Let's Start All Over Again

Changes in Employer Organisations 1985--2005

Peter Hendy

Ladies and Gentlemen, distinguished guests one and all.

Thank you for the opportunity to speak to you today.

I wanted to begin by relating a story prompted by a recent trip to China I made in December just past.

It may not be blindingly obvious at the moment why I am doing this but bear with me.

As I was to give two speeches on my trip, one to the Australia-China Chamber of Commerce in Beijing and another to the diplomats at the Australian Embassy, I thought I would make some reference to my previous trips to China.

My first trip was 20 years ago in September-October 1985.

This was not long after that great socialist leader, Deng Xiaoping launched 'capitalism with Chinese characteristics' which led to his other declarations such as 'to get rich is glorious' and his admonition to local officials to be on their 'guard against the left'.

He was my kind of communist!

Nonetheless my trip was in the early days of this counter revolution.

I stayed at places like the 'Datong Locomotive Factory Hotel'.

It was still very much Communist China.

Everyone in the cooler north were wearing Mao suits, or what the Chinese call Dr Sun Yat-Sen suits.

They came in three beautiful colours, worker blue, army green and official grey.

I must say it was something to see.

Thousands of people walking down crowded streets in towns like Wuhan, Chunqing and Beijing all wearing the same things.

The fashion conscious amongst you would have been severely traumatised---and in need of an immediate course in retail therapy.

But that was then.

My next trip to China was in March 2001.

The changes were phenomenal.

On the occasion of that visit I was chief of staff to the then Australian Minister for Defence, Peter Reith.

In 1985 there was barely a tall commercial building in Beijing.

By 2001 they were everywhere making it look more like Singapore than the place I had seen 16 years earlier.

On that trip we met the now President of the People's Republic, Hu Jintao.

Besides other senior officials we also met General Chi Haotian, Defence Minister and General Zhang Wannian, head of the People's Liberation Army.

Both men were subsequently forced to retire when former President Jiang Zemin stepped down.

However, at the time, they were well into their seventies and it was reported to me that one of them, I can't recall which, had actually, as a child, been on the Long March with Chairman Mao.

As I sat there with Peter Reith, across the table from these men, I asked myself what must go through the minds of these gentlemen.

How could they now sit happily overseeing the new commercial revolution that is today occurring in China, when they had spent 50 years condemning the running dog capitalist roaders and participated in a regime, at senior levels, that had brought misery to millions of people.

It is something to contemplate.

To be the most charitable it may be simply as described in a book I recently read that said that one of the Chinese' greatest assets is 'cool common sense'.

Of course there are other less charitable interpretations but that can be left to another speech.

But the relevance of that story is that obviously a lot can change in twenty years.

So-called orthodoxies can be swept away.

Even communists can become our best capitalist friends.

And I think a lot of the changes for the better in Australia over that time period were indeed because of an onset of what I referred to above as 'cool common sense'.

Not least in this case by employer associations in Australia.

I have been asked to speak to you about the 'Changes in employer organisations 1985-2005'.

That is a potentially big topic so I am principally going to restrict my presentation to comments about the development of industrial relations policy by the employer movement.

The first point to make is that while today I head up the Australian Chamber of Commerce and Industry (ACCI), Australia's peak employer group, I have only done so since June 2002.

That covers only barely 4 years of the 20-year time period given.

I have, however, been personally involved in the industrial relations (IR) debate for most of the period.

In fact my personal participation began when, as a refugee from Bernie Fraser's Treasury, I went to work as an economist on the staff of then Shadow Treasurer, Andrew Peacock, in 1987.

The chief of staff was Peter Boxall who is now the Secretary of the Department of Employment and Workplace Relations and besides myself the other economist on staff was Anna Cronin, who later became the CEO of the National Farmers Federation between the years 2000 and 2005.

Early on when working there Peter, Anna and I were asked to give comments on the IR policy that the Liberal Party took to the recently conducted July 1987 election.

An election that I think John Stone, maybe for other reasons besides IR policies, will remember very well.

The 1987 Liberal Party IR policy was strongly supportive of enterprise based bargaining.

It had been drafted by Neil Brown and compared to the past was a revolutionary document.

Having said that, as economists, and not IR practitioners, I recall we commented that it still contained its fair share of corporatist tendencies.

In retrospect I now know that compared to virtually everyone else including the bulk of the business community the then Leader of the Liberal Party, John Howard and Neil Brown, his deputy between 1985 and 1987 were at the forefront of the reform debate.

