Light on the Hill: Industrial Relations Reform in Australia
Abuses of Power in Contemporary Australia
Senator Peter Walsh
When your President invited me to address this Conference
I considered the matter with some trepidation---fearful
that I might be labelled a meretricious player flitting
across the stage of your Society's gathering.
However, your President's letter emphasised the Society's
willingness 'to canvass the full gamut of debate and
argument on the crucial issues which are set out in
its Statement of Purposes'.
So I am here to canvass some of my views on the important
subject of the use and abuse of power in contemporary
I will look at two issues under this heading.
Firstly, I want to discuss the taxation and government
spending proposals being advocated by the conservative
side of politics at the moment.
I will argue that behind a veil of tax cuts for all,
the reality of these proposals is pressure for a dramatic
redistribution of income and power within the Australian
community. Average living standards in our community
have had to be reduced in the face of the collapse
in the world prices of our traditional export staples
during 1985-86. There has been no alternative.
The Hawke Government stands for an equitable and orderly
sharing of that burden across the community as a whole---with the most powerless members of our community
sheltered from the full impact.
Our conservative opponents advocate that the necessary
burden should be apportioned according to the free
play of market forces.
Those with the requisite economic power would escape
from sharing in the burden. Those without economic
power would have to shoulder a proportionately greater
The tax-scale changes and government spending cuts,
of which we are hearing much, would simply lend more
strength to the already economically powerful, and
weaken further the positions of those already materially
disadvantaged in our society---the aged pensioners,
the low paid and those not in regular full-time employment,
those with poor health or physical handicaps, etc.,
My second topic is more directly and more closely
bound up with the activities of your Society and of
its constituent members.
Members of the H R Nicholls Society seem to focus
their attention and their energy on railing against
what they perceive as being 'excessive' trade union
power, and the abuse of that power. There do exist
other centres of economic power in our society. It
can be argued, and I will thus argue, that excesses
and abuses in these other areas are at least
as worthy of criticism as the excesses and abuses which
you concentrate on seeking to expose and to counteract.
I will put before you some information on these matters,
much of that information drawn from the track record
of the Government of this State---the so-called 'free-enterprise-loving'
Bjelke-Petersen Government of Queensland.
First then, the matter of taxation, government spending,
and living standards.
Urban Australians tend to think of themselves as living
their lives along lines very similar to Western European
and North American city-dwellers. But the economic
structure supporting the way we live has been markedly
Traditionally, we have exported very little in the
way of manufactured goods, or internationally tradeable
services. To pay our import bills, we have relied instead
on the proceeds of primary product exports: wheat,
wool, coal, iron ore, etc.
In periods when world markets for such primary products
have been buoyant, export proceeds have been high and
this has underwritten good times in the domestic economy:
plenty of money to spend, plenty of jobs, plenty of
relatively painless tax receipts for governments to
spend and so on.
In periods when world markets for primary products
have turned sour, the process operated in the opposite
direction. The 1890s and the 1930s are the two most
extreme examples of this, but it has happened on other
occasions also notably when the 'wool boom' associated
with the Korean War collapsed.
During 1985 and early 1986, the world market prices
of almost all Australia's traditional export staples
fell dramatically. Our terms of trade fell by 14 per
cent in 18 months.
This was the worst terms of trade collapse Australia
has experienced since the Great Depression in the early
When the nation's export earnings fall like that,
we obviously can no longer afford to buy imports on
the scale we had been doing previously. The overall
'cake' of goods and services available for domestic
consumption shrinks. Average living standards must
These are the fact of economic life in Australia in
1987. Anyone who tells you that living standards can
be boosted by a round of massive tax cuts, or by the
government spending more to pump up the domestic economy,
is peddling snake-oil.
The fundamental economic challenge facing Australia
today is to get away from our traditional economic
dependence on a narrow range of primary product exports.
Urban Australians must themselves produce more of
the goods and services we have become accustomed to
importing from overseas. And urban Australia must begin
to produce more of the goods and services which can
be sold overseas, on markets which are not subject
to the booms and busts of primary product markets.
