CHAIR —Welcome. Do you have any comments to make on the capacity in which you appear?

Mr Maclellan —I am also an adjunct research fellow at the Institute for Social Research at Swinburne University of Technology.

CHAIR —Thank you. The committee has before it your submissions. Are there any changes or additions?

Mr Mares —There are no changes or additions, but I would like to offer some comments on various related issues that have arisen in the course of today’s proceedings.

CHAIR —You are most welcome to do so. I invite you to make an opening statement and then we will begin our questions.

Mr Mares —I will make a few comments and then Nic might have a couple of comments of his own. I should add that Nic and I are both authors of the fourth chapter in this World Bank report. We do not appear here for the World Bank but we were contributors to that report, as were some of the other people who have appeared before you—notably Richard Brown, who appeared before you in Brisbane and wrote the third chapter in the report, about remittances. I have also provided to the committee a journal article I have written which is still a draft, as in it has not yet been published or refereed, which is called ‘Objections to seasonal work programs’. It basically attempts to summarise the key objections to seasonal work programs and to give responses to them.

CHAIR —The committee has received that and it was emailed to all the senators.

Mr Mares —There are a number of issues that have come up in the course of today’s proceedings. One is the question of discrimination: would a scheme like this, targeted only at Pacific island nations, be discriminatory? The obvious answer to that is: yes, clearly it would be. That would be a reflection of Australia’s special relationship to the island nations of the Pacific, where Australia is seen as a kind of defence guarantor, where Australia is the major aid donor, the big power in the region. I think that we have to confront that issue up front, as it were. It would be a discriminatory scheme. Does that matter? My argument is: no, it does not. There are plenty of other examples of discriminatory schemes of various kinds.

The most obvious example in the Australian context is New Zealand. New Zealanders can come to Australia visa-free and work from day one, and we do not have that relationship with any other country. That is a specific bilateral arrangement we have with New Zealand.

We have a Working Holiday Maker Scheme, which we have heard a lot about. That is a specific set of bilateral reciprocal agreements with specific countries. They are, by their nature, discriminatory. They do not include any Pacific island nations. There are other types of labour schemes. Tuvalu and Kiribati have a scheme with the European Union to allow their sailors to work as merchant seamen. New Zealand has special entry schemes for people from Tonga, Samoa and so on.

The question that has arisen today on the issue of discrimination is whether this would contravene World Trade Organisation rules, particularly under mode 4 of GATS, the General Agreement on Trade in Services. My understanding is that if a scheme like this was part of a broader regional economic agreement such as PACER, the Pacific islands economic agreement, it would fall outside mode 4 of GATS. But I am not an expert in this area. Dr Manjula Luthria from the World Bank, who coordinated this report, can probably give you better advice on that.

Another aspect is that some Pacific island countries are LDCs, less developed countries, and they qualify for special and differential treatment under WTO rules. So if Australia was to have an agreement with a country like Vanuatu, which is an LDC, that would be exempt from any problems under mode 4.

Another question that has arisen has been the question of economic viability. Is a scheme like this viable? We have had it put to us by representatives of departments that it is not economically viable and that the cost would be too great. I have a number of responses to that. Firstly, in Canada it works. In Canada it has been running for 40 years. It appears to be viable both for the workers and for the employers in that situation.

Secondly, we have done our own modelling, and I refer you to the World Bank report, pages 125 to 127. We have attempted to set out some modelling there which looks at how the costs might be shared and what workers might hope to take home over a period of six, 13 or 26 weeks work at current tax rates, which would be 29c in every dollar they earned or, at a more concessional tax rate—the tax rate available to domestic workers—of 13 per cent tax rate on seasonal earnings.

Our modelling suggests that with an adjustment to the tax scheme, a labour program is certainly very viable and could enable Pacific islanders, with a minimum stay of three months and a maximum stay of six months, to remit several thousands of dollars home, which would be of enormous significance in a Pacific island nation context.

If it was felt to be inappropriate to change the tax regime then another way would be to withhold the tax but to reimburse the tax to workers on return to the home country. That could be a form of incentive to return home and reduce overstaying. That might be an alternative way of approaching the issue, but in my view it would be inequitable to have Pacific islanders paying a 29 per cent tax rate in every dollar they earn working alongside other workers who are paying 13 per cent and benefiting from a $6,000 tax-free threshold.

The other question of viability is: what is the cost to the grower? Again, our modelling suggests that growers pay 50 per cent of the travel costs and other associated costs but that the workers pay for their accommodation. We would see the costs to growers over a 13-week period—a minimum three-month period—coming in at around $2 an hour additional cost for labour, on the basis of a 40-hour week. I think that is not an unreasonable extra amount to expect growers to pay, in order to take part in such a scheme as this. If they say that they have a labour shortage then to pay some kind of premium to address that shortage is not unreasonable.

The next question that arises is whether or not this labour shortage actually exists or whether it is just a figment of the imagination of various moaning farmers. There is strong evidence to suggest that there are labour market difficulties—let’s put it that way. The most obvious evidence of that is the fact that the federal government has been changing the Working Holiday Maker Scheme in order to attract more backpackers into seasonal pursuits. That is a response to the pressure coming from farmers and the difficulty of meeting their seasonal labour needs. The Working Holiday Maker Scheme, as I am sure senators are aware, was envisaged as something that was experiential and where work was incidental to travels around Australia. What we are seeing with the changes that have been made to the scheme is that it is becoming a labour market program. It is being targeted at meeting labour market needs in agricultural and seasonal industries. Again, that is a sign that these labour shortages are real.

I know that in your travels around Australia you have heard evidence from several sources that up to 80 per cent of seasonal labour is now coming from backpackers, working holiday-makers. That shows that the industry is already heavily reliant on foreign labour. The question then becomes: which foreign labour should we use to meet these needs? I point out that there is no labour market test for working holiday-makers. There is no test to determine whether there is a shortage of workers or whether those holiday-makers are displacing local labour. There is no premium on the cost of employing working holiday-makers. The farmer does not have to pay anything extra for a working holiday-maker in the way that we are suggesting they would for a Pacific island seasonal scheme.

