Let's Start All Over Again

The Origins and Influence of the HR Nicholls Society

John Stone

The Hawke Government was elected on 5 March, 1983. It did not take it long to initiate the process of paying off the trade union movement, to which (along with the Fraser Government's abysmal performance) it owed a considerable debt for its election, and whose former President, of course, was now Prime Minister. On 14 July, 1983 the Minister for Employment and Industrial Relations, Ralph Willis, announced the appointment of a Committee of Review of Australian Industrial Relations, with wide-ranging terms of reference.

The Committee was chaired by a prominent economist and well-trusted member of the Industrial Relations Club, Professor Keith Hancock of Adelaide University. Its two other members, even more prominent in that Club, were Charlie Fitzgibbon of the Waterside Workers Federation and George Polites, Director of the Confederation of Australian Industry and a Bob Hawke 'mate', long since settled comfortably into the Club's embrace. The Department of Employment and Industrial Relations, which for many years had also been central to the workings of the Club, provided the Committee's Secretariat.

The Hancock Report was delivered on 30 April, 1985. Naturally, a deck so well stacked delivered a set of recommendations wholly acceptable to those who had appointed it. Its relevance here is that it was this report that spurred formation of the H.R. Nicholls Society.

Shortly after its publication, Ray Evans (then Executive Officer assisting Hugh Morgan of Western Mining Corporation) got in touch with me in Melbourne. He, I, Barry Purvis (then Director of the Australian Wool Selling Brokers' Employers' Federation) and Peter Costello, who had recently come to industrial relations prominence as Fred Stauder's barrister in the Dollar Sweets Case, met and decided to form the Society.

Ray Evans and I had never previously met, but it seems that I had come to his notice in this area because of my 1984 Shann Memorial Lecture, delivered shortly after my intention to resign as Secretary to the Treasury had been publicly announced. In that address I had said, inter alia:

    One such lesson [of the 1930s] clearly was (and is) that full employment is not only or even primarily a matter of governments manipulating aggregate demand, and that the labour market itself, and its participants, have a critical role to play. When I say 'the labour market itself, and its participants' I mean, of course, individual employers and their employees. Contrary to their pretensions in the matter, the arbitral tribunals have little constructive to contribute. Only, indeed, by them getting out of the way can we hope to see the development of those bargaining processes which must properly proceed between employers and employees in a full understanding of their mutual interdependence of economic interest. As things stand, there can be no hope of that....

And later:

    ... now that I am able to do so, I wish to say publicly that there is no single fact more disgraceful to the conduct of our national affairs in Australia today than the manner in which we have permitted ... more than 25 per cent of 15-19 year-olds in the work-force to be unemployed.... ... although there is more than one reason for that very high level of unemployment of young people..., overwhelmingly the most important reason for it is the barrier to their employment which is represented by the minimum wage rates which employers are legally required to pay them.... The truth is that our system of wage determination today constitutes a crime against society. It is, starkly, a system of wage determination under which trade union leaders and people preening themselves as 'Justices' of various Arbitration benches combine to put young people in particular, but many others also, out of work.

I have spelled out these quotes not only because they were what led Ray Evans to contact me, but also because I want to emphasise that, from the outset, the Society was not solely aimed at reforming the labour market to increase productivity and raise average real incomes. It was also motivated---although this was never acknowledged by our adversaries---by a strong sense of moral outrage (as reflected in the passages just quoted) about the effects of trade union power, operating through the arbitral tribunals, on the lives of the less fortunate in our society. Equally strong was our sense of outrage (also reflected, incidentally, elsewhere in the Shann Memorial Lecture) over the widespread corruption, and even violent crime, to which trade union privilege had given rise.

In short, we took the view that reform of the labour market would lead not merely to a more productive and richer society, but to a better society also.

The Society came formally into being in early 1986. Its inaugural conference was held in Melbourne on the weekend of 28 February---2 March, 1986 and was attended by, among others, Charles Copeman. Charles, who was shortly to become Chief Executive Officer of Peko-Wallsend, has said on the public record that his attendance at that weekend meeting was for him a transforming experience.

