UNIONS THREATEN RUDD'S INFLATION FIGHT

UNCLAS SECTION 01 OF 02 CANBERRA 000474

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON ILAB AS
SUBJECT: UNIONS THREATEN RUDD'S INFLATION FIGHT

REF: CANBERRA 246


1. (SBU) SUMMARY: There are signs that labor unions in
Australia are becoming impatient with the wall-to-wall
Federal and state Australian Labor Party (ALP) governments.
While the Australian Council of Trade Unions (ACTU) and some
of the larger unions have tried to work with the Rudd
Government as it embarks on its battle against inflation
(reftel),individual unions appear increasingly less prepared
to let the Rudd Government fight inflation at their expense.
The teachers union in the state of Victoria last week won a
17.8 percent pay rise over four years and many other public
and private sector unions are demanding large wage increases.
Union demands for big wage increases are exactly what the
Rudd Government hopes to avoid as it prepares to release its
inflation-fighting budget on May 13. To make matters worse,
a coalition of Australia's most powerful unions has launched
a campaign for the Rudd government to immediately abolish a
Howard government watchdog body set up to crack down on
unlawful union activity in the construction industry. Adding
to the tension between the ALP and the union movement, the
New South Wales (NSW) government is proceeding with a program
of electricity privatization despite the vehement opposition
of the state's unions (see Sydney septel). END SUMMARY.

"WE WANT OUR MONEY"


2. (U) The teachers union in the state of Victoria last week
announced a 17.8 percent pay rise over four years, with the
most experienced teachers receiving an immediate 15.2 percent
increase. The Victorian Trades Hall Council secretary told
the press May 7 that the teachers' agreement exemplified the
type of "catch-up increases" the unions now want under Prime
Minister Rudd. He explained that he backed wage claims that
go beyond inflation because it is "not only to compensate for
inflation but also to compensate for the restriction on the
ability you had for decent wages under the previous
government."


3. (SBU) The Rudd government, like the Howard government
before it, has reaffirmed that pay claims should be based
only on productivity and bargaining at the enterprise level.
The unions, however, appear emboldened by the election of a
Federal ALP government. In addition to the Victorian
teachers, public sector workers in Tasmania, Western
Australia, and Queensland are also pushing for substantial
pay rises. The teachers' contract in NSW expires in January.
The union that represents construction workers, the
Construction Forestry Energy and Mining Union (CFMEU),has
said it will push for wage increases above inflation when its
contracts expire and the waterfront union in Western
Australia, the MUA, is asking for pay parity with its east
coast counterparts.

UNION PROBLEMS IN NSW


4. (SBU) The union movement in NSW is incensed that the NSW
government is pursuing privatization of the state's
electricity sector. At the NSW ALP conference on May 3-4,
delegates (50 percent of whom are chosen by affiliated
unions) voted 7:1 against the move, but the Premier stood
firm, and received the backing of state Labor MPs in his
cause. The story is not over, however, because defying the
will of the rank-and-file of the party is deemed heresy by
ALP traditionalists. (See Sydney septel)

UNIONS WANT RUDD TO BREAK ELECTION PROMISE


5. (SBU) On May 6, a coalition of unions including three of
the most powerful - the Australian Workers Union (AWU),the
CFMEU, and the Australian Manufacturing Workers Union -
QCFMEU, and the Australian Manufacturing Workers Union -
launched a campaign to abolish the Australian Building and
Construction Commission (ABCC). The ABCC is a watchdog body
set up by the Howard government to stamp out illegal union
practices in the construction industry. The unions believe
it is unfair that that only one sector of workers has been
targeted and they maintain that "as long as these laws are in
place, the era of WorkChoices will continue." Rudd, however,
went to the election promising to retain the ABCC until 2010,
and he has made it clear he intends to keep his election
promises.

WILL CARBON EMISSIONS CUTS COST JOBS?


6. (SBU) Organized labor, and particularly the coal mining
unions, supported the ALP's policy on cutting greenhouse gas
emissions during the election, and maintain that they still
back the Government's plan to significantly reduce emissions.
Until now, the unions have accepted without argument the ALP

CANBERRA 00000474 002 OF 002


claim that clean coal technology will allow Australian
utilities to still burn coal to generate power. But union
acquiescence on carbon emission cuts may be ending. On May
7, the AWU warned that 20,000 jobs in the aluminum industry
alone could be lost to China if the Rudd government does not
take a "balanced" approach to reducing greenhouse gas
emissions.

THERE IS NO ACCORD NOW


7. COMMENT: (SBU) Ironically, although union representation
in the Australian workforce is now below 20 percent, it will
be harder for the Rudd Government to control wage increases.
Under the previous ALP government (1983-1996),when unions
were a much bigger part of the workforce, the ALP and the
ACTU had an "accord" on wages, which limited increases.
There is no national accord now. Given the unions' pent up
demands, and the rising discord with the ALP on issues such
as privatization and climate change, organized labor may be
in no mood to help the Rudd Government on inflation. And
despite their smaller share of the workforce, the very tight
labor market with very low unemployment rates and record-high
levels of participation in the labor force is making the
unions more bold in a sellers' market for labor.

CLUNE