Back to Basics
The Problems of the Hunter Valley as Seen by a Newcastle Accountant
Although your Society is principally interested in the industrial relations area, I wish to take this opportunity to reflect more broadly on some of this regional community's culture, motivations and problems.
The last time I saw Des Moore was about six months ago on a stage just down the road at Civic Park where he was speaking about the need for a new direction for Australia. The following speaker was none other than Sir Joh Bjelke-Petersen and he received the full blast of the 'seig heils', megaphones and an organised disruption campaign.
Newcastle and the Hunter Region again attracted national attention. Thousands of demonstrators were reported by the media to be present---I would suggest there were hundreds. Hundreds of police were said to be lining the streets---I would suggest there were tens.
One impact of the Sir Joh visit was, in my opinion, the fact that the Lord Mayor of Newcastle opened your Conference on Friday night. He refused to provide a reception for Sir Joh because, so he claimed, he was not given sufficient notice---the public backlash was significant. Many in this community felt that he had an obligation as the representative of the City to acknowledge a man who at that time was still a figure of significance in the political arena. I would suggest the Lord Mayor's attendance on Friday night partially reflects this body of opinion.
Well, who are we, anyway?
We are a region with a population of over 510,000, covering 312,000 square kilometers. This represents 3.3 per cent of Australia's population (i.e. 1 in 30) and 3.9 per cent of the area of New South Wales. To put this into perspective, Tasmania has a total population of 440,000, of which Hobart and environs account for 180,000. Newcastle and Lake Macquarie City have a total population of 300,000, with other major centres of Cessnock City, Maitland City and Port Stephens totalling 125,000.
We owe our origins to the convicts and to coal which was discovered here in 1797. Lieutenant John Shortland found coal in that year when chasing convicts---which he never caught. We can proudly claim to be responsible for Australia's first export: coal shipped to Bengal in 1799. Our development in the 19th century was around coal, agriculture and the Port. In 1915, with coal as the magnet, the steelworks began operation.
We are an industrial area producing 40 per cent of the nation's iron and steel, 85 per cent of the State's power, and 62 per cent of the State's coal. A feature of our manufacturing structure is the dominance of basic heavy industries, including those mentioned above, together with aluminium, zinc and lead smelting, and heavy engineering and fabrication. We do not rely to any major extent on the manufacture of consumer durables: In addition we have a significant rural sector.
Our total labour force is around 220,000; of those employed, the tertiary sector accounts for approximately 70 per cent and is the fastest growing area. This includes services, construction, wholesale and retail, transport, finance, business and community services.
Our major industry groups, in terms of percentage of employment, are mining (6.2), construction (6.7), manufacturing (18.5), wholesale and retail (19.5) and community services (16.2).
The problems of our region are many; but let me know of any area in Australia of our size and population not sharing in the current world and Australian economic problems. We are a microcosm of Australia. The promotion industry, for example, realises this, as products and advertising are regularly test-marketed in this area.
One of our major problems revolves around the word 'myth'. There is a myth that we are a dirty, sooty industrial area. There is also a myth that we are a riddled with industrial strife. The facts simply do not support these time-honoured beliefs.
Our reputation for poor environmental standards is not substantiated by data or observation. Take a look around yourselves! You'll regularly meet people who have dreaded being relocated to this area but are now even more determined not to move away. Amongst other things, this is related to the quality of life in this region.
Our industrial relations reputation derives from our earlier industrial history, which has been one of turmoil. Expressions such as 'a den of industrial intrigue' are indicative of the position that prevailed in the past. But don't judge this region simply on its history, and on the people and attitudes of times past. Judge it by the facts of today and by the mechanisms and attitudes that will determine tomorrow.
The coal industry is one area that continues to remain outside the industrial relations mainstream. But remember: only 6.2 per cent of those employed in this region are involved in the mining industry. Even if they all had the same attitude as depicted by the media (which they don't), they represent a very small fraction of the employed population. Don't judge the majority by the actions of the minority.
The mining group are the most resistant to change for numerous reasons. Some relate to the industry's British origins and the transplanting of that background to Australia. Similar attitudes were also perpetuated, and possibly even strengthened, by the lack of attention to industrial relations resulting in the 'them versus us' mentality that exists.
Unfortunately, it would appear that many of the issues and realities faced by other employee groups will only be resolved in the mining industry at enormous social and commercial cost. A major factor relevant to all industry groups has been the lack of attention industrial relations received Australia-wide prior to the 1980s. As the Hunter is an industrial area, the impact of this was magnified.
As long as Australian industry simply had a 'cost plus' mentality, industrial relations could remain of low priority. In addition, the impetus to understand this region and its people was correspondingly reduced.
