Shorten must win the Grocon battle

The muscle flexing going on at Grocon building sites is a reminder of how good we had it during what Tony Abbott calls the 'golden age' of the Howard government.

In those days we could afford as many of these title fights as we wanted, and the economy would grow nonetheless. The mother of them all, the Patrick's waterfront dispute, even made pretty decent TV.

But we can't afford it now. Look at the competing forces in the economy, and it quickly becomes clear that a major escalation in building costs – Grocon says it's losing $370,000 a day just at the site in Melbourne's Lonsdale Street – is a golden-age-luxury we can't afford.

Australian Mines and Metals Association director Minna Knight yesterday warned that this kind of dispute would deter inward investment, including $260 billion in resources projects.

That claim is a bit overblown, but when Knight's comments are put alongside falling commodity prices, it's easy to see how much damage the CFMEU can inflict on Australian growth. Overseas investors, including our biggest miners, must revise their forecasts not only for iron ore prices nearly 40 per cent off their peak, but for the risk of rolling industrial action.

The abolition of the Australian Building and Construction Commission has clearly emboldened the CFMEU, whatever its leaders say, and industrial relations minister Bill Shorten has the urgent problem of breaking up this dispute to keep some kind of fig leaf over Labor's embarrassment.

But his is not the biggest problem. While Tony Abbott is happy to say the ABCC 'cop' must be put back on the beat, there is no ducking the fact that industrial action under an Abbott government would return to something like the 'golden age' disputes John Howard and Peter Reith fought.

Why? Because at heart these battles are not about workers' rights – other than workers' right to be part of a potent power bloc in Australian politics. While the Gillard government hangs on, the bald power plays of the CFMEU leadership will at least be heard in Labor boardrooms. Under Tony Abbott they will not.

The risk is that in just over a year's time, a perfect storm will blight the economy – tumbling commodity prices, ravaged public finances, increased labour costs putting an extra brake on infrastructure projects, and industrial anarchy.

If that combination arrives, the Australian economy would look more like the early 1990s than the full employment growth story of today.

The big difference is that in the early 1990s, the 'golden age' lay ahead of us. For some time I have argued that only the opposite looms for us now: a top heavy demographic profile with burgeoning healthcare bills, the golden goose of the resources sector rapidly being replaced by overseas geese or just being hit by softening demand (hence the dropping prices), and in particular, a public debt position that we simply will not be able to address in years ahead.

The Keating public debt that John Howard heroically paid off during mining-boom mark one, was smaller than the 10 per cent of GDP our federal government now owes. When the state debts are factored in, we're well above 20 per cent of GDP, and that's before our private debt bubble in the housing market is considered.

Whether or not Knight's predictions are correct for the resources sector, an incoming Abbott government will be slashing public spending, and public service jobs, to try to balance the budget just as unemployment is naturally rising anyway. The vicious circle of slowing business activity, slowing tax revenues, and rising unemployment will do its work, and we won't be back in the golden age of the late-noughties – more the 'rust belt' blight that characterised the Victorian economy in the late 1980s.

The CFMEU leadership won't be worrying it's pretty tattoo'd head over that kind of scenario – union leaders, if not the workers, prosper during times of mass unemployment.

The onus is now on Bill Shorten to prove that Labor can smooth over the Grocon dispute without the ABCC. If he does, Abbott will take the blame for the coming industrial shocks. If he doesn't ... what does it matter? The unions will get the power they crave, and their members, along with the rest of the country, will suffer the consequences.