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Constitutional and other Constraints on State Governments
seeking Labour Market Reform

Discussion Led by Peter Costello, MHR, and Phil Gude, MLA

Peter Costello:

Greg Craven gave a very good paper and I think he analysed the constitutional position very well. He said that there was a bit of change in the approach of the High Court at the moment. I agree. Today, we are primarily discussing the influence of the Court on industrial relations, but I think it is intriguing to consider the influence of industrial relations on the Court.

Recently the Remuneration Tribunal recommended salary increases for the High Court judges. This is, of course, an independent tribunal which is supposed to set salaries for MPs and High Court judges and various other people. The ACTU intervened and said that the High Court judges couldn't have these wage increases because they weren't consistent with wage-fixing principles. On ACTU advice the Government undid the Remuneration Tribunal recommendation. It was an interesting intervention. It shows where the power lies in this country. In the industrial relations field the ACTU is paramount over the Court.

The Government has now proposed substantial pay increases for the Solicitor General and the Director of Public Prosecutions, who are both Victorians, as compensation to have to go and live in Canberra. The effect of this is that the Solicitor General would receive more and the Director of Public Prosecutions about the same remuneration as a High Court judge. Both are inferior legal officers to the judges. The Chief Justice wrote to the Remuneration Tribunal, pointing out that this was a down grading of the Commonwealth judiciary, that people appearing before the judges would be paid more by the Commonwealth than they, the judges, adjudicating on their submissions. In response, the Attorney General accused the Chief Justice of demeaning 'his office and mine'. A one-line and petulant response. I doubt there has ever been as terse an exchange between the Court and an Attorney. I think the Court may now realise that, in the Government's order of priorities, the ACTU is a far more important institution than the High Court.

The second point I want to make is this. Greg was very critical of what he saw as the literalist approach of the High Court. The strict legal technique was a feature of the Dixon Court---something Sir Owen Dixon defended in his rare extra-judicial writing. Dixon saw it was necessary to protect the Court from political intervention, particularly during the period of the Anti-Communist Dissolution Bill and other fiery political topics. Dixon thought there would be refuge for the Court in strict legalism and it was much more important to preserve the Court as an institution than risk it being drawn into the political fray. I think there was a good deal of sense in the approach that Dixon took. Now, Greg said that if you go to the United States (or you go to North America, he said, I think he may have had Canada in mind rather than United States) ---if you go to the United States of course they laugh at literalism, but then have a look at where the U.S. Supreme Court now is. The Supreme Court has become predominantly a political institution in the United States, which decides those issues that the politicians find too political, such as abortion, public funding in relation to religion, and so on. I think that one of the major constitutional problems in the United States, and I think it has severe constitutional problems, much worse than ours, is the way in which the Supreme Court has been dragged into political controversy because it has forsaken literalism and never found anything to replace it. Robert Bork's book' 'The Tempting of America' gives a good analysis of the state of the U.S. Supreme Court. So it might be a good idea if the Court moves away from literalism; but if you do, you must become aware there won't be that refuge and the appointments will become much more critical. Whilst the current government is making the appointments, that only bodes ill.

The third point I want to make is this. As Greg rightly pointed out, I think the States have become subordinate political entities in Australia for various reasons. The point I would make about that is I find no willingness on the part of the States themselves to try and claw back any powers. The States themselves I think have been amongst the greatest contributors to centralism. Greg (Craven) spoke about federal failings. Well, for seven or eight years the States had the power to raise revenue from income tax and offset it against Commonwealth income tax and they didn't take it. One suspects they would much prefer to let the Commonwealth take the responsibility of raising the revenue, even if it means some limitations on their spending it. The corporations issue is a classic example---the States had the Commonwealth on the mat. They won against the Commonwealth in the High Court. They could have retained controls in significant areas if they had wanted to, but no sooner had they won in the High Court than they decided, effectively, to hand their powers over to the Commonwealth. When it comes to a question of division of powers between the States and the Commonwealth, the States usually ask 'How much?' When they were told by the Commonwealth that for co-operating in this field they could have $110 million in the first six months and have it indexed in perpetuity to the CPI, the States forgot most of their concerns about political control and political sovereignty.

