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March 2000 Newsletter

The Institute for Private Enterprise promotes the cause of private enterprise and a reduction in the role of government. Subscribers receive copies of all publications including a monthly newsletter complete with attachments.





Federal Court "Victory" - Back to "Law of the Jungle"


Last month I reported that the Federal Court (FCA) had made a take-over bid for the Victorian Supreme Court role in industrial disputes - and appeared to have won. This was confirmed in a public address on 29 March by Richard Dalton of Freehills when he suggested that "at the moment, the industrial relations scene, especially in Victoria, probably deserves the 'law of the jungle' label" and argued that this is largely attributable to "a lack of rigour by the Federal Court (and to a lesser extent the AIRC) in applying the relevant compliance provisions under the Act." His address has yet to be reported in The Age or the Herald-Sun, but repays reading in full.


The basic story is, however, in the attached AFR article by Ray Evans, although I understand the article was unable for legal reasons to say a number of things - for example, that the ten judges in the de facto Industrial Relations Court created within the FCA are nearly all ex-union barristers and Labor appointees (Why don't their CVs  automatically make them ineligible to sit in industrial cases?).


Also relevant are the attached press release which I issued when I addressed the Economic Society (WA Branch) on labour market deregulation, and my address. The latter is on the IPE web site (  My address produced a hostile reaction from some members of the WA Industrial Relations Society who attended. One lady from local academia "disagreed with everything I said" and argued that, even though (as I pointed out to her) more than half those on low pay live in higher income households, it is equitable for the AIRC to determine wages for all workers on low pay  "because they then get paid what they are worth"!


The FCA's victory is a major set back in more than one respect. From a legal perspective it means that employers are effectively blocked from obtaining common law remedies against union bans/strikes etc, thus undermining the rule of law.  From an industrial relations perspective, this greatly enhances union power and increases the risk that the unions will have considerable success in reversing the trend to (genuine) enterprise and individual bargaining. From an economic perspective, it increases the risk that the four big unions will extract wage increases and other concessions that will then flow-on to other industries and that will be inflationary. This could, in turn, require interest rate increases.


Incidentally, The Age is displaying more than usual naivety on the Victorian I/R issue. It lauded the statement by ETU bad man, Dean Mighell, at the Victorian  "summit" that the 36 hour week is not on the agenda for upcoming union claims on manufacturers. The key point overlooked, of course, is that the primary union objective is to re- establish industry wide bargaining. The 36 hour week claim (which is not for a 36 hour week per se but for overtime rates to apply for an extra two hours) is less important. Manufacturing unions will doubtless seek some other "concession" that will give similar benefits overall.  


One of the problems in I/R is that the media is almost as biased as the Federal Court. One reason for this is that the journos who report on I/R issues have to be able to keep sweet with the unions in order to get their side of the story. This tends to lead to union sympathisers being given the job of I/Rreporting and to a lot of non-reporting of the other side.


A prime example of non-reporting was the failure of an important study published by the ABS to get any mention anywhere in the media. This study showed that 45 per cent of low paid workers move on to higher paid jobs within a year and that low paid workers are at much greater risk of becoming unemployed. To repeat, it is much better to have working poor than unemployed poor.


I/R Reform Becomes Even More Essential


The actions of the Federal Court have exposed considerable weaknesses in the legislation governing employer-employee relations. But judicial activism means that any legislation that leaves much to judicial interpretation is likely to have such weaknesses. What is needed is legislation that minimises the scope for such activism.


One option would be to use the corporations power as the legislative basis for such regulation instead of Section 51 xxxv of the Constitution. This would enable Federal legislation to prescribe what conditions are to be observed by both sides. Minister Reith is proposing to issue a series of discussion papers examining this option and his Department is employing me to referee the paper which examines the economic issues that arise.


