The July 1 arrival of Fair Work Australia suggests claims about the death of the Industrial Relations Club were somewhat embellished. For most of the 20th century, wages and conditions in Australia were determined by government-appointed commissions, unions and employer organisations which enjoyed the support of public servants along with most academics and journalists covering this policy area.

The domination of the IR Club was shaken by the effects of the recessions of the early 1980s and 1990s, which saw unemployment rise to around 10 per cent. It became evident that Australia’s highly regulated industrial relations system was part of the problem, not part of the solution. After Labor’s 1993 federal election victory, Paul Keating began the deregulation of Australia’s highly centralised labour market. The Coalition, led by John Howard and Peter Costello, continued the reform process after 1996.

Labour market deregulation was one aspect of the general economic reform process which began after Bob Hawke led Labor to office in 1983. The statistics speak for themselves. When Hawke became prime minister, unemployment was around 10 per cent. When the Howard Government was defeated in 2007, it was around 4 per cent and there was a shortage of labour in significant parts of the country. Australian Bureau of Statistics figures, released last week, indicate unemployment is close to 6 per cent. Moreover, an increasing number of Australians want more work and some job seekers appear to have dropped out of the market over the past year.

I was employed in the award enforcement section of the Commonwealth Department of Industrial Relations in the early 1980s. It became evident to me that the rigidity of the centralised industrial relations system was actually creating unemployment since there was not sufficient flexibility to make it possible for employers to retain workers at a time of recession. My experience as a public servant led me to condemn the prevailing system in an essay The IR Club, published in Quadrant in September 1983.

In the latter half of the 1980s, the increasing call for industrial relations reform was led by Costello, then a barrister, and by Howard within the Liberal Party. After the recession of the early 1990s, Keating introduced significant reforms which saw the decline of the IR Club and the move to enterprise agreements.

Last week, Kevin Rudd, Julia Gillard and Wayne Swan exhibited satisfaction that unemployment, as measured by the ABS, had not increased beyond 5.8 per cent. Fair enough, since Rudd and his colleagues can claim that the stimulus packages have sustained employment in sections of the economy. But the evidence suggests Australia’s relatively high levels of employment have been primarily sustained by deregulation of the labour market over the past 15 years.

Employers are retaining staff by cutting working hours, junking shifts and scrapping overtime. In some cases, four-day working weeks have been introduced. It was much more difficult for employers to take such action in the recessions of the 1980s and 1990s even if the workforce agreed to such measures.

Yet, at this very moment, in the midst of the Global Financial Crisis, Rudd Labor decides to re-regulate the labour market.

Globalisation and the fact that most business organisations are no longer so clubbable ensure the IR Club will never be restored to its former prominence.

It is clear, however, that the commissioners and bureaucrats at Fair Work Australia will play an increasing role in regulating labour markets. What’s more, Fair Work legislation restores many trade union privileges abolished under Howard’s Work Choices legislation. And the overwhelming majority of academics covering the field many have never run a business or worked in the private sector can be expected to appear in the media supporting Fair Work Australia.

Two of Rudd’s labour market initiatives are capable of being quite counterproductive in this time of economic downturn. Reintroduction of unfair dismissal laws on small business is a real disincentive for employers to take on staff. And the Government’s call for Fair Work Australia to modernise awards in the retail sector which employs many part-time and casual staff could raise penalty rates and, consequently, significantly increase the cost of employment. Both initiatives would be of concern at the best of economic times. Neither makes any sense during the GFC.

Gillard is a long-time admirer of Henry Bournes Higgins, who established the Australian basic wage just over a century ago. Like Gillard, Higgins was full of the best intentions towards workers. But his Harvester Judgment of 1907 priced workers out of jobs and was substantially altered over the next two decades.

Last week Gillard, Swan and others criticised the decision of the Fair Pay Commission not to increase the minimum hourly rate of pay. The commission had made the correct decision, if maximising the employment of the low-skilled is the goal. The Rudd Government says this is the worst economic downturn since the 1930s Great Depression, when industrial tribunals cut wages to retain employment. The Fair Pay Commission merely left the minimum wage where it was. But it was bagged by the ACTU’s Sharan Burrow.

It’s unlikely the GFC will be over any time soon. Yet Rudd Labor in industrial relations at least acts as if there is no economic downturn.