This requires major adjustments in the structure of
the Australian economy. Such adjustments cannot occur
overnight. And the very process of adjustment has its
own costs---which means that belts have had to be tightened
that much further in our community.
To build up import-replacing industry, and new industries
oriented to exporting, requires spending on plant and
equipment, spending on research and development, and
spending on training.
To cover these investment outlays, we as a community
need to save more. That means spending less than we
would otherwise prefer to, on current consumption.
There are two ways in which this process can take
We can have restraint in wages within an orderly and
co-ordinated framework of negotiation, using our traditional
industrial relations institutions. And we can accompany
this with an orderly and carefully targeted set of
government expenditure cuts.
Or we could leave wage determination to be fought
out without co-ordination, on the industrial battleground.
And we could accompany that with a round of savage,
indiscriminate axing of government spending programs
to fund a round of tax give-aways.
The first is the 'restraint with equity' approach.
The second is the Howard/Sinclair/Petersen alternative.
Taking an indiscriminate axe to major areas of government
spending such as health, education and social security
would hurt those on middle and low incomes far more
than those on high incomes.
If you send your son to Geelong Grammar, you don't
have to worry if the funding of government schools
is being chopped by 15 per cent and 20 per cent of
government schoolteachers are being sacked, as the
Porter plan proposes.
If your income is $100,000 per year, you wouldn't
mind paying $27 per week for private health insurance
after Medicare had been demolished.
But if your income is a middle income or a low income,
you would almost certainly be far worse off.
What the Howard/Sinclair/Petersen 'Coalition that
isn't a coalition' is trying to sell to the Australian
community as a round of massive tax cuts is not that
at all. It is a proposal to redistribute income and
power from middle and low income Australians to high
It's a bid to shelter those on high incomes from the
living standard reductions which, for the community
as a whole, are unavoidable and to impose the whole
of the burden on middle and low incomes.
The complex tax-scale changes proposed and the lack
of detail on where the government spending axe will
fall are simply a veil to hide this fact.
As you have already stated, Mr Chairman. (John Hyde)
'politicians who promise tax cuts of more than a few
dollars a week for average earners should not be believed'.
Now let me turn to my second theme.
I was at first surprised that Ben Chifley's vision
of 'The Light on the Hill'---or rather a variant of
it---had been incorporated into the title of this Conference.
But on reflection your Society would appear to display
a greater degree of intellectual pluralism than most
The Society's name honours a one-time somewhat obscure
Socialist who became an almost equally obscure Tory,
before gaining some notoriety by making allegations
against H B Higgins---allegations which the High Court
judged to fall short of 'contempt' of the High Court,
and in respect of which Higgins himself declined to
take libel action when Nicholls withdrew them, acknowledged
them to be demonstrably wrong, and expressed appropriate
Clearly, a considerable diversity of view exists within
the Society---at least on some issues. For example,
one prominent member has published some of the most
trenchant, and in my view effective, criticism of the
nature and record of the Petersen regime. Another prominent
member is a paid servant of it.
If this is wrong I apologise, but my perception is
that most members of the Society admire both the Queensland
Government and the machine behind it. Some would even
like to see a Commonwealth Government made in its image.
That I find astounding. The ethos and record of the
Petersen regime in this State is as incompatible with
what I understand to be your Statement of Purposes,
with Smith's economics and moral philosophy, with Mill's
liberalism, as Ben Chifley's light on the hill was
with Stalinism. But more of that later.
You, Mr Chairman, recently wrote that 'man is apt
to misuse power'. To conclude otherwise would require
either a profound ignorance of history, or a very blinkered
interpretation of it. On that there would be agreement,
I think, between the Australian Labor Party and all
members of this Society. Where I believe your Society
has erred, is that its appreciation of and distaste
for abuse of power focuses on 'the unions' to the exclusion
of other institutionalised abuse. Its definition of
'the unions' is also much too restrictive, confined
it would seem to those which describe themselves as
'unions' or which are affiliated with peak labour councils.
It therefore ignores such restrictive trade practices
as the statutory and lucrative monopoly on conveyancing
which the legal profession has in four States. Mr Costello
might wish to comment on this.
