Friday, 25 November 2011

Speech to CEDA Melbourne

Aspects of a bad year in 2011 and worse to come
Peter Reith
At CEDA in Melbourne 25 November 2011

2011 has been a bad year for industrial relations. The system of labour market regulation that was built from 1990 to 2007 is being deconstructed day by day.

Of course Jeff Lawrence will say otherwise. In fact he will probably say what he always says. He will start with “WorkChoices” which is his catch-all phrase that means nothing to most people. Then he will move into a really sophisticated argument like the one he put in response to the Productivity Commission’s detailed case on the retail sector. He said that “punishing workers” would not solve the problems in the retail industry’.

If Chris Evans the IR Minister was here he would say as he did on 27 July, that “the Act is delivering positive results” (The Australian). I challenge him or Jeff to put up or shut up. This is my hard ABS data – where is yours? Real per capita GDP growth under the Coalition from June 1996 to Dec 2007 was 2.4%; under Rudd and Gillard from December 2007 to March 2011 it was negative -2%. The real average non-farm compensation per employee was 1.65% pa under Howard and negative .4% under Labor. On these figures alone, if the Howard Government delivered “punishment” Labor must be running a torture chamber.

During the 1990 to 2007 period, especially under the Coalition, the concept of enterprise bargaining was turned into reality and it demonstrated, in practice, that an effective and productive system would enhance productivity, lift real wages and give more people the opportunity to work. The new system was accepted in concept by both sides of politics despite union objections. In 2007, the ALP returned to government and, in payment for political services rendered, the union movement was rewarded with a set of wide-ranging legislative changes that have given the union movement significantly increased industrial muscle. The employer group AiG has identified 60 separate new provisions in the Act designed simply to give unions more control in the workplace. The consequence is a broad attack on enterprise bargaining and the results have been poorer productivity, poor wages growth and rising union militancy.
The rising level of industrial action is a direct consequence of the Fair Work Act. This was obvious well in advance.  I made this point at the start of the year at CEDA’s February conference;
For me the biggest issue by a wide margin is labour market reform. It is the worst of the policy regression since Labour’s election in 2007 and the costs of the ALP’s framework are going to become more obvious as 2011 progresses.
Union militancy is on the rise even though the unions have had the Rudd/Gillard Government legislate a reregulation of the labour market to rebalance the system in the favour of union bosses.
An example of this militancy has been seen in Victoria in the last few days. FWA held that the industrial action by nurses was putting patients at risk and yet the union was still intent on defying the order. This is 1970s style industrial relations. The ANF has about 40,000 members but only about 4000 voted on the motion for action. So we have a hard core group calling the shots. It is a microcosm of the labour market more generally where union membership is down to about 14% but the unions are demanding a big say in the management of Australian companies and , in turn, in the Australian economy.
But militancy is not the only symptom of a system that is failing. There have been many adverse developments through 2011. In no order of priority, they include;
2. THE INTRODUCTION of the legislation to abolish the ABCC
The problem of “go away” money is back.
4. THE LABOR GOVERNMENT supporting the unions before the High Court in a matter for the AEU involving a union member at the Bendigo TAFE. As put to me by one expert, if successful this will ensure that union officials are protected against penalty for slander of employers or employees, offensive language or any other inappropriate conduct or misdemeanours except workplace assault or theft.
The JJ Richards case which allows unions to take industrial action without first sitting down to negotiate is still in the Courts. If upheld this will mean a minority can take action despite the views of the majority and without a log of claims. This blatantly breaches the promise by Kevin Rudd that, under FWA, strikes would be a last resort and only where bargaining had commenced.

