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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 (www.ipe.net.au). 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 FEDERAL COURT MUST BUTT
OUT 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 agreement. 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 CALL TO REPLACE INDUSTRIAL
RELATIONS COMMISSION WITH NEW BODY 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 BUILD RECONCILIATION ON TRUTH 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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