This weekend marks, of course, the 20th anniversary of that meeting. Its Proceedings, including a fascinating dinner address by Sir John Kerr, were subsequently published in the volume Arbitration in Contempt. In my Introduction to that volume (and on its dust jacket) I said:

    ... one conclusion from the paper by Mr Gerry Gutman dealing with [the Hancock] report may be worth noting. As Mr Gutman points out, the thing which, above all, has today done more to strip away the quasi-judicial facade from our arbitral tribunals has been the Accord between the Australian Labor Party and the Australian Council of Trade Unions. Now that all manner of industrial relations deals are arrived at between these two parties, the supposedly tripartite processes before the Commonwealth Conciliation Commission can now be even more clearly seen for the irrelevant charade which they have always been. For all its faults, the Accord has thus done us all a public service. More than any other single event, it has held up to us the mirror in which we can clearly see arbitration in contempt.

Of course, while the Society was getting under way the forces of darkness had not been idle. Pamela Williams (later to be known light-heartedly in the Canberra Press Gallery as 'Bill Kelty's press secretary') led off in Business Review Weekly with a tendentious cover story entitled Union Busters. The then Chief Executive of the Victorian Chamber of Manufactures, Brian Powell, joined a unity ticket with the Secretary of the Amalgamated Metal Workers' Union, John Halfpenny (formerly one of the most prominent and longest-standing members of the Communist Party of Australia) to describe the Society's founders as industrial relations 'Fascists'. This proved too much even for the normally complaisant members of the V.C.M., and Powell was forced to resign. Subsequently, Halfpenny and The Age also settled out of court the defamation action brought against them by Peter Costello and Ray Evans after Halfpenny, in a Calwell Memorial Lecture, had described the Society as the Klu Klux Klan of industrial relations.

Earlier, the Hon John Dawkins, in a 1986 Australia Day address, had scarified all manner of people of whose views he disapproved as 'the false patriots of the New Right'. Max Gillies, always available to lend a hand to his political brethren, devoted more than one of his ABC Gillies Republic television programs to painting the Society as some kind of Australian version of the white South African racist Broederbond. In these and many other similar attacks our adversaries were at all times ably abetted both by the cowardice (or worse) of most large corporate representatives, and by the complicity and collaboration of almost the whole of the media, including without exception its industrial relations correspondents.

Arbitration in Contempt was launched by Geoffrey Blainey, himself not long beforehand the victim of a coordinated character assassination by a group of academic jackals (including not least the current doyen of Australia's historians, Professor Stuart Macintyre). The well-attended launching dinner at the Southern Cross Hotel, Melbourne on 30 September, 1986 saw the then Leader of the Opposition, the Hon John Howard, deliver the vote of thanks.

Introducing Blainey, I said:

    ... our Government is currently considering major legislative changes to the Commonwealth Conciliation and Arbitration Act, and other associated legislation, ... to give effect to the shameful conclusions of the Hancock report.... In particular, it is contemplating legislation which would remove all legal processes relating to trade unions from the realm of real law, and real courts, and place them in a Labour Court (or perhaps more accurately, Labor Court) to be newly created for that purpose. The so-called 'Justices' of this new kangaroo Court..., for the rest of the week, would be sitting in the Commission within which they presently operate.... The H R Nicholls Society has no power to prevent the Government pursuing this oppressive course. We are after all a mere discussion society.... We are [however] quite determined that the Government, and its fellow-conspirators within the trade union movement, are not going to succeed in further enhancing the already excessive power of trade unions, and undermining the rule of law even further, in this way.

I finished on a lighter note. Referring to some years spent earlier at an Oxford college, a Warden of which had given his name to the term Spoonerisms, I said that I had been reminded of this by some then recent remarks by the Hon John Dawkins, in which (following the first of the Robe River strikes) he had described Charles Copeman, and members of the H R Nicholls Society more generally, as being guilty of 'treasonable' behaviour. One could readily see, I said, 'why in government circles Mr Dawkins is regarded as a shining wit. Warden Spooner would undoubtedly have agreed'.

For some months following its foundation the Society's achievement was simply to open the debate. But with the Robe River affair, the first episode in which occurred shortly before publication of Arbitration in Contempt, words turned to action.