Unfortunately, the views of the Confederation of Australian Industry (CAI), one of the predecessor organisations of the ACCI, while supporting the 'thrust' of the Liberal Party policy, principally backed the tripartite, centralised model of the Fraser Government years.

I will have something to say about the Australian Chamber of Commerce (ACC), ACCI's other predecessor organisation, a little later.

That was 1987.

Now, fast track to late 2005 and my appearance as Chief Executive of ACCI on the SBS Insight program when I was debating former Prime Minister Bob Hawke on the WorkChoices reforms.

I have a big regret about that debate, which I otherwise think went very well from an employer point of view.

My regret is that I had prepared what could be described as a throwaway line that unfortunately due to the course of the debate I wasn't able to deliver.

I had hoped to say that:

    the days when Bob Hawke as the President of the ACTU and my predecessor George Polites of the Australian Council of Employers Federations and later the CAI would sit down over a beer in a pub in Melbourne and decide the wages of millions of Australians were long gone and good riddance to those days.

That is my personal view and the view of the overwhelming majority of my constituency.

So what happened in the intervening two decades.

It would be helpful in discussing what has changed in relation to employer organisations over that time period if we understand the longer-term history.

The ACCI is today a result of two principal mergers during the last 105 years.

It is made up of basically three organisations.

In 1901 the Australian Chamber of Commerce was created, in 1903 the Associated Chambers of Manufactures of Australia was created and in 1904 the Australian Council of Employers Federations was created.

These three very different organisations are the core of ACCI today.

All you need to do is go and look at the presidential honours board hanging up on the 3rd floor of ACCI's Commerce House in Canberra to see this history.

Ironically given their subsequent merger some 90 years later, a key reason for the creation of the Australian Chamber of Commerce (ACC) was to lobby for free trade while the key reason for the establishment of Associated Chambers of Manufactures of Australia (ACMA) was actually to lobby against free trade.

The Australian Council of Employers Federation (ACEF) was created as a direct result of the coming into law of the Conciliation and Arbitration Act of 1904.

Its principal focus was to present the views of the employers before the newly created Conciliation and Arbitration Court.

ACMA was also heavily involved in employer/employee relations.

Over the years ACMA and ACEF built up strong bilateral relationships in advancing the cause of employers.

Eventually, without going into too much of the ugly detail, they merged to form the Confederation of the Australian Industry (CAI), at the end of 1977.

The CAI was the principal body representing employers from that time on in the Conciliation and Arbitration Commission.

In a wider context, around these years, as the times moved from the 1970s into the 1980s the economic climate of Australia changed.

A robust debate began in the employer community about whether the centralised wage fixing system overseen by the Conciliation and Arbitration Commission, was actually in the best interest of the economy and their businesses.

While it had been the accepted wisdom for most of the previous 70 to 80 years that Australia's unique centralised system was a clever antipodean solution to disputes in the labour market, this consensus began to break down.

That consensus had been shared by both Labor and Liberal governments, basically since Federation.

In fact, most people will not know this, but it was actually the conservative, Free Trade Party Government of Prime Minister George Reid that actually passed the legislation creating the system.

Indeed, if you were today to go to the memoirs of Sir Robert Menzies, you would find he devotes a whole chapter on the glories and national benefits of the centralised system.

However, times changed.

The industrial difficulties during the Fraser government exacerbated by the recession at the beginning of the 1980's was followed-up by the cosy two-party Prices and Income Accord between the Labor Government of Prime Minister Bob Hawke and the Australian Council of Trade Unions (ACTU).

These events highlighted the bankruptcy of the centralised system.

However, it must be said that CAI, leading the employer side, was still the number one ticket holder supporting the centralised system during the 1980's.

But furious internal debates began within the organisation, which seriously questioned the then IR policy.

The first serious indication of the sea change in policy that was to come was the splintering of the CAI membership that led to the formation of the Business Council of Australia in 1984.

A little earlier the National Farmers Federation (NFF) had resigned its membership.

In 1987 the Metal Trades Industry Association (MTIA) resigned and also in the late 1980's the Victorian Chamber of Manufactures, which had unilaterally renamed itself the Australian Chamber of Manufactures (ACM) did the same.

For a short while before returning, the Chamber of Manufactures of NSW (the subsequently renamed Australian Business Limited) also resigned.

My research suggests that while a key reason for all these various resignations was about money and subscription fees, there is no doubt that policy debates had an underlying influence on these decisions.

