Back to the Waterfront
Industrial Relations Reform: The State of Play
N R Evans
It is nearly five years since the H R Nicholls Society
was founded, in the shadow of the Hancock Report, and
it is appropriate to stand back and consider what is
the state of play in Australia on industrial relations
In any great debate over the state of the nation a
key element is the general state of the economy. Are
the people prosperous? Are employment and opportunity
for enterprise readily available? Is there confidence
about the future?
These questions have only to be asked to elicit a
ready response. Australia is in bad economic shape.
Standards of living continue to decline. Confidence
in the future is shaken. Unemployment is rising again
and birthrates are falling. The birthrate figures are
indeed fascinating. Our total fertility rate has been
below the 1930's depression levels since the late seventies.
It has fallen every year this decade from 1.938 in
1981 to 1.840 in 1988. The 1989 figure will not be
released until the end of this month. This is not the
occasion to take up debates about immigration but the
very strong identification between birthrates and confidence
in the future, is not an argument which has to be laboured.
The sustained decline in our birthrate could be turned
around by a major improvement in our living standards.
Bankruptcies have escalated in the last eighteen months
and the bad debt provisions of the major banks are
many billions of dollars and many sleepless nights.
Our monthly current account deficits and our growing
overseas debt are symptoms of a serious economic disorder.
Under these circumstances there is fertile ground
for advocates, like the members of the H R Nicholls
Society, of labour market reform. The labour market
is by far, the most important market in the economy.
Australia, since federation, has been subjected to
ever increasing measures of economic regulation and
government interference. The high point of the drive
to assert more and more political control over the
economy was the Chifley Government's attempt to nationalise
the banks in 1946. That Paul Keating, after strong
and vitriolic opposition to the recommendations of
the Campbell Committee, should have freed up the capital
markets, deregulated financial markets and invited
in foreign banks, in 1983, is an outstanding example
of the way in which intellectual tides can sweep up
unsuspecting people and bring them to shore.
As our economic problems mount up, as bankruptcy and
unemployment grow, as financial institutions such as
Pyramid and Estate Mortgage go belly-up, the protagonists
of central planning and government intervention are
developing a counter-attack. From Kenneth Davidson
in 'The Age' to Billy Wentworth in 'Quadrant', the
old arguments against economic freedom, and for controls,
protectionism, regulations and monopoly privilege are
being refurbished and re-run.
There is, and it is an extraordinary thing, a great
deal of passion in these arguments. Despite the evidence
of Eastern Europe and the Soviet Union, there is still
an enormous distaste, enmity is more accurate, in the
minds of our chattering classes, for the freedom of
the market place. Kenneth Davidson is their invaluable
spokesman, and his recent attacks on Paul Keating provide
us with ample warning of the way in which the debate
is going to be carried. Martin Ferguson, the new, charming
and articulate President of the ACTU, is the latest
addition not so much to the ranks of the chattering
classes, but to the ranks of the defenders of privilege
Davidson is important in our analysis because he expounds
the doctrines of the chattering classes in the purest
form. While no longer a declared socialist Davidson
avows the efficacy of 'public' ownership, public monopoly,
government intervention and regulation, and trade union
privilege. The financial collapse of the Farrow group,
and the near bankrupt state of the Victorian government
and the State Bank, are blamed wholly upon Mr Keating
and his deregulatory activity of 1983. This line of
argument has been picked up by a surprising range of
commentators, not so much because they liked John Cain
more but they liked Paul Keating less.
The arguments put forward by Davidson and his colleagues
have to be taken seriously, not for their content which
is confused and sometimes laughable, but because in
desperate times crazy arguments can sometimes win the
day. Do not forget that the German inflation of 1922
produced Hitler and all of the consequent tragedy,
affecting many, many millions of people, right on down
to the present day. The Davidsons of our time have
to be answered, indeed pursued, so that as our situation
deteriorates and the people get increasingly desperate,
we do not do things which will take us into catastrophe.
