Malcolm Turnbull paid a very high price for some important psychological wins this week. His parliamentary year has finished with an act to (re-)establish a building and construction commission. Another measure he took to a double dissolution, the Registered Organisations Bill, also passed through the Senate. And there is now legislation to tax, albeit at a concessional rate, backpackers required to pick fruit as a price of their visa. This Turnbull government delivers.
Yes, but delivers what, and with what effect? Each of the measures was substantially weakened by crossbench senators in a way that invites questions about whether the compromises, concessions and encouragement for further Senate adventurism were worth it.
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Assuming he needed to be seen to achieve something from 15 months of fairly pointless meandering, Turnbull had little choice but to make concessions. He made it harder for himself by a self-imposed timetable of getting the measures on the books this year.
Compromise was simply a reality of the Senate Australians voted for as a result of Turnbull's unsuccessful gamble on a double dissolution. It may have been a response to a message that voters wanted politicians to talk and compromise before they advanced very far with claims of mandates.
![Barnaby Joyce and Malcolm Turnbull are all smiles as they announce the Greens deal on the backpacker tax.](/web/20170103101436im_/http://www.canberratimes.com.au/content/dam/images/g/t/2/5/3/a/image.related.articleLeadwide.620x349.gt2rqx.png/1483418357990.jpg)
But the consequence bodes ill for the government – for good government – and for Australia's capacity to navigate in choppy and uncertain economic seas ahead. Down the track, Turnbull and voters will wonder whether it represented a wrong turning, one that did the nation serious economic damage.
There was a moment, three years ago, when there seemed a similar turning point. The Abbott cabinet, including Turnbull, decided to be hairy-chested on liberal economic principle and to pull the plug on an indigenous car-making industry. That's a decision it has regretted ever since; one it paid for, again, this week. The power in the Senate of the highly protectionist Nick Xenophon team is a direct result, as is the need to be seen to be spending $60 billion on submarines in South Australia. For the cost (and, probably, the second-rate submarines we'll get), we could have had a car industry forever.
The protectionist and bureaucratic hobbles put on the Australian Building and Construction Commission were not, as is pretended, tiny steps of little practical consequence. The ABCC bill has measures for local preference rules in the construction industry, and a function of establishing building and building material standards and codes. A mishmash of sometimes inconsistent provisions impose new and anti-competitive red tape on building codes, standards and innovation, and further restrictions on the use of foreign labour on building sites.
The cop on the building beat is being turned into a bureaucratic branch of the Australian Border Force, probably with the same style of camp, 1930s, Hugo Boss uniform, if, it's to be hoped, without the artillery.
![Nick Xenophon's power in the Senate is steering Australia down a dangerously protectionist path.](/web/20170103101436im_/http://www.canberratimes.com.au/content/dam/images/g/r/3/o/w/v/image.related.articleLeadwide.620x349.gt2rqx.png/1480820611582.jpg)
These new systems and relatively recent anti-dumping provisions against Chinese steel will do more to increase building and construction costs in Australia over the next few years than any imagined productivity savings by some weakening and criminalisation of the bargaining power of construction unions. There's no evidence that the old, much more powerful ABCC achieved anything in improving productivity, or reducing criminality; it's doubtful the new toothless tiger will.
The bill was further weakened (at least from the government's point of view), by amendments that restricted its ability to use its coercive powers without, in effect, a warrant granted by the Administrative Appeals Tribunal. The commissioner's powers to be a champion of reining in the union will be inhibited by fresh obligations to be even-handed. There are significant extra obligations on employers in relation to guaranteeing that subcontractors are paid, and a reversed onus on proof in relation to claimed industrial stoppages on safety grounds.
![Cartoon: John Shakespeare](/web/20170103101436im_/http://www.canberratimes.com.au/content/dam/images/g/p/z/g/x/m/image.related.articleLeadNarrow.300x0.gt2rqx.png/1480820611582.jpg)
Further amendments, care of independent senator Derryn Hinch, created a two-year transition period before the act has any teeth on its new building code. Effectively, this gives big employers that have made enterprise bargains (against the government's wishes) with the building unions a serious advantage over businesses that held out, as the government had implored.
Turnbull was indifferent to vehement criticism, particularly from his right at The Australian, that he had horse-traded too much away. The alternative, he said, was to have nothing. "I mean it's fine to be an armchair general and say how things should have been done and would have been done. The reality is we've delivered. We've got the bill passed. We've got the commission set up. The penalties have been tripled, we're able to call union officials and employers in for examination. All of those provisions are there to enforce the rule of law once again."
For the cost of the $60 billion submarine deal (and the second-rate subs we'll likely get), we could have had a car industry forever.
It's by no means clear the new commission will have more power than the existing Fair Work Australia system, or that it will have any significant effect on building workplace productivity, which is not, in any event, in obvious crisis. The government has long argued that the industry is rife with industrial thuggery, corruption and cosy arrangements between union officials and employers to jack up prices by passing costs on to consumers.
But while there are obvious signs of rorting and chicanery (by unions and employers) in the industry, the agenda has included punishing both political and industrial Labor, and, in particular, weakening the CFMEU's position. One shouldn't be sure that this is will happen from a few token groans from union lobbyists, who can hardly believe how successful they were in watering down the bill.
