Reprint

The Sunday Times logo

Union fury at Hawke's

wage blow

The Sunday Times, August 24 1986

By Brian Deer, Sydney

AUSTRALIA'S trade union movement is in turmoil this weekend after last week's budget from the Labor government ordering a 2% fall in real wage levels. The budget package also includes cuts in health, social security and education spending and is expected to worsen the already serious unemployment problem.

Union leaders are warning Bob Hawke, the prime minister, of the risk of a disastrous split between his administration and the unions over the budget, the toughest since the depression of the 1930s. They believe the future of the Hawke government, which so far they have supported, is now at stake.

"Some new wages policy will have to be worked out," Pat Gerraghty, secretary of the powerful seamen's union, told The Sunday Times. "This budget means a straight reduction in living standards and I don't think the trade unions will stand for it any more."

Fourteen unions, led by the builders and the metalworkers, are planning a protest rally outside the federal parliament in Canberra. They are pressing the Australian Council of Trade Unions (ACTU) to break publicly with Hawke, who, before he entered parliamentary politics, was its national leader. The ACTU will convene an emergency conference of all members in October to debate the crisis.

Tom McDonald, secretary of the building workers' unions and a leader of the left of the ACTU executive, predicted a "grass-roots revolt" over the budget. "The trade union movement will now have to go its own way," he said.

A split with the unions would be extremely damaging to Hawke, who as president of the ACTU established his national reputation some 20 years ago. He is by far the most popular Australian politician, but he was able to defeat Malcolm Fraser's Liberal party in March 1983 largely because he was able to promise a formal accord with the unions. That accord is now in jeopardy.

Under the deal Hawke and the ACTU struck in 1983, the government pledged "to protect the purchasing power of wages and salaries" and to "aim to eliminate poverty by ensuring wage justice for low wage earners, reducing tax on low income earners, raising social security benefits and making other improvements to the social wage."

In Australia's unique pay bargaining system, incomes for more than half the work force are determined by rulings from a national conciliation and arbitration commission. This body, an adjunct of the Supreme Court, receives submissions from all sides and makes legally binding awards.

Under an arrangement concluded at the time of the 1983 accord, virtually all awards are settled in a single ruling every six months and are indexed to consumer prices. As a result of the deal, the inflation level fell from 11.5% during the last year of Fraser's Liberal government to 4.3% at the end of Hawke's first year in office.

Inflation has since risen to 8.4%, mainly because of the devaluation of the Australian dollar, and the government has moved away from the agreed pay mechanism by cutting, or "discounting" inflation-linked awards. This means recommending a pay rise figure below inflation to the arbitration commission.

As an independent body, the commission is not obliged to accept the government's figure, but it is likely to do so. Earlier this year, a 2% discount was agreed by the commission, and in last week's budget a further 2% was announced by the federal finance minister, Paul Keating. He said that a similar cut may also be needed in the new year.

These cuts have infuriated union leaders, who believe the accord is now under severe threat. "I'm getting a little sick and tired of continually giving explanations for this government," Harry Quinn, leader of the transport workers, told The Sunday Times.

Leftwing trade unionists have also been angered by Hawke's decision to resume the sale of uranium. A halt to uranium exports was another plank of Labor's policy programme in 1983.

Although Hawke does not need to face an election before December 1988, he is haunted by memories of the last British Labour government's fate. In 1974, Harold Wilson fought and won a general election on a platform in which the so-called "social contract" with the unions was a dominant element. This was the deal that was finally buried in the 1979 "winter of discontent".

Simon Crean, the ACTU president, and other Hawke supporters hope to hold the accord firm, warning that a split would mean disaster for Labor.

Recent by-elections have shown marked swings against Labor, and even moderate union leaders fear it will be hard to sell the budget to their members.

Besides the cuts, Keating's plans, which more than halve the government's A$7.5 billion spending deficit, also defer pledged tax cuts.

Crean wants the emergency conference in October to endorse a new deal with Hawke which both sides can take to the arbitration commission broadly accepting the 2% wage cut. But there is growing concern that some major ACTU affiliates may join the plumbers' union, which has already broken away, and make independent submissions.

Party leaders are this weekend lobbying to avoid what they fear could turn into a union-by-union "unravelling" of the deal with the government.

"This accord needs everybody to support it to survive," said one senior Labor source. "Otherwise it will just disintegrate as unions try to get a better deal for their members."

Hawke and Keating hope to appeal over the heads of the union leaders to what they regard as the better nature of Australians. Opening the government campaign shortly before his budget speech, Keating prepared the ground, telling reporters: "This is definitely not a budget for wimps."

Topic: Australia's budget 1986


Copyright, Brian Deer. All rights reserved. No portion of this article on the Australian budget 1986 may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author. Responses, information and other feedback are appreciated - via the briandeer.com homepage.