Consensus Politics and the Accord

As was mentioned in chapter one, during the Whitlam governments' period in office there were conspicuous grounds for policy and public friction between the political and industrial wings of the labour movement. This problem re-emerged during the Fraser government years. Like the Whitlam government before it, the Fraser government never achieved a harmonious relationship with the unions. The issue of wages become one of most important factors causing conflict between the unions and the government (Singleton 1990: 55). On this critical issue, Fraser’s predilection for confrontation made any viable trade-off or accord with the trade union movement impossible (Kelly 1984: 428). The unions were uncomfortable with the Fraser government’s inflation-first strategy, which suggested that a high level of unemployment sustained for considerable period was necessary to block unions from seeking excessive wage increases and thus to dampen inflationary expectations (Hughes 1979: 40). As a result, the unions opposed every policy the government proposed because they believed that such moves adversely impacted upon the living standards of union members. For instance, they attacked the cut in federal funds for

housing; the privatisation of the Medibank scheme; a reduction of education expenditure; and taxation on most welfare benefits (Sheehan 1980: 124). The lack of voluntary support and co-operation of the unions (not only because they did not have the constitutional power to control them) caused the Fraser and the Whitlam governments to fail to control wages and price increases.

Unlike Whitlam and also Fraser - both of whom had regarded the unions negatively and therefore kept them at a distance - Hawke viewed the unions more positively, seeing them as having the capacity to assist Labor's economic management. As the then-ACTU President, Hawke knew the problems the unions had produced for both Whitlam and Fraser, and how the power of the unions was firmly established in Australia. Hawke realised how potentially damaging the negative relationship he knew the Fraser government and the unions had had and was determined to avoid that in his administration (Kelly 1992: 61). From the early stages of his government Hawke adopted the basic position that a successful Labor government had to be based on the trade union movement. In this Hawke’s interest was not only limited to making the unions more cooperative but he wanted a more positive relationship between the unions and his government. Hawke saw industrial relations as an extension of the predominant political relations at any given time (Carney 1988: 66). He recognised that every industrial issue contained a good deal of politics (Lewis and Spiers 1989: 202). Learning from the Whitlam and Fraser governments, Hawke was aware that the politics of 1980s would be very much centred on industrial relations. Therefore, he believed that benefits for the unions had to be achieved through the political process, not by unions taking industrial action. Since the strategy had to be political, not industrial, this meant the unionism had a vested interest in helping Labor govern in the national interest and staying in office (Kelly 1992: 283).

Seeking to avoid the style and the economic management practices of both the previous Whitlam and Fraser governments, the Hawke government offered a new direction in government, reconciliation and consensus. Central to the consensus

strategy was the open recognition by the Hawke government that there was a large degree of mutual interest among the major participants in the Australian social and economic system (Hawke 1984: 39). By consensus, the Hawke government signalled that it would base its strategy for managing the economic and social problems of recession and recovery on a close association, instead of confrontation, with the organised trade union movement, and at the same time, seek to accommodate business and harmonise the relationship between capital and labour (McEachern 1986: 25). In other words, the Hawke government expressed its intention to embrace and consult with these community interests, hoping to gain their acceptance and the support of government policies designed to produce economic recovery (Singleton 1985: 12). Labor’s consensus politics, therefore, was a product of a process of a revision in thinking and policy decision-making engendered in response to perceived past Labor policy-making failures, the confrontationist style of the Fraser government, and existing economic and political problems.

The chief instrument of consensus was the Prices and Incomes Accord. The Accord was an agreement (or a compact) for a partnership in office that was reached between the ALP and the ACTU just prior to the federal election of March 1983. The document covered every area of domestic concern such as the economy, industrial relations, tax, welfare, foreign investment, health, education, industry and immigration issues. But the primary objective of the Accord was to thwart a wages breakout during periods of strong economic growth and thereby deliver sustained growth. Therefore, wages policy became the heart of the Accord and the principal device whereby the Hawke government and unions sought to reconcile their goals:

A mutually agreed policy on prices and incomes in Australia for

implementation by a Labor government... offers by far the best prospect of enabling Australia to experience prolonged higher rates of economic and employment growth, and accompanying growth in living standards, without incurring the circumscribing penalty of higher inflation, by providing for resolution of conflicting income claims at lower levels of inflation than would otherwise be the case (Accord: 2).

