Dr SOUTHCOTT (5:02 PM) —In speaking in this debate on the Workplace Relations Legislation Amendment (More Jobs, Better Pay) Bill 1999 , I would like to focus on three points. The first point is that it strikes me how out of place the rhetoric in the debate is when you compare it with the legislation. One of the features I have noticed since I have been in the parliament is that, whenever we debate a piece of legislation on industrial relations, the rhetoric is strong and often out of bearing with the actual piece of legislation. This point was noted in the debate on the 1996 Workplace Relations Act by several commentators on labour relations.

The second point I would like to focus on is the principle which lies behind this bill. We pursue labour market flexibility to decrease unemployment. There are significant advantages in a more flexible labour market—it improves productivity and decreases unemployment. Secondly, it helps in the competitiveness of Australian firms. (Quorum formed) As I was saying, the rhetoric in this debate is totally out of place when you look at the evolutionary nature of the legislation. Secondly, there is the principle. We do this to reduce unemployment and to give businesses a competitive advantage. The Labor Party are stuck in a bit of a time warp. They think that the only way you can do this is by cutting wages. There is no future for a developed country like Australia in being a low wage country. The future lies in businesses realising that their sustained competitive advantage lies with their human capital.

Since this piece of legislation does continue from where the 1996 act left off, I would like to focus on the results from that act. Since the government was elected, the unemployment rate has decreased from 8.7 per cent in March 1996 to its present level of 7.2 per cent; 480,000 jobs have been created, despite most of the economies in our region being devastated by the Asian financial crisis. The strong employment growth has been the result of robust economic fundamentals and labour market reform. More needs to be done, and that is the aim of More Jobs, Better Pay.

Enterprise bargaining started under the Labor Party after a realisation that the award was no longer relevant and that adversarial relations between employers and employees were not good for workplace relations. Union membership during the period of the Labor government decreased from 50 per cent of the work force to its present level of 28 per cent. Workers realised that unions were no longer relevant. The union movement itself has decided it needs a sea change from amalgamation and the creation of mega unions in the 1980s to a culture which gets back to the shop floor. In his document Unions@work, Greg Combet argues that unionism is all about `educating delegates and activists to better recruit, service and bargain in the workplace'.

Centralised tribunals conducting conciliation and arbitration have been a feature of labour management relations since 1904. In this decade industrial relations have undergone a shift from a system of centralised arbitration to bargaining at an enterprise level. That trend continued under the Workplace Relations Act 1996. There has been a shift in the level of bargaining from an industry and economy level to a system which places bargaining at the enterprise and workplace level. The key features of the 1996 act were the continuation of collective agreements, the introduction of individual Australian workplace agreements, the award simplification process, the influence of the act on industrial disputes and the freedom of association provisions in the act. During the 1996 election, the Minister for Workplace Relations and Small Business described the coalition's vision for industrial relations as one where direct relationships between employers and employees were central and where the scope for third party intervention was much reduced. That was our policy.

Industrial relations reform as represented by the 1996 act has been evolutionary and continues the decentralist thrust of early industrial relations legislation. It provides for more opportunities for direct relationships between employees and employers but still maintains some regulation monitoring of labour market relationships. This bill is in the same mould and will continue the evolution of labour market relationships to an enterprise level focus and ensure the award system will remain as a safety net.

The 1996 act provides employers with opportunities to deal directly with employees and to agree on terms and conditions of employment that suit individual workplaces. Implicit in the legislation is the assumption that to negotiate agreements will require time and resources from the parties involved. How quickly employers utilise the legislation has depended on a range of factors. In an article in one of the labour bulletins, Gough and Rimmer conclude that factors which affect the level of workplace change include the extent to which industrial relations have been adversarial, the development of human resources, the number of unions at the workplace, the education level of the employees, the stability and age of the workplace, the number of unions and awards already in place and the existence of resources for workplace training. This legislation will not initiate change by itself. It will happen only if employers wish to consider enterprise bargaining in the context of wider employment and industrial relations issues.