Many of the economic problems we now experience, declining
living standards in particular, are, in large measure,
due to the cumulative impact of decades of ever increasing
labour market regulation. The present Government is
deeply, irrevocably, committed to centralised planning
of the labour market. The Treasurer is locked into
a duumviracy with Bill Kelty and there is a deep contradiction
between Mr Keating's laudable attempts to open up the
telecommunications industry to new entrants, for example,
and the Telecom unions' adamant refusal to allow competition
of any kind. This conflict is an example of the insoluble
contradiction between an open, free, competitive economy
which Keating has sought for the financial sector,
and the closed, monopolistic, tightly regulated economy
which he has defended in the labour market.
There is little comment from the press on this fundamental
issue. Paddy McGuinness of course is the outstanding
exception. Des Keegan, our founding president John
Stone, John Hyde, keep reminding us in their columns
of this impasse, but there is little general understanding
within the community of the significance of it all.
The great war-cry of the abolitionists in the debates
leading up to the American Civil War was that the nation
could not endure 'half slave and half free'. Australia
will not reverse the present drift into impoverishment
until the understanding that a successful economy cannot
remain 'half slave and half free,' is widely and deeply
embedded in the public consciousness. I am not advocating
civil war to achieve this ambition. But we do need
much tougher polemic. The deep causal connections between
Bill Kelty's antics in the IRC, and our continuing
economic decline, have to be constantly explained,
in language which ordinary people understand.
As John Hyde pointed out in his paper to the H R Nicholls
conference in Canberra, 'No Ticket, No Start---No More',
the trade unions will fight hard to retain their monopoly
privileges. In telecommunications, in education, in
hospitals, in electricity supply, in the airline industry,
in railways, shipping, on the waterfront, we can see
the battle going on. At the moment, primarily because
we have Labour governments in Canberra and Brisbane,
and because the Greiner Government has a hostile Upper
House, the trade unions are holding their own. Because
the federal Government has based its own legitimacy
on the Accord, and therefore on the legitimacy of trade
union privilege, it cannot attack trade union monopoly.
Hence it cannot win any of these arguments.
The trade unions, the ACTU particularly, are aware
that they have long term problems. Their attempts to
improve their standing with the public are manifest
in the money they have spent in advertising, particularly
on TV. However, their principal strategy to ensure
long term survival, in the face of declining private
sector membership, is based on union amalgamations,
and an attempt to place in legislative concrete the
corporate system which has evolved under the Accord.
The new Industrial Relations Bill is part of this process.
There is a passage in Machiavelli which Bill Kelty
has either not read or not understood. In Chapter 20
of 'The Prince' we read
'A prince who fears his own people more than he does
foreigners should build fortresses; but he who has
more cause to fear strangers than his own people should
do without them.... The best fortress which a prince
can possess is the affection of his people; for even
if he have fortresses, and is hated by his people,
the fortresses will not save him; for when a people
have once risen in arms against their prince, there
will be no lack of strangers who will aid them.'
Bill Kelty, the Minister, Senator Cook, and the ACTU-government apparatchiks are now frantically building
a chain of new fortresses, a Maginot line of giant
unions, each with great concentrations of monopoly
power. There is, for example, to be one maritime union,
embracing the Seaman's Union, the WWF, the Australian
Stevedore Foremen's Association and the Australian
Stevedore Supervisors' Association, which will control
recruitment and contestability throughout the Australian
waterfront and coastal shipping industries. These giant
unions with great incomes and large staffs are required,
somehow, to preserve the privileges of the ACTU and
the trade unions, when political fortunes change and
the McLachlans and the Costellos are in government.
It is, in my view, a major miscalculation. These new
organisations will have no history, no tradition, no
unforced allegiance. They will be nothing more than
rule books and monopoly rents, held in place by legislative
decree, and commanding no allegiance from the membership.
A letter published in the Melbourne 'Sun', from A. Jones
of Newport, a week ago, summarises the position.
