A Matter of Choice

Comes Silent, flooding in, the main

Ray Evans

It is nearly twelve months since our last conference and it is appropriate to consider from a strategic perspective what has happened in these last twelve months. This paper then is an attempt to evaluate, without embellishment or distortion, the significance of the very important events which have taken place since May, 1993.

The title to this paper comes from a poem I learnt at school, "Say not the struggle naught availeth", by Arthur Hugh Clough, an early Nineteenth Century poet.

Say not the struggle naught availeth,
The labour and the wounds are vain,
The enemy faints not, nor faileth,
And as things have been, things remain.
If hopes were dupes, fears may be liars;
It may be, in yon smoke concealed,
Your comrades chase e'en now the fliers,
And, but for you, possess the field.
For while the tired waves, vainly breaking,
Seem here no painful inch to gain,
Far back through creeks and inlets making
Comes silent, flooding in, the main.
And not by eastern windows only,
When daylight comes, comes in the light,
In front the sun climbs slow, how slowly,
But westward, look, the land is bright.

The H. R. Nicholls Society has been engaged in a political struggle, if you like, since its inception in 1985, to bring freedom into the Australian workplace. The Commonwealth Industrial Relations Reform (sic) Act (1993), the Brereton Act, has brought into Commonwealth law virtually everything which The H.R. Nicholls Society has argued would harm Australian workers, and greatly diminish their capacity to make Australia a prosperous society.

An outside observer, who considered only what was on the statute books, would have to come to the conclusion that our Society had suffered a grievous blow, perhaps a terminal blow, with the passage of this Act, and that we would be well advised to pack up our tents and steal away into the night, leaving behind as little trace of our existence as possible.

The attendance at this conference, and the tone of the papers that are to be presented, indicates that there is much more to life than the passage of a Bill through the Commonwealth Parliament. It is important therefore to consider the history of the Bill, what the political consequences are likely to be, and whether we can turn what has been done to advantage.

We should always remember what Lord Salisbury, the great British Prime Minister of the late nineteenth Century told us:

History is the record of a series of reactions in the strong workings of mens' passions. In any great conflict what will be seen as the aim of Providence? Our foes will say the stroke; our friends the rebound.

The Brereton Act is the stroke. We must prepare for the rebound.

Soon after the election of March 1993, the newly confirmed Prime Minister made a speech to the Institute of Directors (21/4/93) in which he lamented the levels of unemployment and foreshadowed major changes to industrial relations law designed to speed up enterprise bargaining. Let me quote from the Prime Minister's speech:

Success in the coming decade certainly depends on things we must do in Canberra.

It also depends crucially on Australian workers, who must continue to adapt and change and win for themselves the increasing incomes that are within their grasp. Under the workplace bargaining system we have adopted and which we will entrench this year, employees themselves are for the first time in our history able to create the circumstances of their own prosperity.

That is the sort of language we would expect to hear at an H. R. Nicholls conference.

As the Minister responsible for the Bill, Laurie Brereton, began to clarify the issues which divided the various interest groups affected by the legislation, one key issue emerged which divided the unions from business groups. That was the right of employees to be a party to a recognised, (a lawful) enterprise agreement, with their employer, in the absence of a trade union.

The Business Council of Australia (BCA) amongst other groups, argued that since 60% of private sector workplaces are not unionised, those workplaces should be able to have enterprise agreements reviewed, registered, and thus legitimised, by the Industrial Relations Commission (IRC) without union involvement.

The ACTU, however, demanded the retention of union monopoly rights in employee representation, and embarked on a major campaign of vilification and threats in order to persuade the Government of the power of their arguments. Minister Brereton fronted up to the ACTU Congress, in August, and was humiliated there, before the TV cameras, in a planned and calculated fashion.

Minister Brereton is one of the Canberra royals. The Prime Minister and Mrs Keating, the Breretons, and Ros Kelly and her husband, David Morgan, comprise the Canberra royal family and the humiliation of Laurie Brereton was aimed directly at the Prime Minister.

The ACTU played a very confident hand. They believed they had saved the ALP from defeat in the March election and were demanding repayment. And they got it. In full. The Brereton Bill contains everything which the ACTU has been demanding since 1983. Repeal of Section 45D&E; freedom from tort action under most conceivable industrial situations (including secondary boycotts); the creation of a special division within the Federal Court to handle all industrial matters; minimum wages under the external affairs power and the ILO Conventions; a statutory right to strike; and, above all, entrenchment of the monopoly powers of the unions within the system. All of this came into effect at the end of March; a fortnight ago.