Of course, the current attitude of the Senate makes further substantive reform extremely difficult unless I/R becomes an election issue. With Labor increasingly likely to offer major concessions to the unions when it announces its industrial relations policy, that possibility cannot be ruled out. The possibility would be enhanced if Labor agrees to the strong union push to make it compulsory for employers to agree to collective bargaining.  (Media reports indicate that the New Zealand Labour Government has legislation in Parliament that would ban non-union collective agreements and require all negotiations to be undertaken in "good faith", a phrase that appears to be code for requiring collective bargaining).


Still No Signs of Higher Inflation -But Central Banks Continue to Increase Interest Rates


Central banks continue to raise interest rates and appear likely to do so again, at least in the US. Here in Australia there is less certainty, although a further US increase would almost certainly lead to another increase here.


A remarkable feature of the debate in Australia is that few, if any, commentators have focussed on the movement in unit labour costs. This should be a major - if not the major - indicator of inflationary pressure as it takes account of the net effects of wage and productivity changes. The Dec Quarter national accounts published on 15 March not only confirmed the slow-down in GDP growth that has been in evidence since early 1999, albeit at a relatively high rate historically, but also confirmed the continued absence of both demand and cost inflationary pressures. The deflator for domestic final demand increased only 0.3 per cent in the quarter, the wage cost index by only 0.6 per cent (3.0 per cent year on year) and the following table tells the very favourable unit labour costs story:



Unit Labour Costs in Non-Farm Sector -% Increase

                                     Dec Q on Previous Dec Q   Year On Previous Calendar Year


1996                                     3.3                                                    2.5

1997                                     0.4                                                    1.1

1998                                     1.8                                                    0.7

1999                                    -0.4                                                    1.1


Further, analysis of the December Q accounts suggests that, if anything, they overstated the underlying trend in growth. In particular, the 18.6 per cent growth in Defence expenditure due to Timor and the export of a frigate to New Zealand (not mentioned in the media) accounted for a not insignificant part of Dec Q growth and are one-offs to a large extent. Contrary to the story that improving overseas growth caused export demand to pick up, the 4.8 per cent export growth in the quarter (seasonally adjusted) largely reflected the NZ frigate and a large increase in gold exports. (Relevant also is the report  of further fall in  prices of our leading export - coal - with the benchmark price down 18 % on 2 years ago and capital spending in NSW down to lowest for a decade).



Note also that, according to media reports, a new IMF study concludes that the limits on growth have been raised significantly as a result of economic reforms.


Leaving aside the increase in share prices (which central banks say they cannot base monetary policy on), the only substantive indication of inflationary pressures comes from surveys of inflationary expectations. The Melbourne Institute's March survey, for example, suggested that consumer prices are expected to increase by 7.3 per cent over the coming 12 months. However, this is clearly driven by expectations of GST price rises and, even if realised, should not be reflected in underlying inflation.


One worrying thing about anti-inflationary policy is that neither the Reserve Bank nor the Government has so far done enough to publicise the one-off effects of the GST. There was going to be a Government publicity campaign to do this - where is it?


"Stolen Generation" - Will the Single Judge be Brave?


Counsel are making their final submissions in this important test case involving claims by Aboriginals for compensation arising from their alleged forcible removal from their mothers. I assisted Peter Howson (who was Minister for Aboriginal Affairs in 1970 and 1971) to obtain publication of the attached article in the AFR. His article makes it clear that, on his reading of the transcripts, the Commonwealth has no case to answer because "none of the evidence presented in the test case suggests that any Aboriginal child could be said to have been forcibly removed from its mother." In typical fashion, the media has ignored the article (but, with one rather pathetic exception, has not done its own analysis of the evidence) and continues to report the issue as though "the stolen generation" is accepted fact.


The main worry in this case is whether the single judge will be brave enough to bring down a verdict that would be widely regarded as politically incorrect and would also expose the inaccurate and unfair picture painted in Sir Ronald Wilson's report Bringing Them Home. The recent behaviour of judges (including the four who publicly criticised mandatory sentencing in a letter to the press and were let off with only a slap on the wrist) reduces one's confidence. (Incidentally, judges have a vested interest in not having mandatory sentencing). Were the judge to take the easy way out, the ensuing rucus would likely make the current one with UN "experts" over mandatory sentencing a pale shadow.


