The Law and the Labour Market
Waterfronts from Singapore to Sydney
When I arrived in Sydney early this year to take up
the new position at National Terminals, I thought I
knew what I was going into, I thought I knew what state
the Australian waterfront was in. I should have expected
what was going to confront me. What I did finish up
facing was something much worse and much more daunting.
I found the waterfront culture so similar to the coal
mining culture that I had just left after 10 years,
that it wasn't funny. It is exactly the same. Its
main characteristic is that the workers belong to the
union, they don't belong to your company. That really
is the main problem.
There were several main features of the coal loader
reforms. One was user ownership. When the beneficiaries
are the owners it is remarkable how much interest they
take in everything being efficient.
Another is true enterprise philosophy. I must say
that I was struck by the talk before lunch today, by
Professor Blandy. I think that what he said is the
theory of what we have done in Newcastle. I know,
from some of the questions, a lot of you here thought
that perhaps he is a bit soft, but I hope I can demonstrate
to you that he is not. He is concerned with making
people want to work for you, rather than for the unions.
Another feature is technology. Reforming the coal
loaders was not just about work practices, it was about
upgrading technology into this century.
The elimination of demarcation, another important
element, is not only about union demarcation, its also
about the demarcation between, for instance, the coal
loader and the State Rail Authority, or between the
coal loader and the Maritime Services Board. The elimination
of those demarcations was very beneficial because,
instead of having them planning their railway system
or their ports separately from us planning our coal
loaders, we are doing it all in harmony.
Competition between ports is another very healthy
thing. When I went to Newcastle in 1983, I set myself
a five-year goal to be more efficient and cheaper than
the Queensland coal loaders. Well, it took about 7
years, but we got there. That is competition for you.
It may seem to have taken a long time. However, coal
loading in Newcastle is the oldest industry in Australia,
and with nearly 200 years of work practices to overcome,
seven years was not really such a long time.
Add to that the reduction in Government involvement.
With the NSW coal loaders, the Marine Services Board
was clearly driving the whole system, an MSB under
a regime that clearly was not very healthy, involving
the sorts of things that port reform is all about changing:
over-manning, bureaucracy, people not being accountable
for what they are doing, or not really knowing what
they are doing. We found it too difficult to reform
the government operations. The best thing was to move
away from them, and that is what happened.
The Newcastle coal loaders were way down the bottom
of world productivity in 1986. The United States produced
over 100,000 tonnes per man, Canada was just behind,
South Africa was well down Ä but with cheap labour
it didn't matter very much. Queensland was around
80 and we at Newcastle were at 40. By 1990 we had
gone right up to the top with the USA. In 1986 dollars
the exporters were paying 6 dollars a tonne and today
they are paying just under 4 dollars a tonne. In real
terms it is about half, when adjusted for inflation.
During that same time the tonnage has gone from 20
million in 1986 to 36 million in 1991.
Going back a bit further, the tonnage in 1981 was
12 million. If you are from NSW, or from the mining
industry you will remember "Wran's Navy" in 1981.
"Wran's Navy" consisted of over 50 ships waiting for
coal off Newcastle. That was with 12 million tons
per year. Now we are doing three times that tonnage
and there are no ships waiting.
When I moved into the container business this year
I moved into a company that had only been formed about
3 years ago as a joint venture between the Australian
National Line, about 60%, and Howard Smith, 40%. They
had joined together to form a strong Australian-owned
container terminal operator who could offer genuine
competition to overseas operators.
The formation of this company was before the government
waterfront reform process officially started in 1989,
during the opening stages of the inquiry that led up
to that reform. In forming this company A.N.L. and
Howard Smith could see that the future of the waterfront
lay in bigger operations, to give you economies of
scale, so you could invest in state-of-the-art technology.
This is a new industry that is going to be built on
economics of scale and genuine competition. Genuine
competition doesn't mean having 100 little back-yard
operators in a port. Genuine competition is when you
get two or three healthy operators, free of inefficient
work practices, competing with each other for Australia's
benefit. It is not the quantity of competition, it
is the quality that counts.
It is useful to compare how we reformed the coal chain
of Newcastle with what has to be done now in the container
terminals. There has to be common objectives, systems
that work across the waterfront. One of the things
we had to do in the Hunter Valley coal industry, because
it is impossible to bring everything under one ownership,
was to make sure that the planning was done in a centralised
way. In doing that we got together the management
of all the different bodies who were moving goods to
and from the waterfront into a planning body.
What we forgot was that there were 36 unions between
the mine and the port. Any one of those unions, if
it so decided, could stop the coal chain. So the reason
for forming the coal chain council, as we called it,
was not to allow the unions to run the waterfront,
but so that we could get the 36 unions to act responsibly
to the Hunter Valley coal industry. We formed the
Coal Chain Council, not the unions, and the union representatives
had to sit in a room with about a dozen people, four
of them, four of us and a few government people, and
discuss things every month. They also had to realise,
particularly the unions down the coal chain, that if
they stopped work in one place, every other part of
the chain would eventually stop.
The container industry is not as simple as that, because
it is not one product, but the principles are the same.
I see, at the moment, Australian waterfront employees
on one side and the waterfront unions on the other,
that's all got to change. Instead of having opposing
sides, we need to work together, to stop competing
where we should be co-ordinating, so we can compete
vigorously in the commercial world.
