Lazarus Rising

by John Howard

  42

  BILLY GETS A JOB, BUT WHO CARES?

  The Australian system of compulsory conciliation and arbitration, like Australian Rules football, was indigenous. We may have inherited the British craft union system, but our forebears did not give Australia the legally clothed industrial relations system established with Federation. It was the Commonwealth Conciliation and Arbitration Court that was inaugurated in 1904.

  Then retired as prime minister, Sir Robert Menzies told an American audience in 1967, ‘The system of compulsory arbitration has, on the whole, worked well in Australia, largely because the judges and commissioners have been regarded by the general public as impartial.’1 He went on to say, ‘It is my own considered opinion that most thoughtful people in Australia would not want the great issues of pay and hours of work, with their tremendous economic implications, dealt with by a political auction at a federal election.’ Those comments revealed an almost reverential attitude to arbitral tribunals; they still retained the aura of courts. The suggestion that pay and hours of work were above politics sounds otherworldly. Yet his remarks were close to the sentiment of the times.

  Until the Coalition, then in opposition, began to change its policy in the mid-1980s, both sides of politics supported conciliation and arbitration, accepted a union monopoly of the bargaining process and unions having legal privileges. Enormous energy went into trying to persuade the Australian Industrial Relations Commission (AIRC) to deliver different wage judgements, without the central role of the commission in that wage-setting process ever being questioned. My action as Minister for Business and Consumer Affairs in outlawing secondary boycotts by unions removed a major union privilege, and was something of an exception. But it was achieved through changing the competition, and not the industrial relations, law.

  Earlier I have written of how the wages explosion of 1981–82 highlighted the need for a less centralised wage fixation system. It was this that I had in mind as shadow Treasurer when I told the National Press Club on 31 August 1983 that it was time to turn Mr Justice Higgins on his head. Higgins delivered the Harvester and Broken Hill judgements of the Conciliation Court in the first decade of Federation, and these were the foundation stones of centralised wage fixing.

  I had also witnessed the misrepresentation of the Metal Trades agreement by the Labor Party and the ACTU as an early exercise in decentralised wage fixation. As the agreement had caused immense economic distress through higher unemployment, it suited them politically to argue that way.

  That claim was wrong, because at no time during the events surrounding the agreement did the commission or, indeed, the Government embrace decentralised wage fixation. There was no talk of enterprise bargaining; no watering down of the award system; no alternative workplace contracts were provided; and there was no suggestion that in any way the union monopoly of the bargaining process should be weakened. Centralised wage fixation and comparative wage justice were well and truly alive in 1981 and ’82, and their operation played a material role in the devastatingly high unemployment which occurred at that time. That is why Paul Keating thought that George Campbell had lots of dead men around his neck.

  The December 1983 floating of the Australian dollar increased the pressure on the durability of the wage fixation system. Exposing Australia’s currency to the fluctuations of world currency markets would highlight internal rigidities within the Australian economy. Deregulation externally called for matching deregulation internally.

  Whatever logic there was behind this view, it struggled to gain support in the post-1983 election period. The newly elected Labor Government, led by a popular Prime Minister in Bob Hawke, the ACTU, those sections of the business community which swallowed the Labor Party line on the real meaning of the 1981–82 wages breakout, most academics and a significant section of the Liberal and National Parties continued to support the old system. There were, however, some encouraging dissenters.

  From very early in the 1980s, the farmers, the miners and small business groups became increasingly frustrated with the centralised system. For farmers and miners their attitudes reflected the experience of having to compete on world markets. They well understood that, to a large extent, centralised wage fixing had become the handmaiden of tariff protection. The one complemented the other. As exporters, the farmers and miners saw wage increases through the centralised system, made possible by high tariffs, as inimical to their longer-term interests. The disenchantment of small business reflected the fact that industrial relations in Australia had always involved two worlds. There had always been a small number of large companies employing big workforces, most of which were either fully or heavily unionised. Then there were the rest, comprising thousands of small-and medium-sized firms whose workforces were largely non-unionised.

  To smaller enterprises it was increasingly unfair that their industrial relations should continue to be governed by a system custom-built for large companies employing heavily unionised workforces.

  In the mid-1980s the climate of the industrial relations debate was changed by three separate events. The first was the successful common law suit by the Dollar Sweets Company to obtain remedies against a union which effectively had placed a blackban on its business. Michael Kroger, later the president of the Victorian division of the Liberal Party, was the company’s solicitor and he briefed Peter Costello as one of the counsel in the case. This legal action was a significant breakthrough, using common law powers which the industrial relations hierarchy had never believed were available.

  In the Mudginberri dispute, the National Farmers’ Federation (NFF), then ably led by Ian McLachlan, strongly supported an abattoir in the Northern Territory which was kept operational through the use of workplace contracts in defiance of heavy union picketing. The Mudginberri dispute would never have been resolved in the way it was without the use of section 45D of the Trade Practices Act, resulting in very large penalties being imposed on the union by the Federal Court.