It also ignores such important contemporary issues
as the ACT Australian Medical Association (i.e. the
Doctor's Union) pay grab for services rendered to public
patients in ACT hospitals. That pay grab is being pursued
by an industrial campaign based on work bans.
The Doctor's Union was seeking a one-hit pay increase
of 85 per cent, or an average increase of $425 a week
for the part-time job which occupies about one-quarter
of their time. That has now been modified for a demand
of a 69 per cent pay increase or about $345 a week.
Compared to either demand, the building workers' campaign
for $52 a week---for a full-time job---and the PGEU's
now failed campaign for $70 a week, are extremely modest.
If a blue collar union succeeds with an excessive pay
claim there is a danger of flow on. The Doctor's Union
explicitly stated policy is that whatever it can get
away with in the ACT will become the pace-setter for
the rest of Australia.
The Doctor's Union (ACT Branch) claim is said to be
based on the NSW standards set by the Macken Determination.
The systems are not strictly comparable. NSW has a
sessional payment system, the ACT a fee for service
system. More importantly, the Macken Determination
awarded increases of up to $52.40 per hour or 78.7
per cent. It was in my view the most irresponsible
decision handed down by an industrial tribunal within
The H R Nicholls Society would have more credibility
if it was more even handed in its opposition to such
extravagant pay claims. Credibility would be further
enhanced by opposition to the proposed compulsory unionism
for doctors advocated by Dr Lindsay Thompson, a former
President of the Australian Medical Association.
At the end of the Napoleonic Wars a revised system
of Corn Laws was introduced in Britain. The purpose
of these laws was to raise the price of wheat and thence
the economic rent of farm land. With the honourable
exception of David Ricardo and a handful of others,
a Parliament of landowners and their clients judged
the Corn Laws to be concomitant with Divine Law and
essential to the military and economic security of
In 1834 a group of unenfranchised agricultural labourers
in Dorset attempted to form a 'combination' or union,
presumably with a view to bargaining collectively for
higher wages---no doubt at least partially in response
to the higher price of bread induced by the Corn Laws.
For that attempted use of such feeble countervailing
power as they may have been able to muster, they were
sentenced under Statute Law to seven years transportation
to Australia---or New South Wales as it then was. Ultimately
pardoned under a somewhat more enlightened Home Secretary
two years later, they ascended into the working class
Pantheon as the Tolpuddle Martyrs.
One must, of course, draw a very long bow to equate
the Tolpuddle Martyrs with the bulk of Australian (or
English) wage earners today. The double standards which
endorsed the Corn Laws and condemned the labourers
is however extant---especially in Queensland.
This is not to suggest that the Right has a monopoly
on double standards, or that power is never abused
by blue and white collar unions. The Labor Party has
demonstrated a willingness to deal with such abuse.
Co-ordinated action by Federal and State Governments
has led to the demise of the Builders Labourers Federation
in NSW, Victoria and the ACT. The point at which legitimate
use of countervailing power becomes abuse of power
and therefore the extent to which such action should
be replicated is a subjective judgment.
The Industrial Relations Bill introduced in the House
of Representatives was misrepresented as a Bill to
put unions beyond the law. That misdescription ignored
inter alia the fact that the Bill contained substantially
increased penalties for unions which breached agreements.
And it did not remove the right to take action under
sections 45 D and E of the Trade Practices Act, or
to take Common Law action for damages. It did require
prior use of conciliation processes. The Bill did not
preclude a repeat of Mudginberri or Dollar Sweets type
actions about which right-wing ideologues of the National
Farmers' Federation salivate---either absolutely or
within the actual timeframe taken for those two actions.
Trade Practices Act penalties remained unchanged and
injunctions against unions taking industrial action
in defiance of Commission directions were available
from the Labour Court. Without doubt much of the misrepresentation
and denial of facts are pure and conscious political
opportunism. But opponents who are neither ignorant
nor opportunistic presumably believe that the nation's
interests would be better served by a decentralised
market-based wages system.
That is a point of view which it is legitimate for
any citizen to hold. But it should be argued on merit,
not by misrepresenting the facts. Could it be that
those who do misrepresent the facts have little confidence
in the actual merit of their argument?