In summary and this may be a too simplistic summary for some, but I will say it in any case, you could argue that the MTIA, the ACM and the Chamber of Manufactures of NSW resigned because they felt CAI was becoming too pro-market, too deregulatory and too supportive of moving away from a centralised IR system.

The MTIA and the ACM after leaving CAI, eventually merged in 1998 to form the Australian Industry Group (AIG).

They are a group for whom the IR Club has been very important and are, in their own words to the centenary celebrations of the AIRC in 2004, a 'firm supporter of the Australian approach to industrial relations of which the AIRC is an integral part.'

Ironically, the NFF resigned partly because the CAI had not moved fast enough in the new direction.

Over at the ACC, then a venerable but fading organisation, people like Andrew Hay were radicals for reform.

Andrew, a leader of the so-called 'New Right' stated in August 1986:

    I would like to see the Conciliation and Arbitration system abolished. I don't believe we have time on our side which will allow us to take an evolutionary route over a 10 year period.

At the time Andrew Hay was the deputy president of the ACC and president of the Victorian State Chamber of Commerce and Industry.

He was subsequently president of the ACC in the years 1987-1988.

The BCA was also a leader in the charge from the business community in calling for a move to break down the centralised system and introduce a system of enterprise based bargaining.

Its March 1987 statement 'Towards an Enterprise Based Industrial Relations System' added to the pressure for reform.

The BCA were heavily influenced by their early membership, which I understand was weighted strongly in the mining and resources industries.

These were industries that fully understood the system needed to react to global demands before it was too late.

If I now then fast track to 1991.

This is the seminal year for the wider employer movement in terms of IR policy.

In a General Council meeting in July 1991 in Adelaide, CAI turned on its head its previous views on a centralised system.

It adopted a major new direction that, as it said at the time, was 'designed to take Australia into the 21st Century'.

The principal elements of the policy were:

  • A rationalisation of the Federal and State systems of industrial relations so as to produce one set of legislative obligations and one statutory tribunal.
  • An abandonment of compulsory conciliation and arbitration except in certain defined circumstances.
  • A greater emphasis on enterprise level industrial relations.
  • A greater freedom for employers and employees to make their own agreements.
  • Freedom of choice for employees in respect of representation arrangements.

There was a lot more detail but this is the brief summary.

I have been told by the old timers who participated in that CAI July 1991 meeting that the impetus for the change came from Western Australia, principally the Confederation of Western Australian Industry.

This may also have reflected a strong influence from the mining company community as we had seen with the BCA.

The WA participants were strongly supported by the Victorians, in the guise of the Victorian Employers' Chamber of Commerce and Industry and the Queenslanders from the Queensland Confederation of Industry.

I understand, and it is ironic in terms of NSW support today for reform, that opposition ostensibly came from our NSW members.

As CAI declared at this stage it, 'now [had] the most advanced policy of any employer group or political party, and will be able to exert a strong influence on the direction of change.'

Ian Spicer, my predecessor, who at the time was the CEO of the CAI, recalled to me the other day, how this was a thunderclap through the organisation and how he then went to see the then Shadow Minister for Industrial Relations, Mr John Howard, to inform him of this very significant change.

In October 1992, and not completely by coincidence, the Liberal and National Parties released the most progressive and radical IR policy ever released by a main political party in Australia.

That was the JobsBack policy.

I am proud to say that I had a minor role in contributing to the writing of that policy.

I have a theory of why employer associations as a group have supported reform and why they have left the union movement behind in this regard.

The employer bodies genuinely have developed constitutional structures that when it comes to it, leave the ultimate power in their organisations to the business people who form their membership.

To expand on this, one of the reasons that the BCA splintered off from CAI, and this can be corroborated by a speech by Sir Arvi Parbo, the first President of BCA, gave in 1993 and by the memoirs of Bob White, another former President, is that they objected to the fact that as they believed at the time the paid staff of the employer organisations completely dominated the organisations.

This was exacerbated by the fact that the senior paid staff tended to be IR experts who wanted to protect their patch.

If this was the case 20 years ago, I would argue that it is not the case today and hasn't been for quite a long time at ACCI and that the policy direction of ACCI as would be the case with its membership, is ultimately decided by the business people who own or run the companies that are members.

So, to take IR, we have a policy that is beneficial to our company members because that is what our Board and our General Council want.

