Light on the Hill: Industrial Relations Reform in Australia
Trade Unions and the Grain Handling Industry
The Australian grain growing industry is one of this
country's more efficient, low-cost export industries.
It ranks with beef cattle and wool production as industries
in which Australia has a particular comparative advantage.
In the efficient production of food, the Australian
farmer ranks supreme. He (and she) produces enough
food for 70 people. His North American counterpart
produces food for 59 people and the West European farmer
feeds 19. The Australian farmer is also good looking!
In the grains industry the picture changes dramatically
once grain moves beyond the farm gate. The cost of
moving a tonne of grain from farm gate to sea board
is much higher in Australia than it is in countries
against which we compete on the export market.
A comparative analysis of off-farm costs was done
recently by some international grain traders and presented
as evidence to the Royal Commission on Grains Storage,
Handling and Transport in Australia. Having made some
adjustments to standardise the length of time of storage
and quality of storage, and assuming that grain was
hauled over the same distance, the estimated cost of
moving a tonne of wheat from farm gate to seaboard
was calculated to be $43.50 in Australia; $30.40 in
Canada; $19.40 on the US West Coast (Portland), and
$39.10 in Argentina.
It can be seen from these figures that Australia suffers
a $4 per tonne penalty compared with Argentina, a $13
per tonne penalty compared to Canada and a massive
$24 per tonne penalty in competing with the United
Very obviously we are doing something terribly wrong.
Why is it that Australia's bulk handling and transport
system for grains performs so badly against our competitors?
The answer is to be found in the environment in which
the system operates. There is nothing inherently wrong
with the people who manage and work in Australia's
bulk handling and transport system. But there is a
lot wrong with the decision-making and operating environment
in which those people are placed. Competition is virtually
unheard of, and there is no clear link between performance
and reward---public service pay scales apply whether
the amount of grain loaded is zero, one or ten thousand
The basic problem with the grains industry is that
it is being suffocated by excessive regulation and
lack of competition in the provision of infrastructure
services. There are four key areas of activity controlled
First, marketing of wheat is subject to complementary
Commonwealth and State legislation which compels growers
to deliver all their marketable wheat (except for domestic
stock feed and wheat under permit) to the Australian
Wheat Board. The Australian Wheat Board has legislated
monopoly marketing rights over the Australian wheat
crop; other major grains are generally subject to State
government marketing boards.
Second, returns to growers from the sale of wheat
are subject to compulsory pooling in which revenue
from domestic and export sales is equalised throughout
Australia, subject to adjustment for quality. Borrowing
charges (for advanced payments to growers) are also
pooled on a per tonne basis, notwithstanding big differences
in price between various categories of wheat and therefore
big differences in individual borrowing costs.
Third, bulk handling of grain is strictly regulated
by State government legislation. Each of the State-based
bulk handling authorities is a sole authorised receiver
for the Australian Wheat Board in its respective State.
Indeed, the Australian Wheat Board is not permitted
by law to seek out competitive bulk handling services.
With some minor variations, charges for each bulk handling
authority are pooled in each State on a per tonne basis,
regardless of differences in the level of services
as perceived by the growers who pay for them.
Fourth, transport of most grains is also regulated
by State governments. In some States, legislation is
used to restrict the movements of grain by road in
competition with rail. In others, the lack of facilities
to receive grain by road at port terminal gives rail
an effective monopoly. Rail charges are heavily regulated
and are based on distance, regardless of the cost of
the haul, and with revenue-raising the overriding requirement.
Charges for loading at port are pooled and are set
by State government instrumentalities.
The ultimate effect of all of this regulation can
be seen in the high costs of storing, handling and
transporting grain in Australia compared with our major
competitors. I mentioned earlier that Australian grain
growers suffered a $13 per tonne cost penalty in relation
to Canadian farmers and a $24 per tonne cost penalty
in relation to Americans. I would also add that extensive
research conducted by ACIL over recent months has revealed
potential savings of at least $15 per tonne across
the Australian grain crop if there were open competition
in the provision of storage, handling and transport
services to grain farmers, i.e. if the present monopoly
powers were removed.
