Turnbull Government Squibs the Contest

24th December 2015

Growing up in the 1970’s the worst insult one could aim at a young boy playing Aussie Rules football was that he was a ‘damp squib’ or just plain ‘squib’. Pulling out of a physical contest for the ball or failing to risk physical harm to assist a team mate mean’t you ‘squibbed’ it.

In spite of the talk of agility, innovation and risk taking, the Turnbull government has squibbed an opportunity to win a contest for a more agile Australian economy. I can’t imagine less threatening policy recommendations than those proffered by the Australian Productivity Commission Inquiry Report - Workplace Relations Framework. Nevertheless, sending the Report off to a further round of consultation means never having to risk harm. It also means you can’t win the contest.

There are many aspects of the Productivity Commission Report that warrant a response from the Australian government, so, never letting it be said that I am a squib, let’s start with the most controversial, Sunday penalty rates. The scare campaign has already started from the usual suspects so it is worth setting out some of the key points in the Report before all semblance of rational debate is shouted down.

  • In retail and hospitality, Sunday is becoming the new Saturday. Over the three decades from the early 1980s, the share of weekly retail trade on Sundays increased from 4.3 per cent to 12.3 per cent, reaching a share close to that of some weekdays.

  • All the evidence shows that weekend employment is far more important in the hospitality, entertainment, retail, restaurant and cafe (HERRC) industries.

  • Consumers (including tourists) would be major beneficiaries from reform of penalty rates in the hospitality, entertainment, retailing, restaurant and cafe (HERRC) industries. With lower Sunday penalty rates, consumers would gain access to more services for longer hours and with higher staffing ratios. Sunday surcharges would be likely to disappear, and average prices for consumer services throughout the week would be likely to be a little lower.

  • Lower Sunday penalty rates will reduce the labour income of existing employees in the HERRC industries. However:

    – only the minority of HERRC employees work only on weekends, which reduces the importance of lower wage rates on Sundays

    – the reduction in wage rates for casual employees is less than for permanent employees because of existing anomalies in the interaction of casual loadings and premium rates for Sunday work

    – the net effect would be lower given offsets through the tax and transfer system

    – many HERRC employees do not come from low paid households. Many are in households with two other income earners.

Although rent, utilities, ICT communications, merchant services, shop equipment, transport and other fixed expenditure contribute to the high cost of operating a business, the Productivity Commission makes the astute observation that various disruptive technologies such as automation and the online provision of consumer goods and services are likely to affect the demand for weekend workers if their wage rates are too high.

Add to the mix the competitive distortions arising from lower weekend penalty rates applied by the dominant retail chains of Coles, Woolworths, Myer and David Jones as well as systematic and widespread breaches of Sunday penalties in the restaurant and fast food sector, the case for change is compelling.

These are just some of the points one could highlight in an enlightened debate. However, our government is too timid to enter the contest, let alone risking a scratch or dirty mark in the interests of the team.

So, whilst bracing yourself for the rough and tumble of the Post-Christmas day sales this weekend, don’t stand on the outside of the pack, like the Turnbull government, waiting for someone else to argue the case for change. Go in hard and get the ball (nee cheap shoes). Go in hard, argue the case for consumers. Don’t be a squib.

Merry Christmas!