Of very great importance in the run-up to the presentation of the Bill to Parliament was the public support for the Bill given by two senior business leaders, Mr John Prescott, MD of BHP, and Mr Dick Warburton, Chairman of DuPont Australia. Mr Prescott was rather more guarded in his support than Mr Warburton, but the statements made by these two men effectively prevented the BCA from taking any effective action against the Bill.1

There are many appalling features of this Act and a number of people will be commenting in detail on various aspects of it. The Premier last night referred to the implications it has for the future of Australian federalism, and I think it is probably true to say that the longer term constitutional implications of the Act are more important than the industrial relations aspects of it.

The Brereton Act is an important part of what we can call Canberra Imperialism, the strategy whereby the States are reduced to provinces of Canberra, in the old Roman style, and Premiers become little more than provincial viceroys, dependant completely on grace and favour from Canberra.

Nonetheless I wish to focus on the labour market and economic consequences of the Brereton Act. The fall-out from this Act will have a substantial impact upon the reform agenda which should dominate the next federal election campaign, and it is now apparent to the business community, including sections of the media, that this Act will be very painful in its consequences.

There is of course a constitutional challenge under way. The Victorian Government is seeking to have the Act struck down on a number of constitutional arguments and it is expected that most of the other States will seek to be joined in the action. But until the Act is declared ultra vires by the High Court, it is law and takes precedence over State law.

My view is that its most immediate impact will be on employment. The Brereton Act increases the costs involved in dismissing an employee, for small businesses particularly, immeasurably. The Government's argument is that it is merely extending across the whole economy, the same provisions for termination which applied to a proportion of employees, those covered by particular awards.

Some commentators, notably Dr Gerard Henderson, have picked up this argument and argued that while big business can carry the costs involved in monitoring the activities of staff which are now mandatory (if an employee is ever to be dismissed for any reason at all) and the legal expenses of carrying out a dismissal, small business cannot do so. And since small business is the most important generator of new employment opportunities, the creation of new jobs will be severely curtailed.

This argument is half correct. Small business will find itself doing everything it can to avoid employing someone in a legal employment relationship. In the rural sector, I am told on good authority, illegality in the labour market is rife, the rule rather than the exception. In the rural setting, however, personal reputation is very important, much more so than in city life. So the capacity of an illegal market to survive and grow, and to be protected by all the participants from an intrusive and hostile state apparatus, is very real.

So it is most likely that in the cities the small business sector will contract, unless new ways of successful sub-contracting in the Trouble-shooters mode can be devised.

What is disturbing in many of the discussion papers that have taken up this problem of dismissal costs is the unexamined assumption that larger corporations can successfully adapt and continue to generate profits and growth, regardless of the regulatory burdens imposed upon them.

This attitude is a legacy of the old protectionist thinking, which readily accepted the cost-plus view. As long as every domestic producer was subject to the same cost burdens, and as long as tariffs kept out international competition, then who cared what burdens of regulation, or wage fixing, were imposed, because the consumer paid for them all!

This was not true of the mining industry. The mining industry had to be able to compete internationally regardless of the cost burdens imposed upon it and it did so because our exploration teams were able to find, particularly during the 1960s, orebodies that were higher in grade, or better placed in terms of markets, than the competition.

But today, protectionism is going. That battle, and I think we saw the last attempt by the automotive industry to recover lost ground in September 1992, is over. Every company producing tradeable goods is now facing up to the reality of international competition. That simply means that no business, large or small, can carry, for long, burdens from which the competition, at home or abroad, is free.

If the cost of dismissing an employee very greatly increases, as it is intended to do under the Brereton Act, then the following adjustments will, or might, occur. First, labour will be replaced, wherever possible, by capital. Second, the costs of dismissal will be borne, often in unforeseen ways, by employees, rather than by shareholders or customers. Third, new investment will go offshore rather than in Australia. And finally, as a last resort, the business will go belly-up.

The fundamental point that has to be remembered is that the new burdens of dismissal are an addition to the overall costs of employment. And in the end, it is the employee who has to carry all the costs of employment. No one else can do so.

All of these things do not look good for new jobs. The golden rule in labour markets is that the easier it is to fire someone, for good reason, bad reason, or no reason at all, the easier it is to hire someone. Low cost firing means lower costs of employment; this means more jobs particularly for lower skilled people.