Keep an eye out for more from Howson, this time on the horrific violence in Aboriginal communities, resulting importantly from the creation of cultural prisons in the areas where land rights have been granted.


Victoria - The Old Team Drifting Back?


The Bracks' Government's appointment of Rob Jolly to a "waste watch" job at EcoRecycle is not only ironic given that as Labor Treasurer he presided over the Victoria Government's wasteful-debt increasing expenditure but adds to developing concerns that the old team is drifting back. The commissioning of old Labor architect, Evan Walker, to report on the shards is another example - but one that looks as though it will backfire as the report was apparently poorly argued and the decision to remove one shard makes the whole project non-viable both architecturally and practically. Watch for a reversal of the decision.


More disturbingly, an article in the Herald-Sun report suggested that some of the old Gramscists responsible for the disaster which Victorian government education experienced in the 1980s are starting to return at the Department of Education. The article also noted that the Victorian teachers union has had some significant "victories" (sic) with the end of contract teaching and, so the union claims, the end of LAP "as we knew it" (LAP was the Learning Assessment Project that tested literacy, and was opposed by the union). Little wonder that there are reports of a continuing drift away from Victorian government schools.


The Age and The Australian have also started to complain that Bracks has not provided the open and transparent government that he promised. No conflict of interest there, of course.


But, despite all this and the upsurge in Victorian industrial disputes, an Age opinion poll showed Bracks with a higher personal rating than Kennett at his peak and the Opposition is further behind even than in Queensland. The Opposition is in serious danger of allowing the Government (and the media) to get away with saying that the Kennett Government reforms went too far - indeed some Opposition spokesmen are  "acknowledging" this publicly. Quite apart from it being wrong, such an approach would leave the Opposition with little in the way of alternative policies.


Labor Ahead in Queensland Despite Unfavourable Indicators


In the lead-up to the Brisbane City Council elections I published an analysis showing that rates had increased significantly in real terms under the current Labor administration of Mayor Soorley, whereas there had been a small real decline under Liberal Mayor Sally-Ann Atkinson (see IPE web site). The Brisbane Courier-Mail gave this only minor coverage but the ABC radio interviewed an irate Soorley and me. During the interview Soorley used the old strategy of claiming my figures were incorrect and of accusing me to be working for the Liberal Party (what if I had been?!). The media took no interest in my follow-up analysis showing that my figures were straight from the Council's annual reports, and that Soorley was in error. He won the election easily despite the increased rates and having been in office for 7 years.


Surprisingly, Labor is also doing well at the State Government level in Queensland, with the latest Morgan Poll showing ALP support at 60.5% on a two party preferred basis and L-NP support at 39.5%. Yet the latest Yellow Pages survey suggests that Queensland business confidence has fallen sharply, the Beattie Government has tightened labour market regulation in ways that must be having adverse effects on employment and Beattie's promise to reduce unemployment to 5% is looking less and less achievable as every day passes. Indeed, Morgan Stockbroking's Economic Strategy   circular for 28 February highlights a dramatic reduction in the rate of growth in employment in Queensland over the 18 months to Jan 2000 from well above the average for Australia to well below it.


An important test case on Labor's I/R legislation is also now proceeding. That legislation purports to treat contractors as if they are employees and thus subject to awards, etc. First cab off the rank is NZ shearer, Barry Hammond, who earned the enmity of the traditional unions in the wide combs dispute. He now operates a large and successful contracting business which the unions would doubtless love to destroy. Hammond has amassed about 40 statements by shearers, cooks, wool classers, roustabouts and woolgrowers all saying that contracting is good for the workers, the growers and the industry. The evidence clearly shows that contractors handle the wool better, are paid more and the growers achieve higher prices as a result.


If Hammond were to lose, there would be significant adverse implications for other Queensland businesses and other Labor States would likely move to adopt the Queensland legislation.