Now I am, of course, a 'Fed' and you will say this colours my thinking. I must say, though, it is very hard to run an argument for political federalism from Canberra when Melbourne, Sydney, Adelaide, Perth, Hobart and Brisbane don't want to run the argument in their own bailiwicks. Perhaps they have been demoralised, but until the States show some inclination I think that federalism, in the proper meaning of federalism, is dead, regardless of the High Court or the Commonwealth Government.

Phil Gude:

Ladies and Gentlemen; I come to you as a recently disbarred of the industrial relations club. I say recently as I think my credentials were in doubt going back about twelve months, when I was the champion of the cause to defeat some new legislation in the State recently to redraft and restructure the State Industrial Commission, my disbarment was confirmed.

It has been interesting for me in many ways this morning to hear people coming to a position on industrial relations from a totally different perspective from my own, and yet we have arrived at the same conclusion. That shouldn't have surprised me but I suppose I was already in the tapering away. About the only law we haven't heard today is the reference to the conveniently forgotten law which Mr Hawke has just introduced. I suppose what we really should be doing is conveniently forgetting the Industrial Relations Commission in the Victorian jurisdiction and other jurisdictions. I think one of the impediments we have got in terms of effecting the change we all want is that a number of the associations and, having been a person representing those associations I have perhaps a higher appreciation of what they are on about, refuse to accept the challenge and the opportunity. They see the challenge as being too great, and therefore they don't want to lose the security of the club, the security of the baby blanket as it were, the guaranteed membership base they will have if they are in that representative range.

I suppose in a sense my process of cleansing started back in 1980 when I joined the Chamber of Commerce which is not, or was not at that time, engaged in industrial relations in any way whatsoever. There I found you could have a very profitable association doing constructive things for business without the need to be involved in that sort of area.

A very strong point that David made in his commentary, which I must say I feel very strongly about as well, was the reference to not requiring any committee to give you any advice on change. If you are going to make the change then you ought to be doing it. There comes in life, not always in life, but there comes sometimes in a person's life a unique opportunity, and I would say that we have reached that point in time in this State, and if we don't recognise we have reached that point in time in this State, we do not deserve to become the Government after the next state election. Should we be put in that position and abuse the opportunity the people would throw us out at the very first opportunity. That brings with it a need to address the key issues---and what are they in Victoria? They are clearly a question of financial management on the one hand and industrial relations on the other and the two are inextricably linked. I am pleased to say in respect to both of those outcomes at least the Shadow Treasurer Alan Stockdale and myself have very common views. Again, interestingly, I suppose we have perhaps come from slightly different backgrounds but have arrived at similar conclusions.

The Victorian Industrial Relations Draft Policy on industrial relations is out for kicking around at the present. I note John Hyde sitting in front of me and he was at a meeting with me yesterday and I am sure it didn't escape your notice yesterday that when we were discussing breaking up into little committees to discuss a whole range of things, which was driving me crazy, one of the issues on the agenda was this issue of federalism on the agenda for each committee to discuss, including what they are on about, trying to preserve the industrial relations processes.

John Hyde:

I thought you were heading for political disaster yesterday.

Phil Gude:

A couple of us were not happy about it. What occurs to me is that we really do need to go very much the way of New Zealand. I am not at all unhappy at the prospect of effectively declaring every state award an agreement, giving it the force of an agreement and abolishing the State Industrial Commission. In dollar terms it's significant in a way but not in another, it is only about $11 million, but $11 million in a $44 billion debt situation isn't a lot, but in terms of what it can do for this State, in terms of what it can do for business, it is an opportunity which certainly ought not be lost, in my view.

With those few remarks I would like to thank David (Russell) for his historical appreciation of changes of events and to, at the same time, challenge us to meet the obstacles of the future and not baulk at the first jump.

John Stone:

I thought I might seek to have the first comment. Dr Craven did make some remarks about own remarks in my column on Thursday (I should describe him as Professor Craven because I inadvertently slighted the colleague in question by describing her only as Doctor Saunders). A matter which has caused some angst within the ranks of at least one or two Melbourne academic circles. Quite unintended I might say, although my other remarks were fully intended.