If local labour is being displaced then I would suggest that it is being displaced now by working holiday-makers, if that is going to have an impact. I do not think local labour is being displaced. Because of various fundamental structural changes in the rural economy, there is a growing demand for non-family farm labour. If any potential labour is being displaced, I would suggest that it may be Indigenous labour. The issue has been raised that Australia, before looking offshore to Pacific islanders, perhaps should be looking at similar schemes for Indigenous Australians. In my submission I have drawn attention to one scheme run by Cape York Partnerships, a very small-scale pilot scheme. I suggest that these two things are not mutually incompatible or mutually exclusive. It is quite possible for the modelling that has been done for the Pacific islands to also be applied to remote Indigenous communities in Australia.

Another issue that has arisen is the question of recruitment—how that would be carried out and who would get to take part in this scheme. I think that is one of the most difficult questions that any such scheme would face. We have heard from His Excellency the High Commissioner for Fiji today that the scheme would be opened up in Fiji nationally and everyone could apply. Given that for a scheme like this, especially in the early stages, if it begins small, there will be limited places and very large demand, a more appropriate way might be to target the scheme at particular areas of disadvantage. You might say that this is a scheme to assist people from remote island communities, for example.

Our preferred model would be to create locality-to-locality links, kind of like the sister city relationships we see. So rather than it just involving Pacific workers coming in, you would set up a link between an Australian rural community and a Pacific rural community. You would build around the labour relationship things such as church relationships and NGO relationships. There could be local fundraising in Swan Hill for a new school roof or schoolbooks or that kind of thing so that it becomes a people-to-people partnership. In that way you can also justify it being in this location or that location and grow it organically from that small base. Obviously there are problems in opening up the scheme to everyone in the Pacific. There will be a lot of people missing out if that were to be the case. So this is our suggestion of a way in which you might begin small and grow it and, in the same way, strengthen people-to-people links. I will leave my initial more than five minutes there and Nic will add some comments.

Mr Maclellan —I would like to add very briefly a couple of key points. Thank you for the opportunity to participate in this discussion. Oxfam’s concern and the reason we came in as an industry partner to the research conducted through Swinburne university was the focus on potential development outcomes—social, economic and cultural—of greater labour mobility between Australia, New Zealand and neighbouring Pacific island countries. That remains our primary focus. A lot of the work of the committee has focused on the benefits for Australia, but our key concern is to look at the final term of reference for the inquiry: ‘the effects of the scheme on the economies of Pacific nations’. But I think the two are interconnected, and I endorse very much Peter’s statements about looking at this through the prism of Australia’s broader relationship with neighbouring island countries.

One of the criticisms that has been raised in the media, and indeed by some government officials, is that increased labour mobility in itself cannot solve the many development challenges facing neighbouring island countries. We do not disagree in any way with that. Seasonal worker schemes will not solve many of the challenges, but they could complement and indeed contribute to broader aid, trade and security policies. We would see the development of seasonal worker schemes as part of a broader relationship, not simply as a one-off thing. That question of integrating it in broader aid, trade and security policies is part of the package.

The key concern about this is tied to the growing demand for improved rural livelihoods and access to basic services in countries neighbouring Australia, especially in rural areas and outlying islands, where the bulk of the population lives. The key anger that comes from many of the people I interviewed during the research in a number of Pacific countries was that they see Australia giving greater access to working holiday-makers coming from a range of countries, particularly European, when neighbouring Commonwealth countries and neighbouring Pacific countries do not have the same opportunities. They ask, ‘Why can’t our young people have the same opportunity to have an experience in Australia that European partners do?’

That reflects these questions about relationships as much as economics, but the economics are central. There is growing literature on the links between remittances and poverty reduction. Some of the research that has been done recently, particularly by Professor Brown and his team at the university, which is published in the At home and away report, has some really new data that has not been seen before about the way in which Pacific island communities spend remittances and the clear link that has to development outcomes. The amount that is spent, for example, on school fees and on educating people is clearly documented and the correlations are spelt out. That parallels other studies that have been done in the Caribbean on schemes that have been running with Canada for much longer. There is a lot more data showing the link between the way in which remittances can contribute not just to consumption and basic needs but also to investment in things like education, improved housing and improved health. So that literature is there and I would be happy to discuss any more detail of it, but that is very much our interest in this process.

We see the potential for this contributing not just to traditional remittance countries like Tonga and Samoa but to others like Fiji which have relatively strong economies by Pacific standards, with industries like sugar, garments, tourism and so on. Remittances are playing a growing role in the region. Globally, remittances to developing countries last year were $US167 billion. That is remittances sent into developing countries globally, not just in the Pacific, but that is twice the amount of all overseas development aid. So remittances into developing countries are a growing trend and a significant trend, and to that extent Australia may miss the boat if we do not engage on this question with our closest and nearest neighbours.

CHAIR —Mr Maclellan, I think you are also the first person to introduce the issue of security policy into this general debate. I was wondering whether you might expand upon what you mean by that and how that could be impacted by such a scheme.

Mr Maclellan —One of the features of the security debate within the Pacific is that most of the security challenges are internal, not external, in neighbouring Pacific countries. They relate to conflict within the community, conflict between communities and corporations, and conflict between communities and government. One of the concerns that has been raised in recent conflicts in Bougainville, East Timor, the Solomon Islands and even in Fiji is that there are many young unemployed people who have the potential to engage in illegal activities, whether petty crime or something more serious. In times of conflict, as has been seen during the crisis in the Solomon Islands, this has become an issue of concern for some Pacific governments.

There is a lot of work being done, both by governments and by non-government and community organisations like Oxfam, to work with young people. They are often presented as a problem, but young people are a great asset in the Pacific. They are engaged in a whole range of activities—in agriculture, in HIV AIDS education and so on. The opportunity for young people to have access to work is a really important part of that. It is not just about cash; it is about a sense of identity and a sense of belonging to the society. A really important part of this process is developing opportunities for young people in the Pacific to enter into the workforce, whether it is in farming and fishing or whether it is in other skilled trades.