Given that the present on-farm price for wheat is
about $100 per tonne (with large variations from that
amount to reflect quality differences and location),
the average farmer could expect at least a 15 per cent
increase in his farm gate return. From a national view,
it would add something of the order of $300m to Australia's
At this stage it is appropriate to reflect on the
role of the grains industry in the Australian economy.
Notwithstanding recent price collapses, the industry
still makes a significant contribution to our economic
well-being and has the capacity to add significantly
to export returns if (and when) the removal of monopoly
control of its output allows it to perform more efficiently.
This year we can expect Australia to produce about
26 million tonnes of grain, of which 16-17m tonnes
will be wheat.
The total value of grain produced in Australia is
about $5 billion, of which about half ($2.5 billion)
is accounted for by wheat. That makes grain about a
third of all rural production and therefore wheat about
16 per cent of all rural production. The percentage
has dropped in recent years as the value of wheat has
dropped. About 3 years ago wheat accounted for closer
to 24 per cent of rural production, compared with 16
per cent today.
On average, about 80 per cent of all grain produced
in Australia is exported and that, of course, makes
the Australian grains industry extremely dependent
on---and indeed vulnerable to---the world market situation.
To put the scene in perspective, rural products in
total account for about 37 per cent of total exports
from Australia and of those exports about one-third
is grain. That means that grain accounts for about
10 per cent of all Australia's exports.
Putting dollar values on those percentages, grain
exports amount to about $4 billion a year, and wheat
exports to about $2.2 billion, down from $3 billion
a couple of years ago.
The market situation can only be described as disastrous.
Falling revenue from international markets has been
the major cause of low returns. Over the last 6 or
7 years, wheat stocks have risen by 75 per cent and
US prices have plunged by 45 per cent; world grain
prices have reached their lowest levels in real terms
for at least 50 years. Total grain stocks in the United
States have risen and are now at a level equivalent
to around 2 years' total world trade.
There was a rapid growth in the world grains industry
during the 1970s, but following that decade of expansion
total world imports of grain have come to a virtual
standstill in the 1980s.
Demand is down due to a number of factors, the main
ones being international economic recession, mounting
foreign debt, drives for self-sufficiency and protectionist
In the years 1984-85 to 1985-86, trade in coarse grains
dropped from 100 to 81m tonnes and over the same period
trade in wheat dropped from 104 to 85m tonnes. Of
the 19m tonne reduction in traded wheat, the USSR accounted
for 11.6m and Brazil and Africa about 3m tonnes each.
Hence, the above three factors accounted for most of
the collapse in world wheat trade.
Not only are world stocks of around 170m tonnes at
a record level, but the ratio of stocks to consumption
is very high at 34 per cent. The simple---but essential-proposition is that the level of stocks has to fall
to an equilibrium level of about 130m tonnes (which
is about 26 per cent of use) before there can be any
significant and sustainable increase in prices. That
is, there has to be a reduction in stocks of some 40m
tonnes, or just under half the level of world trade,
to sustain an upturn in prices.
Because Australia only accounts for about 2 per cent
of total world grain production and about 8 per cent
of world grain trade, it has very little influence
over the stocks and prices on the world scene. Indeed,
not only is Australia a price-taker on the side of
product sales, it is also a price-taker on the purchase
of most farm inputs such as labour, capital funds,
plant, equipment, fuel, etc. Two important consequences
arise from that. First, Australia is not able to pass
on to its customers the cost of producing, handling
and transporting its grain; and secondly, any savings
which Australia is able to make in input usage and
productivity gains are reflected almost dollar for
dollar in increased international competitiveness.
By either count, the future for the Australian grains
industry therefore depends on being able to improve
its international competitiveness. We live in a world
market and our future survival and indeed prosperity
stands or falls on how we compete in that world market.
The recent drop in grain prices and corresponding
drop in farm incomes have caused growers to focus increasing
attention on areas where costs can be cut and gains
in efficiency introduced. The area of costs over which
farmers can have the greatest amount of influence is
on their own farms where by international standards,
productivity is very high. Farmers have far less control
over domestic off-farm costs, particularly grain storage,
bulk handling and transport, which by international
standards are very high.
To illustrate the problem faced by Australian grain
growers, the throughput at typical North American grain
terminals is about 100,000 tonnes per man per year.
