Friday, 14 October 2011

Speech to Victorian IR Society

Notes for an Address to the Industrial Relations Society of Victoria 14 October 2011  
Check against delivery

Thank you for the invitation to be with you.

Having read Steve Knott’s comments on what I can say, I suppose I will have to be careful. You never know what might arise from such a provision. It was belief in freedom of speech that gave the H R Nicholls Society its name. So I am ready to be a martyr and sit in a cell with Steve Knott and say that Labor has been appointing a ‘tribe’ of union types to the FWA. They undermine confidence in the system. The one positive from their behaviour is that it demonstrates that the system needs an overhaul. In fact, Steve’s remarks are very strong and I call on the Minister to answer, point by point, the criticism with something more than rhetoric.

In my view, there are real questions to be asked about the institution as a whole. Members of the HSU have every reason to think that they have been let down by not just their union but the people who were supposed to be regulating the conduct of unions.

After Andrew Bolt’s experience, Paul Kelly is right to say that the issue of freedom of speech should be an election issue. Section 674 provides for a criminal offence for conduct that “disturbs” an FWA Member in the “performance of functions, or the exercise of powers”. I have not researched the background to this provision or its similar earlier forms but, given the Bolt case, I hope one of the legal firms here today might put out a paper on how the provision might operate. This would be useful for those of us who often talk about IR.

I am here because the Opposition is not.   I am here for only one reason. I am disappointed that a much better system for managing the way that Australians work together has been thrown away by Kevin Rudd and Julia Gillard. We are already just starting to see the adverse consequences of Labor’s gift to their union masters in return for their electoral support in 2007 and since.

You may think that is a partisan comment. But it is not. People like Mark Latham, Michael Costa and others have both commented on how Labor since 2007 has trashed the economic policy stance of Hawke and Keating. But the implications for Labor are far wider; as Rod Cavalier has said, Labor can’t reform its party whilst the unions have a vice like grip on everything that happens within the Labor party.

It is the elephant in the room for Labor. Unions only represent 14% of the private sector workforce but they have their hands on the throat of the other 84% and the FW Act gives them the means to exercise control. Australia’s economic performance is now subject to a veto by the union movement.

Of course some people say that productivity performance is not conditioned by the form of labour market regulation. Admittedly measures of productivity are complex and subject to all sorts of other factors. However, as a Minister, I saw lots of cases where better and more efficient arrangements for employees and employers to manage their relationships at work without third party interference provided the opportunity for better work practices and genuine productivity improvements. In the meat industry, in building and construction and many others the reforms introduced in 1996 definitely improved productivity. Perhaps the most obvious to the public was the waterfront. The huge increases in productivity would never had happened but for the introduction of AWAs and secondary boycott provisions introduced by the Howard Government.

In today’s newspaper there are various examples of how FWA is undermining productivity at the same time as the AFR headline states “Productivity not Labor’s fault: ACTU.”

It makes no sense to suggest that either the ACTU or FWA or Labor can wipe its hands and say that decisions it makes do not affect productivity. Look at the retail sector and the Productivity Commission’s comments on retail’s modern award. That has had an impact on productivity. Decisions on unfair dismissal and agreement making can impact on behaviour and thus productivity. Labor certainly claimed a link between its legislation and productivity when it promised that the FWA would improve productivity. As productivity has been flat for some years Labor supporters and others are now making the opposite claim.

I do not say that the FWA is the root of all evil. The current Government is not the first to turn back the clock on labour reform. Nor are employers free of responsibility for what happens in their business. But there is no doubt that the union movement’s control over the ALP distorts the policy agenda. It is a pity for Australia that the Australian Labor Party does not look more carefully at the policy approach of UK Labor under Tony Blair. The problem for Labor is obvious in both Federal and State spheres.

One of the first acts of the new Gallop administration in WA was to immediately close its building Task Force and amend the Industrial Relations Act to neuter individual agreements. It was this abolition of the Task Force that triggered Tony Abbott to create the Cole Royal Commission in 2002.

The Cole Royal Commission reported that the WA abolition had resulted in the “reappearance of all the restrictive practices which existed in the 1980s and early 1990s”. But the impact was immediate. Unions did not wait for the formal dismantling of the Task Force. Targeted companies found the unions at their gates the Monday following the election. The Royal Commission cites one case where Joe McDonald from the CFMEU turned up on the Monday and declared it was “GST time. Get square time. We have waited for this for years.”

