Kevin Rudd’s biggest challenge is probably coming from a direction he didn’t expect, industrial relations. The union campaign against WorkChoices has been so supremely successful it appeared that opposing WorkChoices offered a cruise to electoral success. But ground is shifting. What and why?

Traditionally business has given significant support to the ALP. Particularly at the state level big business donations to the ALP have greatly outstripped that to the Coalition. This is counterintuitive to the public impression that the Coalition is a big business government and the ALP is for workers.

The commercial imperative however is simple. The true secret behind industrial relations for decades has been that unions offer politically-friendly businesses, better operational outcomes than available to non-friendly businesses. Further, state governments are helpful to friendly businesses with planning approvals, services delivery and so on.

There’s never been anything illegal or technically corrupt about the processes but the winks and nudges of the politicized industrial relations processes always gave signals as to preferential commercial practice. This has operated at its most advanced level in NSW.

The system worked while it delivered competitive advantages to labour attuned businesses. But it appears that Howard’s total package of workplace reforms is delivering better commercial outcomes than the old politicized commercial and industrial relations deal-making. The commercial success is greatest in the construction sector with strong hints that the sector is staggered by the huge increases in business performance.

What is significant is that no industry association is hedging their statements on support for continuing workplace reform. In the past, fence sitting from some groups always occurred due to fear of denying themselves access to Labor corridors of power. And the extent to which business CEO’s are outspoken about supporting continuing reforms has never before been witnessed.

It’s not confined to mining. Reform support has broken out across all business sectors but particularly in construction and even in manufacturing. Rudd’s problem is that his two biggest financial supporters, unions and large business are now in fundamental disagreement over the future direction of business in Australia. Hawke’s accord has finally died long after it was shuffled out of public view.

This perhaps explains why Julia Gillard has become so low profile. Rudd is having to personally juggle internal ALP political tensions within an environment of policy change which cuts to the core of labor culture.