A Nation Reconstructed:
The Prices and Incomes Accord and the Making of Post-Industrial Australia

By Mark Hearn*

Hawke and Keating
Labor Prime Minister Bob Hawke (right) and Treasurer Paul Keating in 1983.
It is thirty years since the Labor government joined with the trade union movement in the Prices and Incomes Accord. The Hawke-Keating period of Labor government between 1983 and 1996 represented a project by the dual wings of the labour movement to pursue a transformative, nation building mission, evident in the various manifestations of the Accord, and plans like Australia Reconstructed, released in 1987, or the 'Building a Competitive Australia' economic statement of March 1991. The accord process represented an unprecedented policy project to transform the nature of Australian economy and society, which rivalled the post-war reconstruction program initiated by the Curtin Labor government in 1942.

The Fraser Liberal-National Party government lost office in March 1983 to the Labor Party led by Bob Hawke, the former president of the Australian Council of Trade Unions. Elected as Australia struggled with economic recession and rejecting Fraser's divisive politics, Hawke promised to lead a government committed to 'reconciliation, recovery and reconstruction'. Through the Prices and Incomes Accord, Labor and the unions would join in the process of economic recovery and social development. In April 1983 Hawke's consensus style of politics drew the parties, together with business leaders, to a National Economic Summit. The delegates approved a strategy of modest wage increases through a restored centralised wage-fixing system and non-wage initiatives to reward workers for increased productivity and wage restraint. Hawke's economy strategy was designed to prevent union militancy and high wage increases from undermining both economic growth, and the political position of the government - a fate which had undermined both the Whitlam and Fraser governments.

Each phase of the Accord, as it unfolded throughout the 1980s, paralleled the financial market and economic deregulation process underway in the major western economics, as reflected in Thatcherism and Reaganomics. The Australia labour movement was speeding towards a deregulated future, a process that intensified from 1986, as Australia's trade deficit worsened, and the Accord found renewed purpose in 'facilitating the transition to a more competitive economy'. The trade union movement, the government's partner in the Accord, struggled with the transition to competitive deregulation, and through various renegotiations of the Accord sought to manage the terms of workplace reform.

In 1987 the ACTU supported a two-tier wage system, providing wage increases in exchange for reformed work practices. Awards were restructured in another round of reforms that followed. In 1992 Labor replaced the 1904 Conciliation and Arbitration Act with the Industrial Relations Act and introduced enterprise bargaining. The ACTU encouraged this shift, partly in frustration with the revamped Australian Industrial Relations Commission, but increasingly unions found that, driven by the pressures of deregulation, they could no longer control the terms of workplace reform.

By the early 1990s, Labor still embraced the ideal of state intervention in the economy, but it now believed that promoting jobs and economic security/prosperity for the working class must come from renovating the economic structures that had been in place across the twentieth century. Labor was influenced by the collapse of the Keynesian post war economic settlement in the 1970s represented in the end of the post-war Bretton Woods agreement which stabilised international monetary policy, and by the stagflation that followed the oil shock and which frustrated attempts to revive a productive economy. The labour movement's initiatives were also subject to intense economic and political pressures, from the New Right and employer groups like the National Farmers Federation and in the mining industry who aggressively pushed for labour market deregulation and tariff reform.

It was in this context that in March 1991 the most senior ministers of the Hawke Labor government launched an extraordinary attack on the system of tariff protection that had represented government policy since Federation in 1901.

The statements by Prime Minister Bob Hawke, Treasurer Paul Keating and Industry Minister John Button were delivered in Parliament on the 12 March 1991, in support of a new set of government initiatives outlined under the heading, 'Building a competitive Australia'.

Bob Hawke told Parliament that central to the reform measures the government was announcing was a commitment to a deep cut in tariff protection. Hawke characterised tariffs as 'regressive' and 'discredited'; tariffs had 'isolated our national economy' behind a protectionist 'wall'. The government announced its intention to reduce all tariff rates to a single rate of 5 per cent by 1996.

The cuts were not without precedent; Labor governments had previously made significant cuts in tariff protection, in 1973 and 1988. What was distinctive about the 1991 cuts was the ambition they reflected to reduce tariff protection within a few years to virtually zero, and to do so despite the protracted economic recession into which Australia had lapsed in 1990.

In March 1991 Hawke told Parliament that the tariff system had been one of the 'abiding features of the Australian economy since Federation, and 'protection' was 'deeply embedded in the psyche of the nation'. But by 1991 the various tariff regimes had resulted in 'inefficient industries that could not compete overseas', which were characterised by poor productivity and resulted in higher prices for consumers and higher costs for primary producers.

Hawke said the Government was cutting tariff protection to build 'a clever country'; the Government wanted to build a 'modern ... outward-looking community, enmeshed with the dynamism of the Asia-Pacific region', which would be achieved by cutting local tariffs and liberalising international and regional trade.

Hawke concluded by observing that 'this process of modernisation, of adaptation to the changing world economy, is not something that has some future cut-off point. It must be a continuing process ... we need the habit of adaptation - because the lesson of international competitiveness must be constantly learned and re-learned.'

The Accord process represented an extraordinary intervention by the labour movement to transform the nature of the Australian economy and society, and to renovate its productive capacity from an industrial to a post-industrial economy. The Accord process also reflected the limits of the labour movement's capacity to adapt.

These limits were signalled in 1987 with the publication by the ACTU of Future Strategies for the Trade Union Movement. The ACTU, through the amalgamation process, effectively refused to follow, in terms of its own structures, the deregulatory logic of the march towards a post-industrial Australia. The Amalgamation strategy reduced the number of unions towards the goal of twenty 'super' unions - which nonetheless still largely reflected, in both important structural features and identity, the union movement of late nineteenth and early twentieth century industrial modernity. The amalgamation strategy reflected an instinctive defensiveness in the face of change.

These consolidated union structures were not geared to appeal to a new generation of women workers, and younger workers, who were entering the workforce, and who increasingly found employment in new classifications of work, which the union movement did not traditionally cover. These new areas of work were in the service industries, and the finance sector and emerging information economy, while employment in traditional manufacturing industries declined.

The amalgamation program placed a profound structural impediment in the path of adapting to the realities of a post-industrial Australia, leaving the union movement stranded in the past as the Australian economy and Australian society transformed around it.

The consequences of the labour movement's embrace of economic transformation, and attempting to respond to the shift to a post-industrial Australia, were reflected in the Gillard Labor Government's white paper, 'Australia's Future in the Asian Century', delivered in October 2012, and a speech delivered at the Brookings Institution in Washington in August 2012 by the Finance Minister, Senator Penny Wong. The Finance Minister stressed the need for Australia to maintain an 'open economy' in resistance to a renewed 'threat of protectionism'; and Australia also had to continue to develop and adapt as an 'open, tolerant and multicultural society'. Penny Wong echoed the Hawke-Keating agenda, and a longer Labor tradition of transition and adaptability. Whether or not the labour movement is itself capable of surviving this adaptation into the 21st century is unresolved.

* Dr Mark Hearn is a lecturer in the Department of Modern History and Politics at Macquarie University.

Published 6 June 2013

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