Low productivity growth and high unemployment have characterised the labour market in Australia for at least 25 years. A rigid labour market associated with a powerful labour movement and centralised arbitration have contributed to high levels of unemployment. The principal advantage of enterprise bargaining is that it makes the labour market more flexible and increases labour productivity. There is evidence that, since the introduction of formalised enterprise bargaining in 1991, labour productivity has moved from a growth level of 1.4 per cent in the 1980s to three per cent in the 1990s. This trend has been maintained since the introduction of the Workplace Relations Act. Former Keating economic adviser John Edwards attributes this to enterprise bargaining, the weakness of the trade unions and an Industrial Relations Commission which facilitates productivity enhancing changes in work practices. Enterprise bargaining has given employers the freedom to reorganise work if they wish.

That is an important consequence of enterprise bargaining. It provides an incentive for better human resource management. A centralised, award based system did not encourage enterprise-centred employee relations. By contrast, the shift to enterprise bargaining requires a business to focus on employee relations and to differentiate its business on the basis of the management of its employees. As I said previously, the best businesses realise that the sustained competitive advantage they enjoy is through their human capital—their employees. In a globalised economy, the best way to compete is to have higher productivity and better systems of work organisation. There is no future for a developed nation like Australia to compete as a low wage country.

I recognise that many members of the opposition have specific expertise in the area of labour relations. After all, it is their training ground; it is their breeding ground. But I somehow feel that, because of that breeding ground in the trade union movement, they are caught in a time warp of their own making. Most of their rhetoric—for example, Prime Minister Keating talking about the Lancashire cotton mills—is as a result of their having come up through a system where they think of industrial relations in a confrontational way. That is not the future for workplace organisation in this country; it is not the future for a developed country like Australia to try to compete as a low wage country. So the bill continues the emphasis on agreement making and emphasises the role of the award system as a safety net.

From October 1991 to 31 March 1999, 24,920 federal agreements were formalised by the Industrial Relations Commission. Over 50 per cent of these have been formalised since the introduction of the Workplace Relations Act. So there has been renewed growth in the number of collective agreements under the Workplace Relations Act. The number of employees covered by agreements has gradually increased. In June 1993, only 35 per cent of federal award employees were covered by an enterprise agreement. By February 1997, around 64 per cent of employees were covered by registered agreements.

Since the implementation of the Workplace Relations Act 1996, there has been strong growth in the number of employees covered by collective agreements, with the private sector accounting for about 85 per cent of all agreements and over 60 per cent of all employees covered by a collective agreement. Another feature of the increase in the number of agreements is the increasing proportion of agreements made in the service industries, particularly health and community services and personal services. This shows that the Workplace Relations Act has been successful in expanding collective agreement making in industries where they have not been widespread.

Section 170LK of the Workplace Relations Act allows for collective agreements to be made directly with employees. The number of agreements has accelerated each quarter since the introduction of the act. Section 170LK agreements account for more than 1,000, or 8.8 per cent, of all agreements made under the Workplace Relations Act. These agreements are more common in the private sector and in lightly unionised sectors such as the services sector. There is no longer a requirement that unions be notified of negotiations occurring under this process unless employees request this.

The Department of Employment, Workplace Relations and Small Business has examined the impact of the act on designated groups, such as women, part-time employees, people from non-English speaking backgrounds and young people. In 1998 the proportion of women covered by agreements was greater than the proportion of women in the work force. The proportion in other designated groups was below average and increasing, except for the non-English speaking background group, which declined. The difference between the wage outcomes of male and female employees and part-time and full-time employees narrowed. People from non-English speaking backgrounds, which was a group that it was thought might be disadvantaged by agreement making—and evidence shows they were not—received bigger increases, while young people received smaller increases.

In some industries, for example the construction and plumbing industries, pattern agreements—which are identical to each other—appear to be the norm. Similarity between agreements is not ideal as it essentially reproduces the award and provides little in the way of flexibility at a workplace level. This bill will limit pattern bargaining by allowing the Workplace Relations Commission to terminate a bargaining period if a party is involved in pattern bargaining. These results demonstrate that there has been strong growth in collective agreements, especially in the area of agreements made directly with employees. These developments show that the Workplace Relations Act provides a framework for employers and employees to choose the most appropriate form of agreement for their circumstances.