One problem, as has been mentioned, with increased labour mobility is that many young people do not have access to the formal wage sector in their own countries, which are pretty small. There are many more school graduates coming out of countries like Fiji, Papua New Guinea and the Solomon Islands than can be absorbed into the formal wage sector. So that raises question of what work and employment opportunities exist for people to earn cash for their basic needs and for further education and so on. That is intimately tied to questions of conflict within those societies. If young people do not have those opportunities, what are they going to do?

Mr Mares —Particularly for young men in remote and outlying islands, if there are no employment opportunities there, they are likely to move to main islands, capital cities and so on, where they will potentially become part of that underclass of underemployed or unemployed youth who have the potential to be mobilised in moments of unrest or tension and so on. I suppose it would be my argument—and I am not sure if I am speaking for Nic here; I speak for myself—that we need to create work opportunities for people from outlying islands and remote communities who do not have clear alternative economic options.

CHAIR —Mr Mares, you talked about the WTO. You indicated that you were not necessarily an expert in the area. The Department of Foreign Affairs and Trade were fairly clear with us this morning that they thought that such an arrangement would not be compatible with WTO rules. I do not want to put words in your mouth, but what I have taken away from your submission is that you see that as more of an excuse rather than an opinion based on what the practical application of WTO rules would be.

Mr Mares —I was very pleased when Senator Barnett asked if it would be possible to see the legal advice on which that opinion was based, because I would be interested to see that as well. I am not aware that mode 4 of GATS is operative in any functional sense at this time in terms of restricting these types of agreements. My understanding is that it is still a work in progress, rather than a fixed and clearly operating system. As I said, though, I am not an expert in this area. The two exceptions I would point to are lesser developed countries. If they qualified for that status, they would qualify for special and differential treatment under WTO rules, so they would be exempt in any case. I could imagine that they might be the countries to which Australia is looking for this kind of employment scheme. Secondly, if it is part of a regional agreement, it would then also be exempt from GATS and mode 4. I hope the committee will have a chance to hear from Dr Manjula Luthria from the World Bank, who would be better able to give an opinion in this area.

CHAIR —All right. We will attempt to do that. I know you are not here as the author of the report At home and away, but I will ask you a question about it anyway.

Mr Mares —That is fine.

CHAIR —In the chapter that you are partially responsible for, you pose this question:

That is in effect a question the committee regularly asked some large investors and developers as we went through the inquiry. I have read your response there, but I think it would be interesting if I gave you an opportunity to expand further and give us the answer to that question.

Mr Mares —Thank you. This question was actually put by two eminent international referees who looked at our draft chapter and commented. They said, ‘Why are these Australian farmers investing so much in horticulture if they really have a labour problem?’ I think it is a very legitimate question. There are a number of factors. There are the obvious ones: the fact that there is a time delay between planting a vineyard, an olive grove or an almond grove and the point at which your labour needs will peak. At some point off in the distance of several years you can perhaps think that those problems will be solved—‘Cross that bridge when we come to it’—or that the situation may have changed. However, there are two other factors at play here. One is the growth of managed investment schemes which are attracting superannuation moneys and also have proved to be tax-effective schemes for urban investors who may have a large tax bill and who can claim the full expenditure on a managed investment scheme in horticulture in the first 12 months of its operation. So this is seeing a lot of what might be called ‘hot’ money, I suppose, going into large-scale plantations.

This is an issue that has been discussed in parliament recently, or has been a matter of concern, anyway, to a number of members of parliament. It seems to me that the structuring of these schemes is such that the final harvest of the product, which may be many years away, is somewhat divorced from the profit that can be achieved by the developer of the scheme in the short term. That is, an investor may invest a sum of $9,000 to plant a hectare of, say, almonds, of which a significant portion will go as profit to the developer of that scheme, which may be a large managed investment company. Therefore the profit is made early on in the project. Whether there is an ultimate return later on perhaps is not the immediate concern. It is the growth of managed investment schemes, which is part of a shift away from family farming towards larger scale forms of agriculture, which in turn demands greater non-family farm labour. The Productivity Commission report on agriculture in, I think, 2005, showed that there is this trend over time away from owner labour and family farm labour towards off-farm labour. Wage labour is increasingly needed in order to manage, particularly in horticulture, because it is more labour intensive.

The other aspect I would suggest is drawing investment into these horticultural schemes is the price of water and the scarcity of water. That would seem to be a reason not to invest in horticulture, but in fact horticulture produces more value per megalitre of water than other forms of agricultural activity such as, say, dairying or raising fat lambs on flood pasture. As the price of water and water scarcity increase, what we are seeing is investment in a much more highly targeted use of water for high-value horticultural products. So I think those are some of the factors that are leading to this investment. But I cannot really speak for the investors themselves as to how they think they are going to solve the labour problems that I see emerging once these investments mature.

Senator BARNETT —Thanks for your presentation and your very comprehensive submission. It has been most valuable to me and, I know, to others. I would like to kick off by confirming your answer about the legal question regarding the WTO and whether it is actually legal to have an arrangement with Pacific island nations. I guess that, in short form, you are saying that that is not necessarily the case, based on your advice and understanding.

Mr Mares —Based on my understanding, it is not, but I do not profess to be an expert in this area.

Senator BARNETT —Sure. I thought I had better give you an opportunity to respond to the view of the Department of Employment and Workplace Relations that there is ‘nothing new’ in the World Bank report. I think they made similar comments about your own report, the Mares report. Would you like to respond?

Mr Mares —I think that the World Bank report does contain significant new information—not our own information so much as that of Richard Brown on the use of remittances and the way in which remittances spread throughout Pacific island communities well beyond the immediate family recipients. In our own report, my survey of labour needs, inadequate as it was in its own way, did reveal some interesting information. I think one of the key points was that one in four of our respondents admitted to knowingly using illegal labour. That, to me, was an extraordinary statistic. I did not expect the figure to be nearly that high, although I was aware of the issue from talking to growers and meeting illegal workers. The fact that so many admitted to it suggested to me that labour is an issue for growers and that the real figure may be higher because a lot of growers now use labour hire companies and do not inquire as to the status of the workers that those labour hire companies may hire.