Three significant things improved the coal chain and,
I think, will improve the situation on the waterfront.
One is to increase capacity, second is to eliminate
interfaces where we can, but where we can't to co-ordinate
them better, and third is to manage industrial relations.
Manage is really the operative word here.
There was a question to the Professor this morning
about unions. I've watched the Waterside Workers Federation
very closely, particularly this year, and I have to
say that it's the most awesome body that I have ever
come across. The reason is that its members have
absolute loyalty to it. When they have a stop work
meeting, 85% or 90% turn up. In any other industry
20% will turn up, or 15%. So you know from that that
the members are loyal. They are loyal to that union,
they are not loyal to National Terminals, or any other
employer. That's what we have to change.
With the coal loaders, we were fortunate, we were
slightly outside the general waterfront situation,
partly because of our ownership being through the coal
industry, partly because the management of our company
had been lucky and smart enough to make industrial
agreements many years before this waterfront reform.
It was the beginning of the two enterprise agreement.
Now when this waterfront reform process started in
1989, we stayed outside it and did not put our hands
up for any of the $300 million redundancy money. Some
of my shareholders said, "David, get into that, this
is 300 million," because we had to down-size our operations
in Newcastle when we merged the two coal loaders.
We cut the number of employees from 600 to 250 in 18
months. None of that was with money that came from
this waterfront process.
The reason I kept out of it, was because I knew that
if you took the money, you had to be in the process,
and the process was so imperfect. We had to come away
from that. When you are three quarters of the way
down the tunnel, you don't turn around and try and
go back. You have to push through it, and out the
About the general waterfront, there are some positive
aspects. One of the most positive aspects is the fact
that everyone is talking about it. Probably they are
exaggerating its importance to the micro-economic reform
of Australia. There are lots of other things that
have to happen to fix Australia's economy. But the
importance of the waterfront, as I see it, is two-fold.
Firstly, the obvious one, so that exporters can export
more reliably and more efficiently and more economically.
The other one, which is not so obvious, is that with
an efficient waterfront Australia has a chance to maintain
itself on the world's shipping lanes. Without an efficient
waterfront, we won't. The world's ships will stop
at Singapore and Australia will be fed from there by
feeder services. I predict if we don't get this waterfront
reform in place in the next year or two, that will
be happening. I don't mean by the year 2000, I mean
by about the year 1995.
I can count three new services that have started from
Singapore to Australia, and another one is starting
this year. It is remarkable what they are doing in
Singapore. Their waterfront is remarkable in its size,
it's remarkable in its efficiency, it's remarkable
in its low cost, it's remarkable in the way it works.
The most remarkable thing is that it could end up
driving Australia's economy.
So we need to reform quickly, not only in increased
capacity, reduced interfaces and better industrial
relations, but in reduced government interference.
Companies need to be able to make a reasonable return
on their investment, so it is axiomatic that there
needs to be a rationalisation among operators to eliminate
unnecessary and cut-throat competition. This can happen
while preserving true, healthy competition among significant
operators. The world's two largest ports Ä Hong
Kong and Singapore Ä achieve their high efficiency
with only two operators and one operator respectively.
An example of the reduction of interfaces would be
the integration of port operators and transport companies.
In today's investment climate this may be difficult,
so at least we need to co-ordinate the operations between
companies. I am pleased to say that this process is
This sort of co-ordination for mutual advantage is
essential to an improvement in industrial relations.
Once employers are co-operating, it is easier to bring
unions into the planning process and develop mutual
understanding and trust. This will take a year or
While I am not suggesting that a soft approach should
be taken, I think calls for the army to be brought
in are not constructive. We are talking about ordinary
human relations, which should mean getting people to
work together with pride for common objectives.
The introduction of enterprise-based agreements (EBA's)
at the workplace is the beginning of what I am talking
about in this area. These EBA's achieve three things:
- 1. An immediate reduction in number of employees to
more appropriate levels thus giving our operations
a chance of being competitive;
- 2. Changes to working arrangements and practices which
should, if properly implemented, sustain improved competitiveness
- reduced men on machines;
- continuity of operations;
- multi-skilling and increased skill levels for key positions;
- 3. The introduction of a change in the culture of relationships
between management and employees.
I believe that we are now starting to turn the corner.
It is important, however, that people continue around
the corner and not be afraid of what is there. I detect
a tendency at the moment to baulk. Possible the over-exposure
in the media and the development through that of an
atmosphere of confrontation is not very helpful. Assuming
we get around the philosophical corner, I can see significant
improvements in reliability, competitiveness and efficiency
but there is going to need to be further reform beyond
the current process.
However, the effect this can have on solving Australia's
economic woes has undoubtedly been exaggerated and,
in fact, we will only test our improved efficiency
if the Australian economy becomes more vibrant and
that, I believe, requires much greater fundamental
change to our economic management than what is being
displayed at the moment. There is no doubt in my mind
that the continuation of high interest rates through
1989-1990 has killed off a large slice of our economic
activity and it is going to be a long haul back.
All the reforms I've mentioned are essential if the
waterfront is to move towards world competitive levels.
They can be done and they will work, because they
brought the Newcastle coal loaders up to world standard
from a position like that of the waterfront now. This
is a bigger and harder task, but there is no alternative
to its implementation and success.