I ask those who genuinely believe their argument has
merit to consider the objective evidence.
In the three years from 1982-83 to 1985-86, a period
of high economic growth and falling unemployment, average
earnings in real terms fell by 4.1 percent. I would
contend that that is evidence of a successful wages
policy, Whatever your subjective view, there is no
precedent for that outcome in Australian economic history.
'Nelsonian tendencies' (Stone 1981) should not be permitted
to obliterate that record.
This Government's record can be compared with the
single year 1981-82 when John Howard was Treasurer
and wages grew in real terms by 4.5 per cent, and that
was in a period of rapidly rising inflation and unemployment,
as well as negative economic growth. I would defy anybody,
irrespective of their prejudices, to suggest that that
is not evidence of a spectacularly unsuccessful wages
policy. The Hawke Government has a sound record of
employment growth, economic growth and moderate wages
outcomes. Moreover, those results have been achieved
through co-operation not confrontation, and that co-operative
approach has also produced a substantial reduction
in the level of industrial disputation.
John Beggs and Bruce Chapman of the Centre for Economic
Policy Research at the Australian National University
have recently produced a paper which places Australia's
reduction in the incidence of industrial disputation
in its correct national and international perspective.
In the national context, average annual working days
lost per employee fell from .638 to .262---a fall of
58.9 per cent between the periods 1971-82 and 1983-85.
In the international context, between those periods,
Australia improved from tenth position to seventh on
a schedule of 14 OECD countries.
I am not pretending we have yet reached a nirvana
of industrial peace. Sweden which has .009 average
annual working days lost per employee demonstrates
the potential of the co-operative approach and has
a record to which we might aspire.
The confrontist industrial relations policies of Mrs
Thatcher are for practical purposes a close working
model of the prescriptions of this Society and their
results, with .584 average annual working days lost
per employee, sound a warning to Australia not to proceed
down that track.
I find it disappointing and annoying that the senior
leadership of the Australian union movement which recognised
the necessity of a real wage decline and co-operated
in its orderly achievement should simultaneously be
subjected to so much vilification and abuse.
The power of organised labour will not be wiped out
by abolishing either the centrally co-ordinated wage-fixing
system or the so called 'Industrial Relations Club'.
Remember the wages explosion of 1981 and 1982 which
followed the Fraser Government's flirtation with unco-ordinated,
decentralised collective bargaining? Remember also
that while the Accord was delivering lower real wages
and lower unemployment, Thatcherite confrontationism
in the United Kingdom was failing to achieve its aim
of lower real wages despite unemployment rates in excess
of 12 per cent. Over the three years 1982 to 1985,
average real wages in Britain rose by over 6.5 per
Britain is, of course, the country whose industrial
relations system Australia's would be most likely to
resemble, given our similar trade union structures,
if our framework of conciliation and arbitration tribunals
were ever swept away, and unco-ordinated, decentralised
collective bargaining resorted to. Conceivably, the
power of organised labour could be destroyed by a determined
authoritarian government, which typically and ironically
would require a larger and more costly bureaucracy.
But whether that would induce a better social or economic
outcome is another matter. Societies with superior
economic performance over the post-war period as a
whole (i.e. Japan, Sweden, West Germany, Austria) have
a high degree of social cohesion---the very attribute
which an authoritarian policy would place in jeopardy.
Prosyletisers of the Rambo approach are hyped up by
the decisive victory the Petersen regime and SEQEB
had over the Queensland power workers in 1985. They
would be well advised to note that that dispute had
at least two atypical features. Firstly, power blackouts
immediately inconvenienced the general public; hence
public anger is easily directed against those who are
the immediate cause of the disruption. Secondly, the
ACTU leadership would not be so easily outfoxed as
the Queensland ETU or the Queensland TLC which got
dragged in behind it.
I referred earlier to the double standards which thrive
in Queensland. I am amazed that people who purport
to be economic rationalists, and are presumably economic
literates, can see in the Petersen Queensland model
a formula for the nation's economic rehabilitation,
or for fiscal prudence, or for small government---if
that is seen as a desirable objective in its own right.
