (ABCC), and a new, government-appointed Registered Organisations Commission, onto the notice paper for discussion in the Senate when it was expected to. Most in the media took this to mean that Day and eccentric One Nation Senator Culleton are critical to passage of the bills.

Before this pair’s troubles, the government’s confidence seemed to indicate it expected the bills would pass, by around 40 votes to 36 (pairs aside). That assumed they would receive support from One Nation (whom John Quiggin has described as being in a coalition with the government), market libertarians Day and David Leyonhjelm, new Senator Derryn Hinch, and the three senators from Nick Xenophon’s team. Ironically, Culleton was the only unreliable member of One Nation on the ABCC bill. (Ignore, for the moment, the possibility that Leyonhjelm might vote against a bill he deeply supports as payback for the government declining to loosen gun controls or racial vilification laws.)

Either way, losing Day and even Culleton (who later said he would still vote, despite the controversy he faces) would still leave the margin 38-36. Yet since then, passage has been uncertain, perhaps unlikely. The government has waited until next week to introduce the legislation into the Senate.

The uncertainty meant that either Hinch or Xenophon’s team were wavering, or both were. If Culleton still voted, and in favour, Hinch’s position would not matter. But if Xenophon’s team went against the bill, it would fail no matter what happened with Day or Culleton.

For different reasons, both could have misgivings. Hinch reportedly wants a bill that is “pro-worker, anti-corruption”. This is not good for the government, as the ABCC bill is neither: it does nothing about corruption (imposing restrictions on union access to construction workplaces is unrelated to fighting corruption within unions), but it does hurt organised workers in several ways.

Hinch has signalled a willingness to compromise, but the government seems strongly opposed to the idea of any new federal corruption body, an idea Hinch supports. Establishing bodies they cannot control is not a hallmark of the current government.

Xenophon has sought other concessions for his ABCC votes: stronger occupational health and safety legislation, higher standards on imported building products, and better protections for payments to subcontractors in the industry. The collapse of Day’s building company is one of the things that brought about Day’s own demise and heightened Xenophon’s concerns about the industry.

Xenophon is also troubled by aspects of the Building Industry Code that the ABCC bill would bring into force. He sees it as giving too much power to one body, one that would be ‘investigator and assessor of compliance and…responsible for…sanctions’. He is also concerned about the retrospectivity of the code—affecting agreements made from 2014.

As the likely head of a renewed ABCC is the current head of the Fair Work Building Inspectorate (known as the FWBC), or a protégé thereof, such concern is well justified. The FWBC these days acts as a determined antagonist of the unions, criticised by the Federal Court for ‘abuse of process’ and by the Commonwealth Ombudsman for its behaviour in compulsory examinations of workers. Subsequently, it emerged that FWBC last year withdrew funding provided to the Ombudsman to monitor FWBC’s use of coercive powers.

If the bills fail in the Senate, the government could hold a joint sitting of both houses to pass the bills that were previously rejected. In a joint sitting, no compromise is possible. So Hinch and Xenophon would be even less likely to support the ABCC bills there. The government might stand a better chance due to its majority in the House of Representatives, but it would rely on the support of independents. Cathy McGowan, from a conservative, rural electorate, voted for the ABCC bill last month, but Andrew Wilkie, from an urban electorate, voted against it, as did Bob Katter. The only Xenophon team member in the lower house, Rebekha Sharkie, voted for the ABCC bill, but if her party votes against it in the Senate she may well do that also in a joint sitting. Under that scenario, the ABCC bill would be defeated at a joint sitting 112-113.

By then, a replacement for Day may have been found. But it was always strange that Family First had pre-selected a market libertarian, who often voted against the DLP, once seen as the upholder of family values. Perhaps his huge donations to the party had something to do with it.

If Day is replaced by his senior adviser, as is his wish, the libertarian path would be continued, but even that would not secure passage of the ABCC bill in a joint sitting. Moreover, if the other contender, an upper house MLC is pre-selected, or the High Court orders a recount and the second person on the ticket is elected, the libertarian direction could be reversed in favour of family values, and another vote may be posted against the ABCC.