Although Robe River involved a number of people (including in a small way myself, as a recently appointed member of Peko-Wallsend's Board), it was outstandingly the saga of one man, Charles Copeman. As Ray Evans has said, it was Copeman 'who, at Robe River, changed the landscape of Australian industrial relations in the face of passionate opposition by federal and State governments and union leaders of the day'.

The story of Robe River has been told in detail in the annals of the Society. However, no account of the Society's history can be complete without some repeated reference to it.

As the Peko-Wallsend Board approached the 1986-87 financial year, it was clear that the company's Robe River mining operation was in very deep trouble. The grip that the local trade union organisers had gained over the day-to-day decisions of management had led to abysmal productivity performance and costs spiralling out of control. Without some breakout from that situation, the only fiscally responsible course would be to wind down the operation more or less entirely.

Confronted with this situation, Charles Copeman decided (and the Board agreed) that the only course realistically open was to stand and fight. He then embarked upon a course of actions which, to his fellow Chief Executive Officers in Australia's corporate world of that day, were virtually unprecedented:

  • First and foremost, he handled the matter himself.
  • Second, he appealed directly to the Robe River workers, thereby committing the unforgivable sin (in the eyes of trade union organisers then and since) of treating his employees as adults.
  • Third, he made it clear (to the point that his work-force believed him) that he would not back off, or back down, and that those who followed him would not subsequently be sacrificed to union bullies.
  • Fourth, he convinced his opponents (including WA's Burke/Dowding governments) that the battle would be fought to a conclusion, and that there would be no 'deals' of the kind to which the arbitration system was so corruptly habituated.
  • Last, and vitally, he took the almost unheard of step of reverting, when necessary, to the real courts---in this case, the Supreme Court of Western Australia, where judges still cleaved to their oaths to 'do right according to law'.

The July, 1986 strike failed to achieve its objectives. Production at the mine, and profitability, suffered considerably; but the mine kept working, ore-trains kept running, ships kept on being loaded and productivity per man-hour rose significantly.

From the viewpoint of the trade unions and their Labor Party collaborators these were dangerous developments, which needed to be put down with a firm hand. A concerted push to crush the Society ensued. The late Mick Young, then Special Minister for State (not to mention, through his control of the Electoral Act, Minister for Getting the Government Re-elected), spent some time on a Channel 9 Sunday program assailing us as 'the New Right', and more generally seeking to tar us with his left-wing McCarthyist brush. At about the same time Prime Minister Hawke was referring to us as 'economic troglodytes and political lunatics', and predicting that Australians would never accept the 'radical ideas' we were then advancing.

(I note in passing that, in my last conversation with Mr Hawke before leaving the Treasury in 1984---and after my Shann Memorial Lecture---he strongly questioned my remarks on industrial relations in that lecture. I told him that, just as Labor was clearly beginning to see the light in the area of traded goods protection after almost 20 years of public debate, so the time would come when it would also be forced to do so in the industrial relations area. Not surprisingly given his background, he pooh-poohed that idea and we agreed to differ. In the event, even prior to his departure from office, and even more clearly thereafter, the industrial relations edifice had begun to topple.)

To return to my theme, the second, more serious Robe River strike began in late January, 1987 and lasted for some weeks. It was marked by some actual violence, and many more threats of violence, including against the wives and children of those workers still operating the mine. In the end, however, this thuggery was defeated. Within 12 months productivity had doubled, and Copeman's craven counterparts at BHP were beginning, softly softly, to emulate his performance at their own Pilbara mines.

When Peko-Wallsend was taken over by Norths not long thereafter, Copeman himself was shown the door by the cowardly Melbourne corporate club acquirers. As a consequence, his own personal sacrifice was great. But beyond any shadow of doubt he had, by his principled leadership, changed the face of Australian industrial relations. Things would never be the same again (including for that same corporate club).