This compares with a throughput at the Sydney and Newcastle
port terminals of about 20,000 tonnes per man per year.
Although we are competing on the same markets, North
America's performance in grain handling is 5 times
better. Further evidence of poor performance is found
in the conclusions of a number of independent economic
evaluations conducted by bodies such as the BAE and
the IAC and the ACIL study of Australian grain marketing
for the Australian Institute of Public Policy in 1986.
These reports have highlighted the high costs being
borne by the grains industry from the absence of competition
in the provision of services. Government intervention,
ostensibly on behalf of growers, has resulted in:
- lack of incentive to innovate and perform efficiently;
- high cost of administration and compliance with government
rules and regulations;
- the pursuit of objectives which reduce efficiency,
such as politically inspired investment decisions (of
which the Port Kembla terminal would be a good example);
- the appropriation of monopoly rents;
- the vulnerability of monopolised institutions to
industrial action; and
- wrong economic signals arising from the pooling of
costs and charges.
The high cost of the outcome is largely hidden and
therefore difficult to quantify. Nonetheless, growers
(who pay for the services) perceive that the costs
are indeed very high, and those growers are becoming
more confident in their perceptions as they look at
international comparisons like those mentioned earlier.
They also observe what other growers are doing with
Bulk handling and storage charges in Australia are
in the range of $13-17 per tonne (leaving aside charges
for carry-over, wharfage and two-port loading) and
are determined on a State-by-State basis by each of
the State-based bulk handling authorities. There are,
however, some private bulk storages which operate for
grains not covered by statutory arrangements or for
wheat covered by special arrangements such as under
the permit scheme, and the cost of these storages is
typically in the range of $3-5 a tonne. It also appears
that the cost of port terminals is in the range of
$3-4 a tonne, so it can be seen that instead of the
combined charge being $13-17 it should be more like
$7-8 a tonne. Being very conservative it is relatively
easy to see why, on an Australia-wide basis, savings
of at least $5 per tonne would be easily obtainable
if the monopoly of the bulk handling authorities were
removed and if they were required to compete against
private sector operators in providing grain storage
and bulk handling services.
A similar situation exists with transport. Costs are
unnecessarily high because:
- railways in most States are protected from competition;
- charges are pooled, so resources are wasted (excessive
use of high-cost services and under-utilisation of
- grain is prevented from moving from farm to point
of destination along the least-cost path because of
State regulations and practices which inhibit competition
- the practice of the Australian Wheat Board deducting
growers' rail freight charges on a fixed basis as advised
by each rail authority removes the opportunity for
an individual grower to negotiate lower freight rates;
- uneconomic work practices have flourished in an environment
of non-contestability and feather-bedding.
The extent of savings available from opening up grain
transport to competition depends very much on a grower's
location and business circumstances; however, it is
clear from evidence presented to the current Royal
Commission that savings of the order of at least $6
per tonne are available on a wide scale. Further savings
could be made with improvements in productivity which
would arise from dynamic gains in a contestable market
and through the use of new technology which is presently
being denied to the grains industry by regulatory bodies
such as the Australian Transport Advisory Council and
by State Ministries of Transport.
Finally, at the ports, which are monopolised by State
governments, there is little or no choice and costs
are very high. Apart from wharfage, which is pooled
on a State basis, the cost of grain ports is pooled
nationally even though there are large differences
in costs from port to port. Considerable gains in efficiency
would be made if the full cost of exporting through
each port was reflected in the f.o.b. price for grain.
That means that the Wheat Board and other marketers
should quote a different f.o.b. price at each port
instead of simply quoting one standard pooled price
for all ports.
In order to provide competition at ports, the monopoly
of the bulk handling authorities should be removed.
