Opposition Leader Bill Shorten and his workplace spokesman, Brendan O'Connor, refused to buy into the proposal on Wednesday, but privately Labor sources were shocked by Mr Howes' speech and admitted it represented a significant break from the united front that Labor and the union movement had presented to the Abbott government's moves to tackle penalty rates and call a royal commission into union corruption. Mr Shorten on Thursday again declined to directly criticise Mr Howes, but suggested that it was entertaining a "fantasy" if he thought a Bob Hawke-style Accord could be struct between unions and the Abbott government. ''I am not going to engage in some fantasy that Tony Abbott is going to change his spots,'' Mr Shorten told ABC radio. Mr Shorten said that he supported consensus on workplace relations. ''It's what I've done for 25 years,'' the former union leader said. ''Do you seriously believe that Tony Abbott is interested in working with trade unions?''

He added that Mr Abbott was unlikely to strike a deal with a union movement that he was portraying as corrupt and in need of a royal commission. Australian Industry Group CEO Innes Willox echoed the Opposition Leader in dismissing Mr Howes' idea of a new "grand compact". Mr Willox said "grand compacts" were not discussed when unions, businesses and governments "get together". "It's actually the outcomes that are important," told the ABC on Thursday. "The unions, government and business spoke a lot during [the] last government and we got some fairly poor outcomes".

Mr Willox said there needed to be "attitudinal change" but took a veiled swipe at Mr Howes, saying he had not noticed the union leader being a "wallflower" when entering the public debate. "If we're going to sort of try to moderate language, everyone needs to do that," he said. Mr Howes speech flagged forging a new era of bipartisan industrial relations reform to lift productivity and stop powerful unions pricing themselves out of the market with unsustainably high wages. Mr Howes, the national secretary of the Australian Workers Union, used an address to the National Press Club to break ranks with the rest of the labour movement, offering an unprecedented olive branch to the Coalition government as it positions to reshape the industrial landscape in Australia. He said corrupt union officials were ''traitors'' to the cause, that unions had overreached in some wage claims, and that endless conflict was economically disastrous.

''Some will tell you that our industrial relations system is dragging us down,'' he said of Australia's slide down the ladder of wealth in the World Economic Forum's rankings. ''And I won't be popular amongst my friends in the labour movement for saying this, but I agree.'' In a move criticised by some within Labor as the ambitious Mr Howes styling himself as ''a latter-day Bob Hawke'', the one-time ''faceless man'' shattered the anti-Abbott solidarity of unions by opening the way to a new partnership with the federal government. But he refused to be drawn on the appropriateness of reducing weekend penalty rates, a key concern for smaller employers trying to operate in the seven-day economy. Mr Abbott welcomed the proposal. ''I guess that's not a bad message for everyone - not just for Labor frontbenchers - to let the past be the past,'' he said. ''I want to maximise Australian jobs, I want to maximise Australians' pay and I want us to be amongst the best paid workers in the world. But to be the best paid workers in the world, we have got to be amongst the most productive workers in the world and that's what I want our system to encourage.''

Business Council of Australia president Tony Shepherd said a plan to foster productivity and competitiveness had merit. The Australian Industry Group's Innes Willox said there was always a good case for discussion but a compact was unworkable. Mr Howes denied discussing his proposal with Mr Shorten. ACTU national secretary Dave Oliver said unions had always sought to engage constructively with employers and government. ''Sadly, all we've seen from Mr Abbott and from some sectors of the business community is an attack on the wages and conditions of hardworking Australians.'' The Howes speech brought a ferocious attack from Greens MP Adam Bandt.

Loading ''Paul Howes should resign as union secretary and join the Liberal Party if he is going to just parrot Tony Abbott's attack on people's wages,'' Mr Bandt said. Follow us on Twitter