Mungo MacCallum- Political Corrections

Paying the price for WorkChoices

That strange grinding sound you hear coming from Kirribilli House is not Janette Howard filing her teeth but out beloved Prime Minister gnashing his.

Not only is the bloody economy refusing to behave itself but the enforcers he appointed to whip it into line seem to have gone off the rails as well. Professor Ian Harper, the chairman of the Fair Pay Commission, clearly does not recognise that the title of the body he heads is, like Howards own nickname Honest John, an exercise in irony.

The idea, as the various employer bodies who helped frame the equally ironic WorkChoices policy have made abundantly clear, is that wages should be progressively reduced in real terms. Their submission for a $14 week increase in the minimum wage would have achieved precisely that.

Instead, Harper and his colleagues delivered nearly double, a result which comes perilously close to the genuinely fair outcome proposed by the ACTU. And while the employers were able to rage, predictably, that the commissioners were duped, their decision was preposterous, and the end of the world was at hand, Howard (who has spent his life screaming the same about much less generous decisions by former tribunals) had to cop it sweet.

After all, it was his Fair Pay Commission; he was the one who had constantly denied that it was a device to drive down wages. And now that it had apparently taken his protestations literally, he was reduced to the shameless claim that it proved his point: WorkChoices, far from being a cruel and inhumane policy aimed at grinding the faces of the workers, was in fact warm and cuddly, and the decision was nothing short of a work of genius.

His loyal Workplace Relations Minister Kevin Andrews joined in the applause, although privately he must have been wondering how another upright, steadfast Christian like Professor Harper could have become such a namby-pamby do-gooder; Judas is the word that leaps to mind.

In spite of the lamentation and hair-tearing coming from the employers, Harpers judgement will have a minimal economic impact as only a small percentage of workers under Commonwealth awards will get the full increase. By itself it is unlikely to raise either inflation or unemployment.

But there are three problems. The first is that there will be intense pressure for the increase to flow on to state awards, which could contribute to a wage spiral. The second is that if Harper really does intend the judgement as a statement of principle a precedent then wage increases in the future, and particularly before next years election, could be a problem for monetary policy (on the other hand, if next years increase is stingy, voters may conclude that Howard has sat on the Commission and that the first decision was noting but a cruel hoax). But the third problem is psychological: whatever Howard says now, we know that the judgement was not what he expected.

The impression that he and his colleagues have lost control of the economy will be reinforced, especially as interest rates continue to rise. Howard signalled last week that he was resigned to another rise. A stitch in time, he suggested in his homely fashion, might save us from a worse result later on by which, of course, he meant that the result would be worse for him if it came closer to the election.

But there is every chance that it still may. Petrol prices could turn around again, the impact of the drought on food prices may accelerate and there is always the risk of a surge of wage inflation with the kind of shortage of skilled labour which we have at present. Economic growth is certainly uneven and may or may not be slowing; but this does not rule out the possibility of the kind of stagflation we suffered 30-odd years ago the cycle is just about due.

In Howards favour is the stated reluctance of the Reserve Bank to raise interest rates close to an election, in case it should be accused of interfering in the political process (it has apparently not occurred to the conservative board members that to fail to act when economic circumstances warrant it is also an interference). But clearly he recognises that interest rates are his greatest danger and that short of sidelining the Reserve Bank altogether, there is precious little he can do about them apart from running a hardline budget next May.

That would still leave room for another totally irresponsible pre-election giveaway with the fall-out delayed until after the polls, but it is doubtful that he could get away with it again. The punters were burnt last time and Labor will not let them forget it.

Kim Beazley has already foreshadowed a hit-and-run billboard campaign on Howards broken promise on interest rates. Howard, with some bravado, hit back with the suggested billboard: Beazley-Keating: 17%, Howard-Costello: 7 3/4%. But I doubt that his hearts in it. Apart from anything else the temptation to add a top line Howard-Fraser: 22% might prove irresistible to the historically minded.

But mainly hed rather gnash about other things. Quick, Janette, pass the distraction.

And indeed, I must enthusiastically applaud our dear leaders latest bold initiative, which is the provision of a chaplain for all schools not brave enough to refuse the offer. I remember my own school chaplain with great affection. He ran off with the matron, leaving their respective spouses spluttering with rage and the school authorities writhing in risible embarrassment. No Australian schoolchild should be denied such an uplifting experience.

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