Something else that I think is new in our report is—and I do not want to sound like I am blowing my own trumpet here—that I do not think anyone in Australia has as comprehensively looked into the operation of the Canadian scheme and identified its strengths and weaknesses. That is something we attempted to do and it showed that schemes like this are feasible but that the design of the scheme is important. The Canadian scheme operates very well from the point of view of growers and not so well from the point of view of workers. The workers still want to be part of it because they want that opportunity to earn income and support their families. Even Canada’s trade unions, who are picking up the pieces of the problems in the Canadian scheme, do not oppose it as such. What they say is that they want to see it fixed. They want to see it better run. They want to see it improved. They are not saying, ‘Get rid of this scheme.’ I think that is one thing we have done.

I would also point to the work that my colleague Nic Maclellan has done in getting the opinions from the Pacific, in his travels in Vanuatu, Fiji, Tonga and elsewhere, and getting a sense of what the concerns are from the Pacific end in terms of the social costs—because migration does have costs—and how we can best manage and reduce those costs. Nic may want to add something there.

Mr Maclellan —I think it is important to note that the economic scene in the Pacific is changing quite significantly, and so the research that has been done by researchers, in Australia, at the University of the South Pacific and so on, is trying to document a pretty fast-changing situation. A number of countries in the Pacific have been long reliant on remittances. The classics are Tonga and Samoa, for example. Roughly 90 per cent of households in Tonga get remittances. That has long been the case. It is changing, though, for some other countries, and Fiji is the major example. Historically, Fiji’s economy has been reliant on key industries like sugar, the garment industry to a certain extent, tourism and gold. But the changing nature of the world, with the WTO and trade liberalisation, has meant that key industries like sugar and garments do not play the same role now and certainly will not in the future that they did during the 1990s and further back. What we are talking about is a changing picture. Some of the work that has been done through this report and others looks at that rapidly changing situation.

Fiji’s remittances have gone up. In 1994, it was 56 million Fiji dollars; now it is over 300 million Fiji dollars in a year, and those are the recorded figures. The real figures are much greater. In the same period, sugar has gone down from 266 million to 188 million, so sugar is a declining industry. So a lot of the work that was done a decade ago is not relevant to the current, rapidly changing situation, and I think that is where the pressure on the Australian government is coming from the Pacific neighbours. The issue of labour mobility is taking on greater importance, not just for countries like Tonga and Samoa that have traditionally been reliant on remittances but even for Melanesian economies that have been reliant on sugar, mining or timber and so on. So this is a very rapidly changing economic environment.

The essence of our argument is that this issue is not going away. Pacific populations are very young and growing, and although the population fertility rates are dropping relative to the high points—sometimes in the eighties and nineties; it varies from country to country—they are still growing at a rate such that they will not reduce in ways for another generation. So the issue of employment opportunities for young people and the burgeoning impact of growing populations on the provision of health, education, welfare and all government services is not going to go away for another generation. As the key powers in the region, Australia and New Zealand are going to have to keep addressing this issue at the same time that trade liberalisation has meant that traditional industries like sugar, garments and so on are not going to be able to provide the job opportunities that they did in the past.

Mr Mares —I might just add that the reverse is true in Australia. The supply of local Australians to work picking fruit or doing other seasonal jobs in horticulture is not going to increase. I do not think we are going to see a sudden rush of young people saying: ‘I’ve always wanted to pick fruit.’ Somehow the trend is in the opposite direction.

Senator BARNETT —Mr Mares, you are our local expert on the Canadian experience—or at least the Australian expert to some degree. Can you just share with us the successes and the particular features of that that you think are relevant to Australia and that perhaps could be implemented here and any failures that you think we need to be aware of.

Mr Mares —Thank you for the question. I spent two weeks in Canada as well as reading a vast amount of everything I could get my hands on in terms of academic literature, newspaper reporting and so on about the Canadian scheme. The fundamental thing that Australia can take from the Canadian scheme, I think, is its circularity—that is, the idea that the workers come for a season, go home and then come again the next season. The advantages of that are several. One of the obvious advantages is that it creates a disincentive for overstaying. There is no need to overstay, be separated from your family and live illegally if you know that you are going to have another opportunity to come back and work in the following year. And there is a good reason to go home and see your family, spend time at home, use your money on your own property and so on.

Secondly, it provides the employers with continuity of their workforce so that their workforce is becoming increasingly skilled over time. While this is unskilled labour, there are skills involved in doing it: handling pesticides, learning to prune appropriately, learning to thin, learning to handle fruit et cetera. As a workforce becomes more proficient at the job, it also works more efficiently, so there is less spoilage, less wastage, the fruit gets picked more quickly and so on. So I think the circularity is one of the great positives of the scheme.

An official in Human Resources and Social Development, Canada, which I guess is their equivalent of DEWR, said to me that illegal labour is no longer a problem in Canadian horticulture. There is no need for growers to employ illegal workers. I am sure there are some at the margins, but essentially the scheme is there, people can use it, they do use it, and it provides them with the workforce they need. So, as an alternative to illegal labour, it seems to be very successful in the Canadian context.

It is a series of bilateral arrangements, so Canada has bilateral agreements with the various source countries—the Caribbean countries: Jamaica, Barbados, Trinidad and Tobago and so on; and Mexico—and those are annually reviewed. That enables problems within the agreements to be addressed. It enables things to be finessed and finetuned to try to make things operate more effectively. It also enables the scheme to be targeted, rather than a global scheme where you would take whoever would come. So, in the Mexican case, the Mexican government has not opened the scheme up nationally but has opened recruitment centres in provinces of Mexico where it sees the need to supply work opportunities because there is a large supply of landless farmers or the prospects of irrigation in that particular area and other forms of development are limited. So there is a targeting of the scheme towards those who seem to be most in need of employment. So those are some of the key benefits of the scheme.