Let me say that I found myself almost in total agreement with everything that Mr Craven said which perhaps might surprise him, but I did. In order that we may put out of the picture perhaps one or two of the questions which perhaps others may have raised about the column that I wrote last Thursday, could I just say that although he is correct in saying that Dr Saunders was appointed to the Administrative Review Committee by Senator Durack, she was not appointed to the Chair of that Committee which was the point I made, not her appointment to the Committee. I repeat my view at that time that the Labor Party is not renowned for appointing to such positions other than their own. I hold to that view.

Indeed, the fact that Senator Durack did appoint her to that position is I suspect in keeping with other appointments Senator Durack made during his tenure in the position as Attorney-General, of which we are currently seeing the results in the High Court in particular.

As to the lady's marriage to Mr Ian Baker, the Minister in this State Government, I was merely of course bringing out a point germane to people's appreciation of the position, and one which indeed even Ranald McDonald actually found it necessary to refer to in his 3LO program only a week or two earlier.

I want to go on now to say that I think that the Constitution conference bears very much upon the questions which Mr Craven was addressing last week. However interesting it may have been in many respects, I believe it notable in the views expressed that, as I understand it, it does not in fact bring federalism into the area of the debate. The twelve key issues which it lists do not, as I recall, include the External Affairs power, which I think Mr Craven quite rightly said is probably the central area whereby the High Court has infringed on the role of the States. Nor did I notice among the twelve issues the position of the corporations power, and indeed I didn't notice anything at all about the question of federalism, although I think there was something which indicated a greater degree of support for federalism than perhaps some people approaching the conference might have expected.

In other words, I think we should be, in this Society at least, quite clear, notwithstanding the distinguished academic credentials of those ostensibly involved with the arrangement of this conference, again I use the word ostensibly. I haven't the slightest doubt where that conference is coming from and where in fact it is hoping to take us.

Now that being said, I make it clear once again that I happen to agree almost totally with everything that was said, and I urge Mr Craven in the light of that to do what some people in this room did five years ago, namely to promote a genuine debate on federalism. After all, some people in this room started a genuine debate upon the industrial relations situation in this country, the disgraceful situation which obtained in industrial relations. I would agree wholeheartedly with everything that Mr Craven said toward the end of his remarks, that federalism was probably the wave of the future and the reasons he gave for it.

I suggest to him that he should consider forming a Parkes Society to promote the cause of federalism--- a society for the promotion of federalism. I am sure you would get a lot of members from this room. That's a serious suggestion. I think that needs to be done and it is a society which needs to be totally divorced from governments, attorneys-general, and other people who are involved in manipulative processes and public funding.

I want to conclude by saying that I think Mr Craven has put his finger on an absolutely central issue for the future of the Constitution, one which of course has very great relevance to David Russell's remarks also. The question which particularly arises from David Russell's paper, which will no doubt now be the subject of discussion is: 'To what extent are we in fact prepared to bite the bullet and abandon the industrial relations power, or the legislative application of it at least, at the State level in order to leave it solely the responsibility of the Commonwealth?'

Ray Evans:

I want to move straight from what John Stone has said to what seems to me to be the crucial issue of David Russell's paper---I think it is the fourth paragraph on the second last page. He argues that if the State were to abolish its industrial relations institutions, the constraint on the Federal Industrial Relations Commission is such that it would be difficult for the Federal apparatchiks to move in and take over what the State is vacating. The point seems to arise that whereas in the State jurisdiction everybody is roped in willy nilly, in the Federal jurisdiction it is much more difficult for the bureaucrats and the unions to embrace everybody. Now I would like our industrial type lawyers to comment on that. What is the balance of view on that issue?

Peter Costello:

I will comment first to put the contrary case to what you and John Stone put.