It is not possible, in a paper of this length, to give a blow-by-blow account of every development over the years in the Society's progress. The battle of ideas proceeds in many ways. By way of illustration, I remind you of the airline pilots' dispute in August-September, 1989. In that dispute, we saw a Prime Minister actively facilitating:

  • Use of 'the troops' (RAAF) to help defeat the walkout by a key body of airline employees;
  • The bringing of common law actions for breach of contract against individual pilots to the same end;
  • Use of Sections 45D and 45E of the Trade Practices Act for the same purpose;
  • The import of foreign pilots to take the place of Australian pilots who had withdrawn their labour;
  • The import of charter aircraft (and associated foreign crews) to supply services being withheld by the Australian pilots; and even
  • The provision of some kind of financial assistance designed to assist a major employer (Ansett Airlines) and thus help 'keep it in the field' until the Australian Federation of Air Pilots had been crushed.

Mr Hawke's zeal in all these matters thus went even further than our own. The H.R. Nicholls Society had never argued that a body of employees should not have the right to be represented by a union (or Association) of their own free choosing---a basic right which Mr Hawke and Sir Peter Abels were determined to deny to the pilots.

Such incidents notwithstanding, it would have been easy during the latter years of the 1980s to become despondent about prospects for our views prevailing. Labor was still in full command of the Treasury benches; the Opposition was in more or less perpetual disarray (and in any case had an industrial relations policy which left much to be desired); the ACTU leadership (particularly its then Secretary, Bill Kelty) had its collective feet firmly planted under the Cabinet table; and so on.

As against that, there were other, more encouraging signs and portents. In 1989 a passage in an important book (then still in draft, published in 1991) by Michael Costa and Paul Duffy spoke of the H.R. Nicholls Society 'having won the intellectual and the political debate'---a passage that I then had much pleasure in quoting in the Senate. Costa, now Treasurer in the NSW government, was then an Executive Officer in the NSW Labour Council, where Duffy too was then employed (although shortly to be sacked for having expressed these treasonable opinions). Their book is described on its dust-jacket as 'arguing that compulsory arbitration and centralised bargaining are stultifying growth ... and inexorably driving Australia into poverty'. Instead, it says, 'they reach back to an alternate labour tradition of political independence, free collective bargaining and free trade'.

The Costa/Duffy episode illustrates that, while it was easy at that time to be discouraged, by 1989 the industrial relations edifice was already under strain. Quite apart from any direct effects of the work of the Society, other factors were at work indirectly. Chief among them was the major deregulation of the financial markets, and particularly the exchange rate, in 1983-84. Even before the Society's formation I had drawn attention to that linkage in a speech, Deregulate or Perish, to the Western Australian branch of the Australian Small Business Association in May, 1985, in which I pointed to the longer-term incompatibility between freely operating markets in foreign currency and international capital, on the one hand, and a labour market still mired in regulation, on the other. In the same way, the gradual winding down of the protection of traded goods, although then still in its infancy, was also beginning to apply pressures on its 'Deakinite settlement' counterpart.

Important though these indirect forces were in the gradual evolution of public (and hence political) opinion in the late '80s, it is hard to recall now any major events, such as Robe River had been, to move the debate forward during the next three or four years. Ray Evans (who became the Society's President when, in September, 1989 I felt that I should resign that role) thus shouldered the unenviable task of keeping alight the torch we had lit three years earlier. I go out of my way not only to note that he is still doing so, but also to express my own gratitude---and, I am sure, the gratitude of all our members---for the extraordinary job which, over the past 16 years, he has done in that regard.

One important 'event' during those quiescent years occurred not in Australia, but across the Tasman. New Zealand's National Party government, elected in late 1990, enacted in 1991 its Employment Contracts Act, which brought about a massive change to an industrial relations system previously not dissimilar to Australia's. Given the existence in New Zealand of many Australian enterprises whose executives soon began to experience the benefits of a labour market based not on arbitral fiat but, essentially, on the law of contract, this was a significant event in the evolutionary process. Given also the trans-Tasman interchange of ideas, it certainly did not go unremarked in Australia.

At much the same time as the New Zealand government was enacting its Employment Contracts Act, Prime Minister Hawke issued an extremely important White Paper laying out a path of diminishing protection for traded goods. As noted earlier, one effect of this was to place further pressure on our still highly regulated market for labour.