Newcastle is often described as 'a town of branch managers'. In other words, the real decision-makers both for large business and the unions do not reside here. Understandably, the 'branch managers' were not at the forefront of wanting to break new ground or to interfere with their hierarchical ambitions. Why should they anyway? It could even be contended that, in a 'cost plus' environment, business had a vested interest in preserving the union structure in conjunction with appropriate periodic bleatings about wage demands.
The impact of the 'cost plus' mentality was also widely reflected in the rest of our business community. There was, for example, little incentive to modernise equipment, adopt quality control procedures and market creatively. Marketing for many businesses involved in servicing the major industrial base often consisted of simply knowing a handful of contacts who gave you orders.
The lack of attention to industrial relations is obviously changing and this has especially been the case in the Hunter. Unions locally and nationally have had to change many attitudes---economic conditions have dictated this. A major factor in this change as been the stand taken by employers on, for instance, the matters of Mudginberri, the Dollar Sweets case and Peko. I also wish to offer my appreciation to Mr Copeman today for the immeasurable contribution he made for the long-term interest of industrial relations with his stand. This, I understand, was an inherited situation; but why does the relationship between grown men and women end up disintegrating to the extent that they resort to arguing over the flavour of ice cream? Had Mr Kelly addressed you this morning, he presumably would have outlined a whole array of rorts, work practices and stupidities that had existed at the Newcastle Dockyards.
Yes, there certainly are significant problems with the rules of the industrial relations game with the referees and with the ineffectual sin bins but there are also significant problems with both teams.
We all understand what capitalism and making a profit are about; yet why do the rules change when it comes to negotiating with employees? No doubt many employers have long-term corporate plans for sales, market growth, capital budgets, and so on---yet where are the plans, communication and understanding when it comes to industrial relations. I have heard repeatedly the same story this weekend: at the end of the day we have just had to pay; we didn't have any alternative; the dispute has just had to be resolved.
Yet we also sit here applauding, rightfully, Mr Copeman's courage---interesting isn't it!
We can all talk until we are blue in the face about a deregulated labour market but it will not occur in one quantum leap. The current players in the game have ensured that. But what has occurred locally?
Since the late 1970s, there have been more than twenty major projects in the construction industry, involving power stations, aluminium smelters, coal mines and coalhandling facilities carried out ahead of time and under budget. The overall cost of these projects has been in excess of $10 billion at current dollar values. They have involved over 10,000 workers and given rise to minimal industrial problems. For example:
Cost Lost Time
Tomago Aluminium Smelter $900 million 2.9 per cent
Portland Aluminium Smelter $700 million 25.0 per cent
Bayswater Power station $2,300 million 1.8 per cent
Loy Yang Power station $5,000 million 14.0 per cent
We have the lowest dispute rates for major projects in Australia.
This has directly resulted from the site agreements negotiated. These agreements have arisen from broad-banding various job classifications and pay rates and from establishing a procedure to settle disputes (usually through a private arbitrator).
Eraring Power Station, for example, was completed on time and on budget. It was a $1.35 billion project with 3,000 workers at its peak.
Why do such agreements work? Because:
- they are agreements between the parties involved;
- the dispute-settlement procedures are observed;
- the private arbitrator is local and has a first-hand knowledge of what is going on; and
- there is a public onus on the parties to keep their word.
A current major project that has also benefited is the 496-bed Rankin Park Hospital, estimated to cost approximately $100 million. Based on progress to date, it should be finished nearly 12 months ahead of schedule.
In addition, the region has benefited from the establishment locally of an office of the NSW Industrial Commission. Newcastle is the only non-capital city to have its own dispute-resolution mechanism. There is a Deputy President of the Industrial Commission whose background is from the trade union movement and a Conciliation Commissioner with an employer background.
They are both from this region and their area of jurisdiction is their home. Both have established their creditability by their performance. The importance of the opportunity to resolve disputes locally should not be underestimated. In addition to the matters of convenience and access, our region has a parochial resistance to decision imposed from outside. Also part of our 'culture' is a widely-held inferiority complex. Although in my opinion this complex is quite unjustified, it has certainly been exploited in the past.
At the same time, this culture and sense of regionalism, which historically may have worked to our disadvantage, are positive forces in the changes the region is currently assimilating and is yet to face. We didn't win the submarine contract and our industrial reliability was an issue. We had an industrial agreement in principle and a framework in place prior to the tender. To my knowledge South Australia still doesn't have an industrial agreement in place. But of course the realities of the decision-making surfaced only last week with statements that Mick Young alone was responsible for getting the submarine contract for South Australia.
Our community has had to assimilate significant change in recent years, especially with the reduction in the BHP workforce of approximately 6,500 (to around 6,000) since the early 1980s. Despite the media's dramatics and sensationalism, the 'Light didn't go out locally' when this occurred. When the State Dockyard closed and approximately 380 employees lost their jobs, it was again sensationalised.