Alternative facilities which have been proposed indicate
that very substantial cost savings could be made not
only in the task of loading ships but also in reorganising
the flow of grain from farm to port terminal. Leaving
aside savings from improving the efficiency of the
flow in grain, it appears that the potential cost savings
per tonne at the ports amount to over $4, made up of
- stevedoring $0.50
- improvement in loading rates $1.50
- improved ship programming $4.00
- reduced industrial disruption $0.50
It is, of course, very difficult to quantify these
savings, because we are talking about something which
doesn't yet exist. But the above figures are representative
of those that are currently allowed by the charter
and shipping companies to account for identifiable
costs incurred in coming to Australia. It can therefore
be seen by adding together the cost savings that have
already been identified, that the industry could easily
save $15 per tonne in its infrastructure costs: that
is, at least $4 from improved bulk handling, $6 from
improved transport and $4 from improved performance
at our ports. Not only is that identifiable cost saving
remarkably close to the penalty which Australia carries
in relation to our major grain export competitors;
it can also be regarded as a minimum, because in the
event that the grains industry services sector were
made more open and competitive, there would be large
additional dynamic gains from improved productivity
which have not yet been identified.
In examining why costs are so high in Australia, it
is immediately apparent that institutional arrangements
and practices are not conducive to economic efficiency.
The highly monopolised environment invites poor performance.
To understand why the grains industry got itself into
this mess, it is instructive to have a brief look at
A common theme throughout the history of the grains
industry, particularly bulk handling, transport and
marketing, has been the pursuit of broad political,
price stabilisation and equity objectives through government
During the interwar period when the foundations for
the present grain handling and marketing systems were
put in place, the emphasis of grains industry policy
- 'stabilisation'---a pseudonym for raising prices
above the low market levels of the depression;
- 'equity' (i.e. horizontal equity)---seen as preventing
merchants from dragging down the price of all grain
to the level of the weakest seller; and
- the desire of growers and their organisations to
capture what they perceive to be the excessive margins
enjoyed by middlemen.
These objectives, which were political in that their
attainment required government control to favour one
group at the expense of another through fixing prices
and excluding competitors, constituted reasons (whether
justifiable or not) for government intervention in
the grains industry.
Whilst there was a lot of rhetoric at the time---much
of which is still heard today about exploitation by
middlemen, it seems that there was very little or no
economic analysis of the value and cost of marketing
services; nor was there any analysis of the extent
of market failure in the provision of those services,
ways of overcoming such market failure if it existed,
or the economic cost of government intervention.
Over the years governments have dispensed patronage
to grain growers in the form of guaranteed market outlets,
granting of land, provision of railways, provision
of bulk handling services, and statutory marketing
schemes ostensibly to stabilise prices and provide
assistance. Generally at the request of growers, governments
have built up a huge range of regulations in an attempt
to inhibit or mask the operations of the market place.
But in seeking political solutions to economic problems,
grain growers have allowed themselves to be captured
by governments and the regulators. Instead of encouraging
new ideas, innovations and cost savings through competition,
industry leaders have sought to suppress competition
by setting up monopoly boards to handle and market
their crops, and have sought for themselves the economic
rents created by various boards, authorities and related
Growers originally supported the introduction of bulk
handling because of its potential for cost savings
and the opportunity to control storages and hence ensure
competition amongst buyers for their grains. But the
outcome has been that State governments or their instrumentalities
now control the storage, handling and transport of
grain. Today, the control of State governments over
most of the grains industry extends to using 'orderly
marketing' schemes not to raise growers' incomes but
to protect the State government authorities at the
expense of the growers.
It should come as no surprise that one of the inevitable
results of this huge amount of government intervention
has been the creation and appropriation of extensive
monopoly rents. In any monopolised environment which
has been created by regulation, where the positions
held by individuals and firms are not contestable,
potential cost savings from improvements in management
and the adoption of new technology usually accrue to
the 'system' in the form of more favourable terms and
conditions of employment such as overmanning, inefficient
work practices, over-generous superannuation schemes
and so on, rather than being passed on as lower charges
to the users of the service.
You might well ask why it is that when the cost of
the bulk handling and transport system in Australia
is so manifestly high and when the operation is so
inefficient, growers have not forced changes. Fundamentally,
the explanation is in the appropriation of monopoly
rents by their leaders. As pointed out earlier, the
genesis of most rural boards was in the desire of growers
to gain control of their product in order to prevent
exploitation at the hands of the middlemen and to appropriate
profits from the operations of a board. Accordingly,
growers sought, and were generally granted, majority
representation on boards; but once established, the
boards have taken on a life of their own and have grown
from being servants to masters of farmers.