  The third separate dispute was that involving the provision of power in Southeast Queensland. The Bjelke-Petersen Government succeeded in employing many of its power workers on contracts and, in the process, scored a decisive victory over the power unions. At one stage in the dispute, the ACTU president, Simon Crean, actually pleaded with the Queensland Government to resume negotiations as he feared for the future of the award system in that industry. The Hawke Government attempted by legislation to override the actions of the Queensland Government, but this proved unsuccessful. At one stage in the Queensland dispute, the use of sections 45D and E of the Trade Practices Act was threatened.

  Neil Brown, Deputy Leader of the Opposition and shadow Minister for Industrial Relations, launched the long-awaited Coalition industrial relations policy in April 1986. For the first time, the Coalition unequivocally promised that employees would have the right, if they so chose, to leave the award system and sign a workplace contract which could embody all the terms and conditions of their employment. It would not be necessary for that contract to be approved by the commission or for a union to be involved, unless the employees wished it so. The policy stipulated that a person employed under a voluntary contract had to be paid at least the hourly rate for ordinary hours of work specified in the relevant award. To the extent that these contracts were silent on other conditions of employment, then the award stipulations continued to prevail. If, however, the agreement went on to canvass such issues as penalty rates and overtime loadings, then whatever the contract said would override the award.

  Although the operation of these agreements was limited at that time to workplaces employing fewer than 50 people, it was, in relation to that category of workplaces, a radical and innovative policy. In respect of them, it went much further than the 1996 industrial relations reforms. The 50-employee ceiling was removed in the policy taken to the 1987 election.

  The early 1990s saw public and media support for the Coalition’s industrial relations approach reach its highest peak yet. A widesprea
d view had developed that the system did need basic change; that the Government was confused; and that industrial relations reform was an idea whose time had truly arrived. In July 1992 a Newspoll showed that 64 per cent of respondents believed that individual workers should have the right, if they so chose, to negotiate directly with their own employer without the intervention of a union.

  Even within the then current system, change, albeit at a glacial pace, was occurring. Late in 1991 the commission established an enterprise-bargaining principle which went a big way towards meeting the wishes of the Government and the ACTU. In 1992 the Keating Government amended the Industrial Relations Act to bring into play its own version of enterprise bargaining. In substance, this was that any agreement struck between an employer or group of employers on the one hand, and a union on the other hand, could, provided it met certain criteria, be submitted to the AIRC for virtually rubber stamp approval. There was no reference to agreements not involving unions, and no provision for direct negotiation between workers and their employers without the insertion of a union.

  After the 1993 election Paul Keating said that his government would extend workplace bargaining to the non-union sector. In reality, the 1993 Industrial Relations Reform Act fell well short of this commitment. Rather than further freeing the labour market, this act introduced more rigidity.

  Most perniciously, the 1993 act introduced new and unreasonable unfair dismissal rules which shifted the onus of proof heavily against the employer. They became a further disincentive for small business to take on more staff. The 1993 act also gutted the former secondary-boycott provisions in the Trade Practices Act, and restored unions to a privileged position under the law. This was done by removing the secondary-boycott law from the Trade Practices Act and placing it in the hands of the AIRC.

  Under the 1993 act a workplace contract in the non-union sector, described as an ‘enterprise flexibility agreement’, could only be negotiated if its starting point was the totality of the existing award, it was approved by the AIRC, and any union having coverage in the area was given a full opportunity of opposing ratification of the agreement before the commission. This last-mentioned stipulation applied even if none of the employees covered by the agreement belonged to the union in question. This proviso, in particular, meant that in practice few employers would bother to go down the path of seeking an enterprise flexibility agreement in the first place.

  By the time the act was amended by Peter Reith as minister in the Howard Government, a bare 261 agreements covering just 23,200 employees had been concluded. Keating’s alleged new world of bargaining freedom was a mirage. Direct agreement-making was still held in contempt. In November 1995, the AIRC belled the cat on Keating’s so-called reforms by endorsing a 1994 judgement in another case that ‘the establishment of conditions of employment at an enterprise level through a system of individual contracts … is one at variance with our system of industrial relations, a system which, since its inception, has been based on collective processes as the means of providing terms and conditions of employment at the workplace’.2 The industrial relations umpire had given Mr Keating out.

  In industrial relations folklore Labor-style, the 1993 act, together with the 1992 changes, have enjoyed a wholly undeserved status as the true beginning of enterprise bargaining in Australia. Rather, the 1993 act especially was a classic sell-out to the trade union movement for the massive support given the Labor Government during the 1993 campaign. In a burst of candour, Jenny George, assistant secretary of the ACTU, later Labor MP for Throsby, dismissed employer concerns about the new act by saying that employers should understand who had won the election.

