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Economic and security challenges facing Papua New Guinea and the island states of the south-west Pacific

CHAIR —Welcome. A copy of today’s opening statement has been provided to you. Do you have any questions regarding that document?

Mr Melville —No, I do not.

CHAIR —The committee has before it submission No. 33 from AiG. It is a public document. Do you wish to make any amendments to your submission? If not, I invite you to make an opening statement.

Mr Melville —I want to say a few words to begin with about the capacity of the Australian Industry Group and why we are here. We are a national industry employer association that represents businesses in the manufacturing, construction, defence, labour hire and food manufacturing industries and in the agricultural sector. There are not as many in the agricultural sector as in the manufacturing sector, but we have a number of vineyards and companies that are into canning fruit and those sorts of related activities. For that reason we have some interest in the Pacific Island guest worker program, which is what I want to talk about today. Not only do we have members in agriculture; we also have regional members who rely on those businesses in those towns. We strongly believe that that program will be of benefit to those regional towns and to the communities that the guest workers come from.

The 2006 Senate workplace relations committee hearing raised quite a few doubts about the program. I recall that it said that it was something that could be looked at in the future and that the labour needs really were not there. It talked about the scheme being out of the question on a general basis at the time but thought that if it was narrowed down to some Pacific Islands it would be worth further investigation. Since then of course we have got this pilot program. We are looking seriously at how that is going to work down the track. Our group feels that it will work if it is managed properly.

Our counterpart organisation in New Zealand is Business NZ. They have been involved in the program over there. They are very pleased with the outcomes for businesses and with how it has worked. On average $5,000 goes back to the local community of the person who goes out on that program. Some people who are going to get involved in the Australian program are hopeful of sending back up to $20,000. I saw one Tongan worker say that he hoped to save up $20,000 to send back home.

Given the fragile state of our neighbours, particularly the ones who are involved in the pilot program, the weak governance in those places and their remoteness from trade routes and commercial groups, something like this is very important to contribute to their economy. There are a lot of benefits both ways. I talked about the benefits for the communities and the businesses involved. Also for them there is the training, even though a lot of it will be at a low level, and the connection with work and the work ethic that they can take back to their local communities. It is positive for all of us. It will be mutually beneficial. Clearly we are not naive enough to think that this is the one solution to the problems that these states have, but it will certainly contribute. I have seen World Bank estimates that as much as half of some of these economies rely on remittances, and that is certainly the big issue coming from those workers here.

There are also questions raised about labour shortages versus skill shortages. We have been strong supporters of the 457 visa program, which is about skilled labour. A lot of our members would employ people in the trade categories. You would have seen that as demand in the community falls for those categories then demand for the skilled workers has fallen as well. I think there was a drop in December of something like 30 per cent in the 457 category. This is a different thing. It is a mixture of an aid program and a business support program in an area that still has critical labour shortages.

CHAIR —Your submission is dated September 2008. We have now moved on six or seven months. Do you have anything to add in terms of the scheme now that it has started, particularly in light of the GFC and its impact? Is it having any impact at all?

Mr Melville —I think we should look at my final comment about labour shortages versus skill shortages. These regional areas have both. That has not been affected necessarily by the global financial crisis. If you are in a small town and you need fruit-pickers, the fact that a lot of white-collar workers have been laid off in Sydney will not affect the labour source that you have in Oodnadatta or wherever you might be. White-collar workers will not pick fruit. A lot of our members are hanging on to their skilled staff as much as they can. We have just had a round of council meetings by the states. A lot of them were talking about pressures on employment, but they also said that they are trying to hang onto their skilled workers. Probably the majority who said they were laying off staff were saying they were laying off staff in management areas and trying to work leaner but keep on the staff they worked so hard to train. In terms of the impact on labour shortages I think really it would be minimal. It is a pilot program. If it turns out that the farmers themselves are finding available labour then it is a lot easier to have Australian workers if they are available locally than to get involved in something like this.

CHAIR —How long has the pilot program been implemented?

Mr Melville —I think the first arrived only in February. It was mooted in August last year. That started with some Tongan workers who came in. It has a way to go. That is because they have middlemen involved to make sure they get the right people from the island countries. That slowed up the start of the process somewhat.

Senator KROGER —What is your assessment of how it has gone to date, given that it is very much in its infancy?

Mr Melville —I think it is a bit early to say. The reports I have seen about those initial groups of workers are very positive. As with the New Zealand case, there will be some wrinkles to iron out as we go along. In the New Zealand experience they looked at trying to make very strong connections between one community and another. That is what they had started off with the Tongans. I cannot recall the town that they are involved with, but there are already some Tongans in that town who are there as Australian Tongans, if you like. There are some social and cultural connections there. If you have those sister city, or brother city, programs where there is a flow of people between the towns and the mayor of that town visits the island and gets to know it well and it is treated as a development assistance program as well and you get support from AusAID and the Department of Foreign Affairs and Trade, it will be more successful.