Why can't the L-NP make any impression on Labor in these circumstances?


"Australians Back the Media"  - Or Do They?


Tim Colebatch reported under this heading on the front page of The Age that an AC Nielsen survey showed that over 50 per cent are satisfied with the quality of journalism they receive. However, one also quickly discovered that 37 per cent were dissatisfied. When I asked the ACNielsen surveyor whether, if one were selling a product with that rating amongst consumers, one should surely be concerned, he admitted that "some" journalists had expressed "concern". But shouldn't something be done about it? Like sacking a few executives? Like interviewing some executives to find out what they intend to do to improve quality, particularly as 96 per cent also believe that journos sometimes "distort their reports in order to sell newspapers" (but never in order to "sell" their ideologies, of course!)?


The survey also produced a similar result on ABC "balance" to a recent survey by the ABC itself. It purported to show that about 70 per cent think that the ABC news is more balanced than the news produced by commercial stations. When I checked with ACNielsen as to how they achieved that result given that few people watch both news services, and that only about 15 per cent watch ABC TV, I was told that this was recording no more than "impressions". So much for "balance"!


Economic Rationalism and Equity


During the month I addressed Brighton Rotary on Economic Rationalism, Drawing the Line Between Public and Private Sectors. My main emphasis was on pointing out  that economic rationalists do not advocate laissez-faire but support limited government intervention for both social and economic reasons in a range of areas. I also argued that policies supported by economic rationalists are also often more equitable than existing policies and that economic rationalists are almost certainly in a minority in the economic profession. The address is on the IPE web site.


Interestingly, the main reaction I received from Rotarians was that the media is very biased against business.




Australian Financial Review, 30 March 2000




It's time to reduce the scope for third-party intervention in employer-employee relations, insists Ray Evans


Bruno Grollo, one of the most successful builders in Australia, has conceded a 36 hour week (read higher overtime payments) to the CFMEU, and apologised in a TV interview for his erstwhile resistance to CFMEU demands. Prime Minister Howard has since taken him to task for capitulating to the CFMEU, but Federal Court decisions arguably left little option.


Peter Reith, in his Workplace Relations Act of 1996, sought to claw back, in some measure, the legal privileges the unions have enjoyed ever since the Commonwealth passed the 1904 Conciliation and Arbitration Act. For a while this Act, which the Democrats supported through the Senate, did provide some legal redress to employers subjected to industrial action by lawless unions.


But in recent months a serious problem has emerged in the Federal Court's treatment of employers' attempts to protect themselves against union disruption. Back on 7 February, The Australian Financial Review's prescient editorial ("Federal Court needs overhaul") pointed to a growing tendency for that Court to "interpret the Workplace Relations Act in ways that help unions pursue their agendas". That "tendency" has now reached crisis point for employers.


It has for some time been common wisdom amongst employer representatives that many Federal Court judges, particularly in Melbourne, were interpreting statutory language in ways favourable to the union cause. So much so that unions have been pulling out all stops to have cases heard in Melbourne - and with some success.


But the Federal Court has moved on from interpreting the Workplace

Relations Act in the unions' favour. It is now preventing employers from

accessing common law remedies against unions. Companies faced with union intimidation could once expect to obtain injunctions at the Supreme Court against illegal pickets or unlawful strikes.


But the outcome of a battle over the last two years between the Federal and

Supreme Courts has put a stop to that. The Federal Court first stopped employers even approaching the Supreme Court by granting "anti-suit" claims on the ground that a strike is protected. When employers fought back by gaining "anti-anti-suit injunctions", the Federal Court decided that suing a union in the Supreme Court could constitute" coercion" against unions. Then, during the construction industry dispute,  the Federal Court actually stayed an order of a single judge of the Supreme Court that prevented  pattern bargaining continuing.


