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Productivity must be 'front and centre' in Australia's workplaces: speech to the Australian Industry Group, Canberra



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Senator Eric Abetz 

Liberal Senator for Tasmania 

Leader of the Opposition in the Senate 

Shadow Minister for Employment and Workplace Relations 

Productivity Must Be ‘Front and Centre’ In Australia's Workplaces

Tuesday, 03 May 2011 11:05

SPEECH TO THE AUSTRALIAN INDUSTRY GROUP

HYATT HOTEL, CANBERRA

Australians know something is very wrong with the productivity of their nation when a

command economy offers to show us how to do business here in Australia…

…and, that was the humiliation to which our nation was subjected when our Prime Minister -

the architect of the new workplace regime was in China recently. There we had China ‘offering’

to build our infrastructure.

Perhaps the most humiliating aspect was that the PM seemed oblivious to the criticism inherent

in China telling us how to build projects on time and on budget.

At the same time former ACTU President Martin Ferguson is contemplating Enterprise

Migration Agreements which will reportedly be able to accommodate this type of kind offer.

Surely we need no further proof that things are unravelling in the workplace relations space, to

the detriment of our nation’s future.

And just in case you’re worried, there’s no need to be. Labor will tell you - everything is just

fine. The Minister confirms this in every speech.

Well, I think it is time that genuine stakeholders start making out the case - loud and clear -

where change is needed, and why change is needed.

From the low paid workers who are getting even less to the resources companies that are

being blackmailed into unconscionable wage increases.

The unions before the last election refused to acknowledge the plight of the low paid and, with

respect, business organisations refused to acknowledge the plight of their members.

Individual workers and businesses were hurting but their representative organisations were

eerily silent - so silent that there was no real contest of ideas in workplace relations at the last

election - I suspect an inauspicious first in Australian politics…

And just when you think surely things can’t be made any worse, you remember that we have a

Green-Labor Government where the Greens want to adopt that which Ms Gillard had initially

proposed in Forward with Fairness Mark I and which Kevin Rudd put his pen through.…And if

you can’t remember, Adam Bandt, the Greens spokesman, kindly reminded you when yesterday

he spoke about ‘freedom of bargaining’ being ‘paramount’.

Don’t be fooled into believing the Greens want greater flexibility for workers - let alone

individual workers.

No, ‘freedom of bargining’ is the Orwellian-speak for allowing Unions to strike about anything -

even those matters which are clearly outside the control of the employer. And in case that is too

moderate a position, the Greens would abolish the ABCC as well, re-introduce death duties,

increase the proposed resources tax and introduce a carbon tax - all for the benefit of a healthier

economy no doubt.

More seriously, if one is actually concerned about the future of our nation, and the long term

interests of individual workers, then productivity must genuinely be front and centre in any

workplace relations system.

It was what we were promised.

It is one thing to chant the productivity mantra. It is quite another to deliver it.

As we saw in the case of the MUA’s negotiation with Total Marine Services in Western

Australia. Labor is prepared to not only accept 30 per cent wage increases without any

productivity gains or concern for the flow-on effects, but actively welcomes such outcome as

Senator Arbib did in the Senate.

And the flow-on effects are plain to see. Only last weekend the MUA brought Australian ports

to a halt in pursuit of a $46,000 wage increase to workers already earning over $100,000 for 185

days work per year, where no productivity improvements have been offered in return.

LABOR TALKS ABOUT PROUDCTIVITY BUT HAS FAILED

As with many things this government does, it sets out with wonderful words but spectacularly

fails in matching the spin with substance.

When then Minister Julia Gillard introduced the Fair Work Act into the Parliament, back in

2008, she told us it would create:

"a system that has at its heart bargaining in good faith at the enterprise level, as this is

essential to maximise workplace cooperation, improve productivity and create rising national

prosperity"[1].

Indeed, in 2007 Ms Gillard told us that:

"The best thing about Labor's industrial relations plan is that it will be good for

productivity"[2].

Indeed, one of the objectives of the Act is- “achieving productivity and fairness”[3], something

that no-one could argue with and something that had, and still has, the full support of the

Coalition.

The problem is that the spin obviously is not matching the reality. Instead of moving us

forward (don’t you just hate that phrase) towards a more productive nation, the Fair Work Act is

permitting the exact opposite[4].

It is worthy of note that Labor promised us as well that 'no worker would be worse off'[5]

under Fair Work. Now even the Unions are telling us that many are worse off.[6]

Literally thousands of Australian workers are worse off under Labor’s (Julia Gillard’s) so-called

“modern awards”. Under Labor’s new laws childcare workers, aged care nurses, bar staff and

funeral workers have lost entitlements and had their pay cut.

This is despite Labor’s ironclad promise that ‘no worker would be worse off’[7] under Labor’s

Fair Work Laws. Belatedly - post election, even the unions now admit that workers have had

wages and conditions reduced and that Labor’s modern awards scheme is deeply flawed.

