Give the AIRC an Unemployment Target

During the Election 98 campaign Mr Beazley had two ideas that need to be pursued with vigour.

Firstly, unemployment is the nation's most pressing problem.  Secondly, an unemployment target of 5% is feasible and appropriate.  If countries as diverse as the US, Netherlands, Austria and Switzerland can achieve rates of unemployment of below 5%, why can't we?

Although all parties bowed to the ideal of full employment during the last election, none produced the policies necessary to achieve it.  Given this, and the likely gridlock in the next Parliament, we cannot rely on the pollies for too much action.

All is not lost.  There is another route which has not only achieved excellent results in another previously intractable problem -- inflation control -- but goes to the heart of the problem which is the wage fixing system.

This alternative -- outlined by Professor Tony Makin in an article the Spring 1998 edition of Policy -- is to re-model the Australian Industrial Relations Commission (AIRC) along the lines of the Reserve Bank of Australia (RBA) by assigning it the task of first achieving, and then sustaining, full employment.

One of the most significant policy achievements of the last two decade has been the taming of inflation.  Australian now has one of the lowest inflations rates in the world.  The credit for this goes largely to changes made to the RBA at the beginning of this decade.  During the high inflation era of the 1970s and 1980s, the RBA had multiple, often obscure and conflicting objectives without specific targets or priorities.  In the early 1990s the Government, influenced by the reforms overseas and realising that inflation control could not be left up to the politicians, redefined the RBA's core function to be inflation-control and set an inflation target range of between 2 and 3%.

The AIRC plays a similar role in the labour market to that exercised by the RBA on monetary policy.  The AIRC is the sole independent authority directly responsible for setting economy-wide labour market conditions.  Its decisions effect the employability of a very large proportion of the workforce..

Like the RBA of old, the AIRC has multiple, obscure and conflicting objectives without specific targets or priorities.  Moreover, in its deliberations it assigns a low priority to job creation and gives scant regard to the rate of unemployment.  Although its decision have a substantial impact the unemployed, their job prospects are given little consideration.

Indeed, the AIRC, as it currently operates, is part of the problem.  It functions to enhance the conditions and wages of those with jobs -- the insiders -- and in so doing, erects barriers to those outside work who want it.

If the role and focus of the AIRC were changed to full employment, the institution, like the RBA would be transformed, from part of the problem into a powerful champion of the unemployed.

This transformation could be even more thorough if the new AIRC was to be required to comprehensively review its past decision going back to the mid-1970s -- when the rot first set in.

A re-re-engineering of the AIRC should have a chance of getting through the gridlock in Canberra.  After all it is only putting in place Beazley's ideas, which have already received the support of the Democrats.

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