A mining boom killed by class warfare

According to Prime Minister Julia Gillard, the federal government's decision to allow Gina Rinehart to bring in up to 1700 foreign construction workers for her new mine, happened without Gillard's knowledge.

The government's decision, followed by union outrage, has to be seen within the context of the analysis last week by Robert Gottliebsen of the huge blow-out in the cost of mine construction (A mining boom cut-off is coming, May 21).

Robert referred to his article as a "benchmark comment". He described how the cost of constructing new mines or expanding existing ones had increased by 100 to 300 per cent over the last few years, depending on the sector. The cost blow-out effectively means that large numbers of planned new mines are unviable and will not proceed.

Two primary reasons for the cost hikes are unavailability of skilled workers and the re-emergence of uncontrollable industrial relations problems in construction. Robert referred to this as the spread of the Victorian desalination disease to construction across Australia. My understanding from sources close to Labor is that key cabinet ministers have been made well aware of this by mining executives and accept that a major problem exists.

If this scenario comes to pass Australia is about to kill off much of the greatest mining boom in our history. I issued initial warnings in August last year. If this outcome is to be prevented, it's the political power play within Labor that is critical. There's a deep divide in Labor that the foreign workers decision has cracked open for all to see.

Labor is split into two distinct camps. There's the pragmatic, rational, business, orientated group who view government as requiring managerial competency. They are however disjointed and have only limited political power. Then there's the ‘class warfare' lot, driven, organised and with dominant political power.

The class warfare mob is primarily funded, organised through and dependent on the radical construction unions. This is the mob that had such dominant control over the Brumby Victorian Labor government that they created and enforced the Victorian desalination industrial relations deal. They have aggressively spread versions of this template to construction across Australia, including mining.

(I've predicted it will be a major reason why the national broadband network rollout will have cost containment problems as well).

The political power of the class warfare group rests both within the ALP government but also with The Greens. The Greens are class warfare groupies and having the construction unions as principal financiers cements a solid relationship. The outcome is that Gillard's minority government existence rests on appeasement to the class warfare network. This explains much of Gillard's behaviour.

On matters to do with labour laws and practices the government is caught. Gillard's Fair Work Act delivered powerful tactical advantage to unions in dealing with business. Combined with the destruction of the construction industry watchdog, the Australian Building and Construction Commission, the construction union's capacity to roll out the Victorian desalination arrangements across Australia has been unrestrained.

The business pragmatists within Gillard's government are now seeing and accepting the destructive consequences for the mining boom in particular. They can't fix the Fair Work Act but they are able to do something about labour supply. In what appears to be a lightening attack, Immigration Minister Chris Bowen, supported by Resources Minister Martin Ferguson and Special Minister of State Western Australian Gary Gray, announced the foreign workers approval for Gina Rinehart's project.

The underlying split has now revealed itself and it goes much wider than federal Labor.

Robert Gottliebsen also pointed out that the Victorian Baillieu government has taken steps to stop the desalination deal from spreading in Victoria (Dodging mining sector mothballs, May 22). Baillieu's newly created construction code of conduct disallows such deals from applying to Victorian government work. It has larger effect because tenderers for government work must also comply on their private work. If Baillieu's code is successful it could result in Victoria being the only viable state for construction in Australia.

Yet the Victorian ALP opposition leader Daniel Andrews has pledged to remove the code if elected in three years time. This puts the Victorian ALP firmly in the ‘class warfare' camp of the Labor movement and destined to deny themselves business support in Victoria.

For Australia, Labor's love affair with class warfare is dangerous. It's damaging the management of the country through bad economic and social policy. Yet Labor is caught in by its own imagination that class warfare matters when for our population it's irrelevant.

The immediate future seems to be one in which Labor pragmatists will occasionally succeed with outbursts of success. But they'll be beaten back into submission by the political dominance of the class warfare believers.

The outcomes are unsavoury. It's why Robert Gottliebsen's warning, that a ‘mining boom cut-off is coming', is all too probable.

Ken Phillips is executive director of Independent Contractors Australia and author of Independence and the Death of Employment.