Indeed, ACTU President Ged Kearney conceded that there had been a “failure” in Labor’s

modern awards.[8]

When the Fair Work laws passed through Parliament, the Coalition knew this would be a

problem and tried to fix it by putting Labor’s guarantee into law…

…And yes, Labor voted against the Coalition and by doing so threw thousands of low paid

workers to the mercy of a complex, confusing system that has now been proven to actually take

conditions and pay away from them.

But back to productivity.

SOME UNIONS ARE MAKING THINGS WORSE

After massive pay rises of up to $50,000 per year for offshore oil and gas workers in Western

Australia[9], trade union officials quite openly boasted about the lack of any productivity offsets

in the agreement. This MUA boast sends a very dangerous message.

The Coalition is concerned that we will see huge levels of wages growth across Australia if

action is not taken to ensure sustainable pay increases.

Even Workplace Relations Minister Chris Evans and Minister Martin Ferguson have confirmed

that wages growth in the offshore resources sector is out of control. Pity they refused to

acknowledge it in the Total Marine Services case.

Analysis by the Australian Mines and Metals Association found the most recent wage

agreements gained by the AMWU for offshore construction workers contain maximum annual

pay packages of $423,000 for a laundry hand; $445,000 for a cook; $450,000 for a

tradesperson; and $498,000 for a barge welder. Why bother being PM, or the Chief Justice?

Minister Ferguson said last month that the wage increases were “unsustainable” and that

“industry knows it, the Commonwealth Government knows it and some sections of the union

movement know it,” warning the Unions; “don’t kill the golden goose”[10].

But on the other hand, these wage increases come as a direct result of Labor’s Fair Work Act

which allow unions to hold employers over a barrel.

We have also seen, with great concern Leighton’s profit downgrade which provides more

evidence of declining productivity in the construction sector. Leighton’s is now forecasting a loss

of $282m on the Wonthaggi desalination plant in Victoria.

The reverse osmosis plant, which is the largest component and in which Leighton subsidiary,

Theiss has a 65% share worth $1.9b, is only 40% complete. According to Thiess, one of the key

reasons for the profit downgrade is that “Labour productivity on the project is significantly less

than budgeted”[11].

Significantly, Thiess has identified “failure to achieve improved productivity”[12] as a major risk

to costs and to the project’s timeline.

The CFMEU substantially controls the site, it restricts and controls the use of contractors, and it

insists on large periods of time when work is prohibited.

It has also insisted on huge new redundancy provisions and pay rates increased by around a

third compared to current rates in the construction sector.

On this worksite, we have a typical tradesman earning about $150,000 a year for a four-day

week under a deal that has also seen the resolution of a bitter union turf war threatening to

delay the project.[13]

This construction site is a prime example of the Fair Work Act having a negative impact.

Employees have higher pay packets and are far less productive than their fellow workers on

other construction projects within the very same company.

This is a direct result of the CFMEU taking control and it’s causing major productivity issues

and on this project which will ensure big cost overruns and time blow-outs.

There is now speculation that the Wonthaggi deal has set a benchmark for the construction

sector, which has fed in to the increased construction costs being demanded for the National

Broadband Network. Such unsustainable wages growth will increase inflation, increase the cost

of living and increase pressure on interest rates. That destructive trifecta always results in job

losses.

The Reserve Bank itself is concerned about a wages break-out[14] which could have a very

damaging impact on inflation and cost of living.

Don't get me wrong. Wage increases are good but they must be real-wage rises based on

productivity. The Government needs to be concerned, not just about the goose that laid the

golden egg, but the risk of the entire flock being slaughtered.

In the last few days we have seen our waterfronts again brought to a halt by the MUA, the

nation-wide strike affecting 15 ships and stopping 17,797 containers from being unloaded[15].

The MUA organised strike, in support of a $46,000 wage increase to workers already earning

over $100,000 for 185 days work per year[16], has been given the green light by Labor’s laws.

But there’s nothing in the MUA’s demands which will increase productivity or efficiency - just a

demand for more benefits whilst prejudicing the jobs of thousands of their fellow workers whose

jobs depend on their products being exported…

..And all this from a union that has proudly boasted in the past about gaining massive wage

rises with ‘no productivity trade-offs’[17].

Labor’s laws not only encourage this type of demand, but reward it by giving ‘two thumbs up’

to strike action.

Moreover this sort of waterfront strike sends the worst possible signal to our trading partners.

In another case, at Qantas, the use by unions of the ongoing threat of industrial action has

been sending similar signals.

LABOR IS TO BLAME

The simple fact is Labor has strengthened the unions’ hand by expanding right of entry. They

have allowed the Australian Building and Construction Commission to be weakened and are now

allowing wages growth to spiral out of control.

The Australian Human Resources Institute recently conducted their annual survey of Human

Resources professionals which found that 29% of respondents reported an increase of union

visits to the worksites and 23% reported an increase in industrial disputes. Importantly, 58% of

the Human Resources professionals questioned say that the Fair Work Act will cause a negative

impact on productivity growth.