I think that the Commonwealth at the moment holds the predominance of power in industrial relations. There are unfortunate features of having overlapping responsibilities, and I think that it would probably be preferable if the Commonwealth kept its power. I wouldn't even mind if it took over the whole power in relation to industrial relations on the condition that that power was used substantially to deregulate. Now the argument that has been put by David (Russell) is that in the States there is a difficulty of roping people into Federal awards who are currently under Common rule awards within the States. That is true, but I believe that you could regulate the predominance of relationships through Federal awards---it would just be more time consuming because you would have to pick them up one by one rather than just put out a common rule. You would end up regulating anyway all the key industries which would affect national wage outcomes and national macro economic factors anyway. There would always be a part which would be unregulated but in terms of significance it wouldn't be significant in terms of macro outcomes.

There are two arguments running here. One is the federalist argument, the argument in favour of balance of powers. Then you have a political argument, which is that there is a balance in favour of deregulating the labour market. Now if in the Commonwealth you have a group of people elected on a proposal to deregulate, I believe that they ought to use as much power as is available to them to deregulate rather than decline to exercise that power, leave regulation in place on the grounds of the federalist argument. I am not saying you would use every mechanism available---there are a few that I might baulk at---but by and large I would not restrict what I consider to be absolutely essential political and economic reforms for the sake of giving powers to the States.

Phil Gude:

As far as I see it we have one chance. We have got it coming up after the next State election in Victoria and we have got to take it. If you don't achieve your goal you just have to work it through so that you do achieve your goal. No point throwing out the baby with the bath water. I have tried to look at it from about 25 different perspectives and no matter which way I look at it I can't justify in my heart the continuance of the State system, I am blowed if I can. If you look at the SPC dispute, there you have a dispute where people made a decision voluntarily, between themselves, and the fastest I have ever seen my old mate Malcolm Donaldson move in his life was when it looked like the Commission was going to be taken over. Commissioner Donaldson got his skates on and the trade unions moved faster than they had ever in their life, and they proved that they can actually do something toward enterprise bargaining. Nowhere near where we all want to go to but at least they were doing something.

It seems to me that even if you in part fail, taking the worst case scenario, you will at least have effected some change, and you will drag that crazy Federal system out of its slumberland. I think it's worth that for a start.

Secondly my worry federally is that if we get the change of government at the next election, and we will, will we in fact control the Senate? Will the changes that we want to see take place at the Federal level then come through? If they don't, and if we have thrown out any opportunity to control here, is that something you should worry about? I contend in the end the answer is no. We should go ahead.

David Russell:

One further comment. Non control of the Senate doesn't mean that the legislation can't proceed. If you have a double dissolution procedure---my own view is a double dissolution is unlikely to result in control of the Senate until the appalling relationships between the conservative parties in Queensland are resolved one way or the other---but even if you don't control the Senate you will have the opportunity for a joint sitting. The significance about that is that what goes to the joint sitting must be what went to the Parliament the first time so that when the Opposition wins it has to have what it is going to do at Federal level watertight and worked out because it won't get a second try. It may well not get a second try. If the Coalition gets into office and at that stage asks the Department of Employment and Industrial Relations to draft the necessary legislation having regard to government policy, it is unlikely to produce anything to make it worth going through the agony of double dissolution.

The second point is, there is one further thing the State governments can do which would be enormously valuable, and that is omit the establishment of enterprise unions. We found with the Queensland Power Workers Association that whilst you perform under a trade union which is not registered it has all sorts of disadvantages in terms of civil liabilities in property and the like. If enterprise unions are to work and are operating effectively and have agreements which are capable of being defended in the public eye then part of the Federal Commission game is going to be a question of persuading it to hold the State's hand. In fact in the power dispute when we kept the Federal Commission out of Queensland where it had been held to have jurisdiction, it wasn't on the grounds that the State Industrial Commission had the power to control the dispute, it was on the public interest grounds and that was largely upheld because we had an enterprise agreement in there arguing with us. So that to omit the establishment of enterprise unions would be an enormously valuable thing that the State Government can do quite independently of dismantling the rest of the system and I should have put that in and it will be in the published paper. Because part of this is the policy we are looking at very fast time frames. The Federal Commission, as Paddy McGuinness once said---and certainly everything I saw in the power dispute confirmed the correctness of his conclusion---every decision which it makes has its own self preservation and power as the number one consideration. If you got a government elected with an enormous majority on a mandate to do this and that does it, sets of enterprise agreements and then disputes come before the Federal Commission, in which there is defending the agreement and trying to keep the Federal award out, not only an employer but an employee organisation who can show that what they have done has the support of the workforce, then there is a very real prospect the Federal Commission will not reject it. I am not suggesting that in the long run that would be their institutional bias, in the face of a challenge to their authority from enterprise agreements, what they would be trying to do would be bend with the wind to survive for the time being and hopefully not get abolished so that when government changes they can come back and re-regulate. But even if you assume total malice on the part of the Commonwealth Commission ---and I am disposed to do that---it doesn't change the fact that they can be persuaded to stay out of State industrial relations at least for the short term.