  It would take the Workplace Relations Act of 1996 of the Howard Government to entrench individual contracts, remove the union monopoly on the bargaining process, restore section 45D to the Trade Practices Act and bring more balance to our industrial relations system.

  Through these years of change, commitment to widespread industrial relations reform united all sections of the Liberal Party; likewise the Nationals. There was wider instinctive support for workplace changes than for even taxation reform. When Kevin Andrews presented the final version of the workplace relations legislation, known as WorkChoices, to the joint party room on 1 November 2005, there were no objections. In retrospect this may seem remarkable, and although it is true that various iterations of the legislation had been discussed in detail with colleagues prior to that date, it was, nonetheless, significant that this historic bill received such overwhelming backing.

  The conventional wisdom now is that WorkChoices went too far and was a major, if not the major, reason why we lost in 2007. If that is a valid retrospective, then as party leader, I must accept the principal responsibility for such as error of judgement. It was nonetheless a mistake embraced with eyes wide open by the entire party room.

  The emphatic attitude of Coalition members in 2005 was that, having unexpectedly won control of the Senate at the 2004 election, the opportunity to further advance industrial relations reform should not be squandered, and that the system should be made even more flexible.

  As well as mainstream reforms to the workplace relations system, the Government had a specific policy response to the anarchy in the building and construction industry, as well as special legislation in the Government’s last term dealing with independent contractors.

  Terence Cole QC, a former highly respected judge of the NSW Supreme Court, headed a Royal Commission which found there was widespread thuggery, intimidation and, on occasions, criminal behaviour within the building and construction industry. The Government heeded his recommendation and established the Australian Building and Construction Industry Authority, with particularly strong powers to bring the industry back within the normal law and order of the nation. In its short life, the authority brought huge improvements to the industry, especially in Melbourne and Perth, notorious killing fields for militants in the sector. A sharp reduction in strikes and stoppages, as well as improved productivity, bore testament to this. The Rudd Government weakened this body, and it remains ALP policy to remove it altogether.

  There was also legislation protecting the status of independent contractors. Unions and the Labor Party had long cast covetous eyes on them. In different ways, they fantasised about bringing independent contractors within some broad definition of employer and employee. Independent contractors comprise some of the most fiercely entrepreneurial small businessmen and women in the country, and not surprisingly they regularly sought both support and, where possible, legislative protection from the Coalition Government.

  The mainstream reforms of 1996 and 2005, as well as the initiatives in the specific areas mentioned, had the common goals of removing monopoly union power and lifting economic productivity, so as to boost employment and real wages. There was abundant evidence that this happened. More broadly there was the goal of removing unnecessary third-party intervention from the conduct of industrial relations, be it from the Government, the commission or indeed anywhere else. When I outlined the WorkChoices reforms to parliament in May 2005, I concluded by saying, ‘The era of the select few making decisions for the many in industrial relations is over.’

  The 1996 legislation produced the historic reform establishing Australian Workplace Agreements (AWAs). For the first time the negotiation of an individual employment contract, directly between an employee and employer, was a legislated option. The terms of that contract could be largely what the two parties wanted. The big proviso was that the employee’s pay and benefits under the contact had to be no less in value than what he or she would have received under the relevant award (the no-disadvantage test). This change effectively ended the union monopoly on the bargaining process. The Coalition never wanted to take unions out of the bargaining game, only to end their monopoly.

  AWAs operated for over 11 years. They were widely used in the mining industry as well as in recreation and hospitality; their uptake in other parts of the economy had been steadi
ly rising. They did not supplant awards; they were a further option available to employers and employees.

  But because their introduction did end the union monopoly on the bargaining process, AWAs remained objects of continuing hostility from both the union movement and the Labor Party.

  The first legislative act of the newly elected Rudd Government in the industrial relations area was to prohibit the conclusion of any new AWAs. That legislation preceded action on any other industrial relations front. The priority for Labor was the restoration of union power. It took precedence over alleged protection of workers’ rights, productivity issues and the new framework to administer the changed industrial relations landscape.

  Due to the unwillingness of the Coalition, newly in opposition, to attack the Government on industrial relations, this priority, given by the Rudd Government to serving the interests of union power in relation to AWAs, went by largely unnoticed. There were few protests from the business community, ever anxious to cosy up to a newly elected Labor Government.

  Generically, our 2004 election policy on industrial relations had promised more reform and increased flexibility. There was a commitment to ‘pursue changes to take the unfair dismissal laws burden off the back of small business and protect small business from redundancy payments’.3

  The 2004 policy also promised implementation of the Cole Commission’s recommendations, with which I have just dealt, and we also promised that a re-elected Coalition Government would introduce an independent contractors bill, designed to protect and enhance the freedom to contract and to encourage independent contracting as a desirable small business arrangement. There were sundry other enhancements of existing legislation promised, but no other major proposals.