Victoria Redux

[an edited version also published as "Recycling fiscal mistakes" in The Canberra Times of 14 October]

Victorian "progressives" are some of the most conservative people in Australian life:  repeating old mistakes in new forms seems to be a particular passion of theirs.

The most startling example of this was the Cain-Kirner government replicating in the late 1980s and early 1990s the mistakes that made the Depression of the 1890s such a disaster in Victoria.  Victoria had a particularly appalling 1890s Depression which ensured that economic dominance would pass back to New South Wales:  from 1891 to 1901 Victorian male employment fell by 1 per cent while NSW's grew by 19 per cent.

The 1890s collapse had been set up by a speculative land boom based partly on political suppression of appropriate risk assessment.  This was replicated a century later by State-owned Tricontinental and VEDC lending for ill-judged projects the private sector would not touch.  The 1890s crash was made worse by Victorian authorities mishandling a run on the banks.  This was again replicated in the 1990s with the Pyramid Building Society disaster.  In the 1890s, disheartened Victorians fled to the Kalgoorlie gold fields, a century later Queensland was the Mecca.

Take a bow (Premiers) John Cain and Joan Kirner, (Treasurer) Rob Jolly, (chief economic adviser) Terry Sheahan! Old mistakes updated and re-delivered! (Though borrowing money to pay superannuation obligations was probably a new twist).

As part of this process, the Cain-Kirner Government took a State whose unemployment rate was persistently below the national average, and, starting in 1986/87, turned into one whose unemployment rate was very much above the national average.  Under Kennett, the Victorian unemployment rate (slowly) returned to the national average -- though full-time employment has only just returned to the level it was going into the 1990 recession.

The new Victorian Premier, nice Mr Bracks, has been assuring everyone that he is not going to make the mistakes of the Cain-Kirner Government, no sirree, not him.

Unfortunately for this comforting tale, he has already started doing so with Workcover.  The re-introduction of common law rights has meant a surge in workers' compensation costs:  some firms are looking at increases in their premiums of up to 100 per cent.  Hardly an encouragement for employing people.  Indeed, Tony Harris, (in the Financial Review of 11 August) cites a Victorian Treasury report as estimating the changes will cost 9,000 jobs.

Did you think that tender concern over common law rights in workers' compensation has something to do with the workers?  Foolish you, it is all about lawyers' incomes.  As Tony Harris points out, it is not unusual for costs to consume up to half of an awarded judgement.  Sensible governments cut back common law rights, foolish governments extend them (on this matter, the Cain-Kirner Government was sensible, the Kennett Government initially foolish but later realised, and reversed, its error).

The union movement gets a lot of pro bono work from friendly lawyers:  the pay-off is the gravy-train of workers' comp.  claims.  Cutting off common law rights not merely allows costs to be contained, it reduces mightily the income stream to labour lawyers.  It is a sign of how beholden that the modern ALP is to its supporting interest groups that three of the four Labor Governments in power in the Eastern States -- the Beattie Goverment in Queensland, the Bacon Government in Tasmania and the Bracks Government in Victoria are preserving or extending common law rights in this area.  (A prime reason Kennett's Attorney-General Jan Wade was so hated is her reforms cut the money flowing to lawyers by millions of dollar).

Where the Cain-Kirner Government was foolish on workers' compensation was introducing a statutory scheme that was far too generous, particularly in the ease with which claims could be successfully made.

But foolishness over workers' compensation is far from the only sign of Bracks being a case of Back to the Cain-Kirner Future.  Despite being a remarkably spendthrift government (with a real increase in non-capital outlays per resident of 24 per cent over its term in office), the Cain-Kirner Government were low spenders on capital investment:  the Kennett Government increased capital expenditure markedly.  Since the ALP did not expect to win the 1999 election and -- an even bigger problem -- its values are inner-city but its majority comes from provincial towns, the Bracks Government suffers from agenda-paralysis.  A gap in capital projects moving through the processes of initiation and implementation is beginning to build up.