Barrie Purvis:

I am somewhat comforted and somewhat perplexed by a number of things that have been said. As one who travelled the Damascan road even before Phil Gude, I am concerned that the currently expressed policy of the Opposition parties federally is to retain the design standard of the Federal Arbitration system. Now I had thought, in my progress from centralism to federalism, and possibly even to anarchy, it might be highly desirable for the Federal Act simply to be repealed, thus leaving everything to fall back under State institutions. I was somewhat comforted by Ray Evans' views that that would simply mean that the States would compete with each other and have enormous shifts of capital and people from one State to another, depending on where it was attractive to be. Having only yesterday had an experience before a State Tribunal, I have some difficulty with putting much trust or faith in that outcome, and I am also attracted to the prospect of the abandonment by States of continuing to exercise their jurisdiction in respect of industrial relations and maintaining tribunals if it were to mean that the ceding of power to the Commonwealth meant that it all comes under the one system and then that system was repealed. But if we don't take that last step it seems we have very real problems of training and controlling human nature vested with total national power.

It is not my nature to compromise, and I don't like putting up alternatives which are soft options for those who are not so disposed to latch on to or seize, but if one had to be considered it has long been my view that a process of cession of State authority to the Commonwealth with the intention of repealing the Commonwealth's statute in that regard could be compromised or could be watered down on the basis that you retained a national mediation service which has no enforcement capability whatever. You can have all sorts of variations of this. You can have parties required to fund it as in commercial arbitration; it can set its own rules or it can be required to operate under rules which say that any party wishing to avail itself of it must give an undertaking to comply with the recommendations given, with penalties for default being that you are prevented from using it subsequently, or you can be required to put up a bond which you forfeit for non compliance with your undertaking to abide by its recommendations. But having said all that, I am still perplexed by the nuts and bolts of how this is all going to be translated into the ultimate desirable objective about which I think there is a reasonable consensus between us as to what that might be or at least our consensus is within reasonable parameters.

David Russell:

The first point is this: the more you leave intact the more you run into the last conclusion. In other words, if the thing is there with truncated powers it is easy for it to be given the powers back. If on the other hand it is smashed to smithereens then its re-establishment would be a problem. So that is the argument against moving from an opting out situation of Federal Coalition policy at the moment to an opting in situation which you refer to.

As a matter of political interest in Queensland, National Party policy was to abolish all of these tribunals. At the Federal level we have moved more gently and we said we thought the Coalition should move to a policy of opting in. In other words with much of what you're proposing it would have formal arbitral powers without parties agreeing to abide by its decision, otherwise it could act as a mediator. Part of the problem with that, the political advantages of it are easy, it just sounds like a small change even though in fact it is a major one and it is easy to sell. The disadvantage of it, apart from the fact that there is a residual existence in something that the Labor Party can turn into something powerful, is that the real difficulty with the Federal Commission at the moment is it won't arbitrate. Peter is more a practitioner in this area than I have been but in my experience what the Commission does, it insists you go there for conciliation, and I think Hugh Morgan gave a very good speech in 'I Pride Myself on being a Clubbable Man' on what happened with the Gibbons story---you are all sort of dragged in and told to conciliate, and you're kept there until you have given the union what it wants, and that's the end of the conciliation process, although the Commission never really arbitrated at all. So if you are going to allow a mediation body it must be a voluntary mediation body as well as a voluntary arbitration body.

