Lazarus Rising

by John Howard

Debate over the ethics or otherwise of the restructuring reflected the cultural division in the Australian community on industrial relations issues. It was never going to be possible to persuade the union movement or large sections of the Australian workforce that commitment to a profitable enterprise was a two-way street. Investors had responsibilities to behave in an upfront fashion and to be reasonable in their commitments of capital. Equally the workforce had an obligation to stick to its commitments and to play its part in securing the profitability of the enterprise. For many Australians, including me, the Australian waterfront had seen a consistent repudiation by the MUA of its obligation to play its part in maintaining the profitability of enterprises which employed its members.

  Although there had been detailed discussions with Patrick, and the Government believed that the company was disposed to take steps to secure waterfront reform, it was by no means certain that this would finally happen. Corrigan played his cards close to his chest.

  When news broke late in 1997 that a workforce, largely composed of former or currently serving army personnel, was being trained in Dubai, this was the first that, to my knowledge, anyone in the Government had known of it. Reith said at a press conference that he had been personally told by the two stevedoring companies that it was also news to them. It was true that Patrick had not been directly involved, but Corrigan was certainly aware of the Dubai operation and he believes that one of the consultants hired by the Government (not Reith’s staff) would also have been aware.

  There was uproar in the media when the Dubai story emerged. Dubai sounded a rather exotic and conspiratorial location for the training of an alternative workforce. Due to the pressure of all the attendant publicity, including the threat of an international union ban on ports in Dubai, the Government of the United Arab Emirates withdrew permission for the training to take place, and that part of the exercise ended. Dubai told me that Corrigan was serious about reform. As he observed, a well-trained alternative workforce was critical to any successful reform plan.

  Subsequently, Patrick leased a section of its Webb Dock in Melbourne to the stevedoring company PCS, formed by the NFF, and training of a non-union workforce commenced there early in 1998. Many of those who had begun training in Dubai continued their training at Webb Dock.

  Hostility to the alternative workforce continued, even though the training was out in the open and in Australia. The MUA wanted no alternative workforce available. They knew that a trained non-union workforce threatened the continuation of the cosy, unproductive arrangements that obtained on the Australian waterfront.

  The MUA took industrial action against Patrick in response to the training under way at Webb Dock. Patrick retaliated, seeking injunctions and court orders. In turn, the MUA sought a court order that Patrick would not terminate the employment of its unionised workforce.

  Matters were coming to a head. The hearing of the union application was set for 8 April, two days before Good Friday. Late in the evening of 7 April 1998, Patrick activated the termination clauses of the restructuring arrangement. The companies, then in administration, dismissed the unionised workforce. Security guards were sent into the Patrick docks, accompanied by the much-reported balaclava-clad individuals and dogs. Security measures were justified. It looked bad but given the unionised workforce had been retrenched, it was hard to conceive that it could be otherwise. Patrick immediately placed the non-unionised workforce at its Sydney terminal, Port Botany, and sought to continue operating the container terminal with a new workforce.

  It was a drama-charged event which immediately grabbed the attention of the nation’s media. This was the long-anticipated showdown on the wharves. I felt the frisson of knowing a pivotal moment had arrived in Australia’s industrial relations history.

  The MUA went to the Federal Court immediately and obtained a stay of the dismissals from Mr Justice North. The hearing was to take place immediately after Easter. North found in favour of the union. He said that there was an arguable case that Patrick had engaged in a conspiracy to breach the freedom-of-association provisions of the Workplace Relations Act because the workers had been retrenched on account of their membership of the MUA. He ordered the restoration of the status quo ante, pending full litigation of the matter. This meant that Patrick had to take back the MUA workforce. Justice North completely ignored the argument that the restrictive practices of the workforce had contributed to the insolvency of the company which, in turn, had triggered the appointment of administrators and therefore the dismissal of the workforce.

  On appeal, the Full Bench of the Federal Court said that North’s decision had been free of ‘appealable error’. The matter then ended up in the High Court of Australia. Although the High Court confirmed the decision of the Federal Court in relation to the freedom-of-association issue, there was one important variation. The High Court said that an order for reinstatement would place an unreasonable burden on administrators, almost certainly obliging them to carry on business whilst the company was insolvent. That would be in clear breach of the Corporations Law.

  This crucial proviso from the High Court effectively resolved the dispute by forcing the MUA to the ultimate compromise. Patrick accepted the return of an MUA workforce, but at roughly half its original size and conditional on the elimination of numerous restrictive work practices and a more productivity-based remuneration system. The June 1988 deal between Patrick and the MUA included increased casual employment/contracting out, smaller work crews, longer regular hours, and company control over rostering and productivity bonuses for faster loading.

  The MUA may have remained a major player on the Australian waterfront but it had to surrender the age-old work practices which contributed to the appalling inefficiencies at Australian ports. Attendant litigation, including conspiracy suits against the federal government, Patrick and the NFF, were abandoned. Another part of the settlement was an expectation from the MUA that action against it under section 45D of the Trade Practices Act would be abandoned by the Australian Competition and Consumer Commission (ACCC). Acting independently, the ACCC decided, in its own time, to do just that.