The empirical evidence shows among other things that:
- Queensland presently has the highest number of unemployment
benefit recipients as a proportion of its workforce
of any State.
- It also has the lowest average wages.
- It has the highest level of industrial disputes.
- Since December 1983 it has had the highest Public
Service growth rate---11.1 per cent compared with a
six-State average of 7.1 per cent. The much maligned
Commonwealth sector grew by 5.2 per cent.
- It has had the highest rate of debt accumulation
of any State (Salomon Bros. assessment).
- It is the most regimented economy.
- It is plagued by demonstrable cronyism and economic
patronage, plus recurring allegations of corruption.
If economic outcome is the criterion by which economic
prescriptions should be tested, Queensland's prescriptions
are as spectacularly unsuccessful as is that State's
stance on sexual morality which produces by far the
highest ex-nuptial birth rate in Australia.
This is not to say that Adam Smith was wrong---but
that he has never been tested in Queensland. Certainly,
Smith's economic philosophy and rational economic analysis
are held in contempt by the present regime.
For example, electricity can be generated locally
in any isolated area. Many State governments have incurred
social losses by extending grid electricity supplies
to sparsely populated areas, and have covered the losses
by overcharging other areas. But in Queensland these
excesses have been carried much further. Thousands
of kilometres of power lines deliver electricity to
sprawling National Party farms at a small fraction
of the supply cost. Whether these farmers should receive
hidden subsidies from other consumers is a value judgment.
But opting for the higher cost option of grid supply
rather than local supply is a social loss.
The Australian irrigation cargo-cult has induced major
misallocation of capital investment. In most States
it has been eclipsed by economic rationalism. Not so
in Queensland, where Petersen Government Ministers
vigorously tout such absurdities as the Bradfield scheme
to divert North Queensland rivers over the Great Dividing
Range. They describe it as another Snowy Mountains
scheme, blithely ignoring the altitudinal inversion.
The Snowy Mountains scheme generates peak-load electricity
from falling water, while the Bradfield scheme requires
the water to be lifted about 1,000 feet. I suppose
those who believe a fusion reactor can be fitted in
a motor-car boot would have no difficulty in believing
water will flow up-hill and generate power on the way.
May I suggest that the Petersen regime's fervour for
new irrigation schemes is not entirely unrelated to
its policy of supplying water at user prices low enough
to generate windfall land price gains for the National
Party landholders who receive the water rights? Even
if it is decided that taxpayers should provide water
at below cost, 'development' would not be impeded by
a water price high enough to be consistent with no
increase in land prices. Such a policy would at least
minimise the level of taxpayer subsidy.
For further study of this particular type of Government
patronage, I commend speeches made by Mr Casey in the
Queensland Parliament on 8 February, 3 October and
9 October 1984.
Mr Casey revealed that the 'Government Gazette' (1
September 1984) contained an application from Ciasom
Pty Ltd to install a 450mm centrifugal pump on the
McKenzie River. Fortuitously, it was announced in the
State Budget 19 days later that some $4.5m (1983 values)
was to be spent constructing the Tartrus Weir farther
upstream. Such a weir would provide continuity of water
supply for the 450mm pump.
I was able to confirm that no application had ever
been made for any Commonwealth funds for the Tartrus
Weir on the extensive wish-lists the Queensland Government
submits to the Federal Department of Resources and
Mr Casey also revealed that Ciasom owned some 12,500
hectares of land adjoining the McKenzie River and its
anabranch, and that all the shares of that company
were held by the Premier's wife and children.
There is in force in Queensland a piece of legislation
called the Retail Shop Leases Act. This Act prohibits
shop leases from embodying certain arrangements which
the Queensland Government has identified as being 'onerous
on the small tenant'.
Under the Act a Retail Shop Lease Tribunal has been
set up which, in essence, conducts compulsory arbitration
of a shop lease dispute if negotiation and conciliation
have failed to resolve the matter.
In the Second Reading Speech on the Bill in December
1983, the Queensland Minister for Small Business, Mr
M J Ahern, described the legislation as aiming to 're-establish
the balance between landlord and tenant'.