Senator McEWEN —I was on the original inquiry in 2006 which came up with the recommendation that it not be proceeded with at that time but that a pilot program be considered at a later date. I am very pleased to see we have implemented that pilot program. One concern that the Senate committee had in the original inquiry arose because some employers in the industry were clearly seeing this as an opportunity to have cheap labour. They had not paid enough attention to the fact that wherever you brought the labourers from they would have to have decent accommodation, social infrastructure and stuff like that. I wonder whether your members have absorbed the fact that we cannot have these programs without providing equivalent employment conditions to those we have given to Australians.

Mr Melville —They certainly have. When I talk to them about any of the migration programs that they are involved with, they always say that they would much rather have locally available Australian workers first. This is quite a job. There might be people with English as a second language, and locally you would not necessarily have that. So you have to put systems in place to look after that, especially OH&S issues. You have to meet all these requirements. So they would much rather have local workers first. But, that said, they just cannot find them. In terms of the sorts of salaries they pay, they will pay to get a reliable workforce. Their experience with backpackers, even though they have to rely on them in a lot of ways, is that they will get labour turnover of something like 300 per cent. It will turnover very fast. They will stay there for a short time. What their hopes are for this program is that these people coming from the islands will stay for the full seven months and they will stay in their area. Or you might find that they might rotate through the regions. They might spend three months somewhere and, perhaps if it is a larger company, they might be moving through different cycles. But the companies want reliable workers and they will pay for them. I do not have the sorts of fears that some have that it will drive down wages, because these companies are saying that they have to leave their fruit on the trees to die if they cannot get the reliable workers that they need. You may even find that, when they see how well it works, if it does work well, they would be willing to pay a premium to get people to come back year after year.

Senator McEWEN —Do you think that will extend to building accommodation? One of the big issues was about who was going to provide the accommodation. It is okay when it is a small pilot scheme—I think most of these workers are centred around Robinvale and are actually being housed by the Tongan community. But if you made the program bigger you would have to provide more infrastructure to accommodate these people and provide them with services.

Mr Melville —I share those sorts of concerns, largely because of the perceptions they can create. You could easily get a current affairs television program going out and saying, ‘Look at these three people living in a caravan.’ You could probably find with the backpackers and the Australians that go on the route that they will live in these sorts of conditions. But, if you were able to present it in such a way, it could look bad. That said, the employers need to provide clean accommodation, proper sanitary facilities and all of that. I would imagine they will be subject to the sorts of inspections that will go beyond the pilot program. The department of immigration visit something like 50 per cent of the workplaces—I think that is accurate—of people on 457 visas. That is a huge proportion. You could easily find them doing that sort of thing with this program. They will certainly be looking very closely. If they see those sorts of abuses I am sure the employer then faces the same sorts of penalties that employers face under any aspects of the employer side of the immigration program, including being banned from future employees.

Senator McEWEN —This is just an observation—I do not think we grow a lot of fruit at Oodnadatta.

Mr Melville —It is a bit west, isn’t it! There might be some seed fruit.

Senator McEWEN —Things could change with climate change. Who knows—it might be raining up there! As you said, one of the other objectives of the scheme is to equip the people who come here to work with the skills and knowledge to go back to their own countries and to establish some kind of horticultural industry there. What are employers in Australia doing to facilitate that aspect of this program?

Mr Melville —We have a couple of large members and they have already been investigating that. Some of them have been pushing this for quite a number of years. They have already made the sorts of connections that they need with the home countries. So there will be some official things done at that level. Also, if you are out of work and contributing virtually nothing to your local community and then you are have between $5,000 and $20,000 that you might be able to send home after a year or so, that money is going to your kids’ education, maybe helping the local school and the housing of your family. One of my previous jobs was as a deputy head of mission in the Australian Embassy in the Philippines, and I visited quite a number of these communities. They are very strong on the whole guest worker program; it is a huge part of their economy. When you go to these towns—and I have been to many of them—you see that the houses of people who have people working overseas stand out, even in the slums. You can see that the money has gone into them. Their spouses are buying televisions and the kids are in school. There are social issues that you may ask about but, when you are looking at a balance of risks, they contribute a heck of a lot to their local economies.

Senator McEWEN —But in terms of establishing, for example, a horticultural industry in Samoa or Tonga—

Mr Melville —I think it might be the same as the Oodnadatta issue; I do not know whether some of these fruits will grow there. It is more about the work skills they will get. Some of them will be outdoor workers already and perhaps they are working on the farms and they will see the way we do it. They will see some of the pesticides we use and they will see some of the approaches we use, probably in management. Depending on how big the place is, they might be working on some of the maintenance around the farms and pick up some of the low-level maintenance skills. All sorts of passive learning will be going on that they will transfer to their own communities.