What of course you do not hear about are the constructive efforts of the Hunter Valley 'manufacturing' unions and employers to reduce the impact of this industrial dislocation.
These groups are communicating locally. There have been dramatic changes in attitudes towards demarcation and multi-skilling---changes that would have been heresy less than 10 years ago.
Regional statistics for manufacturing industries do not appear to be available. This of course means that a comparison with State and national performance cannot be undertaken. To enable the region to prove its case and destroy the myths relating to its recent industrial performance, such information ought to be made available.
What is available, though, are the comments, stated attitudes and experiences of the people involved in our local industry and unions. I suggest you talk to them if you doubt the central thrust of my point. You of course rarely hear about the region's manufacturing or business successes.
What about Alcan and Tomago Aluminium---they produce 41 per cent of Australia's aluminium with minimal industrial dispute?
What about Carrington Slipways Pty Ltd---they have built over 200 vessels in the last 14 years and have yet to incur a late-completion penalty?
What about Rundles Pty Ltd---they supply 20 per cent of the Australian tailored-suit market?
What about Koorangan Coal Loader which established a world record last year for loading an 80,000 tonne vessel?
What about A Doninan & Co---which was awarded the largest single order by the SRA, covering design, manufacture and supply of the 'Tangara' series?
In other industry groups there is Steggles Pty Ltd---Australia's second largest poultry producer. Also the Newcastle Permanent Building Society, which has total depositors' funds and reserves of $620m. This is financially the strongest building society in Australia in terms of percentage of reserves to depositors' funds. Interestingly, the Greater Newcastle Permanent Building Society ranks second. For any racing enthusiasts, I would also point out that the Hunter is the second largest blood horse breeding area in the world.
An issue that has not been sufficiently addressed locally or elsewhere in Australia involves the training programs for the skilled and semi-skilled. I am not aware of any significant effort to include in these programs the concepts of reward for individual performance and the importance of the team effort in achieving results. Significant time is spent by middle management on these matters, but how is the workforce going to develop this mentality? It can only be from their education and training. We cannot ignore this area of their training, and then place people in the workforce and somehow expect these attitudes magically to bubble to the surface.
In my opinion a major problem for Newcastle is the lack of attention received from the major political parties. This is an entrenched Labor Party area and I would contend that it is not in the community's best interests to be so totally committed to any one political party. I don't care who it is: be it a child, a person in business or an employee, everyone (especially politicians) perform better if there is incentive. In the political arena, I would suggest a politician's existence is as strong an incentive as you can find.
This has simply not been the situation locally and we have suffered the consequences. The results of what has occurred were succinctly stated earlier this month by Mrs Henry, a former Labor local branch president and secretary. She publicly stated that: 'The ALP appoints mediocre men, sycophants, bully boys and token women to positions of authority at every level. I hate the way. . .the retiring members set the seal of approval on the successors so they can rule from their political graves. They choose people who are amenable and loyal to their faction. The politicians who are selected are the ones who are going to be biddable'.
The fact of growing discontent with the current situation is obvious. In the last Federal election, the member for Newcastle polled the lowest vote for the Labor Party since Federation. This is a seat where on several occasions the ALP candidate has stood unopposed. The Bulletin of 16 February 1988 states that in the seat of Prospect in the last Federal election, Mr Klugman polled 52.5 per cent 'with a massive 15 per cent primary vote going to the independents'. The fact is that in the Federal seat of Newcastle the independent candidate Mr George Keegan polled 28 per cent of the primary vote and went within 1,000 votes of going to preferences. Approximately 60,000 people voted last July in this seat and what resulted was the most significant swing to an independent in the whole Federal election. We have recently seen the appointment of an independent Lord Mayor in the City of Lake Macquarie, together with a council majority of independents. In addition, the Lord Mayor of Port Stephens Shire Council is an independent.
As national surveys apparently indicate, there is significant dissatisfaction with party politics and interest in competent independent candidates. This is also being clearly displayed in our region.
So what we have historically had, and are currently breaking away from, is a very unsatisfactory recipe. Neither the major employers nor the unions have had significant and local decision-making power. Also insufficient attention has been accorded to industrial relations. If leadership, direction and strategy do not come from the business community, the unions or the government, then were does it come from?
We are sometimes quoted as being 'the industrial heart of Australia'. The problem is that much of what flows out of the area doesn't return. We all know what occurs with this condition medically and I would suggest there are a number of similarities for our region.
Why is it for example that the Hunter District Water Board appears to levy the highest average charges of any major metropolitan area? Last year it paid a dividend of approximately $lm to the State government; yet Sydney, which is eight times larger, paid $1.5m. The Board does not receive any significant financial help from the State government and has to fund works from its own resources. Thus Hunter water users have had to contribute from State and Federal taxes towards funding water and sewerage schemes in other areas---and then have had to pay again.
