Last Friday, Kevin Rudd made an uncharacteristic error. The Prime Minister claimed he had not said, before the 2007 election, that no worker would be worse off under his Fair Work Australia legislation.

But such a commitment was unequivocally made soon after the Rudd government’s election. Responding to a question from Julie Bishop on March 20, 2008, the Prime Minister said: “No working families in this country will be worse off as a consequence of the industrial relations laws that we have advanced”.

This answer suggests Rudd has lost control of his government’s industrial relations agenda since some workers are worse off under the Fair Work legislation as are some unemployed.

At a meeting in Sydney in 2008, the Deputy Prime Minister, Julia Gillard, was asked how she would get her My School website out in view of likely opposition from teacher unions. She said her time in the Labor Party equipped her to handle unions and she was confident of providing this information to parents. Gillard was correct and she has successfully put in place one of the government’s key reforms so far.

Gillard has also succeeded in introducing Fair Work Australia. The problem here is that her agenda was re-regulation rather than reform. There is no doubting Gillard’s sincerity in such matters. She sincerely believes that individual employees are not capable of standing up for themselves and, wherever possible, should have their pay and conditions negotiated by unions and determined by industrial relations tribunals.

In a speech in August 2008, Gillard declared that Fair Work Australia would not be the embodiment of the old Industrial Relations Club. The term IR Club was used to describe the group of unions, employer organisations, industrial relations judges and public servants – with the backing of academics and journalists – which had administered Australia’s highly centralised labour market from around Federation until the reforms instituted by Paul Keating’s Labor government in 1993.

Keating’s changes were further developed by John Howard and Peter Costello after the Coalition’s election in 1996. However, the consequences of the Fair Work Australia legislation are already evident: Fair Work Australia has become an interfering industrial tribunal committed to the view that tenured judicial officials, with the support of public servants, are best able to determine what work practices should prevail all around Australia.

It intervened to disallow a deal reached between Woolworths and the shop assistants’ union because its role as a potential arbitrator was not part of the agreement. The Prime Minister was embarrassed last week when confronted by the fact a student had lost his part-time job in a small business due to a Fair Work Australia ruling that shop assistants cannot work for fewer than three hours in any one shift. The fact that a young man wanted to work half that time was irrelevant. Fair Work Australia knows best, apparently. Just like the days when the IR Club was all powerful.

The revitalisation of trade unions has been a factor in increased militancy within the resources sector. The industrial relations reforms of the Keating and Howard governments had diminished the power of unions in this area. Recently, the militant Maritime Union of Australia achieved a $50,000 increase over three years for its members in the oil and gas industry without any productivity trade-offs. MUA leader Paddy Crumlin described productivity deals as old-fashioned.

The Reserve Bank warned last week a blow-out in wages and conditions in the resources sector which spilled out into the general economy could lead to higher inflation. This would invariably result in interest rate rises.

As the Prime Minister made clear last Friday, he believes the Fair Work legislation is necessary to protect the rights of workers. But what about the unemployed and underemployed?

Jason Clare, the MP for Blaxland in western Sydney and parliamentary secretary for employment, wrote in a newspaper column last month that “teenage full-time unemployment in Bankstown is over 45 per cent”. He used this dreadful figure to justify the Rudd government’s economic stimulus package. But, clearly, the stimulus has not prevented a blow-out in youth unemployment. It’s much the same with the long-term unemployed. The recent Australian Bureau of Statistics figures reveal that men and women out of work for a year or more increased dramatically last year.

The evidence indicates the re-regulation of the labour market has not reduced – and probably has contributed to – unemployment among unskilled Australians. This is not surprising since the reintroduction of unfair dismissal legislation is a disincentive to small businesses taking a chance with low-skilled workers, whether young or mature.

The Prime Minister and his colleagues are busy bagging the opposition finance spokesman, Barnaby Joyce. They should listen to Peter Walsh, the successful finance minister in the Hawke government, who warned last week the MUA’s recent industrial victory could lead to a wages breakout of a kind that devastated Gough Whitlam’s Labor government in 1974.