For many of the so-called farm leaders who sit on
these boards, the boards have become a source of privilege,
apparent influence and a pleasant lifestyle---it sure
Or as Hugh Morgan remarked to a meeting of farmers:
'It is my melancholy duty to have to inform you that
it doesn't matter how many representatives of growers
there are on these government bodies. Middlemen have
always kept, and will always keep, their margins for
themselves. In the case where government controlled
organisations perform middlemen functions, these margins
are called 'salaries' and 'superannuation packages'
instead of profits.
There is no administrative technique, no method of
grower representation, which can eliminate monopoly
rents. The part time, honorary, grower representative,
no matter how dedicated, no matter how able, can never
compete with a full time professional bureaucratic
monopoly rent defender and collector'.
An example of the pervasive effect of monopoly rent
can be seen in the positions of power created by the
wheat marketing legislation. Under the marketing arrangements,
the States cede to the Australian Wheat Board the right
to sell and price wheat on the domestic market. This
requires complementary legislation to be passed by
State governments. The quid pro quo is that in return
for giving up their pricing powers over wheat, State
governments dictate that monopoly rights must be granted
to the State based bulk handling authorities. That
is why the Wheat Marketing Acts in each State compel
the Australian Wheat Board to use only the authorised
receiver, i.e. the State bulk handling authorities.
The power of State governments to refuse to pass complementary
legislation---and therefore bring to an end the monopoly
of the Australian Wheat Board on the Australian market-puts the bulk~handling authorities, and in some States
the rail authorities, in a very dominant position in
relation to the captive users of the services. It can
be seen that the bulk handling authorities and the
railways are extracting large monopoly rents from government
regulation of the wheat industry.
It needs to be emphasised, however, that the rent-seekers
are acting rationally in response to the signals, pressures
and incentives which they receive in the environment
created by the monopoly. It is the non-competitive
market which creates the economic rents.
This whole system is a 'sitting duck' for industrial
disruption. It is easy to blame trade unions for the
problems, but to do so is to make the classic error
of mistaking the symptoms for the cause of the problem.
The cause of the problem starts with the proposition
that single suppliers of services such as the bulk
handling authorities and the State railways and indeed
the Australian Wheat Board are extremely vulnerable
to industrial action. With a single employer, it is
easy for unionists to take industrial action to stop
the entire handling transport system. Where the single
employer operates in a non-contestable environment
and the managers of the monopoly do not have their
personal incomes affected by decisions which increase
costs, it is understandable why these managers accede
to union demands. In the grains industry the costs,
of course, are passed back to growers and ultimately
the competitive position of Australian grain on world
markets is jeopardised.
By contrast, where services are supplied by a large
number of smaller, decentralised and independent operators,
staff are more likely to be employed on a site-by-site
basis and are likely to be paid according to their
performance. The small-sized unit is generally characterised
by greater flexibility, enthusiasm, joint decisions,
productivity. sharing arrangements and a clear understanding
of---and commitment to---the goals, of the firm. In
those circumstances industrial action which reduces
productivity is very unlikely to be used because everyone
in the firm suffers. That contrasts with the big monopolised
grain handling and marketing institutions where staff
are paid a salary at a standard rate regardless of
performance and have little interest in the outcome
of the operations of that institution.
Work practices such as low productivity, overmanning,
lack of integration of shirts, absenteeism, labour
rigidities (such as 'last on---first off') highlight
an industrial situation in the grains industry which
reflects appallingly on both management and unions,
but is fundamentally an outcome of a totally inappropriate
operating environment. Fundamentally, it is the environment
in which people make decisions and work that is wrong,
rather than the people themselves. Where there are
work practices which reduce or retard the efficiency
of the industry, it is wrong to blame solely the employees
or the union; rather that behaviour is a manifestation
of the failure of management to manage the industry
and governments to require---or demand-proper management,
and to create an environment which is conducive to
enthusiasm, commitment to the task and productivity
advance. Inherent in the general malaise of the
industry is the obvious influence of the series of
monopoly authorities which have consistently chosen
the path of least resistance in their dealings with
unions and have decided time and time again that it
is easier, simpler, and even better to concede union
claims---and increase the cost to users---rather than
face further industrial un rest and disruption. The
cost-plus approach of these monopolised institutions
has adversely affected efficiency in the grain service
Looking at the transport sector, the combination of
a long period of non-contestability and being regarded
by State governments as social instruments have made
railways very vulnerable to trade union demands. Work
practices which developed decades ago have become entrenched
and it is only very recently when faced with the threat
of real grower protest---and I might add the imminence
of the present Royal Commission---that action has been
taken to overcome some of the deep-seated problems.