  Due to careful preparation, the Government had been able to give effect to its redundancy proposals through introducing the relevant legislation into parliament immediately Patrick took action. The redundancy legislation played a key role in resolving the dispute once the High Court found as it did. This had been spelled out on 24 April when Peter Shergold, the secretary of Reith’s department, wrote to the Patrick administrators saying, ‘Funds will be made available to facilitate the payment of redundancy only in circumstances that contribute to genuine waterfront reform. The objective is to reduce overmanning, eliminate inefficient work practices and create genuine competition on Australian wharves.’ The MUA was caught in a bind. Many of its members wanted the redundancies, but they would only be available if the MUA agreed to the improvements in productivity insisted upon by the Government.

  After the dust had settled it was beyond argument that the Australian waterfront had changed forever. It had become more efficient, and within a few years the productivity levels of Australian ports were the equal of, or in advance of, other developed countries. That was the historic achievement. The MUA had retained a place in the waterfront sun, but in a greatly diminished capacity.

  A gratifying personal footnote to the dispute was the mutual trust which emerged between Chris Corrigan and John Coombs (the boss and increasingly fatherly face) of the MUA. Although worlds apart in philosophy they came to respect each other.

  Although the dispute was milder in Western Australia and Queensland, the Coalition governments in those states gave strong support. By contrast, the Kennett Government in Victoria, where the dispute was intense, proved unsupportive at crucial times. It did not provide enough encouragement to the Victoria Police to guarantee the safe passage of people willing to work at the Melbourne docks. There was a total failure of the Victorian authorities to enforce a wide-ranging order from Mr Justice B
each of the Victorian Supreme Court. This failure gave reality to the declaration of Bill Kelty, the secretary of the ACTU, that the order of His Honour would be ignored. That was because the union movement did not like the court’s ruling.

  The weekend of Easter 1998 was especially difficult. The MUA workforce had been retrenched by Patrick, and the non-union labour was endeavouring to go in but faced a huge picket line at the ports in Melbourne. A massive port shutdown threatened. If that were to happen, damage would be done to the reform cause.

  Reith rang and briefed me on the problem emerging with the Melbourne picket line. He correctly surmised that the Victoria Police were doing very little to assist people in going through the line. The police simply said they did not have enough officers. I felt that they were not getting sufficient support and encouragement from their employer, the Victorian Government. I telephoned Kennett on Saturday morning and put to him strongly the need for support, pointing out that this was a really crucial moment in workplace relations. I reminded him that we had all wanted waterfront reform for many years. I felt that I was appealing to a kindred spirit. He, after all, had championed industrial relations reform in his own state and much to his credit had stared down massive union protests. In so many ways he was an impressive reformist premier.

  His response disappointed me. He pointed out the difficulties of mounting a police operation, citing the large number of people on the picket line and how, above all else, peace and order had to be maintained. Jeff Kennett had regularly, but unfairly, criticised my Government for not being sufficiently reformist. I, therefore, might have expected his enthusiastic backing over waterfront reform. I was mistaken.

  Peter Reith deserves immense praise for his role in the waterfront dispute. John Sharp had begun the process in partnership with Reith. Unfortunately Sharp was obliged to resign from the ministry late in 1997 and increasingly all of the responsibility was carried by Reith. Peter Reith was subjected to enormous pressure. He never lost his cool. He endured constant ridicule and criticism from many sections of the press. He and his family received threats of physical violence and needed a very strong AFP protection detail for months.

  He maintained his sense of direction, even when there were setbacks. I was open in my support for what Reith was doing and supported him through thick and thin. Some of his senior colleagues went a little quiet when the going got tough.

  He came to see me at Kirribilli House one night, late in April 1998. He had been genuinely shocked, as had other members of the Government, with the decisions of the Federal Court following the dismissal of the Patrick workforce. Our legal advice was that the procedure adopted by Patrick was perfectly legal. We were therefore quite amazed at the direction taken by Mr Justice North. Fortunately the pragmatic decision of the High Court paved the way for a sensible resolution.

  During our Kirribilli House discussion, Peter accepted that the dispute had not gone precisely in the manner that he had expected or advised that it would. He felt at the time that the tide of public opinion had turned against the Government. He laid out various options as to how the Government might handle the matter from then on. One of them was for him to fall on his sword.

  I would have none of this option. To start with, he had displayed consistent political courage on this issue. He had held his hand in the flame. No government can predict how courts will rule on contentious issues which have political consequences. We didn’t like the decision of Mr Justice North, but we accepted it. It was part of the legal framework in which everyone had to operate.

  Also Reith’s legislation of 1996 had been fundamental to achieving waterfront reform. Without Australian workplace agreements, created by the 1996 act; without Section 45D of the Trade Practices Act, the restoration of which was a feature of the 1996 bill; without the obligations to fulfil contractual obligations imposed by the 1996 bill, it is hard to believe that the historic turnaround on the waterfront in 1998 would have been possible.