To make matters worse, the Board's labour force, which was reduced from 1,600 to 1,400 in 1987, is still far greater than the 600 ultimate workforce target identified by Dr Paterson. It is notable that, unlike the Metropolitan Water, Sewerage and Drainage Board in Sydney and the Marine Services Board (MSB), the Hunter District Water Board has either not seen fit or not been able to reduce its workforce to more efficient levels. Our community bears the cost.
Why is it that Newcastle faces extremely high prices for natural gas? The NSW government controls AGL's pricing of natural gas through the Gas Act. It has the power to equalise prices between major areas and has done so with electricity. Newcastle domestic customers, however, currently pay about 60 per cent more than Sydney for their gas, and commercial customers pay over 20 per cent more than Sydney. What a regional incentive!
What happens to the State government taxes on the coal industry effectively levied through the State Rail Authority? These taxes are 'guesstimated' at between $1.5m and $1.8m per day, or around $600m per annum. I say 'guesstimated' because I am not sure whether anybody really knows the exact figure. The Coal Association considers, for example, that the taxation element in rail charges is approximately 25 per cent. Quick mathematics show that the amounts previously referred to are certainly indicative.
In addition is the matter of MSB charges. The pricing structure that we have is not related to our costs but means that we subsidise other areas. MSBs General Manager stated in the magazine Port Development International that Newcastle subsidises Sydney. Here we have a significant regional asset whose potential in terms of general and containerised cargo has been ignored and we are supporting other ports.
The information reported by the MSB does not enable the quantum of the subsidy paid by Newcastle to be determined. Its 1987 annual report, for example, advises that total revenue is $77.9m; nevertheless, costs are only provided on a State-wide basis. It is our region that pays the price! This is one of the busiest ports in Australia in terms of tonnage; however, containerised and general cargo has been lost to the congestion of Sydney. But the story doesn't end there.
It is also obvious that the stevedoring and shipping industry as a whole requires significant review and reassessment. It is important to our country and this region. Some of the current arrangements established in the name of industrial relations simply make us more uncompetitive. The costs of transporting coal from the Upper Hunter, together with stockpiling and handling costs, are approximately six times the cost of shipping coal to Japan.
The reality is, though, that any scheme or strategic plan for a region remains only words on paper unless accompanied by investment from the government and/or private sector. The reduced political motivation has already been discussed and the private sector is not encouraged and pursued. If an investor comes to this area with an idea that will even potentially benefit our region, he should be positively supported---not hindered by bureaucratic red tape and indecision. Our Newcastle City CounciL although making efforts in this area, does not match its publicity when it states there is 'a new dawning'.
To make matters worse, many consider that the Department of Environment and Planning actually dissuades development in the area in preference to other regions. See what happens if you try enlisting support for a decentralised project locally compared with, say, the western suburbs of Sydney.
So what a combination---a bad image which I have suggested is unjustifiable but nevertheless exists; decisions by the larger employers and the union movement traditionally originating outside the region; and a lack of encouragement to those interested in development coupled with complacent political representation.
Is it any wonder that unemployment in this region is a significant problem, especially with our youth. Approximately 25 per cent of 15-19 year olds are unemployed, compared with a State average of around 18 per cent and a national one of 17 per cent (which are obviously unsatisfactory in themselves). Our youth unemployment is nearly 40 per cent higher than the State and national averages. Why?
This situation is a result of world, Australian and local issues, but jobs will only come from investment within the region. Such investment will result, not from pieces of paper on Strategic Plans prepared by public servants, but from the region demonstrating that it can perform and achieve satisfactory returns for all who participate.
This is the important challenge. Our regional identity and culture will play a significant role in such a program. This identity, however, will be increasingly difficult to maintain. The important improvements that have occurred to the transport facilities between the Hunter and Sydney and the continued urban spread of the latter will assist.
The theme of your Conference is 'Back to Basics', and I agree with this emphasis on micro rather than macro issues. The centre of gravity of industrial relations must be shifted towards the enterprise to encourage satisfaction, performance and reward for all participants. This change of emphasis, although difficult due to vested interests, is occurring especially in our region.
The days of labour-intensive industries are gone. For example, the proposed BHP electrolytic manganese dioxide plant which is to be located locally has an estimated cost of $75m and will employ only 40 people in the production process. The important point is, however, that it is an expression of the company's confidence in the region.
To ensure our region's future, we cannot simply rely
on our traditional resources and calmly wait for the
outside world to discover us. We must help ourselves
in the commercial, political and industrial relations
arenas. I am confident the region does have sufficient
sense of purpose to achieve these goals. But also
what exists are the myths based on what occurred yesterday
and the continued sensationalisation of issues that
are not representative of this region. I appreciate
why they occur. More importantly, I also appreciate
that you must move the mind before the body.