There is obviously the impact of remittances. The research shows a lot of money being spent on children’s education. Workers who have been in the scheme are likely to keep their children in school longer than their colleagues, farmers in the same village, who are not part of the scheme. It gives them the resources with which to maintain their children’s education. In the Jamaican context, I think the figures are up to 35 per cent of remittances being spent on education of children.

That spending will also change over time. In the first few years, the money may all go on paying debts that have been accumulated, or on improving the house and improving nutrition and things like that. But, over time—and, again, this is part of the circularity—the longer that someone is in the scheme the more likely they are to be able to use their remittances for productive investment. So those are the strengths of the scheme.

The weaknesses are really that the scheme is weighted far too heavily in favour of employers. An employer has the right to send a worker home for failure to work, refusal to work or—this is the wording—‘any other sufficient reason’. Essentially, the employer can say, ‘This worker’s not pulling their weight; off they go.’ That creates a situation in which it is very difficult for a temporary, seasonal worker, to say, ‘No, I am not working in that greenhouse spraying pesticide without a gas mask,’ because the employer can say, ‘Then you’re going back to Mexico.’

This seems to me the fundamental problem in the Canadian scheme: the weighting is too much in favour of the employers without any kind of counterbalance. There is no appeal mechanism. The only protection the workers have is through a system of consular liaison officers from their own consulates, who they can call upon to try and help them if there is a dispute. Naturally, when you are talking about 20,000 workers nationally, the chances of reaching your consular liaison officer on Saturday afternoon when you are in dispute with your boss are perhaps limited. And there is something of a conflict of interest for the consular liaison officers themselves, in representing their own workers as opposed to maintaining the smooth running of the scheme. There is some competition between the different countries—between the Caribbean countries and Mexico, for example. If Jamaican workers are seen to be too much trouble, then the farmer may choose to go and hire Mexican workers the following year.

So I think from that we see the need for some kind of system of oversight and an independent appeals mechanism, or some kind of independent body, which might be a tripartite body—with government, growers and unions, in the Australian context—to which workers can appeal, to which problems can be addressed, which can be called in if there is a problem.

Briefly, the other problem I see with the Canadian scheme is that workers are tied to a particular employer for the entire duration of their stay and can only be transferred with payment of a fee and an approval process. Essentially, you are tied to one employer. I would prefer to see a system whereby there was some mobility within a location, because I think it would mean that if there were a falling-out between a particular employer and a particular worker another situation could perhaps be found. It may also mean that the costs could be defrayed across several employers bringing workers in; it may mean that the season for those workers could be extended; and so on. I would think some kind of pooling system, on a locality basis, would be more appropriate than simply having people linked to one specific employer. Sorry, that was a very long answer.

Senator BARNETT —You said earlier that the changes to the Working Holiday Maker Scheme here in Australia was in part due to the demand for more labour in those areas that need it across regional Australia. That seems to be in conflict, at least to some degree, with the Department of Employment and Workplace Relations, who indicated that they could not see a need for the possible pilot scheme envisaged through this inquiry. They advise that they could not see any evidence to support any scheme, notwithstanding they refer to 2002 figures with the use of working holiday makers. But I understand that you have had a look at the area and you can see that there has been an increase in working holiday makers as a proportion of the total workforce and that these two issues of labour shortage and reliability are very important issues across regional Australia. I am seeking your response as to whether you can confirm that and whether you can flesh out your views?

Mr Mares —I can only say in terms of numbers that the number of working holiday makers approved to come for Australia has grown—I think doubled—in the last 10 years from around 50,000 to around 110,000. Whether a larger proportion is working in horticulture or agriculture would be difficult for me to say. My point, I guess, is that the federal government has created a situation where there are specific incentives for those working holiday makers to work in seasonal agricultural jobs and has made a specific allowance where the three months per one job time limit has been extended to six months, again for specific seasonal and agricultural jobs.

I am assuming those decisions were made because there was a perceived need to supply more labour to those industries. That is my supposition. I do not have evidence for that, but when these measures were released, the relevant minister, the minister for immigration, made a point, particularly in the last case, of putting out press releases for every rural community in Australia, pointing out the huge benefits this would have for their communities. So I think there is little doubt that these were targeted at supplying foreign workers to rural communities to meet their seasonal labour needs.

As for the Department of Employment and Workplace Relations and their evidence that jobs can be filled from domestic sources, I am sorry, but that flies in the face of the evidence. These jobs are not being filled from domestic sources; these jobs are being filled by foreign workers—those workers being working holiday makers. My evidence for that comes from the submissions and evidence that your committee has heard around the country of growers saying, ‘Eighty per cent of the people putting tomatoes in boxes in my sheds are backpackers.’ That is the only evidence I have, and it is evidence that is already before you.

Senator BARNETT —You mentioned that the cost to the grower for covering the travel costs was $2 an hour. I think your analysis was over a 13-week period. So obviously if they are here for six months or longer, that cost to the grower is going to be half or somewhat less than that?

Mr Mares —Yes, that was calculated on the grower paying $20 per week per worker they employed to help cover the administrative costs of the scheme and the grower paying 50 per cent of the travel costs, which I estimated as a total of about $1,600 made up of a return economy airfare, Fiji to Australia, plus a range of associated costs—a couple of hundred dollars for travel into Nadi airport, some incidental costs, visa fees, medical fees and things like that.

Senator BARNETT —What is your preferred time frame for the scheme?

Mr Mares —My preferred time frame would be that the worker should come with a guarantee of three months employment, to ensure that they go home with money in their pocket, and that the maximum should be six months. The reason for making a maximum of six months is simply that I think it would be regrettable to have a situation, as exists in Canada, where some workers come for eight months of the year every year for decades and in fact spend the majority of their time away from their families. That seems to me to be an undesirable outcome. So it is arbitrary in one sense, but it seemed to me that six months is a good time limit. If there is a need for a greater number of workers, another worker can come for six months and it can be shared out in that way.

