SPC Ardmona: Abbott Government Right To Refuse $25m Handout Request

THE DECISION by the Abbott government to refuse a request from SPC Ardmona for a $25 million government assistance handout — the latest in a continuing series of demands for taxpayer assistance made on the government by business — is the correct call; whilst there is no doubt SPC Ardmona faces cost pressures in its business, the role of government is not to prop up failing enterprises. The government’s decision is indeed a precedent.

With industrial relations issues (and related considerations) looking daily more likely to define a big part of the politics of 2014, it is heartening to see the new Liberal government appears to have its wits about it.

It has to: the looming onslaught of propaganda, strikes and other disruptive behaviour set to be unleashed by the union movement will require the government to play its hand with skill, and to avoid the temptation to shirk decisions that are difficult — even unpalatable — but nonetheless right.

In this vein, the decision not to shovel $25 million out to floundering fruit processing company SPC Ardmona is absolutely correct.

First things first: if SPC Ardmona closes down its operations (or, more likely, downsizes its payroll), jobs will be lost, and I accept that; unemployment is not a pleasant contemplation at the best of times, and less so when the company might come crashing down as well.

And the voices from union quarters and — of course — an “outraged” opposition will try to nail Abbott on “jobs,” stuck as they are in the conveniently self-serving 1950s view that a job is for life and should not be permitted by government to be lost under any circumstances whatsoever including, it seems, commercial closure.

But Labor and the unions are the last people with any right to criticise Abbott; courtesy of the ALP’s efforts in government the country is hocked to the tune of $350 billion, with no money for bailouts even if the government wanted to pay them, and in any case the unions’ efforts over long years to strike extortionate enterprise agreements that push the companies paying them, literally, to breaking point is the primary reason SPC Ardmona is in the mess that it is.

I don’t believe governments should be interfering in markets, picking winners, shovelling out cash to stave off inevitable closures or subsidising uncompetitive businesses or industries at public expense: that kind of thing is the preserve of the Labor Party and its loopy bedfellows over at the Communist Party Greens.

I have said in this column — quite some time ago — that I’m not interested in discussing the merits or otherwise of bailouts engaged in by the Howard government; those activities were the decision of that government, and there is no causal reason to view them as a precedent for the Abbott government to follow. In fact, to date, the conduct of industry policy has been undertaken by the Abbott government on a much sounder basis than was the case under its conservative forebear.

And I said, just yesterday, that the “high dollar” excuse rolled out by Labor and the unions as an excuse for businesses with bloated workforces labouring under the weight of ridiculous, union-inflicted wage costs doesn’t cut ice any more; the value of the Australian dollar has declined 20% against its US counterpart in the past year, and is expected to fall further, and I pointed out yesterday that were it not for the presence of a shiny new conservative government to take its anger out on, the union movement would have nowhere to hide when it comes to the punitively high real wages its EBAs have inflicted on major businesses.

And this is the case at SPC Ardmona.

Regrettably, the fruit processing and canning firm that has for decades been a trusted Australian brand is one of an increasing number of companies which struck a series of bargaining agreements with the unions, only to see their wages bill spiral out of control to the point the viability of the company itself is at stake.

The unions may well have been able to get away with blue murder when its own political wing — Labor — was controlling the Treasury purse strings; in fact, it’s a breathtakingly efficient rort to push business into virtual bankruptcy merely to see taxpayers prop those businesses up to ensure union demands continue to be met indefinitely.

A responsible government can have no truck with this, however, and Abbott was right — not least given the state of the budget — to simply point out that it is not appropriate for taxpayers to borrow money just to hand it over to Coca-Cola Amatil, SPC’s parent company.

In an irony that I expect will not be lost on most readers, the Chairman of CCA is one David Gonski — a favourite of the Gillard government.

The Prime Minister’s point that CCA is a highly profitable, multi-billion dollar business (and one I would point out is ultimately foreign-owned) is a salient one, and tends to dampen any moral or economic case for the taxpayer to bail out one of its divisions — even if the government were inclined to do so which, in any case, it isn’t.

Like the foreign-owned car companies before it who have chosen to cease manufacturing in Australia, it is understood SPC Ardmona employees are covered by EBAs that confer high wages on its unionised workforce that are unrealistic on any reasonable measure, as well as other ridiculous perks such as bountiful provisions for paid leave, inflated redundancy “entitlements” that look obscene compared to those prevalent in the rest of the community, and the small point that the agreement makes the unionised workers virtually impossible to sack.