It is of course, not possible to substantiate all
of the anecdotal evidence of high-cost work practices
but many of the claims are made with sufficient confidence
and corroborated from such a large number of sources
to give grounds for serious concern at the damage being
done to the competitiveness of the grains industry
by low productivity in rail transport.
For instance, it seems that the NSW State Rail Authority
still changes the crews of its modern diesel electric
locomotives at the same times and places as it did
for long-gone steam engines, i.e. at the points of
taking on coal and water. The effect of this is a quite
unnecessary reduction in the effective operational
hours of trains and a corresponding loss of productivity.
There are reports of crews having been paid for 7
hour shirts although the train only operated for one-and-a-half
to two hours. This loss is compounded by the enormous
cost of ferrying crews around the country in taxis
to change shift at points which, in some cases, are
at the turnaround point for the train journey. Apart
from the problem of breaking with entrenched union
attitudes to outmoded work practices, it should be
relatively easy to schedule train journeys and crew
shifts to maximise labour productivity, provided management
wants and is allowed to exercise flexibility. If crews
could be paid according to hours worked or tonnes of
grain hauled, then it is clear that they could be rostered
to work on a per journey basis. With such a change
the utilisation of locomotives and rolling stock would
also be higher.
Railway maintenance practices is another area where
substantial cost savings could be made. The threat
of industrial action combined with complaint and generally
unaccountable management have kept in place the outmoded
and very labour-intensive practices of rebuilding equipment
instead of scrapping and replacing it. The railways
have continued with maintenance practices such as lubrication
on a time basis derived from the steam era instead
of according to hours of service. If maintenance practices
were updated to those now being used in the aircraft
industry---which are, in fact, appropriate to current
railway technology---reductions of the order of 35
per cent could be made in the number of staff at railway
workshops with no lowering of the quality of maintenance.
Rather, adoption of currently available servicing technology
would improve the productivity and safety of locomotives
and rolling stock. It has been indicated by senior
Transport Ministry officials that the above changes
have a combined potential saving to the Australian
railway system of well over $150 million annually.
Is it any wonder that the cost of labour accounts
for 70 per cent of the total cost of State Rail Authority
operations compared with 40 per cent of rail costs
in North America?
The crucial point that emerges is that there is clearly
considerable scope for reducing rail transport costs.
But the potential is not being achieved because of
entrenched industrial practices and an historical unwillingness
on the part of both labour and management to move away
from highly inflexible and institutionalised arrangements
which are unresponsive to changing demands and values.
It must be said, however, that proposals for cost savings
announced within the last year indicate the capacity
of the railways to respond if the pressure is great
enough. There is every indication that the railways
would respond on an open, competitive transport market
by reducing their charges and would therefore be forced
to pay greater attention to overcoming high-cost work
Work practices in the storage, handling and transportation
of grain differ greatly at each stage, from State to
State and location to location. Levels of manning and
other work practices are sometimes set down in awards;
more often than not, however, they are contained in
industrial agreements or are merely an arrangement.
Let me give you some examples of restrictive work
practices which significantly diminish the productivity
of grain handling operations.
The grain terminal at Albany (WA) only works for an
effective six-and-a-half hours per day, even though
it is capable of operating for 24 hours if required.
If half an hour of overtime is worked, the men receive
two hours pay at overtime rates.
O.D. Transport (a WA road haulage company) estimates
that the reluctance of Co-operative Bulk Handling Ltd
(CBH) to work overtime requires an additional 15-20
per cent in the number of trucks used. This arises
because O.D. Transport is not able to complete 2 hauls
per day from most of its collection points in the allotted
time, but instead is forced to wait idle for full trucks.