The economics of the Accord was very different from the Fraser government’s “restrictionist” or “monetarist” policy approach. The stagflation of the 1970s implied

that attempts to secure full employment, would be accompanied by accelerating inflation. To decrease inflation, therefore, the government had to slash the growth of the money supply. The method used was to cut the public sector call on capital markets by winding back the government’s budget deficit. The macro-economics behind the Accord abandoned these diagnoses and prescriptions. Instead it maintained that fiscal policy was the best device to apply to cyclical demand management. An expansionary fiscal policy, the Accord held, was required to kick- start the economy. The Hawke government saw inflation mainly as the consequence of interest group struggles for income shares. This, it thought, could be resolved by a political agreement with the economic actors, particularly the unions, rather than by forcing up unemployment (Stutchbury 1990: 56). Therefore, unlike the Fraser government’s wage freeze - which was perceived as a unilateral imposition - the Labor Accord would build consensus into the process and limit the socially divisive consequences of wage restraint over time (McEachern 1991: 40).

The Accord can thus be seen as a documentary set of policies determined by the ACTU and the Government and directed at stimulating economic recovery and reducing unemployment and inflation through a comprehensive prices and incomes policy and through full wage indexation imposed via a centralised wage-fixing system. In return, an incoming Labor government was to implement “social wage” improvements to social security benefits and a range of other helpful policies designed to promote union objectives (Singleton 1987: 1).

It is clear, however, that the Accord was not only the basis of Labor's credentials for sound economic management (a comprehensive incomes policy for achieving economic growth, low inflation and low unemployment) but was also, as Hawke himself recognised, “encompasse [d] a spectrum of economic, industrial and social policies and provides a framework for continuous consultation and co-operation between the government and the trade union movement” (Hawke 1984: 40). And more importantly, it was a fundamental political instrument and the basis for the Hawke government’s electoral strategy. Politically, the importance of the Accord

was that it has created a close, interdependent relationship between the government and trade unions. For the government, the Accord provided a way to handle the demands of the organised unions in manageable trade-offs, vital to winning elections. First, by entering into an agreement with the ACTU, which linked economic growth and recovery to consensus, the ALP hoped to convince the electorate of its capacity to govern Australia through the difficult economic time ahead. Second, through the Accord, the Hawke government indicated that it had a capacity to handle one of the main actors in Australian political and economic life, the unions. This signalled that the Hawke government was able to reconcile three different set of interest: the essentially economic self-interest of the unions, a sound national economic policy and its own electoral drive.

For the unions, the Accord provided a formal channel to the political, economic and social policies-making process. In return, the union movement offered industrial discipline and wage restraint. Thus the Accord was both the product and tool of closely related objectives within the political and industrial wings of the labour movement, the instrument for achieving their disparate but interrelated economic, electoral and philosophical objectives (Willis 1979: 6). It incorporated a policy process, the willingness of the trade unions and the government to negotiate their differences and to pursue policy solution in Accord. In this sense, the Accord, to borrow Gerritsen’s words, comprises “a set of attitudes which make possible a “bargained bilateral” relationship between the government and the unions” (Gerritsen 1986: 49). Gruen and Grattan saw the Accord in even broader terms: “as a relationship between the Labor government and the union movement - as a process both for making deals and for settling problems as far as possible to the mutual benefit of two parties” (Gruen and Grattan 1993: 111).

The Accord - together with the personal popularity of Bob Hawke - provided a the basis for a very marketable package - a charisma-led recovery, with co-operation from the union movement (Stilwell 1986: 24). The Hawke government cleverly turned the special relationship with trade unions to its political advantage. The co-

operation of the trade unions was presented to the electorate as evidence that the Hawke government could work constructively with the unions in contrast to Whitlam's dismissive style and Fraser’s confrontationist stance towards the unions (Singleton 1990: 126).