On 21 April, 1993, shortly after Dr Hewson had lost 'the unloseable election', Prime Minister Paul Keating delivered a remarkable speech in Melbourne to the Victorian branch of the Australian Institute of Company Directors. So far as the rhetoric was concerned, that speech remains to this day, in my opinion, among the most forward-looking utterances in the field of industrial relations by any politician from either side of politics.

To this day the precise origins of that speech are not entirely clear to me. The best source we have on the topic is John Edwards's biography, Keating: The Inside Story, where (p.510) he says:

    Over the year [1992] we had found industrial relations to be one of our weakest policy areas. We had moved away from central national wage decisions and arbitrated settlements, but we had failed to create the means of reaching enterprise bargains for most of the work-force covered by federal awards.... It was now easier to reach bargains, but employees had to be represented by unions. This veto power allowed some unions to resist the spread of enterprise bargaining.... We knew that if we wanted to press ahead with a transition to direct bargaining at the enterprise level we would have to amend the legislation to allow employers to deal directly with their employees.

Later, Edwards says (p.513):

    The industrial relations system needed to be reformed, ... but as long as Australia was to have a system of collective bargaining underpinned by minimum awards, rather than the alternative of individual contracts, the reform Keating proposed was as far as he wished to go ... or would be allowed by his colleagues to go. (Emphasis added)

It is true that the specific proposals in the Keating speech did not wholly match the rhetoric. It is also true that the subsequent dogfight between the Minister for Industrial Relations, the Hon Laurie Brereton and the ACTU resulted both in the public humiliation of the Minister at the ACTU's 1993 annual congress and some backing down from even those specific proposals. Nevertheless, Brereton's 1993 legislation marked a significant forward movement in the deregulation of the labour market and the downgrading of the role of the Industrial Relations Commission.

In March, 1996 the Keating Government was swept from office in a landslide exceeding even that in which Gough Whitlam had been dismissed in 1975. Hopes ran high that, strengthened by this outstanding electoral victory, the new government would proceed to a major reform of the Australian industrial relations system. Our hopes were encouraged by two facts. First, one of the Society's founders was now Deputy Leader of the parliamentary Liberal Party; and second, the new Minister for Workplace Relations, the Hon Peter Reith, was undoubtedly one of the most able Ministers in the government.

Both then and since, however, some of those calling for reform, not only in the industrial relations field but elsewhere, have paid too little attention to the fact that, although we have had Coalition governments since March, 1996, it is only since July last year that those governments have commanded a majority in the Senate (and as events have shown, a somewhat fragile majority even then). In these circumstances it is unrealistic to demand that a government should go to the barricades in pursuit of the Holy Grail, when it can be confidently predicted that not only will it fail to gain it, but will also be left with a large quantity of political egg on its face in the process. In other words, governments can be persuaded to spend their political capital if, at the end of the day, they have some political dividends to show for having done so, but not otherwise.

In 1996 the so-called Reith/Kernot Workplace Relations Act was, in its outcome, very much a product of these circumstances. The government's original proposals, framed with an eye to Senate realities, were much less bold than this Society wanted; and the final outcome was, of course, even less of an advance than the original. At the time, if I recall correctly, the Society was strongly critical of Peter Reith and what it saw as his failure to push harder for much greater reforms. I did not agree with those views at the time, and I think it is only fair to say that the Minister's judgement---that it was better to achieve the good, than to fail while seeking to achieve the best---proved, over the following nine years, to have been correct.

In Peter Reith, however, we did at least have a Minister for Workplace Relations who believed in the cause and who was never afraid to espouse it publicly. By contrast, our other initial hope in this area, the Hon Peter Costello, never so much as ran onto the field. Blessed as he is with some of the same thespian talents as the politician with whom he is most often compared (Paul Keating), during the past ten years he has conspicuously failed to deploy those talents in the cause which he helped to initiate ten years earlier. In that, as in so many other ways, he has proved to be a major disappointment.

In 1998, by contrast, it was Peter Reith who presided over what I may call the second defining moment (along with Robe River) in the long struggle for reform of our industrial relations system. As Ray Evans has since said, 'during that confrontation, in which violence and the threat of violence was an everyday event, Peter Reith displayed outstanding qualities of composure, steadfastness and resilience under great pressure'.

