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Doing something about what everybody's talking about

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Addressed the

Employers' Federation of New South Wales

Annual Luncheon

in Sydney today

A copy of his speech is attached.

1 December 1989



Address By


Deputy Leader of the Opposition Shadow Minister for Industrial Relations

to the

Employers' Federation of New South Wales


1 December 1989

Most Australians now understand that Australia has got real economic difficulties.

It's understandable I suppose because over the last seven years their real incomes have declined.

They understand it because they read in the newspapers on a daily basis about enormous growth in foreign debt over that same period.

They know it because, of course, high interest rates (which are a symptom of our problems) press very heavily on many of them.

Perhaps a smaller number understand that lying underneath all of those difficulties is a lamentable productivity record which almost certainly guarantees that Australia's difficulties will continue. The latest round of National Accounts tell more of the gloomy story.

In the last two measured quarters, the productivity of labour has gone down, in one by 1.5%, in another by 1.7%. That's an almost certain guarantee that the sort of difficulties we face now will be compounded.

Now I suppose all of us are conscious of the barrage of reports that have been directing views and opinions at us and which touch on these fundamental problems.

We've had reports from Macquarie Bank, Citibank, Professor Garnaut. The BCA is calling for a debt summit, as well as reporting on some of Australia's problems. The IAC has brought out some extraordinarily important reports over the past month. Whilst the observations of those reports confirm our

difficulties, there is also something very cheering about them because, in a very consistent way, they tell us what we need to d o .

Invariably, they talk about the need to make Australia a more productive country, and invariably they focus on the need for what's termed, micro-economic reform, for doing something about the notorious areas of inefficiency, about our transport and

communications systems in particular.

But one area stands out. The area which is identified by the Business Council, by the Industries Assistance Commission, by the OECD, by any serious commentator, is the way we work here in Australia. I suppose the cheering thing is that there is such a

consistency in what is being put forward and recommended for change.

Labour market reform features large, and greater flexibility is something that has been advocated consistently now over years.

It is gradually becoming more and more specific. We get talk of a closer enterprise focus to our industrial relations, we get talk of the need for a trade union structure which will complement, or indeed permit, an enterprise-based approach to


industrial relations. It is remarkable how widely those points are being acknowledged.

The important thing is that it is not just the OECD, it is not just the Macquarie Bank, it is not just the IAC, it is not just the BCA.

We find these words appearing in the mouth of Mr Keating, Mr Kelty, the Prime Minister and indeed of anyone who is seriously trying to address these subjects.

Now, that's the good news, because a broad common analysis of our problems is, of course, the start of a solution.

The bad news is the extent to which the politics of all this, the vested interest of politicians in being re-elected and of trade unions in maintaining their vested interests, so clouds the debate.

Only this week, I sat and listened to the Prime Minister of this country, a country in trouble with declining living standards, with real hardship being imposed on the people, and I heard him, on the one hand acknowledging a core part of our Industrial

Relations policy, the need for a single enterprise bargaining unit structure to be encouraged, and at the same time playing the cheapest politics.

I mention it because that behaviour will be repeated over and over again between now and the election. You will hear a succession of Labor politicians and their colleagues in the Accord, on the trade union movement side of the Accord,

desperately trying to tell Australia that the industrial relations approach that we're advocating is one which is confrontationist, which will cause a wages explosion and so on.

There will be little regard for the substance and a great deal of regard for the politics of what is being said.

Now I hope at lunch today, to try to talk to you about the substance of these things, about the great degree of common ground which has emerged and about the relevance of what we are going to do and indeed the practicality of what we are going to d o .

The fact is that if we don't do it, if we don't make the changes, at a faster pace than are being made now, there is one thing that is quite sure.

We will continue the process of national decline. We will spiral down into the third world status that comes with a combination of declining incomes and increasing debt.

In fact these are encouraging times in industrial relations, especially for those who have been advocating a greater enterprise focus for some time.


In recent years there have been a lot of very positive developments:

- the abandonment of formal indexation in 1987, and the introduction of the second tier which sought to relate wage rises to productivity improvements at the enterprise level;

- the process of award restructuring which is at least partly designed to bring about more flexible and up to date awards;

- a growing consensus that we need to reform union and award structures away from their craft and occupational orientation towards an industry and enterprise base;

- growing recognition on the part of the business community, some union leaders and elements within the Labor party that the future lies with enterprise bargaining.

These developments have been force fed by the reality of falling real wages, mounting overseas debt, high inflation and interest rates, and a realisation that if we do not change the way we work we will simply be facing more of the same.

It is becoming increasingly obvious that the highly centralised approach of the Accord has failed.

While there has been a degree of wage restraint, our wage and price inflation has been about double that of our trading partners and enterprise and workplace flexibility has been restricted.

Probably the most important point is that under the Accord Australia's productivity performance has been abysmal.

The challenge is to harness the growing sense that we need to reform our labour market institutions into positive action.

The trouble is that at the moment there is a lot of talk about the need for change, a lot of positive rhetoric, but far too little action.