The week also saw high farce as the government negotiated with senators, ultimately successfully with the Greens, to get through the backpackers' tax, albeit at levels well below what it had hoped. Various senators, including Hinch, the Pauline Hanson One Nation Party, its now rogue senator from Western Australia, and the Xenophon team, were less than entirely consistent adherents to principle. Labor was not in the least helpful; indeed, it was purely opportunistic in the manner of the present government when last in opposition. No one was discouraged from trying it on again in future.
Turnbull was experimenting with a line about Labor preferring the interests of rich white backpackers from Europe to the modern variation of indentured labour from the Pacific Islands and the coerced labour of Australians. It may work in some quarters but was far from convincing, given that the measures must be judged by the sum of tax collected, not the marginal rate at which the last dollar is earned. In any event, the government's anxiety to strike a deal – any deal really – was not primarily focused on protecting the revenue as on dealing with horticultural industry panic that these rich white European backpackers whom we ought, apparently, to despise, might stay away from Australia and its fruit farms. Honestly, is further abuse of them required?
The various negotiations saw the Xenophon team acting as states' rights senators – perhaps the first time that's been observed since federation, other than by Brian Harradine's capacity to be hired by the creation of jobs in Tasmanian call centres. The Xenophon team can be relied on to put South Australia's interests first, even, sometimes, ahead of the national interest.
Like other crossbench senators, Xenophon can think in three-dimensional terms, and has long made horse-trading deals, across an array of measures, with governments of the day. But this week saw him flex his muscle in new ways.
First, South Australia was, once again, being dudded by Queensland, NSW and Victoria, and by the man Turnbull put in charge of water allocations, Barnaby Joyce, over its rights to Murray-Darling water, All the local political parties were rightly outraged, and very loudly, although it was noticeable that South Australia's supposed champion in federal cabinet, Christopher Pyne, was largely silent.
Xenophon, a champion of environmental relief for the Murray as much as of South Australia's rights, was under particular pressure to respond. At first, he seemed ballistic, and he was soon threatening that his team would (as it could) block Turnbull's hopes over the ABCC Bill, and backpackers' taxation if the diversion of environmental water was allowed to stand.
Then, suddenly, it appeared he had calmed down as a result of some unconvincing assurances from Turnbull. He was criticised for being convinced. But it soon became clear he had used his bargaining position to extort the government over the ABCC.
Perhaps this is, in the short term at least, to the benefit of industry, and perhaps manufacturing, in South Australia. It may have some incidental benefits in Victoria, also a rust-belt manufacturing state. But it won't benefit most Australians, who will pay considerably more for goods and services and, probably, receive second-rate services as a result. And, down the track, even Croweaters will suffer if our retreat from an open economy leads to retaliation and reduced world trade.
It would, of course, be nice to have a solid manufacturing industry in Australia, employing hundreds of thousands of workers. We had one in the past, not least because of high tariffs, quotas and other forms of industry protection, paid for by higher prices and, usually, inferior goods.
Over the decades, tariff boards, industry commissions and (the latest title) productivity commissions have shown how high the price was that other Australians paid for protecting such jobs. In many cases, indeed, it would have been cheaper to pay workers hundreds of thousands of dollars to do nothing, while allowing consumers to buy tariff-free goods, such as cars, electronic equipment, clothing and footwear from abroad.
A good many people think the decline of manufacturing is primarily a result of the "export" of Australian jobs, and their replacement by low-wage, low-skill coolies from the third world. But most of the high-wage, high-skill jobs – the loss of which we mourn – are now performed in factories that are capital-intensive, with highly skilled and well-paid workers, having all of the benefits of economies of scale. Absent some factor (perhaps intellectual property, or some peculiar Australian need), Australian industry simply can't compete with the high-tech, high-volume factories of China, Japan or Korea. We can't go back to the inefficient and coddled economy Australia had in the 1960s, and efforts to build a wall around Australia are doomed to expensive and disastrous failure.
It's true, as Turnbull has said defensively, that a good many of the local content rules imposed on the building industry won't make a great deal of difference, because most materials are locally sourced. But the shift is important psychologically and politically. Internationally, Turnbull is imploring countries not to go down the protectionist path, and not to respond to change with isolationism and closed markets.
No one yet knows what Donald Trump will do, nor the full effect of Britain's departure from the European Community, the rise of economic nationalism inside Europe, and the community's own adventures in renewing trade barriers, including (like Australia) against Chinese steel. But the measures to which Turnbull has agreed will be perceived abroad as proactive measures, proof of our hypocrisy, rather than as necessary adjustments or reactions to protectionist moves taken by others. Turnbull isn't responding to international events. He could be leading a national conversation about the benefits of an open economy. Instead, he's buckling to economic populists and snake-oil salesmen.
Indeed, some of our trading partners may well conveniently see Australia's own moves towards protectionism as both a sign of further retreat and as one of the initiating moves inviting retaliation. This might not seem reasonable, at least to Australian eyes. But it should hardly surprise that other nations, themselves uncertain of the future of world trade, read the tea leaves of self-styled free-trade nations closely. Australia deserves better leadership, and from both its major political parties.
Jack Waterford is a former editor of The Canberra Times.