The Law and the Labour Market

The South Australian Opposition's I.R. Policy

Graham Ingerson

I thank you for giving me the opportunity to address your Society's Conference this morning with my ideas on the direction of the Industrial Relations policy under the next Liberal Government in South Australia.

Our policy must be simple, easily understood and, more importantly, introduced without complicated legislation, but with a steadfast determination to introduce the new laws.

It will be based on -

  • individual freedom
  • the current day needs of individual enterprises
  • cooperation between employers and employees and their representatives and with easily understood dispute resolution procedures
  • a simple, plain English legal framework

Mr Chairman, I will firstly paint the picture of the economic and industrial environment in which South Australian businesses have to operate today and then put to you, the general direction which I believe we must take to give South Australia the `kickstart' it needs to again become a vibrant, exciting State economy.

Well, what is the position in South Australia today?

Premier Bannon has just recently put to Parliament a balanced State budget Ä that is if you accept that borrowing $370M to adjust for the difference between income and expenditure is called balancing the budget.

Further S.A.F.A. has borrowed $145M to fund a substantial recurrent (day to day) deficit for the second year in a row.

This technique of funding by the Bannon Government is like you or me borrowing money to feed and finance the family's daily needs.

There has been a deliberate attempt to mask this serious situation in the Budget papers by the Premier and unfortunately it has not been given the coverage by the media that should have occurred.

The State Bank's corporate loss has inflated State debt 50% in one year to the tune of $2.2 billion. The ongoing interest cost to the taxpayers of South Australia is $220M per year (a serious comic said, this week, "if every person in the world, the 5 billion of us, put fifty cents into the Premier's offering bowl, we would only just repay the loan and the first year's interest").

Unfortunately for South Australian taxpayers, the State Bank loss is the second biggest corporate loss in Australia's history behind Mr Alan Bond.

Total interest costs of $694M are the fourth largest budget expenditure item behind Treasury, Health and Education.

Forty-six cents in every dollar of tax revenue will be needed to pay this year's interest bill.

Taxation is up 11%. There has been a welcome but very small cut in the rate of payroll tax. Welcome though any reduction is, the government still believes it will collect $40M more in payroll tax in 1991/92.

In fact, all other business taxes and charges are up in a time of deepening recession.

As well as the significant increase in borrowings, Statutory Authorities are being raped of their development or retained profit funds. For example, S.A.F.A. will contribute an extra $140M to $400M in 1991/92; E.T.S.A. an extra $20M; E. & W.S. now $10M; and P.A.S.A. now $5M.

The last three resulting in higher future electricity, water and gas tariffs to business.

Workcover has estimated unfunded liabilities to $260M Ä the levy rate on employers averages 3.8% which is the highest in Australia. This is hardly surprising when according to an official actuary `Workcover has the highest benefits paid to employees in Australia'.

Unemployment last month was 10.2% but of more concern is the staggering rate of youth unemployment. More than one in four people under 19 are out of work, girls being significantly worse off than boys.

Our regional economy is in deep recession, our major rural sector is struggling and so is our major manufacturing sector, the motor industry.

Not a very happy picture, Mr Chairman.

Now let me turn to the Industrial Relations arena. Over the past two years, the Bannon Government has extended shopping hours but not before, at the insistence of the Liberal Party, penalty rates were partially removed and work practices significantly modified Ä a positive move.

On the other side of the ledger, an Industrial Relations Act was introduced to enshrine preference to unionists, special rights to U.T.L.C. before the Tribunal and in demarcation disputes, the watering down of common law rights to sue unions or employees for breach of contract and the limitation of new enterprise agreements.

The Government, with the help of the Democrats, introduced legislation on Workers Compensation that significantly increased costs to business by increasing average levy rates from 3.2% to 3.8%. This move took $50M of productive capital out of the economy in one year.

Thus while recently there has been some positive de-regulation via shopping hours, the Bannon government has moved backwards by re-regulating privilege to unions via preference, making it more difficult to move to enterprise agreements and increasing costs to business through Workcover levies.

Mr Chairman, I want to now look at one other concern of business that will affect any future policy direction of industrial relations in our State; that of Government charges on LABOUR ON-COSTS.

I have with me a table (appended) which sets out these on-costs as they apply to a manufacturer in South Australia today. There are some interesting lines on this table e.g.

- Payroll Tax 6.25%
- Workcover 7.5% etc.
There are a lot of State instigated and controlled on-costs on this list which totals 40%.

Mr Chairman, that's the scene in South Australia today Ä a State in recession, a State Government borrowing to keep alive its Government run businesses having increased tax revenue and charges, some deregulation of Industrial Relations (shopping hours) but principally more regulation (extension of preference to unionists) and finally rising labour on-costs due principally to changes in our legislation.

Mr Chairman, as you can see, there is much to do to mend our economy. Much of it will be affected by significant coordinated changes at National level, in TAXATION, INDUSTRIAL RELATIONS, TRANSPORT, COMMUNICATIONS, and TARIFFS.

But many things also depend on the State Government cooperation, a factor sometimes ignored in the industrial debate. At State level changes in the industrial relations area will be very important.

Mr Chairman, South Australia must become internationally competitive and we will only do it if employers and employees decide together, that this goal is necessary and achievable.

We need policy changes that recognize that all the Federal issues mentioned above must move together. As an example, it is nonsense, as the current Hawke Government has done, to drop tariffs without giving business community a complete package of economic reform.

Two separate issues of reform as part of this package would be the opportunity for business to negotiate with unions changes to labour on-costs, and for State Governments to reduce their statutory on-cost charges to business.

It is nonsense to even talk about a level playing field, let alone try to establish one if, as a country, we don't address the time lag with our anti-dumping laws. They could, if Government had the will, be properly administered to prevent this dumping practice from occurring.