The more I think about it, whilst I think it's politically harder to push for total abolition at all levels it seems to me that really should be the objective. If you leave it there, the prospect of it's coming back is just too great. That would be my conclusion anyway.

Phil Gude:

I think you have got to get rid of them because as far as the State Commission is concerned, the talk-fest arrangement in conciliation is something we have all gone through forever and I couldn't help but be amused by your anecdote earlier of having a Minister with no air conditioning and the toilet shut off because I have gone through the same antics myself over the years---it is a bit of fun in a way but it's a pretty serious indictment of what we are really on about. The people that are in the State Industrial Relations Commission you wouldn't feed let alone allow them to arbitrate. The NSW Commission are light years in front of the Victorian Commission, so you get the idea how bad it is here. You couldn't leave those people in place. But it doesn't end with the Commission. It's the whole culture of Labor, the whole culture through the public enterprise sector and the universities as well. Just take the State Industrial Relations Commission. It's gone from 350 people in 1982 to 1350 people today and there is no prize for guessing where they have come from, and that permeates all the way through the system. You know it just has to be a complete off-with-his-head job or it won't work.

Peter Costello:

Well I can see a place for a voluntary arbitral system. I would probably privatise it in the sense that if you wanted to use the Commonweath's arbitral system you could pay a fee and it wouldn't be compulsory, you could also go to John Stone and pay him a fee, or David Russell.

I must say one advantage of disbanding the industrial tribunals is that to a degree you abolish the career structure. On the Victorian Commission there are number of ex-union officials who lost elections. When you tip out the president of your union, and he's been a union official for 20 years and started off as an electrician, he's obviously not going back to being an electrician at the age of 50. You have got to think of something to do with him so you make him a Board chairman or commissioner on the Victorian Industrial Relations Commission. Similarly in an employer organisation, where there's a palace coup, then you have to get rid of the old managing director, you need somewhere to put them. These things are very important in politics, you need ambassadors to Dublin, because you have to put people who become an embarrassment to you somewhere, and you need ILOs. Of course if you take away the top superannuation tier the career path becomes a lot less attractive to these people. It ends the career path and the political parachute.

Greg Craven:

As a non industrial relations practitioner I tend not to have industrial relations opinions on matters as absolutely outside my experience. I agree with what Peter was saying, there is often a tension between structures here and political achievements, there is always an immense temptation to say, if we can just push the structure out of the way to achieve the objective wouldn't it be wonderful---the Mussolini theory of politics---the question is though whether in the long run pushing federalism out of the way to achieve that single good is good especially when the other guy ten years down the track does it to you. There are a lot of structures we might care to think about apart from federalism intruding that way, like parliament and judicial independence which are also pushed aside in very good and well meaning ways. The other thing you might care to think about is, well maybe it isn't a question of saying structures against politics absolutely oppose. Maybe it's at least a question of how much you consider the structures in considering what you will sacrifice to get your political achievements. Perhaps you should be thinking, even if you ultimately decide, well we are prepared to throw federalism to the wolves to achieve x, maybe you should at least be thinking that about it before you do it. I suggest both political parties are very liberal with that sort of thought when it comes along.

Barrie Purvis:

Of course we have got Mussolini corporatism now.

John Hyde:

In all political parties, as Greg just said.

I never cease to marvel at the confidence that opposition politicians have of themselves when they get into government. I do not for a moment believe that either here or in Canberra these people will do all the things they say they are going to do. Yesterday I attended a meeting at Parliament House where for an hour and a half you went about setting up the structures that would ensure that you fight, you went about it and let your opposition organise, put them into a position where they will feel miffed if their views are not taken into account, you let every vested interest get at you, and you carefully went about structuring it saying we are determined to fight. Now I just do not believe that you will do all the things you are saying you will do in office. Therefore, the structures are viable and in the long run the structures are more important than keeping power unto yourself so that you can do the right thing ---because you are not going to do it. You will be guided in the end by what the public will wear at any time. That's your given. Now part of that given is, that will be in a Federal system.