The newspaper and TV industry is very much accustomed to the rule, easy to fire, easy to hire, and the economics of the industry were based on it. Now, that firing anybody is going to be very expensive, News Ltd in particular, has become very unhappy. So watch this space.

Another potential source of great discontent is in the field of de facto compulsory unionism. Secondary boycotts are now legal. Trade unions are interested, above all, in feeÄpaying members, and an old trick that was used many times to bring about a unionised workplace was to apply a secondary boycott. It was simply a form of extortion, but when Section 45 D and then 45 E of the Trade Practices Act became law, it was a simple matter for an employer to refuse to become a party to extortion.

But during the last decade, the idea that trade unionism is a benefit which should be brought to people through compulsion, whether they want it or not, has lost considerable ground. If the unions decide to go back to the old ways in order to recruit, then we are in for turbulent times.

So the Brereton Act is, in its economic consequences, a time bomb on a slow fuse. There may be some understanding in the Federal Cabinet of this, because the Prime Minister got very terse recently when the OECD came out and in its customary oblique style, suggested that Australia's labour market regulatory regime might be detrimental to the economic well-being of the country.

The OECD report questioned whether Australia should follow New Zealand's example and "make a decisive break with the award system."

The choice of a moderate pace of reform in the labour market may be justified in the interest of maintaining social consensus, however, if the costs in terms of workplace inflexibility, poor productivity and higher structural unemployment are to be avoided, bargaining structures and the role of the award system will need to evolve in such a way as to facilitate the spread of enterprise bargaining.

Those sentiments are written in OECD-speak, designed to avoid any hint of partisanship in Australian debates. But the Prime Minister quickly got the message and responding from Bangkok, attacked the report for its "eurocentricity", and suggested that the OECD wished to impose on Australia a Thatcherite labour market which would increase the gap between the wealthy and the poor. (The Australian, 8/4/94)

This retort, off the top of the Prime Ministerial head, goes to the heart of what this Society is about. Does the sort of intrusive, extremely detailed, expensive, labour market regulation, which has grown up in Australia since 1904, produce a society which is happy, prosperous, harmonious, fully employed, replete with opportunities for everyone; or does it produce a society which is acrimonious, in which unemployment is a major problem, in which prosperity is declining, in which productivity is flat, in which the bright young people head overseas for career opportunities?

I'll return to that fundamental question in due course. Let me return to the politics of the Brereton Act. The High Court could, theoretically, gut the Act. But because the External Affairs power and Corporations power provide much of the constitutional base for the Act it would seem difficult for the Court to do so without at the same time implicitly reversing Koowarta, for example. And that would have far-reaching implications for other areas of social policy, particularly in Aboriginal affairs.

So the focus now goes back to the Opposition, and the position which the Opposition parties will take on repealing the Brereton Act, and their attitude to the External Affairs power, to the States, and to the future of the federation.

During the prime ministership of Bob Hawke the latent imperialism within the federal ALP was, at least in some measure, contained. It is true that Hawke supported the 1988 referendum proposals. But, in the early stages, the Leader of the Opposition, John Howard supported two of them, and there were bitter arguments in the shadow cabinet, and in the Coalition party room, before the Opposition finally adopted a policy of total opposition to the proposals. When it came to referendum day only the people of the ACT, (i.e. Canberra) supported the Government, and then for only one of four proposals.

Under Prime Minister Keating, however, we see Canberra imperialism rampant. Mabo and the Native Title Act, the Brereton Act, the use of the UN Human Rights Commission to override the Parliament of Tasmania, threats by Ministers, including the PM, against those States who seek to challenge Commonwealth Acts in the High Court; all these things are indicative of a deep hostility within the Keating Government to the sovereignty of the States; a sovereignty which still provides, not withstanding the High Court, a counter balance, a check, to the overweening power of Canberra.

In Western Australia these issues are already of very great importance, and in the other smaller States, Queensland, South Australia, Tasmania, they are growing in importance. But in Canberra, where the politicians from Victoria and New South Wales dominate the thinking and discussion, the Opposition has not begun to focus on them.

The time has come when it must do so, and there is no better place to begin than in labour market reform.

The issues are becoming quite clear. With the Brereton Act, the Commonwealth is attempting to force the States completely out of the field of labour market regulation. Hence the use of the External Affairs power and the Corporations power. This Act is going to prove to be a disaster. Unemployment will not fall; the only group who will do well out of the new Act will be industrial relations lawyers and trade union officials; and the hassle involved in keeping detailed dossiers on every employee (which will become mandatory under the new dismissal regime) will tend to poison working relations everywhere.