It is ridiculous to encourage Riverland growers to value-add to their oranges to produce juice and then allow Brazilian orange juice concentrate to be dumped in Australia at half the cost.

Mr Chairman, our State needs Federal policies and time because of our specific regional economy to enable businesses in South Australia to have a chance to adjust to being internationally competitive.

Mr Chairman, at State level, industrial relations management will be one of these important changes of direction.

All States will need a coherent Federal industrial relations policy that we can complement.

John Howard recently put down four points for a basic Federal Industrial Relations policy which I support. We will use its general direction as the basis of our policy.

As John Howard rightly states, "The litmus test of any industrial relations system in the 1990's must be its potential to deliver more productive outcomes than those achieved in the 1970's and 1980's.

Our policy also will be built on the major principles of:

  • firstly, the absolute right of individual employers and their employees to make voluntary agreements at the workplace level, without the intervention of organisations or industrial tribunals and subject only to the observance of a minimum wage calculated at an hourly rate and other minimum statutory requirements including safety and health measures,
  • secondly, the absolute right of individuals to join or not to join trade unions,
  • thirdly, the maintenance of the principle that the conduct of all Australians should be subject to the ordinary laws of Australia administered by the courts, and
  • fourthly, the right of trade unionists to associate on an enterprise, industry or craft basis without arbitrary restrictions of any kind.

Whilst we will need to legislate to achieve this opportunity for businesses who wish to opt to make these dramatic changes to the way they negotiate their industrial agreements, it is obvious to me that many employers, unions and young people want two streams of industrial relations.

Some, and I might add, significantly more than I first thought, want awards negotiated as they are today to be an option - but they want more flexibility within these awards. Others want to move away to a freer model of enterprise agreements.

We will accommodate both of these options in the amendments necessary to our Industrial & Conciliation Act.

Of those four principles mentioned, it was very interesting when I recently spoke with young people i.e. under 25 to find that they strongly believed that the right to join or not to join a union was the most important issue of all to them.

A very significant majority thought that union membership should have nothing to do with employment or promotion. They want unions to exist but the union movement has to earn the right to their membership. Another important issue was the desire for a simple dispute resolution process.

Mr Chairman, States must introduce complementary legislation to the Federal Government as I have recognized but we must have the opportunity to add or subtract local components to our own industrial relations agenda.

As an example, in setting minimum standards for wages it is necessary to take into consideration, Adelaide's significantly cheaper cost of living.

As well as these industrial relations framework changes that need to occur, South Australia must reduce the labour on-costs that this Government has created (Workcover, payroll tax) and the other fixed costs of business that governments create like electricity, water and gas charges.

I wish to deal with these labour on-costs.

The two most important on-costs that we must tackle in government are payroll tax (6.25%) and Workcover (7.5%).

Payroll tax is the most iniquitous tax any government can put on employment as it reduces jobs and productivity. If we are going to insist as a community that tariffs are to come down to minimal levels, thus reducing consumer prices, then governments have to reduce their component charges in the significant labour on-cost otherwise business will go broke. The Goods and Services Tax change heralded by the Federal Liberal Party must include a percentage component pay-back to the States that will enable them to reduce or even eliminate payroll tax.

The other change we as a State can make is to put Workcover back on the rails and reduce this significant labour on-cost for South Australian business.

Yesterday I was speaking to a large manufacturer in South Australia who has branches in New South Wales. He advised that Workcover was 8% of salary in South Australia and 2% in New South Wales for the same factory type.

Mr Chairman, it is our policy to re-introduce the private sector insurance companies back into workers compensation administration. The cost savings will be significant to South Australian businesses.

We will re-vamp the benefit structures, an increase for some and a decrease for others, so that those workers who are genuinely injured at work will be adequately insured. We will remove all excessive benefits that currently exist in the Act.

We will run the Corporation with a revamped Board that is required to make sure the scheme is fully funded.

We expect to reduce the average levy rates to business from the highest in Australia at 3.5% very quickly.

Mr Chairman, I have summarized our economic woes to establish the context for industrial relations reform at the State level.

I want to conclude by saying that Australia, and thus our State, needs a plan that is coordinated at State and Federal levels.

A plan that is easily understood. A plan that's exciting. A plan that encourages a new attitude to success with a very positive direction for our future.

Mr Chairman, I'm sick and tired of the effect of this government created recession. "The recession that we had to have".

The positive changes that I have put forward here today, I believe will turn the economy around giving us all hope for the future of our state and nation.

Thank you for giving me the opportunity to talk to you this morning.

March 1991

LABOUR ON-COSTS

Per cent
1. Payroll tax (*) 6.25
2. WorkCover 7.50
3. Occupational Superannuation) 3.00
4. Training Guarantee Scheme 1.00
5. LSL Provision (6.5 days p.a.) 3.00
6. Annual Leave Provision (20 days p.a.) 9.00
7. Annual Leave Loading (3.5 days p.a.) 1.60
8. Sick Leave Provision (20 days p.a.) 4.50
9. Bereavement Leave (2 days,
3.5 times over 50 yrs) 0.07
10. Public Holidays (10 days per annum **) 4.50
Total On-Cost 40.42

* The first $414,000 of payroll is exempt from payroll tax.
** Easter Saturday is not counted

Notes:
1. The above calculation does not include any additional wage costs resulting from the replacement of an employee by a casual during periods of leave.
2. Nor does it include non-award superannuation contributions by the employer.
3. It also assumes (wrongly!) that all time at work is effective time. It is widely regarded that productive time ranges from just 65% to 80% of attendance time at work. If this is factored into the above calculation the 40.42% figure becomes more like 45.7% Ä 51.5%.

Source: Chamber of Commerce & Industry

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