In Mrs Thatcher's Britain the great 1980s coal strike marked a watershed in that country's industrial relations. In our case the 1998 dispute with the Maritime Union of Australia marked a similar watershed. Although it was, of course, another Copeman-like figure, Chris Corrigan, who led that struggle, it was Peter Reith who decided to give Corrigan his backing, and that of the government, in pursuing it. Today I can best comment on that battle by quoting from my remarks when presenting the Charles Copeman medal to Peter Reith in 2002, namely:

    In the teeth of a bitterly hostile media led, as usual, by 'our own' ABC; of a trade union movement which rightly saw the waterfront dispute as a potential turning point in its national power and influence; of a Federal Court whose judges persistently took it upon themselves to thwart the national interest; and not least, in the face of a Victorian police force which largely failed to maintain law and order at a number of critical moments ... in the face of all these obstacles, the Maritime Union of Australia was ultimately forced to sue for peace. And the rest ... is history: container lifting rates now achieved which had been declared unattainable; an Australian waterfront which is no longer seen around the world as a kind of thieves' kitchen of industrial relations extortionists; costs to our major export industries greatly reduced; and so on.

In that epic struggle Peter Reith had at all times the unswerving support of his Prime Minister. With one minor exception, at no time did he receive the public support of his colleague the Treasurer. Such are the ways of Canberra!

As in the late 1980s, it was easy in the late 1990s (the 1998 waterfront dispute apart) and in the next four years to feel despondent about our cause. This was despite the fact that, as indicated earlier, beneath the apparently unruffled millpond of the system much progress was actually being made. However, after the Howard Government's remarkable election victory in October, 2004 hopes were again raised that, once the new Senate came into being in July, 2005, genuinely path-breaking legislation could be enacted to deregulate our markets for labour. In the WorkChoice legislation finally enacted late last year it can only be said, however, that our hopes have once again been dashed.

This is not the place, and in any case I do not have the time, to comment in detail on the new legislation. In terms of its sheer magnitude and complexity it is bidding fair to outdo the Tax Act (and with hundreds more pages of detailed regulations apparently still to come). Clearly, however, any suggestion of a move to the law of contract has been largely put aside; the dysfunctional and socially reprehensible system of minimum wages is to continue in being, under the aegis of a new quango, the Fair Pay Commission; unfair dismissal provisions will still apply to companies having more than 100 employees (a strange exercise in logic if ever there was one); and our workplace relations laws generally will remain in a fearful mess.

Not the least of my own concerns, I may add---although I recognize that this view may not be universally shared within our Society---is the means by which even these unsatisfactory ends purport to be achieved, namely by the prostitution of the corporations power (s. 51(xx) of the Constitution).

That said, it must also be acknowledged that (subject to my doubts about the constitutional validity of the whole exercise) the new legislation does achieve some improvements. Whittling down the unfair dismissals blackmail racket, even though confined to firms with less than 100 employees, still represents an advance, and one which, we might not unreasonably hope, will lead to its logical extension to larger firms. The power and status of the Industrial Relations Commission has undoubtedly been downgraded, which is all to the good. The minimum wage system, while remaining an abomination, is unlikely to be worse, and could perhaps prove somewhat better, than the one it is replacing.

Importantly, too, the government has promised separate legislation to put the status of independent contractors, that most vibrant sector of our work-force, beyond the jealously destructive reach of trade unions and arbitral tribunals both State and federal. While this promise results from the work of the Independent Contractors' Association, it is relevant that one of the most active members of that Association, Mr Bob Day, has been a member of the Society's Board of Management almost from the outset. I do not think he will contradict me if I say that he has taken the ethos of the Society into the work of the Association. While there is many a slip 'twixt the cup and the lip, that promised legislation should mark a major advance.

I have no wish to play Polyanna. The grounds for current disappointment, even disgust, are well-founded. Yet, however slowly, the cause of reform continues to move forward. In the years ahead, the Society's role in advancing that cause with the community, and through that with ever-timid politicians, will remain as vital as it has been in our first 20 years.