'After working for 30 years I have found out that
the working man is not the union any more.
I work for a boss who pays me, and I pay union fees
to my other boss.
At the place where I work we decided to change unions
in line with restructuring and to our amazement we
were rushed into the Arbitration Commission faster
than the BLF.
There the two unions argued who would represent us
and I was told the workers would have no say in what
union they would be in. A judgment would be handed
down by either the Arbitration Commission or the ACTU
as to who would own us.
What is the trade union movement coming to when this
is allowed to happen? I have always thought the members
were the union but as it turns out this is not so.'
For every A. Jones of Newport there will be many hundreds
of unionists who resent, as he does, what is being
done but would not dream of writing a letter to the
All of the time and energy that has gone into building
Bill Kelty's new Maginot Line is doing little more
than eroding whatever is left of the real social fabric
of trade unionism. Who will defend these great fortresses
when they are put to the real test? Certainly not Mr
A Jones of Newport.
There is, however, a different program to the amalgamation
and concentration of union power which merits much
greater concern on our part. This is the campaign to
introduce 'right to strike' legislation into our various
parliaments. Those of you that heard Professor John
Niland in Sydney will recall that he defended the idea
that 'the right to strike' should be given legislative
support. The Evatt Foundation has recently published
a booklet by Dr Roy Green, currently a senior lecturer
in economics at the University of Newcastle, but formerly
Principal Secretary to Ministers Willis and Morris.
Let me quote from introductory summary.
'The right to strike is a basic liberty in a democratic
society. It is enshrined in a key ILO Convention, to
which Australia is a signatory. Australia may well
be in breach of this convention, as well as being at
odds with the law and practice of most comparable countries......
'It is argued here that the traditional British 'immunities'
approach to legal protection, (Dr Green is referring
to the 1906 Trade Disputes Act) which has dominated
thinking in Australia, is inadequate. An alternative
approach would be to enact a 'positive right' to strike
and take other forms of industrial action, as in Western
Europe labour law systems. This could be confined with
a modified form of immunities to exclude common law,
on the American New Deal legislation'.
That Professor John Niland, IR guru to the Greiner
Government, supports these sorts of arguments tells
us that here we have a real problem. It is important
therefore to understand why these soothing phrases
carry deadly implications.
The development of the West, from the C16 onwards,
as the world's most prosperous, advanced society, took
place because it was in the West, notably in Britain
and in the Netherlands, that the sanctity of private
property, and the law of contract governing exchanges
of property rights, became embedded in the social framework.
Modern technologically advanced society is based fundamentally
on private property and the law of contract.
The law of contract in the work place, as Richard
Epstein so brilliantly explained in Melbourne two months
ago, usually boils down to the contract at will. Under
this contract the employer can say to the employee,
'You're fired', and the employee can say to the employer
'I quit'. Under the contract at will they can say these
things to each other, and act upon them, without impairment
or legal constraint.
A 'right to strike' if given legislative authority,
will destroy the contractual basis of the labour market.
What it gives to the employee is the right to say to
the employer, 'I quit', and in the next breath to say,
with complete legal force, 'and you must hold this
job for me until I choose to reclaim it'. It is as
complete an attack on foundations of the law of contract
as can be imagined, and the consequences for our economic
health, such as it is, are profound.
I predict we are going to hear a lot more of this
'right to strike' argument in the months ahead, and
we must be well briefed on the details as well as the
broad sweep of its implications. The employer organisations
will be crucial in this matter, and as soon as we have
an edited copy of Richard Epstein's paper we will have
it available for wide distribution.
The campaign for the 'right to strike' is the antithesis
of building fortresses. A good example of how dangerous
a fortress can be is the particular danger to the trade
unions from the Accord, and the special relationship
between the Victorian Government and the Victorian
Trades Hall Council.
