Public Interest or Vested Interest
The Honourable Nick Greiner, M.P. Premier of New
I am delighted to be given the opportunity of opening
your conference. The H R Nicholls Society has made
an extremely important contribution to the debate on
industrial relations which has taken place in Australia
over the past four to five years. It has consistently
and correctly argued that reform of the industrial
relations system is essential to the improved performance
of the Australian economy.
In the 1988 election campaign, and since coming to
office, my government has consistently emphasised the
importance of making substantial changes to the industrial
relations system in this state. Such changes are urgently
needed to boost productivity, to overcome excessive
rigidity and centralisation in the conduct of industrial
relations and to give greater recognition to the common
interests of enterprise managers and their employees.
Our approach to improving the operation of the industrial
relations system involves placing greater onus on management
and employees and individual enterprises to make their
own arrangements and to resolve their own differences
with as little interference as possible from external
tribunals, unions or employer organisations.
There is no doubt that the labour market and industrial
relations have become the dominant issue of the 1990s
and as my colleague, the Minister for Industrial Relations
and Employment, Mr Fahey, recently noted:
The key issues of the 1990s for industrial relations
will increasingly be 'productivity' and 'efficiency'.
Frederick Hilmer in his seminal work New Games,
New Rules notes that:
'Productivity is, unsurprisingly not a national strength.
In most cases, if one measures productivity by real
output over real inputs, Australian workplaces are
at best at parity with their overseas competitors and
usually worse. This is true not only for labour but
for capital productivity. Until both are encouraged
to improve, why should we expect firms to compete successfully?'
He goes on to note that although most Australians
seek an economic turnaround this will only occur when
substantial changes take place within the workplace.
I intend in my remarks to you this evening to outline
those aspects of our proposed industrial relations
legislation, shortly to be introduced into parliament,
which will assist in improving the productivity and
flexibility of individual enterprises and workplaces,
and to indicate what my government has already achieved
as regards these matters in the public sector.
When we were elected to office in 1988 we found the
New South Wales Public Service had some very clear
and fundamental problems.
There had been too much emphasis on policy and not
enough on management. Too much emphasis on the political
agenda and not enough on accountability, efficiency
and individual performance.
The consequence of this was over staffing, inefficient
work practices, excessive union power over lower grades,
poor selection practices and inadequate training, research
and development. We immediately set about implementing
a program of corporatisation as a means of providing
for better performance by the public sector in this
state. A fundamental tenet of corporatisation is that
the workforce of the relevant State Authority be responsible
and flexible and efficient so that productivity and
With these principles in mind we created a senior
executive service to isolate senior managers from the
wage fixing system and to provide for agreed performance
targets as an essential element in employment contracts.
Further, the adoption of structural efficiency principles
in public enterprises is designed to lead to a leaner,
more responsible and flexible workforce, better morale
and more efficient work practices.
Already the implementation of reforms has resulted
in substantially improved performance in bodies such
as Elcom and the Government Cleaning Service.
Elcom, a body which received Australian Business
Magazine's 'Best Government Enterprise' award for
1989, has substantially improved its performance due
to more flexible employment arrangements and incentives
to employees. The result has been to turn around Elcom's
$6 billion debt into a profit, the benefits of which
have been passed on to the people of New South Wales
by way of reductions in the price of off-peak power
and reductions in commercial users' subsidisation of
The signing of an agreement by the Government Cleaning
Service with the Federated Miscellaneous Workers Union
in June 1989 will result, when fully implemented by
May 1991, in dramatic increases in productivity and
a substantial reduction in cleaning costs per year.
It is estimated that working hours at each location
will be reduced by 40-45% and that overall cleaning
costs will be reduced by $70 million per year as the
result of this agreement.
The achievements which have taken place in the public
sector have only come about as a result of the government
sweeping away anachronisms and restrictive practices
which have prevented efficiency, and increased productivity.
The reform of industrial relations in New South Wales
is long overdue. That is why on attaining government
we appointed Professor John Niland to produce a Green
Paper on Industrial Relations Reform.
The Niland Green Paper stated that:
'what is remarkable is not that the New South Wales
industrial relations system is now undergoing significant
review, but that it could have taken as long as it
has to reach this point'.
Prior to the 1988 election we announced that in government
we would encourage an industrial relations system which
places the onus on management and workers to make their
own arrangements; a system which would allow them to
resolve their own differences at an enterprise level.
We believe that those principles and objectives will
be met by the reform legislation.
The key issue for Australia, and this is the point
which is being made by organisations such as the H
R Nicholls Society and people like Fred Hilmer, is
that we don't want to become a third world country
by paying third world wage rates, but, at the same
time, if our labour costs growth remains above that
of our overseas competitors the exchange rate will
have to fall to maintain competitiveness. High wages
growth that is not backed by productivity growth only
results in inflation.
The simple fact is that the current centralised wage
fixing system, which operates in this state and in
Australia generally, has failed. Wage increases have
consistently been above the OECD average since the
early 1970s and Australia's productivity performance
has been poor by international standards and in fact
has fallen below the OECD average since the mid-1980's.
Therefore our objective has to be to introduce measures
which encourage and reward higher productivity but
which, at the same time, contain wages growth.
Enterprise agreements legislation will offer the opportunity
for individual workplaces to shift totally or partially
from the award based arbitration system.
This does not mean that the government is declaring
a free-for-all on employment conditions, or on unions.
The new legislation will instead mean that genuine
initiatives to bring about a more productive work environment
will not be hampered by the constraints of the award
The enterprise agreement provisions will include a
number of checks and balances to ensure that such agreements
will be a genuine alternative to the award stream,
not a second rate substitute. These include the requirements:
- that all agreements are free from duress and entered
into voluntarily; Where employers or unions wish to
remain within the award stream, they are entitled to
- that all agreements must provide wage and employment
conditions at least equivalent to the minimum prescribed
in the legislation;
- that all new agreements containing components in
pay or conditions which exceed current wage fixation
principles must be scrutinised by a designated member
of the commission to ensure that the agreement provides
productivity or efficiency benefits which warrant the
increase in employment conditions.
Enterprise agreements are likely to occur where there
are mutual benefits to employers and employees. For
example, where enterprises face severe competitive
pressures and are being held back by the centralised
system, they will be able to negotiate substantial
efficiency improvements in terms of better training,
career paths, job security or wages. Such agreements
will also be attractive to situations where plants
require a major restructuring to continue to compete
in markets which have significantly altered their complexion,
or where new contracts have been entered into that
require new work practices.
One of the major deficiencies in Australian industrial
relations is that there has been too much reliance
upon third parties and on the ill-defined notion of
the public interest. These deficiencies have placed
too much emphasis on the resolution of industrial conflict
and not enough emphasis on encouraging parties to take
responsibility for developing mutual benefits and ongoing
commitments, and thus furthering the national interest.
This is the objective of the enterprise focus of arrangements.
It is pleasing to note that the Federal Liberal Party
also sees the benefit in enterprise agreements. It
recognises, as Senator Chaney noted recently, that
industrial relations policy 'is first and foremost
aimed at improving productivity.' This can be the only
rationale for industrial relations policy in the 1990s
if Australia is not to be led down Paul Keating's Argentinian
road. The reform program that we are implementing comes
at a critical time not only for New South Wales but
for the whole of Australia. We are committed to the
notion that good management and better results for
people are entirely consistent with each other. This
is what the reforms in the public sector are all about.
The overhaul of the industrial relations systems is
about creating an environment where incentive, opportunity,
and efficiency result not only in a substantial improvement
in economic performance but in more harmonious relationships
between employers and employees. The result is that
New South Wales and Australia are the winners.