To me, this is just an example of the culture. As soon as the ALP win an election the behaviour of militant unions changes. This can be seen in the building industry. The announcement to abolish the ABCC is a green light to encourage industrial strife. In 2006 the number of working days lost per thousand employees was 1.6 in the building industry. John Lloyd was still there in 2008 when the figure had moved to 2.8. The latest figure for the quarter ending 30th June 2011 is now 44. A massive increase. Generally the level of disputes is on the rise. Labor in office, gives the green light to poor behaviour and then they are surprised with the consequences. The ABCC is to be abolished; it will be replaced by a Directorate.  The compulsory powers (already cut under Mr Johns) will be legislatively curtailed and the penalties for poor behaviour are to be slashed by two thirds.

Today’s headline dispute is with Qantas. Aspects of this dispute are a direct result of changes made by Julia Gillard on the demand of the unions. It is a dispute that has all the rhetoric of a dispute in the early 1980s under Malcolm Fraser. A union official suggests that Qantas fabricated certain events to put pressure on the union. One union official advised Qantas customers to use other airlines. Paul Howes sounded as if he was supporting the public but actually his union is vying for coverage against the union running the claim. There is nothing like a demarcation dispute; I thought we had seen the end of them but they are back, ugly as ever. Then I hear a Minister attack the unions and then say that all disputes can be settled. Of course this came from a good bloke but all the same a former ACTU President. Martin should know that unreasonable demands from pilots on $500,000 per annum cannot be negotiated if you want Qantas to be a viable business in the future. A business can capitulate but that is not in the national interest.  Minister Martin Fergusson probably thought he was pursuing the public interest but of course his government widened allowable matters from the 1996 legislation to allow unions to strike over their claims that they know how to run Qantas better than the Board and the CEO. These unions have learnt nothing and now are intent on running the company into the ground.

Keating set out a better approach at the AICD in the early 1990s.
“It is a model that places primary emphasis on bargaining at the workplace level within a framework of minimum standards provided by arbitral tribunals. It is a model under which compulsorily arbitrated awards and arbitrated wage increases would be there only as a safety net. This safety net would not be intended to prescribe the actual conditions of work of most employees, but only to catch those unable to make workplace agreements with employers. Over time, the safety net would inevitably become simpler. We would have fewer awards with fewer clauses.”
AWAs are a good idea; they give people choice. I do not know what Abbott will do next. I think it was a mistake to unilaterally wipe out policy that has been part of Coalition thinking for nearly 30 years. He did so on TV on the night that John Lloyd, Prof Judith Sloan were arguing the case at the National Press Club. I am not sure I will ever go back! I think it is a mistake to think that IFAs could provide an alternative to AWAs. If you redefine the operation of an IFA to make it like an AWA (however it is named), the Senate will block it. If it walks like an AWA and quacks like an AWA then it is an AWA.

One of the problems about the IFA is that the legislation gives the unions plenty of opportunities to stymie their operation. They are individual but the union agreements can limit their scope. They are not just a poor cousin of the AWA, IFAs are really the individual agreement you have when you are totally opposed to the concept. They are more like Keating’s EFAs.  EFAs did not work. They were union constrained.
The Keating speech allowed the Coalition to say that its 1996 policy was supported by Keating even though by then he opposed it. In the battle of ideas, Keating’s comments meant that both sides of politics were on the same page. It was now accepted that bargaining at the enterprise level was essential as a means to link remuneration to productivity and that this approach would help manage inflation. It was also a means to cater for the rising demand of workers to have flexible working arrangements that were tailored to their personal needs on issues like work and family.
The issue that was not settled was the role of unions. Keating killed off his own reform when he gave unions the right to intervene in agreements even if they had no members on site. So employers shunned his agreements and by the end of the first 12 months, only 27 employers had used them. By contrast, the 1996 reforms took off from the start and in the first twelve months, 340 employers used the new non union collective agreements and 5000 AWAs were approved.
So, the delivery of the reform was left to the Coalition. By the end of 1996, the Coalition had secured legislation through the Senate to allow for not only simpler awards and union collective agreements, but crucially, non-union collective agreements and individual contracts (Australian Workplace Agreements, AWAs). The framework legislation gave people choice so employers and employees, at the workplace, had a menu of agreements and they could decide which would suit them best. Around 1,400,000 AWAs were filed during the Howard years and the non union collective agreements were widely used. Even where these options were not used their mere availability changed behaviour generally in the labour market. The reforms soon brought huge productivity improvements in key sectors like stevedoring, meat works and many others.
The bottom line is that Australia’s problems with the FWA will grow, business will continue to complain, our productivity will remain stagnant and living standards will be lower than they could otherwise be. And the politicians will do little to address the issues and give themselves a massive pay increase at the end of the year. This will only dismay the public at large but leave too many issues unaddressed.

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