The Abbott government had to draw the line in the sand; at the very least, it should send the signal to the union movement that more due care and diligence is required of them in their bargaining negotiations: the assumption the taxpayer would fit the bill for the most flagrant union excesses should be dispelled once and for all.

It is to be hoped this message sinks into the heads of Trades Hall types, and quickly; one of the problems with the union movement is that it really doesn’t represent the struggling worker at all, but aims to create an upper class of privileged industrial warriors for political purposes, and if anyone doubts that, they should ask where the thousands of demonstrators who will soon parade through Australia’s cities demonstrating against Abbott are being rounded up from — and whether they’re being paid for work they should be doing, but aren’t.

My guess is that the unionised workers won’t lose any money in protesting, but the same can’t be said of the firms they claim to be acting in the interests of.

It brings me to two points in closing.

One, the Industry minister, Ian Macfarlane, must at some point start to wear out his welcome in Abbott’s cabinet; it is understood that he argued behind closed doors for the bailout money to be paid to SPC Ardmona. Paying the money might have been the easy way, and the populist way, but neither of those considerations make it right.

This is the second time in less than three weeks we have had to single out Macfarlane for doing things that would not sit out of place at the ALP or, in fact, the Greens; earlier this month, his was a lonely voice in Cabinet arguing for the retention of the mandatory Renewable Energy Target, a policy largely responsible for usurious hikes in essential utility prices that occurred during the term of the previous government.

We’ll keep an eye on Macfarlane, but his performance in Cabinet to date has been less than impressive, especially given the pivotal economic portfolio he is charged with.

And two, the Abbott government’s decision on SPC Ardmona almost obliges the Abbott government to attempt, at the very minimum, to pass legislation abolishing the foreign ownership restrictions of the Qantas Sale Act.

To date, the record of the government on these questions has been to allow the market to determine the outcome, as it should be; unions have thus far refused to budge on the terms of their EBAs in any meaningful sense whatsoever,* with the result Holden is gone, just as Ford and Mitsubishi have already gone.

The SPC Ardmona decision once again puts the onus on the unions to modify the unbelievable provisions of the workplace deal it made with SPC: nobody has any problem with them extracting an agreement that sees their members reasonably and well paid for the work they do. The present agreement takes that to a level of labour expense that puts the company  itself in jeopardy, and if the unions refuse to co-operate now (as they did on the Holden EBA) then any loss of jobs must be on their heads — not the government’s.

Having said that, the same determination to allow free markets to determine industrial outcomes must be applied uniformly; in the case of Qantas — faced with identical labour cost problems for identical, union-created reasons — the airline must be permitted to attempt to resolve those problems in a fair environment.

Its foreign-owned competitor, Virgin, faces none of the barriers to sourcing money offshore that Qantas does; in fact, it could be argued that notwithstanding the punitive labour costs Qantas faces, Virgin’s foreign owners are free — and quite capable — of driving Qantas out of business at a time and in a manner of their own choosing.

The Holden issue showed Abbott unwilling to throw taxpayer money at big businesses struggling under the cost of union labour. Now, SPC Ardmona has proven it. Qantas has said it doesn’t want money but that it does need help, and the abolition of the Qantas Sale Act is at the top of its wish list.

It’s time — having done the right thing now — for the government to show some consistency. Qantas may not be making a request for money as others in the field are, but the Qantas Sale Act is every bit as much a market distortion as the assistance packages Abbott is now correctly refusing to dole out.

If industry assistance is a no-no, then so must be the Qantas Sale Act. The government should move to abolish it immediately.

 

*The offer by unions, widely reported immediately prior to the announcement of the Holden closure, that its members were prepared to work an additional 16 minutes per shift does not constitute a reasonable or meaningful attempt to contribute to cutting costs or improving productivity in the business: all such an offer does is to make union labour even more determined to watch the clock than it usually is, and an additional hour or so per week is laughable — especially when most of us in the real world routinely work 50, 60, 70 hours per week (without truckloads of overtime cash an EBA delivers) and don’t even flinch. It just shows how out of touch with reality unions and their adherents in this country really are.