Australian politics explainer: the Prices and Incomes Accord

The Conversation is running a series of explainers on key moments in Australian political history, looking at what happened, its impact then, and its relevance to politics today.

During the Hawke-Keating years, the union movement – under the leadership of Australian Council of Trade Unions (ACTU) secretary Bill Kelty – became a partner in Labor’s economic rationalist agenda.

Through Accord agreements, unions accepted a degree of responsibility for Australia’s broader economic health. This was often at the expense of their own members’ interests.

What happened?

The Hawke Labor government had a strong incentive to seek a new approach to industrial relations when it came to office.

The last time Labor held government was under Gough Whitlam, between 1972 and 1975. At that time, Hawke was ACTU president, and the front man for the industrial militancy and wages explosion that saw inflation peak at 18% and unemployment reach 5% for the first time since the early 1940s.

Hawke was a confrontational union leader. But Hawke 2.0, the self-possessed teetotaller who became prime minister in 1983, preferred consensus.

In opposition, Labor’s industrial relations spokesperson, Ralph Willis, developed the idea of a formalised agreement between the unions and Labor in government, which was adopted as policy at the Labor Party conference in 1979.

The Prices and Incomes Accord was a series of agreements between Labor and the ACTU where unions would moderate their wage demands in exchange for improvements in the “social wage”.

The first Accord was struck in February 1983, just before the election of the Hawke government. There were six subsequent accords, culminating in Accord Mark VII in October 1991, which ushered in the system of enterprise bargaining.

The Industrial Relations Commission developed a policy of “two-tier” wage fixation, in a shift from the “wage indexation” system of the past. Basic increases would be provided but additional wage rises were dependent on “efficiency offsets”.

By the early 1990s, this had developed into the dual system of basic annual wage increases for award-covered workers, and the opportunity to implement enterprise-based agreements to drive productivity at the workplace level.

The Accord’s social wage elements included better public health provision through Medicare, improvements to pensions and unemployment benefits, tax cuts, and – eventually – superannuation.

What was its impact?

The Accord was a key component of the Hawke-Keating governments’ economic reform program. Along with the floating of the Australian dollar, opening the door to international banks and the reduction of tariffs, the Accord signalled a turn toward a more globally engaged Australian economy.

Hawke’s consensus-oriented style brought the union movement inside the economic policy management tent. This was also a corporatist project: although business groups were not formally part of the Accord, Hawke brought big business into other institutions such as the Economic Planning Advisory Council.

Generally, business groups became critical of the influence the ACTU exerted over Labor through the Accord years. From the mid-1980s, arguments for radical reform of the industrial relations system grew stronger.

Elements in the Coalition and the New Right pushed for individual workplace bargaining and a reduction of union power. They saw the Accord as symbolic of the much-reviled “industrial relations club”.

Within the union movement itself, the Accord was always controversial. Critics argued it transferred power from the grassroots network of delegates and shop stewards to an elite group of senior officials sitting around the table with business and government.

The Accord evolved over the 1980s to focus mainly on managing wages outcomes while ignoring accompanying increases in the social wage. In response, left-wing officials like Laurie Carmichael of the Metalworkers Union became increasingly critical of the Accord. For many, the union movement had simply given up too much for too little.

What are its contemporary implications?

On the 30th anniversary of the Accord in 2013, ACTU president Ged Kearney said the Accord’s spirit should be revived to meet the challenges of job insecurity and wage inequality.

Rising inequality is behind the backlash now underway against neoliberalism and the mantra of prosperity through free trade and globalisation.

The ACTU’s new secretary, Sally McManus, has been in the headlines since assuming her position in March this year. McManus said she believed workers were justified in breaking laws that they judged to be unfair.

She later declared neoliberalism had “run its course”, and:

The Keating years created vast wealth for Australia, but it has not been shared, and too much has ended up in offshore bank accounts or in CEO’s back pockets.

McManus’ combative style recalls an era before market economics gained bipartisan support, when the lines between labour and capital were more sharply drawn. Her approach also raises important questions about the future of the relationship between the industrial and political wings of the Australian labour movement.

McManus appears to be positioning the union movement as the bulwark against unfairness, and the vigorous defender of long-held conditions. There is none of the Kelty “pinstriped proletarian” in her approach. It is unknown whether the McManus-led ACTU will entertain a similar kind of compact with a Shorten Labor government, or take a more conflict-oriented approach.

Bill Shorten is by nature a consensus Labor leader, who is inclined to seek common ground between business and labour. At present, though, he is riding the turn against neoliberalism, adopting a pro-union position and populist rhetoric on issues such as corporate tax cuts and penalty rates.

There is some prospect therefore of a new Labor-ACTU compact for the 2020s. This would not focus so much on the Accord’s economic objectives, but on the protection of workers’ rights in the fast-changing world of automation and new platforms of service delivery.