The problem for them is this. The unions require statutory
support for their privileges and their monopoly rents.
the government requires the support of the unions for
the operation of the Accord, and the centrally planned
wage fixing system. The Opposition has found itself
compelled, by fundamental political forces, to oppose
the idea of a special relationship between government
and unions. If the Accord produces prosperity and all
the good things which flow from that, then the unions
win, the Labor Government wins, and the Opposition
If contrariwise, for whatever reason, prosperity fades
further and further into the past, if recession should
move into depression, and government and unions feel
it necessary, in the face of continuing, or worse accelerating,
economic decline, to undertake new initiatives, to
pass new Industrial Relations Bills, to continually
restructure, to have fewer and fewer unions, then when
eventually the government falls, because of the special
relationship, because of joint responsibility for what
has happened, the trade unions, the ACTU, the Victorian
THC, will fall with the government. They will become
This is the strategic position, and it should give
us good grounds for believing that if we persist in
our efforts of argument and explanation, our ambitions
for reform will be fully realised.
In the short term, however, the trade unions have
good cause to be pleased with themselves. Reform legislation
in NSW is being mangled, if not subverted, by the Legislative
Council. When the Bill went to the Upper house, 328
amendments were put forward. The Government either
accepted or was responsible for 90 of them. To be an
expert on that situation would require a close involvement
in what has gone on, but my understanding of the situation
is as follows.
The nonsense which Professor John Niland, at our last
conference in Sydney, stressed as crucial to the new
industrial relations order in NSW, the distinction
between interest disputes and rights disputes, has
been accepted in the amended Bill. Enterprise agreements
have been virtually destroyed. Access to Common Law
remedies will have been closed off entirely by the
time the Bill has passed through the Legislative Council.
State secondary boycotts, those not outlawed by Sections
45D & E, will be legal. An amendment to deem sub-contractors
as employees, aimed directly at Troubleshooters type
workers, will most likely be carried.
The Bill seeks to lay down a collective bargaining
regime, modelled on the American pattern, in which
penalties for breaches, however, are very modest.
If the Greiner Government accepts these amendments
and passes them into law it will be a tragedy. On one
issue alone, loss of common law remedies and inability
to outlaw secondary boycotts, the Bill should be withdrawn.
The Queensland Government carried legislation in May
which has made illegal, from September 30 next, the
Voluntary Employment Agreements which had been secured
under the legislation passed by the previous government.
The Liquor and Allied Trades Union has, in the meantime,
sought to impose an award on the employees at Power
Brewing, in lieu of their Voluntary Agreement. The
employees at Power Brewing voted unanimously against
the incursions of the Liquor and Allied Trades Union
into their affairs. Whether or not as a response to
that show of contempt the L&ATU sought an award
which would have resulted in a pay drop of $60 per
week for all Power employees. Fortunately for the workers
at Power Brewing the L&ATU is now in a state of
disarray as its officials seek to grapple with the
problems occasioned by the results of the Cook Enquiry.
The other vital feature of the Queensland legislation
of May, which was debated for all of 41 minutes in
the Legislative Assembly, was the repeal of the Industrial
(Commercial Practices) Act.
This Act had provided for small unincorporated businesses
in Queensland, what Sections 45D & E of the Commonwealth
Trade Practices Act have provided for incorporated
businesses, or businesses with interstate or international
trade. That is quick relief from secondary boycotts.
The membership of the Queensland Liquor and Allied
Trades Union dropped from 35,000 to 8,000 when the
use of secondary boycotts was made illegal under the
Industrial (Commercial Practices) Act. The threat had
been that beer supplies would be stopped if the hotel
management did not enrol all workers in the union.
That the threat had been effective became clear, when
it became illegal. Now that secondary boycotts can
again be effectively applied it will be interesting
to see how quickly, despite all the evidence of criminality
in the Liquor Trades Union to come out of the Cook
Enquiry, membership of that union increases.
The Goss Government may succeed, for a time, in turning
the clock back. But the examples of the Power Brewing
Agreement, the Metway Agreement, and the SEQEB Agreement,
will not be forgotten. If we look around the political
situation in the various states Victoria may be the
next state to give statutory protection to voluntary
The significance of these events cannot be overestimated.