Mr Maclellan —That is tied very much to the findings of our research in the Pacific that there are some social costs associated with these questions of family separation. If young people are travelling to Australia and New Zealand to work, there are, for example burdens on older women in the village, who are often left with child care. There are issues about children’s educational standing if parents are separated and so on. So there are some costs related to this that involve intervention by government, by community, by family, to ensure that the separation of families during this process does not bring added social burdens. Those social burdens fall on the community.

I think one of the core messages that have come out of our research is that there are both costs and benefits to this process. It is not all one-way. The question of who bears those costs as well as who gains the benefits is part of the discussion. Our broad thrust is that there is a role for government, for employers and for the workers themselves to bear some of those costs. It is a key political dispute, frankly, about the balance between the various players. We see a role for all of those participants in the process. I suppose that is where we have a slight difference to some other people who have written in this area when they say there is a role for government to set the broad legal and administrative framework for these schemes but then to step back and let the private sector do it. We think there are roles for other players, for government and for community.

There is a role, for example, for church and local communities within Australia and in the Pacific to support people in the social adjustment necessary for this. Non-government and church leaders might play a role in pre-departure briefing and orientation on issues such as cultural relations, HIV-AIDS, which is a crucial issue for the Pacific, and substance abuse. If you have blokes coming over and working for six months in Australia with nothing to do at night, what is that going to mean in terms of alcohol and substance abuse? With all those sorts of pre-departure questions, we think there is a role for community, for church and for government to play that is beyond the purely economic relationship between employers and workers. That is where we may differ from some other researchers in the sense that there are some costs for government. We think though that government should be playing that role to support this process because it contributes to broader development objectives.

Mr Mares —I do not want to take up too much time but I want to add something in relation to this from the Canadian scheme. The situation in Canada was that the workers coming in were virtually invisible for decades. They would be accommodated on farms; they would only go into town on their Friday night off to go to the bank and to go out to dinner and so on. Mostly they would be accommodated purely on farms, which were remote and quite isolated. There was very little interaction between the Canadian local community and these workers. That has begun to change as the scheme itself has achieved some notoriety, because of abuses and problems. Journalists have begun to write about it, academics have begun to study it, churches have begun to get involved and now what we are seeing in Canada is a kind of flowering of community support for the workers in things like English language classes, community events, festivals. Some now are getting the support of local governments, provincial authorities and so on.

We would hope that we could learn again from the Canadian experience and try to build in that sort of social interaction from day one rather than have the workers shut away in houses that are behind the barn somewhere out on a farm. I would also recommend to the committee—and I would be happy to lend my copy—a film called El Contrato. It is by a Canadian documentary maker and it traces the experiences of four Mexican workers going to Canada under the scheme. It is a very partisan film. It takes very much the view of the workers, but it is also quite a heartbreaking film and it brings home to you the fact that we are talking about people with families, who experience great pain, loneliness and separation from their families, but who are desperate for work and employment opportunities. I say that because I think it is always important to keep that fact in mind. We are talking about people’s lives here so getting the settings right is extremely important.

CHAIR —We would appreciate borrowing your copy.

Senator McEWEN —I have a couple of questions about the Canadian system. One of the issues we have here is to demonstrate that there is an actual need for labour in the horticultural industry. In Canada do the employers who use the scheme have to demonstrate on a regular basis, annually or whatever, that they do have skill shortages? How do they do that? What information do they have to provide and who checks that it is accurate?

Mr Mares —Before they join the Canadian scheme an employer has to demonstrate that they have made efforts to secure local labour. They have to demonstrate that they have been to the local employment office, that they have advertised and that they have attempted to recruit labour locally. Once they prove that to the satisfaction of the local employment centre—which is part of the Department of Human Resources and Social Development, Canada—then they can be admitted to the scheme. They do not have to prove it in any subsequent year. Once you are admitted to the scheme, essentially you are in and you then remain part of the scheme. You do not have to reprove that there is a labour shortage. So it is only initial. My inquiries suggest that it was a fairly simple thing to prove, that it was not very rigorously checked.

Senator McEWEN —So there is no evidence that local unemployment has grown while growers are still importing labour from Mexico and the Caribbean?

Mr Mares —I think the evidence actually shows the opposite. The evidence is that the scheme itself has enabled horticulture in Ontario, where I looked, particularly to expand and has created extra jobs. It has created jobs in the processing industries, transport and packaging. The spin-off effects of the spending by the seasonal workers while they are in Canada creates employment effects in the local town. As the Mexican Consul General in Toronto told me, the town of Leamington—which is the tomato capital of Canada—has the best tacos in all of Canada; and indeed I know it is true because I sampled them. That is a small restaurant set up by a former seasonal worker to cater to the Mexican workers on their days off. I think that, in fact, a scheme like this, far from taking away jobs, is more likely to create jobs and have an employment effect. We propose that workers pay for their accommodation. That would create another spin-off employment area. So I see the effect as being the opposite.

Mr Maclellan —There is some benefit also for the sender countries. For example, Oxfam International held a major conference on remittances and development in 2004. The documents for that are available. There were studies showing sending countries also getting some industries out of it—for example, exporting ‘comfort food’ as it is described. So, for example, people are able to send taro; there is now a market. If there are several hundred people from a Pacific island country working in a particular area, there is the potential for entrepreneurial links between rural Australia, regional Australia and Pacific island countries for a range of exports, trade industries, handicrafts and so on. So there were actually some economic spin-offs beyond the remittance culture. There is the potential for that to be expanded.

Some aid programs are tied to that; for example, with the Canadian scheme the Mexican government has a scheme called ‘three by one’ where the three tiers of government—local, regional and national—all put in a dollar for every dollar that is put into an investment activity within the country. So as workers come home to a village with, say, $10,000 the three tiers of government put in another $30,000. That boosts the capacity of people bringing money back to a community to build a new roof on the school, community hall or something like that. So the government aid programs are tied to remittances coming back into the community. There are similar examples in the Philippines and other countries that have a long tradition of remittances. That seems to me to have enormous potential. AusAID, NZAID and non-government organisations in Australia could target some of their activities to complement this work as remittances came back into a community. There is the potential for investment in microcredit, in community development programs and so on that could be complemented as people returning bring money back into the community.