This comes on top of recent decisions of the Federal Court effectively neutering two

important statutory provisions designed to protect employers against union

intimidation  - Section 127 of the Workplace Relations Act (designed to be

a "quick and effective" remedy against illegitimate industrial action) and

Section 45D of the Trade  Practices Act (designed to prevent secondary

boycotts). One example is the refusal of the court to make orders against a

10 day strike during the currency of a "no-strike" enterprise bargaining



 The net result is to leave the big four unions (AMWU, CEPU, CFMEU, and MUA) apparently free to operate above the law, a "concession" they are readily exploiting. There is now a serious risk, for example, that those builders who have stood out against the 36 hour week will be forced to concede it or face long drawn out union disruption.


Moreover, unions will soon embark on Campaign 2000, seeking a flow-on of inflation-inducing concessions. As that could lead to interest rate increases and even recession, little wonder that Canberra is starting to get worried. If unions again employ strategies based on industry bargaining coupled with unlawful pickets, the Federal Court will on recent experience offer little resistance.


 The Samuel Griffith Society has published a revealing analysis of the appointments to the Federal Court and apparently what is involved is a classic case of regulatory capture. Indeed, although the previous Industrial Relations Court of Australia was abolished by the present Government, the Federal Court has effectively re-created a de facto industrial relations court.


These recent decisions of the Federal Court decisions constitute a serious

threat to employment and the maintenance of law and order. The Court's role

in industrial relations must be eliminated.


Ray Evans is President of the HR Nicholls Society in Melbourne




MEDIA RELEASE                        Embargoed until 29 March 2000




It is no exaggeration to say that the increasing bias against employers shown by industrial tribunals has pushed industrial relations close to crisis point. Decisions by these tribunals in recent months have left unions largely free to operate above the law and they are exploiting that to the full. This has the potential to lead to inflationary flow-ons and higher interest rates, even recession. Something must be done quickly to drastically reduce the scope for third party intervention, particularly by the Federal Court, in employer-employee relations.


Des Moore, Director of the Melbourne-based think-tank, Institute for Private Enterprise, said this today in addressing the Economic Society (WA Branch) at Bankwest, 108 St Georges Terrace at 5.00pm on The Case for Further Deregulation of the Labour Market. He is author of a report on this subject to the Council of Federal and State Labour Ministers and is currently refereeing a report to Workplace Relations Minister Reith on the possible use by the Commonwealth of the corporations power to regulate employer-employee relations.


Mr Moore said that the Australian Industrial Relations Commission (AIRC) should be replaced with a body that provides advisory and mediation services on a voluntary basis, as is done in the UK. Contrary to the mouth-opening claims by mining union boss, Tony Maher, that the AIRC is biased in favour of employers, that body and other industrial tribunals have a long history of giving preferential treatment to unions and of allowing unions to avoid penalties because of the perception that employers have superior bargaining power. But, with over I,000,000 Australian businesses competing for labour, that perception is mistaken.


Mr Moore added that, as the present constitutional basis of Federal regulatory arrangements requires that a dispute must exist, the combined effect of that and the preferential treatment of unions is actually to encourage industrial disputation. As a result, Australia continues to have a higher rate of industrial disputation than in less regulated labour markets overseas, such as the US and UK.


Tony Maher's call for the AIRC to be replaced with a new body is, however, spot on - but for the reason that the present tribunals and the legislation they apply are deterring employers from taking on employees. If Australia had the same proportion of the working age population employed as in less regulated labour markets such as the US or the UK, we would have hundreds of thousands more in employment and many fewer unemployed.  


Mr Moore emphasised that the upsurge in industrial disputation in Victoria partly reflects a very worrying increase in preferential treatment of unions by the industrial section of the Federal Court, centred in Melbourne. In recent months that Court has brought down a series of decisions that have both neutered important statutory provisions designed to protect employers against union intimidation and effectively eliminated employer access to common law remedies in the Supreme Court.


The immediate need is to eliminate the role of the Federal Court in industrial relations. Longer term, third party intervention must be reduced to an absolute minimum.