Senator TROOD —Your submission refers to the problem of shifting costs. I understand the problem—and you might like to elaborate on your remarks here—but I would be also interested in knowing whether or not the AIG has had any examples drawn to its attention in light of the early stages of the pilot program.

Mr Melville —In answer to the latter, no, I have not heard of any examples. It is a principle that we have included in a number of our submissions about the 457 program and this. The existing legislation talks about a limit of, I think, $10,000 that an employer can be charged if someone working for them absconds. That has been in the act for some time—it is not new—but it is something that we raised as an issue, because we feel that, if there is a good process at the start, when the person is screened by the department of immigration, and if there are good backup mechanisms through these programs, then that risk should be more on the department of immigration than on the individual employer. They have done their best. A lot of our companies do not have officers in the countries from which they are sourcing the labour. They do not have anything on the ground, but the department does. They also could easily be put into a situation where someone who wants to stay in Australia makes a claim for a protection visa. That could have happened. They could, say, have been encouraged by someone in their own community to do this because it will get them another six months in Australia or something like that. It is really beyond the control of the employer if something like that happens. Also, we are uncomfortable with the general principle of an employer being told, ‘If that person absconds, we could charge you $10,000 of what it cost us to find that person.’ Are they supposed to lock up the person who is working with them? These things cross your mind. You could be putting some pressure on a bad employer to perhaps threaten the people working with them: ‘If you abscond, I could be charged this money.’ Anyone who arrives at Sydney airport or Melbourne airport on a plane from overseas could potentially overstay. Do you then charge the airlines? Sometimes you probably do. A lot of those people are found and sent back home and nobody is charged for finding them, so why should there be special cases in this regard?

Senator TROOD —Your point, in part, is that a lot of the responsibility for assessing and screening these individuals is responsibility undertaken by the federal government—

Mr Melville —That is right.

Senator TROOD —which makes decisions as to whether or not a person is suitable to come to Australia, and your enterprises have no control over that process.

Mr Melville —Very little, except during the interview process, and people can be very convincing.

Senator TROOD —So, if they abscond, it may be a function of the failure of the screening process, rather than the activities of the employer.

Mr Melville —In a typical immigration case someone comes into the embassy and says, ‘I want to go to Australia and get on the guest worker program.’ You would imagine that the department of immigration would then say, ‘What are this person’s connections with his home country? His sister is there, his wife is there and he has got three kids in school’—tick, tick, tick all the way down the line; he is less of a risk. If there is a failure at that point and maybe this person is not as honest as he appears and he does not have those connections—maybe he lies about them or they are not properly checked at the approval point—the employer cannot know that that person has lied about his family connections. Then when the worker gets to Australia, it may be found that he may be someone who may have very limited connections to his own country. He may be an only child, not married or not have any kids and be a typical person to abscond. It is that balance of risk. When I read a lot of the things that have come out in the last few years from the immigration department a lot of it is, ‘Employers must do this; employers must do that.’ The immigration department needs to take some of that risk as well.

Senator KROGER —To follow on from that, I would have thought that a number of your employees would not actually have the resources or the capacity to do the kind of background work on potential guest workers that the immigration department does. So, if you are in Robinvale, or wherever you are based, it is far more challenging to be able to do the due diligence that would be required, so that would be a significant factor in that. Do those employees who have currently taken guest workers tend to be small enterprises where they have a small handful or employees or larger enterprises where they take a number of workers, such as 20 or something like that?

Mr Melville —I think that all the companies that would have these fruit-picking operations would be interested, but the larger ones are the ones that are geared up for it. They would be able to get involved, particularly in the pilot stage, because they have the back office support they would need to meet requirements. I think it would be pretty tricky for a very small operation to just have a couple of people from one particular area. It would have to be a reasonably sizeable operation.

Senator KROGER —So that would only be possible if it were in the same community where they could piggyback off their friends down the road who have a larger operation in terms of support for housing and that sort of thing.

Mr Melville —That is right.

Senator KROGER —So you are looking at a very collective approach to the support that is required on the ground for the guest workers.

Mr Melville —We have seen it happen with the general migration program as well—refugees going to particular towns and being adopted by those towns. The same sort of thing can happen on this temporary sort of basis. I saw a documentary on, I think, Four Corners, where people from a New Zealand town would go out to the islands. You would even get mini tourism booms happening in some places, with money going to those local communities from those visitors.

Senator McEWEN —I think the initial pilot is done through a labour hire company, which then places the workers wherever they are needed in the area.

Senator KROGER —And they are assisting the coordination of the support that is required on the ground, presumably.

Senator McEWEN —I understand they are a company whose principals are from the community on the island.

CHAIR —Thank you, Mr Melville, for coming along today and for providing that background. You have been of assistance to the committee.

Proceedings suspended from 12.39 pm to 1.33 pm