The Workplace Relations Act 1996 allowed, for the first time, agreements between individuals and their employers. These agreements can be negotiated on an individual or collective basis. One of the improvements of this bill is that it streamlines the approval process of AWAs. The uptake of AWAs has been increasing each year, with 10,000 lodged in 1997 and 40,000 lodged in 1998. There have been 60,000 AWAs approved since March 1997. The AWAs and the section 170LK agreements have been much more widely taken up than their analogous predecessor, the enterprise flexibility agreement.

The bill will improve the administration of AWAs by allowing AWAs to be implemented as soon as they are signed, which will give some protection for what is already occurring; by removing the requirement to offer the same AWA to all comparable employees, which undermines the nature of the AWAs and is further red tape which does not protect anyone; by removing the requirement for referral to the Workplace Relations Commission if unsure about whether the worker is worse off; and by allowing AWAs to prevail over certified agreements.

Despite the rhetoric of the ACTU prior to the 1996 election, and despite some high profile disputes in the last couple of years, the number of days lost in industrial disputes in 1997 and 1998 was the lowest since records began in 1913. However, in areas such as mining and stevedoring where union organisation remains strong, levels of industrial action in 1997 and 1998 remained high. Clearly, section 127, which allows the commission to hear and to quickly determine whether directions to prevent industrial action should be given, has a deterrent value. From January to October 1997 the commission received 164 applications and only 23 of these resulted in orders being issued to cease industrial action. So, while the commission issues relatively few directions under this section, its availability to employers can end disputes quickly once an application is made. This bill will further improve the operation of section 127 orders by forcing the Workplace Relations Commission to direct that unprotected action cease and to deal with an application within 48 hours.

The commission will also have the power to terminate a bargaining period if pattern bargaining is occurring. Prohibiting secondary boycotts under the Trade Practices Act 1974 has also had a powerful deterrent effect. Currently any secondary boycott which causes loss or damage or lessens competition can incur a penalty of a $10 million fine. In addition, the Australian Competition and Consumer Commission is more likely to impose penalties than the Industrial Relations Commission. Only one union was prosecuted under the secondary boycott provisions in 1997. The operation of those secondary boycott provisions prevented the MUA from encouraging a secondary boycott, but they avoided those penalties by threatening an international boycott.

The Workplace Relations Act made union preference clauses non-allowable so that being a member of a union was not a condition of employment. In practice, the `conveniently belong' principle does not provide a full freedom of choice for an employee. In addition, most cases of compulsory union membership in an enterprise are not due to preference clauses in an award but to an arrangement between the union and the employer.

Mr Martin Ferguson —Like Dr Shepherd's union. You're a bit quiet about Dr Shepherd's union.

Dr SOUTHCOTT —I will take the interjection because membership of the AMA was not compulsory. When I was a medical practitioner, I was not a member of the AMA, so I am happy to educate the member for Batman on an area of industrial relations. The Workplace Relations Act is evolutionary rather than revolutionary. The legislation is incremental in its stated goals. As Rimmer highlighted in an article in Australian Bulletin of Labour , evolutionary change is the pattern in Australian federal industrial relations and the 1996 act fits this analysis. So does this bill. The evolutionary nature of industrial relations has had its advantages. Many businesses are not ready to take advantage of the choices that are available to them.

Viewed in the context of industrial relations tradition in Australia, the Workplace Relations Act should be seen as incremental and evolutionary. These amendments continue that tradition. While labour market reform is an important micro-economic reform, it does provide an incentive for firms to differentiate on the basis of their work force. As such, enterprise bargaining requires and reinforces close attention to HR management.

In conclusion, the future for employment and for business lies in the development of human resources of business so as to gain a sustained, competitive advantage by having more labour market flexibility. This bill will encourage that. I think the opposition should welcome this and should look to the future. (Time expired)