Sometimes, and I will not use any names to protect the 'guilty', what is in the best interest of the paid staff and the secretariat of an employer organisation, is not necessarily in the best interest of our company membership.

And so it is very important to have a governance model that ultimately says the business people control the employer association.

For all the patronage---Australian Industrial Relations Commission appointments and the like---we were able to abandon the old system more easily than unions.

For whatever reasons, we were able to change as a matter of culture.

Our changing structure and nature drove policy change.

As old Employers Federations became genuinely entwined with economic organisations like the Australian Chamber of Commerce ideas cross-pollinated between disciplines.

IR policy became more economically informed.

Increasingly, new CEOs were economists or generalists and not IR people who had worked their way up through the system.

That is not to say that IR people aren't good staff, it is that they no longer possessed a monopoly.

As an aside, you might be interested that another old timer that I have spoken to recently reflected that it was ironic that at the time (in 1992) that the CAI effectively took over---'merger' is a more diplomatic word---the Australian Chamber of Commerce (ACC), it was believed that all that the ACC people were getting out of it, was the name.

That is the name Australian Chamber of Commerce and Industry (ACCI).

But in fact, it is the strongly pro-market policies of the ACC at the time that now form the framework of all the policies of ACCI.

Now let me contrast what I have been saying to what occurs in the union movement.

Basically the way unions are operated, their paid staff in their secretariats completely control and determine both the administration and policy of the union movement.

The check that exists in employer associations today, whereby the membership interests are protected by the Board, basically does not exist in the union movements because of the overwhelming power of the paid apparatchiks.

And so, as time goes by the Unions have simply not been able to confront the fact that IR reform is of actual benefit to their memberships.

This is because industrial relations reform may impact on the power of the paid secretariat, which they regard as being the be all and end all of the unions.

But to return specifically to the IR debate.

We all know that in 1996, the policy that the Coalition took to the election was actually a backward step from the JobsBack policy.

The reason for this is that the Coalition had obviously been tenderised by losing the 1993 'Fightback' election.

The Howard Government since 1996, first with the 1996 Reith changes and now with the WorkChoices legislation, have effectively implemented that 1996 policy.

They have actually implemented the mandate on IR that they had originally sought.

We though, at ACCI, have basically maintained the policy framework that the CAI agreed to in 1991 and it is available in graphic detail in the 166 page Modern Workplace, Modern Future Blueprint that we released at the end of 2002.

This is a policy that goes well beyond WorkChoices and in our view still needs to be implemented.

When we launched our Blueprint in 2002, I gave an analogy that IR reform could be compared to driving from Melbourne to sunny Queensland.

I said that at the time, in 2002, we had maybe got as far as Albury Wodonga and the car had stopped and the wheels had fallen off.

After I said that, the Prime Minister said at a meeting of ACCI that he understood the sentiment of what I was saying but 'fair go, I think we have at least reached as far as Canberra or Goulburn'.

Well WorkChoices may have got us up somewhere nearer the central coast of NSW.

There is still a long way to go.

I know there is one aspect of our policy that members of the HR Nicholls Society have a fundamental disagreement with us on, and that is the setting of a minimum wage by a government institution.

As a 'well trained' Treasury economist, I understand the economic arguments that go behind the opposition to such a policy.

However, the fact is that as with any micro-economic reform, we have to be realistic about what can be done, and we have to take the community along with us or we can completely jeopardise the whole reform program.

I think you will agree with me, that there is no way that we would see a Beazley Government abolishing the minimum wage.

I am confident in also saying that there is no way a Howard Government would abolish the minimum wage.

Some of you may think that a Costello Government or a Nelson Government or a Downer Government of the future might abolish the minimum wage.

But don't hold your breath.

So there are still disagreements over what policy should be.

We at ACCI have a policy that yet needs to be implemented.

It is a far cry from the policy position that the bulk of the employer movement held 20 years ago.

However, as I alluded to earlier cool common sense seems to have prevailed.

The HR Nicholls Society has been a key ginger group for pushing for reform in the IR area.

I am very happy to acknowledge that very important contribution.

And of course there was the critical contributions of those involved in Dollar Sweets, Robe River, Mudginberra, the Waterfront Dispute and other battles.

At least those on the side of the angels in those disputes.

They are for other speeches.

However, the employer movement has also been crucial to that reform and I think has actually been instrumental in garnering the political acceptance, even if to date only on one side of politics, to the needed changes.

Thank you for the opportunity to speak to you today.