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 Australia.

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 burden.

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., 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 different.

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 1930s.

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 fall.

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 place.

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 income Australians.

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 observers perceive.

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 'regret'.

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 living memory.

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 the realm.

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 cent.

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 Energy.

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 and conditions.

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 Act'.

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.

He said:

    '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 deliveries.

    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 be curtailed.'

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 1985) declared:

    '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 free'.

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 industry.

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 designated authority.

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.