IPA Today

Kelty Puts Politics First, Good Policy Second

Written by
8 September 2022
Originally appeared in The Australian Financial Review

Bill Kelty is a political genius. But his ideas are grounded in the world of three decades ago – just like Labor’s jobs summit.

Bill Kelty is a political genius. As secretary of the ACTU, he created with Paul Keating compulsory superannuation – a policy the Labor Party is obsessed with and which the Coalition is terrified to change, but which has almost completely failed to achieve its original purpose.

Australia’s superannuation system is now bigger than the value of the ASX – yet over the 30 years of the scheme, dependence on the pension has fallen by just 2 per cent. (Only in a country like Australia could such a policy be regarded as some sort of success.)

The superannuation guarantee started at a compulsory rate of 3 per cent of wages. In 2025 it will go to 12 per cent and the ALP platform is committed to eventually increasing it to 15 per cent.

A mere 14 per cent of the country’s employees are members of a trade union, but through superannuation, unions and the superannuation financial complex that’s been created are well on their way to controlling the commanding heights of the national economy.

Kelty wasn’t wrong when he remarked recently, “Super is gonna be the biggest game in town, it’s going to be the biggest source of growth in town.”

He went on to explain that as superannuation funds gained board seats in recognition of owning 10 per cent of major listed companies, funds would “take an interest in the performance of the board, the performance of management, which your average non-executive director cannot do because a non-exec director is sitting there with no gunpowder”.

A lot of gunpowder for unions

The $3.3 trillion in superannuation (an amount larger than Australia’s annual GDP) buys a lot of gunpowder. And trade unions won’t be afraid to use it.

So what Kelty says should be taken seriously. He knows how politics works – as proved by his invention of compulsory superannuation.

In this newspaper a few days ago, Kelty set out a list of eight measures that he believes would increase workers’ wages. They range from increasing the minimum wage, to allowing multi-employer agreements, to improving collective bargaining to give “unions a fair go”.

The problem is, though, that these ideas are grounded in politics first and good policy second – just like superannuation.

Take for example Kelty’s suggestion to “increase the wage rates of nurses and teachers, aged care and childcare workers. Start by giving them greater contract certainty and permanence.”

Paying teachers more money would by definition increase their wages, but there’s no evidence it would do anything to overcome the two biggest education challenges faced by Australia: rapidly falling student achievement levels and a workforce of declining skills.

It’s good that people like Kelty are still engaged in policy debate, but what’s missing from his policy prescription is a focus on outcomes.

This year is the 10th anniversary of another Labor signature policy, the so-called Gonski reforms. No one talks about them much these days, because the outcomes prove what’s been long known.

Beyond a certain point, more spending on education has a negligible (if any) impact. Since Gonski, federal government education funding has increased in nominal terms by 80 per cent, while student outcomes have gone backwards. One in five Australian 15-year-olds is now functionally illiterate.

The claim that teachers are poorly paid is a myth. The starting salary for a teacher in a Victorian government school is $74,976 with conditions that include four weeks of annual leave and eight weeks away from the classroom during school holidays. The problem is not what all teachers are paid – it is what the best teachers are paid.

As successive Labor and Liberal state governments have succumbed to teacher union demands to reduce class sizes, the demand for teachers has outstripped the supply of suitable candidates.

Last year nearly one in 10 trainee teachers in Victoria failed initial training tests in literacy and numeracy. The standard of the tests are the equivalent of what would be expected of a year 9 student.

It’s good that people like Kelty are still engaged in policy debate – more debate is better than less – but what’s missing from his policy prescription is a focus on outcomes.

Kelty’s suggestions are grounded in the world of three decades ago, just like so much other policymaking in Australia at the moment – and just like the outcomes from Labor’s Jobs and Skills Summit last week.

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John Roskam

John Roskam is a Senior Fellow at the Institute of Public Affairs

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