Five thorny issues for Gillard

All focus is now on Julia Gillard's cabinet and her new sense of determination and confidence that appears to stem from winning the battle with Kevin Rudd.

For Gillard to transform that determination and confidence into better government she will need the new cabinet to tackle some of the thorny issues that lurk below the surface but which will become more and more important as the election approaches. I have isolated five of these thorny issues.

First she will need to tackle education. The David Gonski report was a disappointment because it did not provide a clear pathway to fund the difficult issues and it dumped a whole lot of new expenditure on the states without consultation.

States are starting to wake up to the fact that in many areas they have far more expertise than Canberra, and they are no longer going to take bullying, particularly as the government no longer has the money available to bribe them into accepting second-class decisions.

There is an enormous amount the states and Commonwealth can do to improve national productivity by simply avoiding duplication and coordinating things better. Money does not need to come into it.

A good start would be the second thorny issue: uniform occupational health and safety laws, which was a great idea but through bad Commonwealth drafting have become a nightmare. Quite rightly, some states are refusing to jeopardise their employment by enacting bad legislation to gain a Canberra bribe (Hard lessons in Canberra's safety laws, January 18).

The third issue is the by-product of the Gillard industrial relations legislation, which sees unions trying to regain their old power over management in industries where there are large capital investments.

BHP's coal operations are under attack and unless the issues are tacked BHP is likely to abandon its $10 billion Queensland coal expansion in favour of Indonesia. Other mineral projects are in jeopardy. (Is BHP the new Qantas? February 27.)

BHP is strong enough to fight and win but others are not as fortunate. This issue has the potential to do great harm to Australian productivity.

My fourth thorny issue is perhaps the most important for the longer term. Australia desperately needs top ministerial talent in the post of defence minister because the joint strike fighter debacle is getting closer to the surface.

The Joint Standing Committee on Foreign Affairs, Defence and Trade met earlier this month and the Air Power group used actual American documents to show both government and Opposition groups how the Joint Strike Fighter cannot compete with its Russian rival and how the parliament has been mislead.

Government members could not say anything in public so it was left to the Coalition WA member Dennis Jensen to say what others were afraid to say:

"Defence have a record of getting things wrong and attacking detractors who tend to be accurate with data. Defence needs comprehensive reform and needs a defence minister with the guts to take it on. Unfortunately, of late – and I am not just talking about this government – we have not had defence ministers who have done this."

Later he added: ”The security of Australia and the lives of our troops, our sailors and our airmen depend on it”.

It's rare for a politician to confess that their own party's mistakes in government are just as much to blame for a mess as the government mistakes and then to highlight what is at stake.

My final thorny issue is interest rates. If the Morgan Research group is right and we are headed for a serious rise in non-mining unemployment which forces the Reserve Bank to lower interest rates, then Canberra must move out of the blame game.

It is likely those interest rate cuts will not be passed on because of the high amounts banks are charged to borrow money in overseas markets. In those circumstances the government will need to consider acting to use its borrowing power to lower interest rates (Gillard's secret rates weapon, February 21). I would not use this weapon to lower rates at the moment. It has to become really necessary because of an unemployment blowout.

We will watch the progress of these five thorny issues in the new Gillard ministry with great interest. They may well determine her fate.