So, it is not surprising the government wishes to negotiate a revised ABCC Bill through the Senate. It has a better chance of success there than through a joint sitting—something which will probably not happen in this term.

It also makes sense that the government wishes to deal with the legislation this year, regardless of what the High Court does about Day and Culleton. Their status is not the problem for the government; the problem is Xenophon and, perhaps, Hinch.

But even if the ABCC legislation is passed, that would not be the end of the matter for the government. For one thing, it has created expectations that cannot be met. Some of this is because the expectations are contradictory. For example, Treasurer Scott Morrison recently claimed that the ABCC would help boost wages, while the Prime Minister said it would stop excess wages growth.

And some of it is simply because it is based on wishful thinking. For example, the government still repeatedly refers to huge gains in productivity that will flow from the introduction of the ABCC, but these claims are based on a report that has been repeatedly discredited, not least because a central part flowed from spreadsheet errors —data from a major quantity surveyor had been incorrectly transcribed and, conveniently, the result was an implausibly large ‘effect’ from ‘reform’ of the industry. The consultancy firm admitted the error but never changed its estimate of the ‘effect’ of ‘reform’.

That report had been paid for by the earlier incarnation of the ABCC, who received exactly what they wanted. Later versions were paid for by a construction employer body, after the ABCC had been abolished by Labor and replaced by a body with only slightly reduced powers, the FWBC.

Although it claimed that ‘reform’ of the building industry through the ABCC regime would lead to $9billion in savings (a claim still used by the government, though Minister Pyne recently raised the bid to $16.8 billion), analysis of the underlying data show no such thing. The correct number is closer to zero than to Pyne’s estimate.

The whole idea that the regulatory regime or the regulator determine productivity growth in construction is a furphy. As we saw in an earlier posting, the evidence from ABS data over recent years is that productivity growth in the industry (and indeed, nationally) is influenced by a range of matters—such as, quite simply, how much work is going on—not the legal regime. Productivity goes up and down from one year to the next.

The rhetoric of union corruption that has been used to justify the ABCC has led some to say there should be a body with broader powers dealing with wider corruption issues. That is well outside the purpose of the ABCC bill, but entirely within the rhetorical cage built by the government.

The other problem is the building code itself. In some ways it is more important than the ABCC. As industrial reporter Paul Karp writes, ‘Compared to the ABCC’s long war of attrition, the building code’s effect is viral and immediate’. It actively punishes employers who do not adopt the government’s industrial agenda. Much (but not all) of what the revived ABCC would do can already be done by the current body, the FWBC.

The belligerence of the industry regulator towards unions in recent years has been shaped more by the identity of the head of the regulator than by the legislation it acts within. The new Building Code, however, would give the head of the ABCC much greater power to punish employers who did not abide by ABCC policy than is presently available, or would be available through the ABCC legislation on its own.

As pointed out to me by Andrew Stewart, the building code is a ‘legislative instrument’ that can be disallowed by the Senate. Xenophon has already expressed his concern about it, and there is no doubt the Code would give immense power to the director of the ABCC to pursue a much-expanded agenda—and to do so retrospectively.

If Xenophon’s party supports a disallowance motion, and assuming the Greens, Labor and Jacqui Lambie do so also, a disallowance motion would succeed by 39-37. If Hinch agreed, it would go down 40-36, though his vote is not decisive unless Lambie votes no, and only matters if Xenophon’s team also vote to disallow.

It might seem strange for the Xenophon team to allow the ABCC bill to pass and then disallow the code. But stranger things have happened in politics.

So the future of the anti-union regime of the ABCC is far from clear.  The ABCC legislation might eventually be passed in some amended form, but if the Building Code is disallowed then the ABCC would be much less effective in pursuing a partisan agenda than the government would like.

David Peetz is Professor of Employment Relations, Centre for Work, Organisation and Wellbeing, Griffith Business School, Griffith University.

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