Respondents are saying that they are "bogged down in disputes with adversarial unions",

facing increased compliance costs and "increased costs doing business with no increase in

productivity".

This is all as a result of Labor's Fair Work Act.

Workplace productivity has never been a more crucial issue for our economy and nations

future. To have a set of workplace laws that ignore it, fails the national interest test. A system

that encourages strike action but does not encourage discussion about workplace productivity

shows that common sense and the national interest have been abandoned.

CHINA IS READY TO TAKE ADVANTAGE

Last week Chinese companies and officials approached the Prime Minister looking to build

turnkey infrastructure projects in Australia, frustrated that our infrastructure projects are taking

too long and costing too much.

Incredibly, only weeks after NBN Co abandoned its construction tender it seems the Chinese

are looking with particular interest at building the National Broadband Network[18].

Speaking alongside Ms Gillard recently, Vice Premier Li Keqiang said that Chinese companies

could play an important role in the construction of Australian infrastructure.[19].

China now recognises certain Australian construction projects as failing the productivity

challenge and are looking to capitalise.

And by my reading of her remarks, the Prime Minister, Julia Gillard, is definitely leaving the

door open for this to occur.

This just goes to show that the unions’ unrealistic pay demands overseen by Labor are now

placing the jobs of Australian construction workers at risk.

THE WAY FORWARD

There are some very important steps that must be taken to ensure productivity is more than

just a buzz word but is also delivered on.

The Australian Building and Construction Commission must be kept and it must have its powers

maintained to ensure that there is a tough cop on the beat in the building and construction

industry.

The Coalition understands the cost of living pressures being faced by families around Australia.

We know that rents are up 20.5%, food prices are up 13.5% and electricity skyrocketing at

50.8% since Labor came to office in 2007[20]. Employees can be forgiven for seeking wage

increases to meet cost of living pressures which are out of control on Labor's watch.

However, unions and employees must realise that they cannot ask for excessive pay increases,

in some cases of up to $50,000, with no productivity offset.

Former Labor Treasurer, Frank Crean recognised that ‘one man’s wage increase is another

man’s job.’ This dictum certainly applies when unions are demanding $50,000 per annum pay

rises.

Only today I read that economists are warning that interest rate rises remain likely over the

next six months and that the government will need to look to immigration to fill immediate skills

shortages and that more broadly in the economy, business is concerned about emerging wage

pressures and related inflationary consequences.

We recognise the significant skills shortages in the workforce, but at the same time it is

important to recognise that Labor has dropped the ball on the progress that the previous

Coalition Government made on unemployment programmes like Welfare to Work.

CONCLUSION

It is in this practical real world context that the Coalition is preparing its policy for the next

election.

In that process, it is important that employers and employees tell us about their concerns and

how to achieve the best possible workplace relations system.

We now have a series of industry groups - ACCI, AMMA and the AI Group that have identified

issues with the Fair Work Act. That is now three major employer organisations that can see

major issues.

When we first raised problems with BER, pink batts, green loans, Cash for Clunkers, Ms Gillard

and the entire Ministry dismissed the problems and said that we were just engaged in cheap

politics rather than representing the actual concerns of the communities. Well, despite Labor’s

ongoing and monotonous reassurances that Fair Work is all rosey, I can guarantee that we have

the same thing unfolding here.

I recall that Shadow Minister Keenan made a number of comments in Parliament about

workers being worse off under the Fair Work Act yet Ms Gillard said that these problems were

‘alleged’, and that the Coalition was talking about perceived problems rather than real problems.

The reality is very different, now even the Unions are telling us that people are indeed worse off.

I congratulate the AIG for its recent statement on the Fair Work Act. I believe that, in

retrospect, this will be judged to be a significant intervention in the workplace relations debate.

I also congratulate the Vice-Premier of China for his observations which in retrospect will also

be judged as a significant - albeit, I suspect - unintended intervention.

The issues are fast emerging and the Coalition stands ready to address them.

[1] House of Representatives Hansard, 25 November 2008

[2] Gillard caught in Workplace Trap, The Australian, 2 April 2011

[3] Fair Work Act 2009

[4] Quarterly change in market sector labour productivity (5 year rolling average), prepared by

the AI Group

[5] Julia Gillard interview with Kieran Gilbert, Sky News Agenda, 4:15pm 19 March 2008

[6] Battlers jilted by Labor IR reforms, The Daily Telegraph, 3 March 2011

[7] See 5

[8] See 6

[9] Total Marine Services Case

[10] ABC Radio, 11 April 2011

[11] Investor Presentation in relation to a downgrade in the Company’s profit forecast for

2010/11, 11 April 2011

[12] See 11

[13] The Age, 24 December 2009

[14] Gillard’s Jobs Challenge, Daily Telegraph, 1 May 2011

[15] The Age, 29 April 2011

[16] See 14

[17] See 14

[18] Business Spectator, 27 April 2011

[19] Wall Street Journal, 28 April 2011

[20] Consumer Price Index