In order to meet CBH's requirement to deliver 800 tonnes
per day, O.D. Transport has to put on more trucks than
would otherwise be the case. O.D. Transport considers
that if CBH were prepared to work another 1.25 hours
per day, most trucks could be scheduled to do 2 complete
trips. It should be possible to keep the terminal open
for 10-11 hours on 2 rostered shirts---and even longer
if justified by the volume of grain to be handled.
The basic requirement is for more flexibility in hours
of operation to get the best utilisation of equipment.
If country silos and port terminals were in the hands
of private operators, every effort would be made to
increase throughput and there would be a much greater
incentive to overcome current restrictive work practices.
The labour force employed at grain loading ports around
Australia varies considerably. It appears to reflect
a combination of historical practice and the capacity
of waterfront unions to extract 'rents' from employers.
Within the port terminals there is evidence of gross
overmanning and feather-bedding. For instance, a member
of the Grain Handling Authority of New South Wales
has conceded unofficially that the Sydney terminal
could be run with 40 employees per shift instead of
the current 110.
The number of men actually required to load bulk ships
depends very much on the age of the ship and the state
of its technology. There are ships available today
which do not require any labour to load and can be
monitored by one supervisor. Nonetheless, regardless
of the requirement for labour, there are established
levels of manning which appear not to have been challenged
by stevedores or grain marketers. One reason for the
acceptance of this situation is that the cost of waterfront
labour is hidden in the freight rate so that shipowners
(who pay for the cost of stevedoring) are able to pass
it on to growers (who are unaware of what they are
paying) via the reduced f.o.b. price for grain. If
all waterfront costs were publicised and reflected
in the cost of each port, the pressure of accountability
and loss of business would act as a brake on the amount
of feather-bedding on the wharves.
In the view of several marketers, there are many instances
where stevedoring costs could be halved if work practices
reflected the way that similar loading equipment is
manned at export terminals in competitive countries.
For instance, at Kwinana a gang of 11 is required for
grain loading from two spouts, yet in the opinion of
marketers no more than 6 men are called for.
Similarly, the manning arrangement at Geelong is that
when a ship is loading, 2 men are required for each
spout (4 spouts at Geelong), and there are 2 foremen
and one supervisor. So 11 men are employed plus extra
labour for trimming. However, only one man is needed
per spout plus one foreman and supervisor, so no more
than 6 men are required. Indeed, there have been a
number of occasions when the men have tossed a coin
to decide which four work the spouts and which go home-the latter, of course, still on full pay.
According to the shipping companies and charterers,
stevedoring costs in Australia range from 30 cents
to $2.00 per tonne for wheat, with a significant proportion
of the variation being due to additional charges for
overtime, unscheduled delays, trimming and payments
to various funds. The shipping companies and charterers
generally build an 'insurance margin' of about 50 cents
per tonne into their freight rates to cover the risk
of additional stevedoring charges, and the risk of
being directed to load at a port with high stevedoring
One of the major complaints of shipowners and charterers
about stevedoring costs in Australia is that the final
bill may be far higher than the original quote because
of the unforeseen additional costs, some of which are
difficult to relate to the stevedoring task and others
which are blatantly bogus items. A ship charterer from
Western Australia, for example, has advised that he
was recently charged $17,000 for stevedoring, of which
$7,000 was for stevedoring labour and the balance of
$10,000 was for 'special debits' and payments to various
An effective way of putting downward pressure on stevedoring
charges generally would be to have them paid by the
shipper (grain marketer) instead of the charterer,
as part of the loading charge. That would then facilitate
the identification and publication of the cost of stevedoring
at each individual terminal as a means of creating
public pressure to reduce charges and remove the risk
premium from the freight rate, which at present diminishes
returns to all growers regardless of the port from
which their grain is shipped.
The view of a number of shipowners and charterers
is that there is potential to save about 50 cents per
tonne in stevedoring costs by reducing manning levels
to those required to utilise equipment efficiently
and by making the shipper responsible for stevedoring
and therefore removing from the shipping company the
risk of being directed to a port with high stevedoring
Lack of integration of the hours of operation causes
unnecessary lost time and under-utilisation of facilities.