If Mr Bracks had been a Coalition Leader, we would no doubt have been hearing endlessly about his lack of vision, just as his widely criticised replacement of popular Governor Sir James Gobbo would have been written off as nasty small-mindedness.  (The contrast with John Howard quietly extending Sir William Deane's term of office as Governor-General so he could preside over the centenary of Federation celebrations could not have been sharper).

Another sign of Bracks being a new words but the same music is the appointment of Sydney University Professor Ron McCallum to head a Taskforce into industrial relations reform.  Professor McCallum has already performed similar duties for the Beattie Government in Queensland and the Carr Government in New South Wales.  While the consequent legislative changes are currently stalled in the Upper House in NSW, the Beattie Government's Industrial Relations Act 1999 provides an excellent indication of where things are likely to be heading.

The Queensland Act contains quite a range of remarkable provisions attempting to extend the position of unions and discouraging modes of engaging labour other than conventional employment -- section 125, for example, gives the Queensland Industrial Relations Commission the power to declare any contract for services to be an employment contract.  A fascinating provision for, say, franchisees or for contractors in the housing industry.

Since regulations are not costless, imposing a new set of costs and complexities on a labour market which is still highly regulated is hardly likely to improve the employment prospects of new entrants to the labour market.  We will have to wait and see whether the Bracks Government, like its Cain-Kirner predecessors, will once again drive the Victorian unemployment rate above the national average.  The early signs are not encouraging.

There is, however, a fascinating public spat over the direction of the Bracks Government going on.  The inner city Left has noticed that Bracks has not been fulfilling their hopes -- there has been a lot of "business as usual" maintaining the Kennett legacy -- and his warm remarks over how the police handled themselves during the recent demonstrations against the World Economic Forum have been the last straw.  A wave of renunciations, angry motions of repudiation and threats of resignations from the Labor Party has followed.

Bracks did cancel a proposed congratulatory barbecue with the police, but whether the Left will get much more satisfaction is doubtful.  Bracks himself is a Catholic Lebanese lad from Ballarat.  John Brumby, the former Leader and now key minister, is from Bendigo.  This is a Government in power because of provincial Victoria, led by two Labor Right boys from provincial Victoria with a Labor Right-dominated Caucaus.  Inclination and electoral calculation march together:  a very powerful combination.

But the Left feel betrayed because they were the ones that mounted the campaigns -- against privatisation, against the Grand Prix, against government secrecy, against the Auditor-General changes -- that (in the case of the last two) eventually bit, immensely aided by Jeff Kennett's own miscalculation in gagging his candidates.  The Labor Right, by contrast, were more likely to be quietly congratulating Jeff on some of his changes.

On the other hand, Kennett's failure to spread the joy in provincial Victoria (which received a disproportionately low amount of the capital spending) was something Brumby in particular sheeted home effectively.  This internal division is the biggest danger for the Bracks Government at the moment:  but repeating the past Cain-Kirner mistakes is not a solution, though one suspects that much of the Left would only be too happy to do so.

Response

Regarding Richard De Angelis's letter classing as nonsense by alleged suggestion that Australian Aborigines were still hunter-gatherers, I would have thought it blindingly obvious that the (true) statement that going from hunter-gatherer culture to the information technology revolution in two centuries (and less in much of the continent) was a big ask did not entail the (false) statement that Aborigines were still hunter-gatherers, but apparently not.  Regarding the reality of different cultural experience, I can merely agree with the commentator who wrote of those who:

...  sometimes appear to have no more idea of the nature of indigenous community here than for the most part they have so far displayed in relation to other hunter-gatherer peoples whose country has been occupied and largely taken over by the settled material culture of the invaders.  The key to understanding Aboriginal culture likes there, and even people whom one would think had the intelligence and the background and the motives to understanding often lack it

The writer?  Don Dunstan, The Adelaide Review, March 1996.

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