Outside of carbon tax, Gillard has little for business: Kohler

The KGB interview with prime minister Julia Gillard provided as clear a demonstration as anyone needs on why her government is unpopular with Australia’s business class – and just about everybody else: all of her political capital, such as it is, is being spent on a carbon tax.

She acknowledged that many parts of the non-mining economy were doing it tough, but the only two specific business reforms the PM was able to mention were putting a price on carbon and the $3 billion skills package in the last budget.

The first of those may be necessary but in the short term it’s only going to make life more difficult for businesses, rather than improve employment and investment. There will be a big lag before the increased training and apprenticeship places, and vocational education and training scheme reforms, take effect.

As we pointed out to the prime minister, the non-mining parts of the Australian economy are quite weak at the moment, as the Reserve Bank acknowledged this week. Retail trade has averaged 2.5% growth since the beginning of last year when it normally grows at an average rate of 6% and according to recent data, non-mining investment is actually contracting at the rate of 22%.

We told her how three of us had met with a banker recently who came away from a series of meetings with 15 companies over the past few weeks convinced that the rest of the country, apart from the resources sector, is in recession.

The prime minister said she calls this the “patchwork economy”: “I certainly do understand that there are industries doing it tough and there are parts of the country doing it tough and the challenge is our economy is in this major period of transition with the resources boom, with the transitions we’re seeing from west to east in global economic weight.”

But when asked what reforms the government was implementing to help firms deal with this transition, the prime minister nominated pricing carbon, the skills package, and the reform agenda in infrastructure, including the NBN.

The plan to price carbon is only producing uncertainty and fear at this stage, while the reforms to infrastructure, skills and telecommunications are all long-term in their effect.

In the meantime, Australian businesses are facing higher interest rates, a higher exchange rate raising the prices of their exports, weak domestic demand and unions that are beginning to throw their weight around.

When asked whether the government is ensuring that the new Fair Work industrial relations system is delivering improvements in productivity, the PM said no special measures were being taken.

The main purpose of the Fair Work Act, of course, was to not be WorkChoices, but the question remains whether it is doing anything to turn around the decline in productivity.

As for the centrepiece of this government – the carbon tax – businesses face a long period of uncertainty thanks to the tactical opposition to it from the Coalition, despite the fact it theoretically proposes the same degree of carbon abatement.

Even when the details of the government’s plan are announced, business people can’t be sure of it until after the next election in 2013, and even then if Tony Abbott becomes prime minister, as seems likely at this stage, he won’t be easily able to repeal the carbon pricing scheme because the Greens will control the Senate.

This is the Labor Party’s fault. By going into the last election having suddenly dropped emissions trading from its policy and specifically ruling out a carbon tax, Julia Gillard is unable to claim a mandate for it.

The result is that Australian companies face years of uncertainty over one of the biggest and most difficult economic reforms in our history at a time of the greatest “transition” in our history caused by the terms of trade and resources investment boom.

This article first appeared on Business Spectator