The workers at Power Brewing, at Metway Bank, are ordinary
Australians. They, not the trade union officials of
the L&ATU and other unions, represent the workers
of Australia. Their message to politicians in and out
of government is that Martin Ferguson or Bill Kelty
represent only the apparatchiks of the ACTU and, to
a lesser extent, the affiliated trade unions, and the
fortresses they are building are designed to protect
them from their own people, their own rank and file.
The main performers, regrettably, play out their parts
in Canberra, as the Government battles against a sea
of economic troubles. Reform in telecommunications
and the waterfront, two vital areas, is stalled. Although
it is unlikely, the Beazley megacom proposal may even
fail at the special ALP conference scheduled for 24th
September. That would be a crippling blow to the Government,
six months after re-election. More probable than outright
failure is even further emasculation of the Beazley
plan in terms of competition and contestability. As
it stands the Beazley plan will make no significant
contribution to our productivity, our business costs,
our international competitiveness. Mel Ward has made
that very clear. And giving Telecom access to the OTC
cash box makes the WA Inc ploy, of allowing Mr Bond
to raid the Bell Group cash box, look like a play with
On the other side of politics the intellectual and
moral stiffening which has taken place since the last
election is beginning to show. Ian McLachlan is speaking
all over the country of the 'golden door', opening
into the world of voluntary agreements, which will
liberate employer and employee from the shackles of
the arbitral tribunals and the trade unions. His key
message has not been so much about the technicalities
of opting out but of the credibility of the commitment.
That credibility is greatly enhanced by his own reputation.
But it is further enhanced by the parallel commitment
to the rapid reduction of tariffs to insignificant
levels, as urged by the Garnaut Report. That commitment
is only credible in the context of really radical labour
One of our members, Gerry Gutman, reminded us in his
book of 1981, 'The Retreat of the Dodo', of the close
intertwining of protectionism and legally privileged,
monopoly trade unionism; a connection which began with
the Higgins' Harvester judgment of 1907. The attack
on protectionism has been a vital part of the attack
on trade union privilege and monopoly.
The essential feature of the ACTU/Government fortress
building program is the conviction that a Coalition
Government will never command a majority in the Senate,
and that the Democrats can always be relied upon to
block the major reforms which are required. Whether
or not that turns out to be the case is impossible
to predict. There are, of course, solutions to an intransigent
Senate. As Gough Whitlam demonstrated, a double dissolution
and a joint sitting of both houses of parliament can
be used to obtain passage of a crucial Bill, or indeed
of a number of crucial Bills.
The Labour Market Reform Bill is the foundation stone
of any successful economic recovery in Australia.
There can be no tariff reductions, no expansion of
or investment in export industries, no arresting of
economic decline, without root and branch labour market
reform. The next task of the H R Nicholls Society is
to embed that understanding deep inside the minds of
our parliamentary representatives. Any Bill that the
Democrats, now the most reactionary political group
in the country, will currently accept will not be nearly
adequate for our pressing needs. A double dissolution
and a joint sitting will almost certainly be the immediate
business of the new government, and the sooner that
is understood, accepted and proclaimed, the greater
will be the credibility of the whole program of economic
Let me conclude with a broad summary. It is clear
from many opinion polls that the trade unions do not
enjoy any significant public support for their privileges
and monopoly powers. The continuing decline in union
membership, particularly in the private sector, underlines
this fact. The arbitral tribunals likewise, are declining
in standing and prestige. There is, I think, a growing
understanding of the close link between trade union
privilege and our declining economy. We must do all
we can to drive that connection home. The opposite
side of that coin is the strong connection between
freedom, economic freedom, and prosperity. Our task
is to ensure that when the opportunity comes, and it
will come I suspect, sooner than we may think, we are
ready, prepared to seize the occasion, and perform
a great service for our country.
Why HR Nicholls?