And even where there has been some change, we are still being outstripped by our trading partners.

In the highly competitive world we face it is simply not good enough to do better than last year. The only test is whether we are catching up to and, better still, beating the rest of the world.

That is the test that successful economies such as Japan and West Germany impose on themselves.

We have to learn the lesson of such countries: that accepting the challenge of change and continual improvement must be a way of life.


At the moment we are falling inexorably behind the rest of the world. Professor Helen Hughes estimates that whereas at the beginning of this century Australia enjoyed the highest living standards in the world, we are now rated fifteenth.

And we are still falling. In six years time, families in Hong Kong and Singapore will have higher average incomes than in Australia.

As I have said, what is particularly frightening is that living standards are falling behind at the same time as we are building up unsustainable debt levels. Gross foreign debt at more than $130 billion is now equal to 40 per cent of GDP, compared to ten per cent just ten years ago.

In terms of external debt to commercial banks we have the dubious distinction of third place behind Mexico and Brazil, and ahead of the Soviet Union and Argentina.

Unless we radically alter the way we do things in this country and lift our productivity performance we are simply going to go on falling further behind.

The key, of course, to lifting our productivity is in the way we work.

Attention here in New South Wales has been focussed on the State Government's Industrial Arbitration (Enterprise Bargaining) Amendment Bill, which is designed to provide for the registration and enforcement of enterprise agreements and the establishment of

enterprise bargaining units.

While I am not primarily here to debate the details of the NSW Government's legislative package, I can assure you that not only does the Federal Coalition support the general thrust of the legislation but that the move towards an enterprise focus is

inevitable if this country is to have any hope of competing economically with the rest of the world.

We have had this view expressed in our policy since 1986. I was pleased when a few months ago the Business Council of Australia produced its major study which comes to the same conclusion and indeed advocates the same mechanisms for change.

It is important to note the report's findings and recommendations are not ideologically based. Rather they are based on a practical examination of what works at the enterprise level.

Like most attempts to introduce major change to industrial legislation the NSW Government's Bill has brought with it a fair degree of controversy.

But if we can put aside some of the rhetoric and look at the detail of what we propose, it is clear the Opposition's policy is very much in line with the emerging consensus on industrial relations reform.


I am confident that once the Federal election is over there should be scope for a far more positive dialogue.

The Coalition, for its part, will be seeking to work with the union movement in overcoming this country's economic problems.

The three key elements of the Opposition's policy are:

. enterprise bargaining; . reform of union structure; and . effective compliance provisions.

So far as I can tell, none of the major participants in the debate have criticised the proposition that we need an industrial relations system that pays greater regard to the needs of individual enterprises and which encourages enterprises dealing directly with their employees.

On the employer side, the Business Council of Australia has stated that if Australian businesses are to compete successfully in world markets, an enterprise based approach, where most matters relating to the terms and conditions of work are settled

directly by employers and employees in enterprises, must progressively become an alternative to the current centrally driven system.

In New South Wales I note that the Employers' Federation has explicitly acknowledged employers' desire to have a more enterprise based industrial relations system.

The Chamber of Manufactures has stated that:

"There is clearly a need for industrial relations to be more responsive to the needs of the enterprise".

Nor has the Labor Council attacked the concept of enterprise bargaining per se.

Even senior Federal Labor politicians are beginning to come around to the need for enterprise bargaining.

Senator Button recently said that Australia should adopt a wage fixing system that includes a minimum wage topped up with increases negotiated at the workplace.

The Treasurer has also acknowledged the need for greater flexibility in wages and working conditions across industries and enterprises.

The second major plank in the Opposition's industrial relations policy is the need to reform union structure so that employers only have to deal with a single bargaining unit at the enterprise level rather than the multiplicity of unions they generally have to contend with at present.

This objective has the strong support of the Business Council of Australia and the Confederation of Australian Industry.


Once again recent comments by Kelty and Keating indicate they also see the need to get away from our craft based union structure to a situation where there would normally only be one

union represented in each workplace or enterprise.

In practice however the Federal Government lacks any coherent strategy for reforming union structure away from its current predominantly craft basis.

One of the aims of the Federal Industrial Relations Act is to bring about fewer and larger unions. As I have pointed out again and again there is nothing in the Act to ensure that union amalgamations will lead to industry unions or significantly reduce the number of unions within individual enterprises.

As is becoming increasingly recognised, most of the amalgamations currently being canvassed are aimed at creating larger and more powerful unions, rather than a more efficient industry or enterprise structure.

The recent report by the Business Council's Industrial Relations Study Commission found that the principle cause of multiple unions in typical Australian workplaces is the predominance and pervasive coverage of larger craft and occupational unions.

It found that the union amalgamation proposals that appear to be in the offing suggest that these larger craft and occupational unions are likely to remain predominant into the the foreseeable future. It concluded that the amalgamation process will do

little to reduce the number of unions within enterprises or increase the workplace focus of unions.

What the BCA report recommended was that there should be a workplace based mechanism for rationalising union coverage within individual firms.