The administration of the FWA has also come under the spotlight and raised serious questions about how the provisions of the Fair Work Act are being implemented. The HSU case is still under examination after nearly two years. You would have to wonder why FWA has not fulfilled its obligations.
Lack of transparency by FWA in the reissue of right of entry permits is another development. This allows that a person who has lost their permit can apply to have their permit reissued but without the right of the interested parties being first notified that the matter is coming to FWA. This denies interested parties the opportunity to put a case.
Tony Abbott abandoned long standing Coalition policy when he announced the Coalition no longer supports individual contracts and thereby closing off, for the time being, a key reform needed to overturn labor’s policy
At the State level, whilst Premiers O’Farrell and Baillieu have started to address some of the issues they face, in WA the Liberal government is not prepared to change any of the laws put in place by the Labor party and which in some cases is even more pro-union than the Fair Work Act. The WA system covers about 450,000 people outside the reach of the federal corporation’s power. In Queensland, the Bligh Government is likely to be defeated but the LNP look unlikely to do anything to give greater flexibility for their small business and tourist businesses.
There has been no resolution or reform of the three hour minimum rule which inhibits jobs growth across many industries and stops young people from having the experience of after school work.
Three children lost their jobs in Terang in 2010 because their employer, a local cooperative, had committed the awful crime of letting three children work for an hour and a half after school from roughly 3.30 pm to 5.00 pm when the business closed. The award specifies that employment must be for a minimum of three hours.  Instead of the children getting their job back, FWA went after the cooperative for not paying the children for the one and a half hours that were not worked! This issue is not just about children working after school: it effects working arrangements across many industries. It is a major issue for the tourist industry. Queensland business owners were telling me in Brisbane this week that this rule and others mean that the industry is denied the flexibility they need to run their business.

Andy Georges runs the well known restaurant, Il Centro, in Eagle Street, Brisbane on the waterfront. He told me this week that the award system is destroying his business. Due to award changes he is facing wage increases for each of the next 4 years just to comply with award amalgamation and without regard to cost pressures on the tourist industry. Except for Christmas day, he told me that he would not be opening on the other public holidays over Christmas because he can’t make the business pay its way when he has to pay $50 an hour just for cleaning dishes.
As the Productivity Commission demonstrated in its report earlier this year, the retail sector is badly served by the Gillard laws. Labor will not and cannot ever respond to the compelling evidence produced by that report. And, for many in the retail sector, like the tourism sector, the real wage increases, as demanded by the amalgamation of awards, are being imposed incrementally over the next few years. So there will be more pain for many businesses in 2012 and beyond and more jobs will be lost.


The changes wrought by judicial decisions, FWA rulings and legislative amendments are on going. This week the Government announced a new tribunal to set pay rates in the trucking industry; under the guise of a special need in the case of “poor safety”. This new body will have arbitral powers for a vital industry sector. We used to have separate tribunals and separate deals for particular industries like coal industry tribunal.
The new proposed specialist tribunal will obviously be stacked with former union bosses will put up the cost of transport across the Australian economy. It is a very bad idea. I note the opposition has yet to comment on the matter in line with its tactic of not talking about IR. The Federal Minister said (AFR 23 Nov 2011) that the special need for this tribunal had been recognized as far back as the mid ‘70’s. He was right; his proposals are taking Australia back to the 1970’s.
The same hankering for arbitration was behind the special arbitral powers provided in the FWA for the textile industry. The Coalition did not oppose the Fair Work Act generally or in regards to this provision; presumably they were worried that they might be seen as not sufficiently supportive of low paid workers. This relates to the matter currently before FWA. This issue is not about equal pay as falsely claimed by various politicians. It is about how much governments are prepared to pay. There are issues about what these workers should be paid but the use of arbitration was always the wrong venue for the decision making. This is very obviously still the case because Julia Gillard has put up some cash and flick passed the issue to the States.
Under FWA the unions have been able to run a guerrilla campaign against Qantas. This is not good faith bargaining; there is nothing fair about announcing strike action, then rescinding the announcement with the intention of damaging Qantas with loss of revenue whilst ensuring employees do not lose any pay.  Qantas only acted after having endured 15 months of a union guerrilla campaign, and in the face of threats of more industrial action. Qantas finally fought back with a lock out.  The Government sought to use the FWA and thus opened the door to arbitration. This outcome was inevitable in the sense that the legislative process finally left the employer with no choice. There is no prospect that the union will abandon its claim that the union should have rights to manage the business. The union is hoping that eventually it can force Qantas to meet its demands. The suggestion of industrial action over the busy Christmas period is just another indication that the union will not hesitate to defy the law and fight Qantas until they have a win.
A key union objective now is to seek further legislative change. The ACTU and TWU have a script. The union has had a tactic of slowly baking Qantas; this is the antithesis of good faith bargaining. So their latest script is to say that Qantas is not acting in good faith and a new regulatory regime is thus needed to put Qantas and all employers in their place.
Ged Kearney, ACTU President, said on Tuesday (the Australian 23 November 2011) that employees were facing “a new wave of employer militancy that is threatening the livelihoods of working Australians”. She thinks Qantas is aggressive but Qantas did not initiate strike action, they waited patiently for 15 months until they had no choice and then the ACTU whinges that the company tries to defend itself.
Lock outs are not common because it is a big step for a company to close its business or hire alternative staff. And the resort to arbitration is not easy because very few companies can demonstrate that the industrial action is having an impact across the economy. A recent full bench FWA decision held that a third party losing $3.5m a day was not suffering enough damage to suspend industrial action.
The first step in the campaign to further weaken employers has been to fashion the facts of the Qantas dispute to support the case. Next it will be to pressure Labor at the national conference in early December. Provisions to force contractors to mirror union agreements are being pursued to produce uniform conditions thus enhancing union monopolies in the labour market. They also serve to undermine employer and employee relations thus also reinforcing union control even though the unions can only attract 14% membership in the private sector. The claim includes more arbitration “where an employer engages in ‘surface’ bargaining..... and in ‘first contract’ situations”.


