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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.