For instance, at Geelong the day shift for the wharf
labourers is from 8.00 am to 3.00 pm and the twilight
shift is from 3.00 pm to 10.00 pm. There is a 'smoko'
of 20 minutes every 2 hours, with a lunch break between
12 noon and 12.25 pm. However, the terminal operating
hours for the first shift run from 8.00 am-5.00 pm
with a lunch break from 12.00-1.00 pm, so 35 minutes
of loading is lost in the middle of the day. For the
terminal operators the second shift runs from 6.00
pm-10.00 pm. From 5.00 pm-6.00 pm, therefore, the wharf
labourers are on full pay but do nothing, though from
5.00 pm-5.20 pm is 'smoko'. As a result, a minimum
of 75 minutes is lost per day, plus the time taken
for the men actually to reach their stations following
the start of each shift.
At Portland, by comparison, the hours of work for
both silo operators and wharf labourers are integrated
so there is no lost time in the scheduling of labour.
Continuous running grain loading facilities were introduced
at the Sydney terminal in May 1986 and are estimated
to have increased productivity at the terminal by 35
per cent. Indeed, through better integration of operating
hours, the terminal exported in one month (350,000
tonnes) as much grain as had traditionally been shipped
from both Sydney and Newcastle per month, and in doing
so cast serious doubts on the necessity for the new
terminal being built at Port Kembla. However, the success
of continuous running at Sydney was short lived because
it reduced the amount of overtime required. Continuous
running was discontinued in July 1986.
Determination of the hours of operation is essentially
a matter between employers and employees. Considerable
scope for productivity improvement exists from better
utilisation of storage and loading equipment and faster
turnaround time for ships. Indeed shipowners and private
grain marketers emphasise the necessity for 24 hour
loading when ships are available.
Another area of impact on the costs of terminal operation
is the level of absenteeism of employees. At the Sydney
Terminal, for example, the average level of absenteeism
in March 1987 was 37 out of 180 employees, i.e. over
20 per cent of the workforce was away every day in
March. The Grain Handling Authority includes in those
figures employees absent on sick and recreation leave
and workers' compensation. These figures do not, of
course, include sick periods. Also during March, 20
shifts were lost because of AWU and PSA strikes. January
1987 was even worse, with 48 men away each day or nearly
27 per cent of the workforce.
This type of information is generally closely guarded
by bulk handling authorities for the obvious reason
that growers would be incensed if they realised that
they were paying for this level of absenteeism. The
Grain Handling Authority admits that this level of
absenteeism is 'outrageous', that it is evidence of
overmanning, poor management practices and staff morale,
and that it contributes to excessive costs.
There is no doubt that the level of absenteeism is
outrageous. Attempts are being made to 'tighten up'
the sick leave procedures, but they don't go nearly
far enough. After two years' service, employees will
still be entitled to 30 days' sick leave, with a medical
certificate being required for each day of sick leave
after 10 days. The past performance of the Sydney Terminal
has shown that employees will take everything they
can possibly get.
The cost of overmanning and limited hours of operation
is reflected in the very low throughput per man at
Australian grain terminals compared with those of our
competitors. As mentioned earlier, the number of tonnes
loaded per employee in North American terminals is
about 5 times higher than at Sydney and Newcastle.
The poor performance at Australian terminals is also
illustrated by the fact that over the past four years
unauthorised strikes and stoppages have cost the nation
the opportunity to load and ship 6m tonnes of grain.
Half of the lost opportunities (accounting for 3.055m
tonnes) occurred at the ports of Sydney and Newcastle.
There is no doubt that poor industrial relations in
the grain storage handling and transport system have
been a major item of cost and have severely damaged
the international competitiveness of one of Australia's
principal export industries.
There is also no doubt that the highly institutionalised
system of monopoly boards and State government authorities
has created monopoly rents which have gone to those
who can apply the most leverage. It is hardly surprising
that the trade unions have picked the bulk handling
authorities, railways and ports as easy targets and
have milked massive rents out of the system.
The solution, therefore, is to change the operating
environment so that economic rents are minimised and
so, accordingly, is the scope for trade union abuse
The action required to achieve this is relatively
simple: remove the regulations which prevent new entrants
to the broadly defined marketing system from providing
competitive services. That requires political decision
and actions. The contestable environment would stimulate
entrepreneurship, innovation and productivity advance,
and therefore result in lower real costs. The presence,
or even the prospect, of competition would eliminate
the source of industrial problems.