The government is required to hold a review of the Fair Work Act earlier next year and it seems beyond doubt that any serious review e.g. by the Productivity Commission would reveal the inefficiencies and loss of productivity promoted by the new Act. The government has ruled out a Productivity Commission review and is yet to tell us who will conduct the review. The review is now likely to be a platform for union demands.

Despite being told by employers since the introduction of the Act that changes were desperately needed and with the Minister stating that there will be no changes and everything is working fine, now that the unions haven’t got what they wanted in the Qantas dispute, change is all of a sudden possible to stop employers responding to industrial action.

If 2011 was a bad year for industrial relations, then it is likely that things will be even worse.
Labor will appoint a new head of Fair Work Australia. The government has placed a national advertisement calling for applicants. Now that is a joke and a waste of taxpayer’s money. Why would they bother? Nine out of ten appointments made by Labor so far have had a disposition to the union cause. Kevin Rudd promised that Labor would not try to stack FWA. That promise has not just been ignored; it has been decimated.
Mr Justice Bromberg is the name being mentioned on the street as Mr Justice Geoff Giudice’s replacement.
I recommended Giudice’s appointment. I had a concern that Labor in office might have tried to sack him or not reappoint him (as they did with Jim Staples) so I fought to have him also made a federal court judge. By this means, he had some security in the job. He has played a straight bat. I thought he would do a decent job and he has. He had previous experience of the jurisdiction and his basic view about the role was to interpret the legislation as he thought appropriate in accord with established legal principles. You can’t ask for much more than that. You could not say that of some of his predecessors. He also has refrained from lecturing on political economy as has been the wont of others.
I should also say that I was always reluctant to appoint more people to the Commission. The more you appoint the more work they make for themselves. This is an iron rule in government and when this rule is ignored you end up with more red tape and regulation. I note that in the Qantas there are to be three benches with three people each to arbitrate the issues. I wonder if any of them would know how to run an airline? One thing is for sure, it certainly provides a lot of people with work at government expense.
2012 could be very bad if Labor is re-elected and then starts to repay the unions with more powers for union interventions in the management of the economy. If Tony Abbott is elected Australia will clearly be better off in a number of vital policy areas including the abolition of the carbon tax and fiscal policy. But at this stage we do not know what he will do in office and we do not know what road blocks he might face in the Senate.
What we do know is that if there is little public debate about these vital issues, then the public will say, what is the problem? If the public are not told about the problems then they can’t be expected to be great supporters of reform. Neither side of politics are confronting the reality that poor productivity is a consequence of a poor labour market and our system is not fit or purpose. It needs to be changed.

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