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Industrial Relations in Australia

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AT PARRAMATTA TOWN HALL. 8.00 p.m. Friday 17 September


I am very glad of the opportunity to sepak to you tonight about a subject which, although not closely connected with Foreign Affairs, nevertheless is of special concern to me and indeed to all members of our Government. There are very few aspects of Government

that are not touched by the effects of industrial actions and this of course includes our relations with other countries.

Our society is a fabric of competing interests and aspir­ ations. For the most part what is required of Government is the provision of an equitable framework of laws and an economic climate in which those interests can be pursued. But there are some areas in which Government must become more directly involved because of the

consequences that might flow if competing interests were allowed to run their course unchecked. One such area is industrial relations.

Tonight I want to talk chiefly about the arbitration system and its relation to present economic conditions.

The central feature of industrial relations in Australia is the system of conciliation and arbitration, in particular .the federal system set up by the Conciliation and Arbitration Act 1904- 1970. . ,

This Act is an exercise of the power conferred by Section 51 (XXXV) of the Constitution to make laws with respect to: :Conciliation and Arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State.

This power was conferred on the Federal Parliament as something of an afterthought when it was realised that industrial disputes involving shearers and seamen were likely to spread across State boundaries and so be beyond the powers of any one State. The

intention had been that industrial relations would, in the division of powers between the Commonwealth and the States, be left to the States as part of law and order.

So they were originally. The first Commonwealth Arbitration Court consisted of one of the High Court Justices sitting part-time in the Arbitration jurisdiction. But the Arbitration Court gained favour with the trade unions who combined to form

federated unions and created multi-State disputes by the service of logs of demands on employers in more than one State.

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The Federal arbitration system began at a time when wages and labour conditions were depressed following the failure of big strikes in the I89O's. The Arbitration Court showed itself prepared to raise wages and improve conditions, so interstate disputes were, as I said, created in order to get awards from the Court which, as Federal awards, overrode State laws and awards.

The effect of this of course was that more and more workers came under Federal awards which is reflected in the growth of the work of the Commonwealth Arbitration system and the relative decline in the States tribunals.

The end of the Second World War marked a distinct turning point in industrial relations. After the War, during which the economy was controlled, wages were pegged and the ordinary arbitration function was in abeyance, the Federal arbitration tribunals resumed their functions

in an economic climate markedly different from that which had previously prevailed. Full employment policies, shortages of labour,^.migration, general prosperity and affluence combined to produce a situation in which, as between employers and employees the balance of bargaining

strength lay with the employee side. Instead of poverty and unemploy­ ment, inflation was to become the overriding social and economic problem.

' It might well be asked why, if the arbitration tribunals were only to fix minimum wages and conditions at a time when the bargaining strength of organised labour was such that it could do as well by direct action as it could do by arbitration, should, the

system have survived for so long in sustained conditions of 1 labour power'. .

But abolition of the arbitration system has not seriously been suggested, except by the extreme left wing of the Trade Union movement. Employers, employees and the Government all firmly support the principle of arbitration. In the conditions of full employment which we have enjoyed since the Second World War it may well have meant

to employers a more moderate rate of wage increases than otherwise. At the same time employees regard the arbitration system as

are advantages to trade unions in that the smaller and weaker unions are saved the expense of direct action. The larger and more militant employee organisations regard awards as no obstacle to obtaining over award payments by means of direct action.

So in the last 25 years the arbitration system has neither been converted into an anti-inflation authority nor has it been abandoned as irrelevant in time of prosperity. What has happened is that a middle course has been adopted. This has been the introduction

into the awards of 'bans clauses' with penalties for breach of those clauses.

A bans clause takes the form of prohibiting the union whose members are covered by an award from being concerned, directly

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or indirectly, in any ban or limitation on the performance of work covered by the award. The validity of these clauses has been consistently upheld by the High Court as provision designed to make the award

effective by binding the union not to hamper its observance.

The effect of a bans clause is to forbid the union from organising or being concerned in direct action to try to get more than the award has given but to leave the workers themselves free as individuals or as a group to negotiate agreements for payments over the award rate and the employers free to pay over the award rate to attract and retain, the best men.

