D espite rising levels of prosperity in Australia in recent decades, there is growing economic and social inequality. Many people are working longer hours and more intensively in insecure jobs. Australia has one of the highest levels of casual employment in the industrialised world. Stress at work is one of the major causes of occupational illness. A more decentralised system of industrial relations has contributed to this situation by removing many of the previous safeguards that workers had under awards and agreements. This is exemplified by a number of award-based employment arrangements related to various forms of leave (e.g. sick leave and maternity leave) which have been 'traded off' in enterprise agreements, often without union involvement or worker representation. This process has been assisted by the federal government's legislative reforms which have been hostile to unions and have contributed to a decline in unionisation. The government has also weakened the powers of the Australian Industrial Relations Commission to protect workers whose bargaining power is weak. Many of those who advocate an even more deregulated and individualised form of industrial relations for Australia argue that the forces of globalisation provide no alternative. Yet other countries, particularly in northern Europe, have retained strong labour market institutions to provide adequate social protection while competing effectively in the international economy. Indeed, rather than seeing globalisation as a threat, Australia should be supporting the efforts of international agencies, such as the International Labour Organisation, to assist other small nations to strengthen the rights of their citizens in the workplace and labour market. To ensure that Australia remains both a prosperous and an equitable society, we need a new social contract or partnership between employers, workers, unions, community, organisations and government. The three pillars of a new social contract comprise I wish to thank Greg Patmore and my colleagues in Work and Organisational Studies at the University of Sydney for the honour of inviting me to deliver this year's Laffer lecture. I am indebted to many of my colleagues for their comments on earlier drafts of this paper. My wife, Gwen, and children Owen and Nina, also provided valuable help and advice. I also wish to thank Rawya Mansour for her patient and meticulous assistance. Any errors are entirely my own responsibility.