Rethinking labour for a China slowdown

A China slowdown is not inevitable but both sides of politics need to be prepared – and so do unions, who should be leading the debate on workplace flexibility.

The World Bank warning to commodity exporting nations – that putting too many eggs in the China basket is risky – is a reminder that the structural transformation of the Australian economy cannot proceed as smoothly as both sides of parliament hope.

The bank has revised its projection for 2012 GDP growth in China from 9.2 per cent to 8.2 per cent, prompting World Bank East Asia chief economist Bert Hofman to comment: "In the longer term we do see China slowing down to a more moderate level – around 5 per cent growth by the end of the decade. That trend over time is going to be important for commodity dependent countries so to start preparing for that change now would be a good choice."

Our structural transformation, in simple terms, involves a burgeoning of mining-dependent jobs (including those feeding off the massive LNG projects) and a corresponding contraction in trade-exposed sectors outside of mining and energy. So far the numbers tell a happy story – unemployment is a tight 4.9 per cent, which allows Labor to continue taking credit (though not necessarily being given it by the media) for 'managing the boom'.

We shall see. The OECD is also revising figures down – or rather up, with its forecast for Australian unemployment now at 5.7 per cent for 2013 (its revised figure for this year is 5.4 per cent).

And all the while China's biggest export market – the European Union – teeters on the edge of a potentially decade-long slump that would cause pain in commodity markets very quickly, and heal very slowly.

So far Labor has made much of its multifaceted approach to managing the mining boom – it has invested more in education and training and infrastructure than the Howard/Costello governments did and the mining tax, in both its original and modified forms, was designed to help fund these public goods.

The World Bank and OECD reports are only kicking along the kind of 'China slowdown' stories that have been circulating since the 2008 and 2009 depths of the GFC – and they might be wrong. Europe may hold and China might find innovative policy responses to counter the slowdown that inevitably follows a fixed investment boom (at least when those investments are centrally planned and of dubious economic value).

But both side of parliament must be prepared for a pretty rapid reversal of our mining fortunes. Robert Gottliebsen has written recently on the rebound in productivity growth occurring in the US (Taking productivity tips from America, March 22) but it's a point he also made many times in 2009. Back then, when the US looked to be falling apart, Gottliebsen reminded readers that America's greatest strength was in its business culture of flexibility and rapid innovation.

Canberra, whether under a Gillard or Abbott government (or Rudd or Turnbull for that matter) is likely to soon face a rapid structural adjustment in the other direction – away from resources and back into some of those withering trade-exposed sectors. Labor will boast that its lifelines to auto manufacturing and the steel industry lay the groundwork for exactly that.

But there is one other political force that should be leading this debate. An opportunity is arising for the union movement to pull off something like the Bill Kelty-brokered Accords that aligned business, government and union interests to produce the productivity boom of the late 1980s and early 1990s.

That's right. Unions, which are currently stuck in the rut of opposing industry calls for greater flexibility in the workforce, should be leading that debate. As Leon Gettler points out today, unions would be better off without formal connections to the Labor party, and need to shake off the assumption that one of their main objectives is to stop conservatives ever forming government (Why the unions should leave Labor, May 24).

The ACTU is currently focused on resisting the long and ongoing shift in the Australian workforce from long-term 'secure' jobs to short-term contracts, and the swelling ranks of the self-employed contractors.

But those are just the kinds of workers we need to facilitate a rush into resources jobs – and, if a China slowdown sends all that to hell, a rush back out again. Unions puzzled by shrinking memberships need to become flexible and innovative themselves to services those workers, rather than arguing against their right to exist.

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