Until recently the bans clause was enforced by orders of the Commonwealth Industrial Court to cease breaches of the clause, followed, if the order was not complied with, by fine for contempt of court - the so-called 1 penal clauses'. Nowadays the Act deals with industrial

stoppages as a breach of an award, but before there is any move to prosecute it is necessary for the parties to have taken advantage of the conciliation processes and, if necessary, the arbitration _of a

presidential member of the tribunal. This change in procedure .which was adopted last year reflects the Government's attitude that sanctions cannot resolve disputes. Sanctions are applied purely as a last resort.

Implicit in the new procedures is a conscious 1 policy, of patience' by the Government. But if, after all measures to resolve a dispute have been taken, an organisation still persists in its attitude an approach is then made to a presidential member for a bans

clause certificate under Section J>2h of the Conciliation and Arbitration Act.

There can be little doubt that the unions' tactics today are to 1 soften up' the Arbitration Commission with a continuous run of extravagant wage claims and by big strikes, esnecially in essential industries, with the object of extracting the maximum benefit from that quarter. This is followed by 'back alley1 confrontations with employers from whom they extract additional concessions in the form

of over award payments by brandishing the strike weapon. And their tactics have been remarkably successful! ·


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In recent years some rather generous decisions of the Commission such as the Metal Trades Decision of 1968 and the 1970 National Wage Decision sent the inflation 1 hobby horse' into a reason­ able sort of a canter but the added spur of increasing over-award pay-

ments^were responsible for about 40% of the increase in average weekly earnings. Two years earlier they accounted for only 15% of the total.

mta£vvv) There is no doubt in my mind that under present conditions

the propostion that workers are gaining anything by this process is purely illusory. If a wages drift of this kind continues, accompanied by a lamentably low rate of increase in productivity, estimated this year to be 1%, there can be no alternative to a continuing round of


increased prices which robs the worker of anything he has gained. The distressing part about all this is that there is a very large section of the community missing out on the fatter pay packets but who are nevertheless required to pay the inflated prices. I refer particularly to the rural community and to pensioners and those on fixed incomes to whom every wage rise means simply that they are that much worse off.

I was interested to read a recent address given by the Minister for Labour and National Service, Mr. Phillip Lunch, to the Committee for Economic Development in Australia in which he made a point that has great relevance to the present economic situation. And that is that the problem of cost-push inflation (the variety

affecting Australia today) and industrial unrest would be much less acute if employers showed greater solidarity in dealing with wage" demands and if they gave employees more opportunity to air their grievances and had higher regard to increasing job satisfaction.

In a period of widespread expectation that wages.and prices will go up anyway, the easy way out for an employer is to give way to union threats and merely put up the price of his goods. The results gained by threats of industrial action cause far greater

damage to the economy than the actual economic cost of strike action. And the economic losses caused by strikes, serious in themselves, are dwarfed by the staggering losses to the economy through unrostered absences from work, or absenteeism. Figures taken out by the Department

of Labour and National Service show that last year 2.4 million man-days were lose as a result of strikes. But a study undertaken by that Department on absence rates shows that work absences dur to reasons other than industrial disputes or industrial accidents could account

for about 45 million man-days in a single year. Even allowing for sickness, absenteeism on this scale is nothing short of scandalous. Little wonder our rate of productivity increase is so low.

I mentioned a little earlier that this year the expected increase in productivity in Australia will amount only to. 1%. I . would like to make some comment on that point because it is only by lifting productivity that we, as a people, can manage wage increases

of the present order and be able to continue the prosperity we have enjoyed for so long.

Four factors are of prime importance to productivity - labour turnover^industrial accidents, absenteeism and strikes, and all four are increasing year by year. Ib 1970 voluntary job separations expressed as an annual rate may have been as high as 67% for males and 84% for females. I have already stated figures

for strikes and absenteeism and that of course does not include 3=5 million man days lost through industrial accidents.

One must expect in conditions of full employment that these figures will rise but nobody will convince me that management - whether

Government or private - cannot improve its performance particularly in relation to labour turnover, industrial accidents and absenteeism.