I understand that the Bill was strongly supported
by Queensland shopkeepers, and that shopkeepers in
other States are equally concerned about what they
regard as unfair practices on the part of their landlords,
in respect of their shop leases.
Surely such entrepreneurs can sympathise with wage
earners seeking compulsory arbitration to assure 'balance'
vis-a-vis their employers, in respect of their pay
The Queensland Government has not always been so subtle
when it decides to use the power of the State to protect
favoured clients from the free market.
In 1979 it passed the Bread Industry Committee Act.
A Code of Trading Practice was established which set
a minimum wholesale price for manufacturers and a minimum
retail price. It also required major manufacturers
not to extend areas of trading without Bread Industry
Committee approval, i.e. it acted to perpetuate established
monopolies and oligopolies.
In 1983 a new Bill was drafted 'to discipline some
persons who threatened to destroy the benefits of the
The Bill lapsed. However, J J Sheeran, President of
the Association of Bread Manufacturers of Australia
and New Zealand, stated in his Presidential address
to the 72nd Annual Conference of the Associated Bread
Manufacturers of Australia and New Zealand in October
1986 that the 1979 Act had not been a complete failure.
'National Party government has been beneficial to
the baking industry, in that we have retained the Bread
Industry Committee Act of 1979, and obtained regulations
under the Act in March of this year which gives the
Committee the power to make determinations regarding
the areas off distribution of bread manufacturers,
the jurisdiction of the Committee in respect of disputes
between the various sectors of the bread industry,
and the giving of directions or advice by the Committee
to the various sectors not to deliver or accept bread
The consequences of these regulations are that they
give protection to the bread manufacturer against action
under the Trade Practices Act, but of course the Act
is still deficient in penalties for non-compliance
with determinations made by the Committee. We believe
therefore that the result of the election this week-end
is crucial. The Committee has already determined that
activities by a major Brisbane manufacturer in Murgon,
a small town near Kingaroy in the central Burnett area
of the State, 230 km north wost of Brisbane, should
Might I add it did not require Government regulation
to curtail last week the activities of a certain purveyor
of snake-oil from Kingaroy.
It is perfectly clear that in some circumstances,
a legislative requirement to go through an earlier
process before invoking the powers of the Trade Practices
Act is an intolerable infringement of personal liberty,
but in other circumstances cancelling the provisions
of the Act is highly commendable.
Mr Sheeran is not alone in holding the latter view.
An editorial in the publication 'News for the Bread
Manufacturers and Pastrycooks of Queensland' (January-February
'The philosophy of free enterprise surely encompasses
the right of all to compete in a climate of equity.
The concept of minimum wholesale and retail prices
does not conflict with free enterprise'.
Arguably, that could be the most spectacular piece
of doublespeak since the Privy Council pontificated
in 1949 'that interstate trade commerce and intercourse
thus prohibited and thus monopolised remained absolutely
Adam Smith said of Louis XIV's Finance Minister, Colbert,
that he seemed 'to have been imposed upon by the sophistry
of merchants and manufacturers who are always demanding
a monopoly against their countrymen'.
Amusing though such snippets are, they should not
be allowed to obscure the fact that breadmaking (and
selling) is by no means Queensland's most regimented
In Queensland anyone can grow sugar cane. But if you
grow it on unassigned land it is acquired by the Sugar
Board for $1 a tonne. If you desire a higher price,
you must first get an assignment, plant the precise
area you are told to plant on the precise piece of
land, and deliver stipulated amounts or part thereof
to a specified mill at a particular time. The mill
in turn is required to market the milled sugar through
This stultifying web of regulation has prevented the
industry from developing the economies of scale for
which its technical efficiency provides the potential.
Attempts by the 'socialist' Government in Canberra,
since the industry drifted into its most recent crises
in 1985, to free the industry from its shackles have
been vehemently resisted by the Petersen regime.
As one of the more recent recruits to that regime,
Dr Joe Siracusa observed in his more objective phase:
'The cold arithmetic of how Queensland is run is a
sight to behold. In contrast to all that campaign baloney
about free enterprise, the National Party of Queensland
has been a frequent proponent of interventionism, centralism,
protectionism and opportunism'.
I rest my case.