As a result of the debates and discussions which this Society has conducted for more than eight years, I have become totally convinced that the best labour market regime is a regime of freely contracting parties. As with contract law generally, there have to be some constraints on the sort of contracts into which people can lawfully enter. A contract to perform services of prostitution, for example, is a contract which, I believe, should not be recognised by the courts. People who are not intellectually capable of entering into a contract, have to be protected. But these are minor caveats.

The evidence is clear from the historical record in England, from contemporary life in Hong Kong, and more recently from the beneficial consequences of the New Zealand Employment Contracts Act, that freedom in the labour market does produce prosperity, opportunity, harmony and social concord.

But, my political friends tell me, the community as a whole is not really convinced of this. They want a measure of freedom, but they also want regulation. They want opportunity but they also want security. Human nature is, indeed, a contradictory thing. Politicians have to be sensitive to public opinion but they have to guide and help form that opinion. That is the art of politics.

Now that Canberra imperialism is a central issue for Australia, and the disastrous nature of the latest Canberra incursion into labour market regulation, with the Brereton Act, is soon going to dawn upon the whole Australian community, the time has come to try to put on the agenda the argument that Canberra should get out of industrial relations legislation, and labour market regulation, entirely.

I accept, albeit unwillingly, that the community still wants the everlasting arms of government to enfold them, at least in some measure, in labour market relations. Well then, let the States do that. Let the States compete in offering to the Australian community the most effective, the most popular, the most competitive, regime of labour market regulation.

The great virtue of our federal system is that it guarantees competition between the States. If the States are solely responsible for labour market regulation then, sooner or later, and, in our situation I think it would be sooner rather than later, one of the States will get it more or less right; just as New Zealand has got it, in substantial measure, right. The other States will then find themselves compelled to follow.

Let me conclude with a response to the Prime Minister's attack on the OECD report. What the OECD demanded, he said, was a Thatcherite regime, widening the gap between rich and poor. The Brereton regime, fully supported by the Prime Minister, will certainly increase unemployment. Does that reduce the gap between rich and poor? Does that increase social harmony? Does that promote a prosperous community?

The Brereton regime will entrench the monopoly powers of trade unions. Does legal privilege reduce the gap between rich and poor? It certainly creates a gulf between those who are legally privileged and those who have to contemplate being on the wrong end of a secondary boycott without any legal redress.

The Prime Minister's rhetoric is fatuous, false, phoney and full of woe. It is time to take up the gauntlet. The members of this Society have the opportunity, through letters to the press, through talk back radio, through their influence in the forums of our political parties, to change the language of political debate and to set Australia onto a better path. I repeat :

Say not the struggle naught availeth,
The labour and the wounds are vain,
The enemy faints not, nor faileth,
And as things have been, things remain.
If hopes were dupes, fears may be liars;
It may be, in yon smoke concealed,
Your comrades chase e'en now the fliers,
And, but for you, possess the field.
For while the tired waves, vainly breaking,
Seem here no painful inch to gain,
Far back through creeks and inlets making
Comes silent, flooding in, the main.
And not by eastern windows only,
When daylight comes, comes in the light,
In front the sun climbs slow, how slowly,
But westward, look, the land is bright.

1. In the Australian Financial Review of 11/10/93, Mr Warburton stated "employers now had to work with the package despite the disappointment and frustrating outcome". He was incorrectly cited by the AFR as "chairman of the BCA's industrial relations committee", a curious but significant error. This statement was made at a time when Mr Bryan Noakes, Executive Director for Australian Chamber of Commerce and Industry, was reconfirming his organisation's policy of spending "whatever was necessary" to prevent the legislation getting through or it get it repealed.
On 4/11/93, The Melbourne Age reported the speech which Mr John Prescott of BHP gave to the National Press Club. Tim Colebatch wrote the following:-
"The BHP chief also broke from employer ranks by endorsing the existing industrial relations system, and warning against calls to abolish award wages and shift to pure enterprise bargaining.
"I think we have fundamentally a very good system", Mr Prescott said. "It's a system in transition and there has been a remarkable degree of common thinking and common purpose in its refinement and development over the last several years. I think the challenge from Australia is to improve the system we've got, and to change it in some materials ways as quickly as possible. But you can only do that at the pace at which the practitioners are developing new skills."
Mr Prescott said the Government's new industrial relations Bill had not gone far enough but it "clearly will facilitate some developments" by business.


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