This of course has been Opposition policy since June 1988. The aim of such a mechanism would be to provide a bottoms up way of moving towards single enterprise bargaining units. The process

would be subject to supervision by the Industrial Relations Commission which would ensure that any changes to union structure would contribute to better industrial relations at the enterprise level and would meet the needs of the particular enterprise.

The third key element of the Opposition's industrial relations policy is the need for effective compliance provisions.

The pilots' dispute has starkly revealed that while there may be no legal protection under common law for strike action, there are still no effective sanctions within the conciliation and arbitration system to ensure compliance with the decisions of the Commission.

What this means in practice is that arbitration decisions are effectively binding on employers but only optional for unions.

The Opposition is committed to enacting legislation along the lines of a Bill I introduced into the Senate in 1987 which would


ensure there are effective sanctions for those who fail to comply with the decisions and orders of the Industrial Relations Commission.

This would enable the Commission to issue directions to stop or prevent industrial action. Such directions would be enforceable by injunctions issued in the Federal Court. Failure to comply with injunctions would constitute contempt of court.

This directions and injunctions process would have undoubtedly been of value in dealing with industrial action by the Pilots' Federation.

The CAI has given its strong support to our compliance proposals which it has said would provide "an effective and workable method for the Commission to secure compliance with its decisions."

We have received similar support from other employer groups such as the MTIA.

I also suspect that the more intelligent union leaders would also see the sense in such remedies against those renegade elements of their own movement who fail to comply with arbitration decisions.

Michael Easson, for example, is on the record as acknowledging that the NSW Essential Services Act drew attention to the need to obey orders of the Industrial Commission.

I believe that despite all the heated debate that is going on, especially in this State, the way ahead for industrial relations in this country is becoming increasingly clear and increasingly accepted by the major players.

We must change the system so that "enterprises can deal directly with their workforce" to use the Treasurer's words.

We must have a system which encourages a common commitment by employer and employee to the success of the enterprise.

The old adversarial mindset that is enshrined in the existing system has to be replaced by a sense of common purpose.

Such a sense of common purpose will not be achieved unless we reform our highly centralised system.

I am aware that there is nervousness on the part of some employers about the means of achieving this change.

For example some employers are concerned about their capacity to deal with their employees without some form of external control.

I think these fears are misplaced.

The approach we are advocating is not a free for all.

Rather i t H s based on both greater flexibility and accountability.


The centralised system will remain for those enterprises who wish to remain within it.

The Commission will continue to play a central role in ensuring an appropriate wages outcome for those firms that opt to remain under its awards.

It will be a continued requirement that wage increases generally be negotiated in exchange for improved performance.

At the same time we will open up a second stream for those employers and employees who feel they can profitably deal directly with each other without outside interference.

Many of these enterprises will be those who are keen to compete at a world class level.

Such enterprise agreements will have to contain no strike requirements and will encourage flexibility and productivity growth.

It cannot be stressed too often that such agreements will only be valid if they are truly voluntary ie. they must be freely assented to by both employer and employees.

Those who believe they may be forced out of the system and into coerced deals will have protection at a number of levels.

The first level comes from the Commission itself. An employer who faces industrial blackmail can stay in the system and seek the enhanced protection our policy provides.

Second, the insulation of voluntary agreements from award negotiations means there will be real economic pressure to avoid sweetheart or coerced deals. No flow on to competitors is an

important safeguard. As is the promotion of pro-competitive policies in every part of the economy. Our policies on contracting out by government, privatisation, shipping and waterfront reform and continuing reductions in protection are

part of that essential pro-competitive stance.

Third, the institutions themselves, tribunals, unions and employers alike have all learnt from past mistakes. No arbitral authority will want to repeat the mistakes of 1974 and 1981.

There has been a dramatic shift in the debate since the Liberal and National Parties first advocated the need for a more flexible industrial relations system in 1986.

Propositions that were extremely contentious then are quite commonplace now.

I like to think that part of the reason for the shift in the debate has been the intellectually convincing nature of the argument.

I suspect however that it has more to do with more fundamental economic forces.


In boardroom after boardroom around Australia I have heard the same story: that pressure from international competition has forced the company to change its attitudes to industrial relations.

Increasingly firms that what one might describe as the leading edge of change are finding that the constraints of the centralised system are obstacles in the way of better and more productive employee relations.

What these firms want is the opportunity to do something different, to take their relations with their employees into their own hands and reduce the reliance on third parties.

Many firms do not yet want to go down this path. No one is suggesting that they should have to if they do not want to.

But we must not allow nervousness to paralyse us.

We must make sure that the growing consensus on the need for change is translated into action.

There is a danger that simply saying the right things will be seen as sufficient.

Change is always a challenge. But unless we change, and change quite fast, we are condemning ourselves to a continual path of decline.

Business should not delude itself that an enhanced profit share built on a basis of continuing declines of real wages is sustainable. Nor should it be.

Our objective is real wage increases based on improved productivity.

The Australian workforce wants that. It is ready to work with employers to achieve it.