Australian Financial Review Thursday 2 March 2000



The Prime Minister's recognition that true Aboriginal reconciliation will take years is realistic, says  Peter Howson*


The Prime Minister has indicated that the Government will not seek to achieve reconciliation between aborigines and whites by end December 2000, the date set by the previous Labor Government. Contrary to the reaction in some quarters, this is a realistic recognition that an attempt to force an outcome by then would likely have found only superficial acceptance amongst many Australians.


The major difficulty arises over demands for an apology for wrongs committed by past generations of whites. But, even apart from whether such an apology would be meaningful and appropriate, a genuine reconciliation needs to be based on an accurate rendition of history for those on each side. This is not apparent from an examination of allegations that Aboriginal children were "stolen" from their mothers,  the subject of the current test case by two mixed-race Aborigines for compensation from the Commonwealth Government.


I say this notwithstanding the conclusion of the 1997 report by former High Court judge, Sir Roland Wilson, entitled Bringing Them Home, that many Aboriginal children were victims of Commonwealth policy in the Northern Territory during the period 1935-70. My careful reading of the evidence in the current test case leads me to the view that the Wilson report presented a totally inaccurate and unfair picture.


Contrary to that report, none of the evidence presented in the test case suggests that any Aboriginal child could be said to have been forcibly removed from its mother. Rather, the case indicates that the Wilson report cast a grossly unfair slur on the patrol officers and failed to recognise the unstinting dedication of the missionaries who cared for the children. The evidence also makes it clear that there is no conceivable justification for Wilson's description of the Commonwealth's policy as "genocide", a charge which cast a completely unwarranted slur on the nation itself that has had international ramifications.


How could it be that a report by a former High Court judge was so wrong? To answer this question would require a wide-ranging consideration of complex psychological and political issues beyond the scope of this article. Suffice to say that the Wilson report failed to identify the facts because it relied on the unchallenged evidence of  childhood memories. By contrast, the present case has heard from the missionaries and their staff, from patrol officers and from senior officers of the welfare branch. None of the latter was invited to give evidence to Wilson and none of their offers to do so were taken up.


Furthermore, evidence given in this case by both sides has been subject to intensive cross-examination by counsel, extending over five months. The cross-examination of Commonwealth witnesses failed to reveal any significant misbehaviour but the cross examination of claimants soon revealed fundamental contradictions between the claims made and what actually happened. Again, how could it be that adult Aboriginals could make claims that have been so easily exposed as unwarranted?


This question is not easily answered either. But what did become clear during the case is that some white lawyers encouraged Aboriginals to make claims by suggesting to them that the outcome would almost certainly be the awarding of considerable compensation. Again, the Wilson report doubtless had a significant influence here.


The case highlights the serious problems that arose from the customary rejection by tribal communities of the mixed-race children who were the product of casual encounters (none of the claims are on behalf of full blood Aboriginals). The Commonwealth Government policy was to provide the opportunity for these mixed-race children to participate in the broader community by offering to provide subsidised institutional care and education away from the tribal environment.


Naturally, the process of separation was often difficult, particularly given the distances between tribal communities and hostels and/or boarding schools, and the agreement of Aboriginal mothers to separation was sometimes forthcoming only after much deliberation. The evidence shows, however, that it was generally recognised that separation was in the best interests of the children, who were afforded access to their mothers and were generally well cared for.


This case was not initiated by the Commonwealth but, with goodwill on both sides, it has the potential to provide a new approach to reconciliation. Such an approach would accept that the case for an apology for the forcible removal of mixed-race children from their Aboriginal mothers is based on false premises. It would also recognise that the Commonwealth policies of the time were generally in the best interests of the children, many of whom went on to lead profitable lives and to make substantial contributions to  Aboriginal welfare.


Despite the national importance of this test case, it has received little attention in the media. Whatever the final decision, the more accurate historical picture that has emerged from the trial should signal the start of a process of reconciliation based on this new version of the past.


*The Hon Peter Howson was Federal Minister for Aboriginal Affairs from1971 to 1972.



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