CHAIR —The committee got to sample some taro in Robinvale—and I do not think there is going to be much of a market, I am afraid.

Senator McEWEN —I have one other question, and I guess it is also an opinion, mainly directed to Mr Maclellan because of his close recent connections with the Asia-Pacific region, about this matter. The committee has asked the officers of various government departments what the government’s response is to the fact that our Pacific neighbours are continually being knocked back—they are requesting that this worker scheme be put in place and they are continually being knocked back. The Prime Minister and the Treasurer have made bald statements that we will not be having a guest worker scheme. Public servants, when asked about that, quite rightly can only reflect what the government is saying. I am curious about what you think are the reasons the federal government is still opposed to this scheme.

Mr Maclellan —I think the government has stated its reasons publicly both in Australia and in the Pacific. They relate to an analysis of what is the best way to promote economic, social and cultural development in our near neighbours. The government’s priority commitment is to promoting good governance and better economic management in Pacific island neighbours and the belief that resources allocated to that are more important. The foreign minister has also made a number of statements suggesting that the small numbers of people coming under seasonal worker schemes could not address the broad needs for employment opportunities within the Pacific, so I think that the government has been quite open about that.

I think, though, there are also underlying issues which are less publicly stated in both the Pacific and Australia. The references to blackbirding that have often come up are significant. There are historical issues about the presence of foreign workers in Australia that have deep roots and are often unspoken. You only have to go to rural and regional Australia to have these issues come up about the relationship between domestic workers and overseas workers. We talk about overseas workers, but all the working holiday-makers are overseas workers. They are not black overseas workers by and large, though.

I think these are important issues that need to be talked through because they have implications about the way in which these schemes would work. If there were examples of exploitation of seasonal workers coming in, those would cause a big political problem for the sending government and Australia. That needs to be talked about fairly openly, because if these schemes are to work they have to be done with goodwill on both sides and people have to address the very real concerns that people who come be treated well. I think that is an important issue that possibly underlies not so much what the government has stated, because it has been very open about its concerns in terms of economic priorities, but the underlying community response to this issue. That is a very important issue in the labour movement in some parts of rural and regional Australia.

From my interviews both with government officials and community people—we interviewed extensively throughout the countries during our research—I know there is a real anger that Australia is not addressing what is seen as a growing problem, the growing demand for greater access to the labour market. Australia and New Zealand are currently engaged in building closer relations with Pacific island neighbours. There is a process of regional economic integration under way tied to a whole range of trade, financial and other areas. The government has made a major commitment, through the Pacific Plan for strengthening regional cooperation, to this process, and many Pacific governments—and certainly the non-government community sector—see the question of labour mobility as part and parcel of that. So if we are going to continue with this process of supporting regional integration—and I think that is very important—then labour mobility will keep coming up as an issue as part of that process.

Mr Mares —One of the stated objections to a scheme like this—from the Prime Minister and the Treasurer—has been that Australia is a country of permanent migration and not a country of temporary migration—‘We don’t do guest worker schemes’. As we know from the dramatic growth of the 457 long-stay business visa—the skilled business visa which is a temporary visa—these days Australia certainly does have temporary migration schemes. The working holiday-maker scheme is increasingly a temporary migration scheme. As I said, it was originally meant to be an adjunct to travel but increasingly it is being used for labour market purposes.

I think that part of it is the idea that we are not a country of permanent migration. One alternative is to say if we have labour shortages let us open up to unskilled migrants as well as skilled migrants, as we did in the post-World War II period—‘Why not allow unskilled migrants in to fill these jobs?’ There are two responses to that. One is that that would then need to be a global opening, so whether many Pacific islanders would benefit from such an opening for the permanent migration of unskilled workers is questionable. Secondly, if you came to Australia as an unskilled permanent migrant, the chances are you would not choose to go and work in horticulture because, as we know, it is difficult and hot and remote. The chances are you would move to Sydney or Melbourne and get a job on a construction site or in processing in a factory where you would be nearer your compatriots who live in that suburb or where you would earn more money or where your kids would have a better choice of schools and so on. Ideally, there should be an option of greater permanent migration for unskilled workers, but that will not necessarily meet the needs of the Pacific or the horticultural industry.

CHAIR —You said initially that the Canadian scheme was largely invisible. Should I take it from that that the general community at large was not aware it was even happening? One of the things I am conscious of is that there would have to be community acceptance, particularly in regional communities, that this was ultimately a good thing if it were to work appropriately and have a long-term future. I am wondering about the experience in Canada initially was and what the community reaction was—if there was one.

Mr Mares —I have spoken to the head of the Ontario Fruit and Vegetable Growers Association about the history. His father was one of the people who got the scheme off the ground in the late sixties. He said that it was initially 200 workers or something like that from Jamaica. In the first year there was some controversy and some concern about those workers taking local jobs and so on. Initially, I think the program actually declined in the first couple of years. That was partly because of the political sensitivities around it when it was first raised.

My understanding, though, is that it gradually disappeared from view, and most Canadians had very little idea that their tomatoes were being picked by temporary Jamaican workers. It grew over time without anyone taking much notice, to the extent that after a few years there were several thousand workers, a few years later there were 10,000 and so on. It grew as the industry grew and as the number of local workers interested in working in that industry declined—I think there were alternative employment options that were preferable.

I should say that Canadian growers had been complaining about labour shortages since the Second World War. The Canadian government had drafted Polish veterans and displaced people from Europe and so on into horticulture in an attempt to meet those needs. So I think that at its inception there was some controversy. It was debated and there were concerns about the labour impacts. But over time it disappeared from view. It has only re-emerged into view in recent times as a result of things like the documentary I mentioned, some newspaper reporting and some interest from churches and a range of social scientists looking at the scheme.