By the very nature of its position in disputes it is very seldom that the Arbitration Commission can satisfy both parties. Over the years we have taken for granted the continual public bleating of union officials who, privately, are usually quite satisfied with

their gains. In recent years the rumblings have become even louder from the Government side.

That the Commission is increasingly being cast in the role of economic and social legislator is a source of concern to the Government because by its decisions it can upset the fine balance sought by our economic advisers. The importance of the need to weigh very

carefully the likely economic impact of the Commission's decision is certainly not lost on the President of the Arbitration Commission, Sir Richard Kirby. In a paper published by the Federal Law Review in February, 1970, entitled "Conciliation and Arbitration in Australia -

Where the Emphasis?" Sir Richard when referring to the question of economic policies relied on the words of the then Chief Justice of the High Court Sir Owen Dixon who in 1953 used words "of such clarity and wisdom that they would have put the Commission's role beyond question

I would have thought".

Sir Owen's quoted words are:

"While an arbitral tribunal deriving its authority under an exercise of thelegislative power given by S. 51 (xxv) must confine itself to conciliation

and arbitration for the settlement of industrial disputes including what is incidental thereto and cannot have in its hands the general control or direction of industrial social or economic policies, it would be absurd to suppose that it was to proceed blindly in its work of industrial arbitration and

ignore the industrial social and economic consequences of what it was invited to do or of what, subject to the power of variation, it had actually done." ,

Sir Richard went on to say that the problem for the Commission centred around the relative emphasis to be given to each aspect of a particular decision - whether more attention should be paid to industrial relationships, or to the social consequences

of the decision or to their effect on the national economy. He had this to say at the conclusion of that particular part of his paper:

"Clearly having in mind both the preceding passage of Dixon C.J. and the powers given to the Commonwealth Conciliation and Arbitration Commission in both the Act and the Constitution, it is dependent upon the particular environment in which a decision

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is made as to which of the three factors will be given most emphasis. This environment is constantly changing."

I mention the remarks of these learned gentlemen because I believe they are pertinent to the criticism, that is sometimes given to judgements of the Commission.

Whatever one's opinion may be about the merits of a judgement it could never be said that there is any partiality or lack of care in the consideration of submissions. Nevertheless I cannot help but feel that the deliberate softening up process of industrial unrest and claim upon claim to the Commission can scarcely fail to have some effect on that body. Certainly the evidence seems to suggest that economic considerations do not seem to have had the weight they should have had in the two notable decisions that I mentioned earlier, the Metal Trades' Decision and last year's National Wage Decision.

But on any view I think it fair to say that the- damage to the economy has not been caused so much by decisions of the Commission as by the additional loading superimposed by over award payments obtained by collective bargaining outside the Commission's authority.

Whenever one hears it suggested that we should abandon our arbitration system it is generally claimed that collective bar­ gaining presents a new or revolutionary approach to industrial relations. This, of course, is not so, since currently there are a number of agreements between unions and employers, on over-award payments and other conditions of employment. In fact negotiations leading to agreements pre-date our conciliation and arbitration system. It was the failure of the parties to reach agreements amicably that led to the establishment of statutory tribunals in this country in the

early 1900's=

Any such suggestion should be treated with the greatest caution. Imperfect though arbitration may be it still has many distinct advantages over collective bargaining. Not the least of these considerations is the community interest which it is the · Government's responsibility to represent and safeguard.

There is also the problem that voluntary agreements tend to cause wide disparities in wages rates for the same or similar between industries. This is common to countries practising collective bargaining but it would be an extremely

doubtful proposition for the Australian people. It cuts across our strong egalitarian traditions which are expressed in the concept of comparative wage justice in the industrial area. There can be no equity in a scheme whereby a worker's pay is largely determined by his fortune in choosing the right employer or by the amount of pressure his union is able to exert on his employer. A much fairer system is one in which people share in the prosperity

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of their country according to the skills they possess, and this, basically, is what happens with arbitration.

If one were to compare the record of man-hours lost in Australia through strike action with that of other countries which practice collective bargaining the balance would be overwhilmingly in favour of arbitration. It would be a sad day if we ever had

strikes of the bitterness and duration - often six months or more at a time - that the U.S. and Britain, two countries who have collective bargaining, have. ,