  An even more important reason for dismissing Reith’s resignation option was that for him to have resigned would have been an admission of failure by the Government. Second only to me, Peter Reith was identified with the cause of industrial relations reform. Reform of the waterfront had been long sought by our side of politics. His instincts on the issue were right. His policy direction was the only feasible one, in all of the circumstances. The preparatory work which Reith and Sharp had done had been first-class. The discussion and cooperation with Patrick, the other stevedoring companies and the NFF had been both necessary and proper.

  Reith had worked his way through a difficult public policy maze. If he had gone, his departure would have been cheered by the Government’s opponents and interpreted as a failure of both will and policy in relation to something that we had wanted to achieve for many years.

  Chris Corrigan, the boss of the stevedore company Patrick, showed the gumption and fortitude always needed from a business leader, if genuine reform of the waterfront were to be achieved.

  To many true believers in private enterprise, Chris Corrigan had become something of an iconic figure. Never an establishment type, he was treated with a certain disdain by some in the business community, yet those in the broader community who believed strongly in economic reform greatly admired his strength and tenacity.

  Over the years I have had numerous private discussions with businessmen and women in Australia. Most of them, in different ways, have agreed on the need for key reforms. Only a limited number have been willing to match their private exhortations and rhetoric with equivalent public stances. Corrigan was an outstanding example of a man who had been willing to do this. He was very much a loner in the Australian business community, who had a certain contempt for the frequent equivocations of some industry associations, especially on industrial relations issues.

  Without his courage and strength, waterfront reform would not have been achieved. If it had been left to the British-owned P&O, the inefficiencies we had more than a decade ago would still be there. During the 1998 dispute, the British-based chief of P&O, Lord Jeffery Sterling, was in regular contact with me. He was polite, encouraging and full of praise for what the Government was doing. Yet his company was not at the sharp end of the reform push. That responsibility was left to Chris Corrigan. There were a number of excuses from P&O. One of them was that the workplace relations legislation in Australia was inadequate. Corrigan did not find the legislation inadequate; nor should have P&O.

  The NFF, under the leadership of Donald McGauchie, also played a courageous role in the dispute. The historic inefficiency of the Australian waterfront had done great damage over the years to our rural exporters. They, more than most, deserved a more efficient waterfront. As for the rest of the Australian business community, it can be said that they wanted waterfront reform yet were extremely pleased that the Government, Chris Corrigan and the NFF were prepared to take the risks and bear the hostility of the union movement and a fickle media when heavy weather was encountered.

  The most poorly treated group in the whole dispute were the non-union employees of PCS, the NFF-backed labour-hire company. They were encouraged to sign up in the belief that there would be plenty of work opportunities for a non-union workforce on the waterfront. The unexpected turn of events before the courts meant that the upshot of the dispute would be the re-engagement by Patrick of a significantly reduced number of MUA members as employees. There was no room, therefore, for the PCS employees. They were blackguarded by the unionists in the MUA and abandoned by the NFF, although some did find jobs on the waterfront. Having not been directly involved in their recruitment, it was not the responsibility of the Government to look after them. That did not mean I was free of guilt for what had happened to them and I felt that the NFF displayed a certain indifference to their fate. They were entitled to feel that they had been used and abandoned.

  Who won the dispute? The answer to that must clearly be — Australian productivity. Prior to the reforms of the early part of 1998, con
tainer movements per hour on the Australian waterfront were 17.6. Following the reforms in the wake of the dispute, that level rose to 27.5 in 2003 and has remained there ever since, despite the huge reduction in manning levels. Pre-1998 the level was well below the Organisation for Economic Cooperation and Development (OECD) average. It is now higher.

  The MUA remains the only union on the Australian waterfront, although there is still some non-union labour employed. To that extent, the union movement can argue that it successfully resisted the attempt to break its monopoly on the employment of waterfront labour. Yet the price it paid for retaining that monopoly was very high. The permanent workforce has been close to halved. Many of the old and odious work practices have been eliminated, productivity levels are markedly higher and waterfront remuneration more in line with community averages.

  In 2002 Access Economics wrote: ‘On virtually all measures in this study, Australia is at, close to, or superior to world best practice.’5 That represented a remarkable turnaround and a total vindication of the policies adopted by the Government. In the September quarter 2008, the national crane rate productivity remained at the world-ranking level of 27.5 containers per hour. The vessel-working rate (a measure of labour productivity) increased from about 21 containers per hour in 1998 to 30 in 2000, 35 in 2005 and 2006 and just over 40 by December 2008.

  The waterfront dispute had been tough and brutal. But a huge reform had been achieved. The Government had had plenty of critics throughout the dispute but the long-term gains were unarguable. Australia would, in very short order, have a world-competitive waterfront. The rorts and excesses of the past ought never return, and the reformist credentials of the Government had been demonstrated beyond doubt.

  27

  THE HOLY GRAIL OF TAX REFORM

  When he was Treasurer in the short-lived Government of Billy McMahon in 1972, Bill Snedden established an inquiry to examine Australia’s taxation system and make recommendations as to how it might be reformed. That was almost a quarter of century before the election of my Government in 1996.