CHAIR —You may have done this work and it may be in your submission—if it is, I missed it—but is there any correlation between the figures for the expansion of the industry, the number of guest workers and the resultant creation of full-time, permanent jobs in Canada as a result of their scheme?

Mr Maclellan —I can only go on the evidence that was presented to me by industry bodies and other researchers. There appears to me to be a correlation between the growth of horticulture and the growth of the scheme, and there appears to be a correlation between spin-off, related jobs—jobs in associated industries and so on—and the growth of the scheme. But I do not think it would be possible to put exact figures to it or to calculate that in terms of permanent, ongoing, full-time work. I would not have that sort of data and I am not sure whether it would be available.

CHAIR —Does the Canadian system allow for the effective replacement of a full-time, permanent job with a number of guest workers? That is the issue. Logic says to me that, if you have the ability to plant a million acres of almond trees and you need a thousand people to harvest them and, as a result, there are three factories built which are going 24 hours a day, 365 days of the year with permanent, full-time jobs, that is something you can easily demonstrate as expanding the industry with guest labour. The direct result is permanent labour. If you then rotate four-monthly guest workers through those full-time jobs, there is no net benefit. Could that happen?

Mr Mares —Let me start be saying that the Canadian seasons are perhaps more dramatic than our own. The season for field crops is clearly limited by weather impacts. It is too cold before May or June for any work to be done—

CHAIR —So it is bit like Canberra, is it!

Mr Mares —Perhaps!—and it is too cold and too dark after September. The people who I spoke to in Ontario who were working in apple or other stone fruit orchards say that the season is limited to about four months work, beginning with pruning and moving through to the final clean-up after the harvest. The tomato industry, though, is rather different. The tomato industry is huge in Leamington, which is near Windsor in southern Ontario. This is a greenhouse industry which uses gas fired greenhouses. In a sense, the seasons have been overcome. The greenhouses can produce several crops in a year. The greenhouses close down for the coldest months of the year, so there is no work in December and January. But for much of the rest of the year there is work, and that is why you have Mexicans coming for eight months of the year—because they are working in the greenhouse industry. Potentially, you could have almost full-time, year-round employment. There would probably be a gap, but people would need to take holidays, too.

CHAIR —The point that I am getting at is that it is for one eight-month period. In Australia, it is six months. But could you have two lots of six months to create a permanent ongoing job for someone who is taking on a job with a supposedly seasonal nature? That would be filled in different lots by guest workers.

Mr Mares —I suspect that in the Australian context permanent ongoing jobs would only exist if you were working for a labour hire agency that was moving you around the country so that you were working in different areas at different times. It may be that a job could be created by putting together pruning in the vineyards, picking winter navel oranges, picking summer grapes, trellising dried fruit et cetera. There may be a combination of different jobs that could be put together to create year round employment. That is quite possible. But you would probably be working across different farms and perhaps different seasonal locations. The potential is there for year round employment in some industries, but probably not in all industries, and in some locations, but probably not in all locations. That would be my answer. Does that answer the question?

CHAIR —Yes.

Senator TROETH —I have one question. In your discussions with farmers and farmer organisations, what was their reaction to and feedback on the notion that they would need to pay at least some of the costs involved in this?

Mr Mares —You will see from the survey results—and I know you have read that survey that I carried out—that the general reaction was: ‘We’d rather not pay.’ That is a fairly normal reaction. However, larger growers and investors who have thought seriously about the labour issue recognise clearly that there has to be some cost sharing and that there will be a cost to them in order for them to secure the labour they need. They are already experiencing those costs in various ways. Some of them are saying, ‘We’re building accommodation, because we think we’ll have an advantage in the labour market if we can offer accommodation.’ They are building accommodation, which requires an investment up front.

Senator TROETH —I am not worried about the million acres of almonds, because in an investment of that nature that would be part of the cost for them. I am thinking more of even the larger individual family farms, where that cost may be seen as something that is not going to produce a direct economic return and therefore will not be very popular.

Mr Mares —The response varies, it would be fair to say. But the larger family farmers would be willing to pay a premium for it if, as a result of having to pay more, they can get security of labour supply and reliability of labour supply and a labour supply that is increasingly skilled. They are not going to be willing to pay a lot of money for someone for a couple of weeks work. However, a scheme like this that supplies labour to the larger employers should—theoretically, at least—make it easier for the smaller employers to find workers elsewhere.

Mr Maclellan —It is also about reallocating costs. From the research, a number of the growers spent a lot on retraining people. When you bring in a backpacker, you spend time training them on how to do the work, how not to damage the fruit and so on. If that person leaves, you have to do it again. If you have a regular and reliable source of labour, your training costs drop and that money can be reallocated. More important than the money are the people involved. Often in the mid-level operations there are key foremen, managers and even family members who are involved in that training work who could then be reallocated to other work, which would improve costs and benefits in other areas. So it is sometimes a question of reallocating resources rather than extra burdens in terms of paying a premium.

Senator TROETH —But, if the scheme did target the unskilled or low-skilled, there would be a training component with every worker?

Mr Maclellan —Yes and no. We use the term ‘unskilled’, but many of the people in the Pacific that we are talking about are actually very skilled farmers. They are involved in horticulture and they grow root crops. They survive on growing a range of products. So they are probably better fitted than your average European backpacker to work in areas like this. There are specialist techniques that are needed in the areas of pruning and so on, but, with regard to the term ‘unskilled’, we are talking about people who come from the Pacific islands who live by growing fruit, food and so on, so they have certain agricultural skills that could be transferred to work in horticulture in Australia with, I think, less training than your average backpacker might need.

Mr Mares —Especially in the first year, there would need to be training for the specifics of the job here in Australia—in Mildura, Swan Hill or what have you. But the idea of the scheme, as we envisage it, would be circular—you would have the same workers coming back the following year. So, over time, as that workforce became more experienced, your training costs would be diminished.

CHAIR —Thank you for your excellent work and for your presentation today.

Mr Mares —Thank you very much for the opportunity to speak.

[4.28 pm]