Twenty years ago this month, the Australian Council of Trade Unions (ACTU) torpedoed Paul Keating's plan for a broad-based consumption tax. It would take another 15 years and a Coalition Government to secure this important economic reform for Australia.
The failed Tax Summit of July 1985 was not simply a defeat for a better taxation system. With hindsight, it was the beginning of the end for a style of corporatist politics that bound Australia in an economic straight-jacket.
The idea of the select few taking the big decisions and handing them down to the rest of the community is alluring for any nation's political class.
And until a few years ago, nowhere in our politics was this corporatist edifice more imposing, its ethos stronger or its sacred cows better nourished than in the field of industrial relations.
Here was a realm where, the 'experts' agreed, only experts should dare to tread. Only they understood the special qualities of our centralised wage-fixing system - the virtues of the closed shop; why 'comparative wage justice' was all that stood between order and industrial chaos; and why placing trade unions above the law was simply part of the Australian way.
By the early 1980s, some were prepared to prick these pretensions. And none possessed a sharper eye or pen than Gerard Henderson. His landmark Quadrant article on 'The industrial relations club' in 1983 stripped away layers of mythology from a system that was failing our country on the scales of prosperity, of fairness and (ultimately) of democracy.
It certainly struck a chord with me given my own experiences as Treasurer in the Fraser Government.
So tonight I am pleased to be back at The Sydney Institute to make the case for Australia embracing a flexible, simple and fair system of workplace relations.
Australia's high living standards rely on the productivity of our workplaces. And just as today's prosperity has been built by Australians working smarter in the last decade, so we must unleash a new burst of productivity growth to secure our future prosperity.
The workplace relations reforms that I outlined to Parliament a little over six weeks ago are the next logical step on a path that has delivered higher wages, more jobs, low inflation, the lowest industrial disputes on record and the longest economic expansion in half a century - perhaps the longest since the gold rushes.
While these reforms are significant, they are not radical. They are grounded not in ideology but in economic reality. They aim to strengthen our economy but to do it the Australian way - by advancing prosperity and fairness together.
In recent days, we've heard sinister claims about what lies ahead. Family living standards in free-fall. 'Dark satanic mills' across the land. Australia to lose the Ashes.
Some people seem intent on giving hyperbole a bad name.
It's time some facts got a look in - two facts in particular.
First, no system of industrial regulation can protect jobs and support high wages if an economy is not strong and productive.
And second, standing still is always riskier for Australia than going the extra mile on economic reform.
To go the extra mile on workplace reform is to appreciate that building a culture of enterprise in our workplaces is a never ending challenge, not a lemon that 'has been squeezed dry'. It is to understand that a dynamic, job-rich economy is the foundation of a fair go in Australia. And it is to recognise that, after nearly 105 years as a nation, one set of workplace laws is better than six.
The rise of the 'enterprise worker'
The way Australia works has been reshaped in our lifetimes. Economic reform, the opening up of the economy, higher education levels, changing consumer demands, new technology and modes of production - all have combined to transform the way we live our lives.
In the past, I have singled out the adaptability of the Australian people as our greatest asset in this age of globalisation.
Tonight I want to be more specific and suggest that there is no more important economic development in Australia in the last two decades than the rise of the 'enterprise worker'.
These Australians do not fit neatly into categories based on age or geography, occupation or industry, income level or formal qualification.
They are white collar and blue collar. They work each day in our factories, our small businesses, our great services companies, our farms and our mines.
Some choose to be trade unionists, many do not. Most are traditional employees, while a growing number have embraced the independence and flexibility of working for themselves.
This new breed of enterprise workers includes the knowledge workers who now make up roughly 40 per cent of our workforce. They include the providers of personalised services, reshaping our society with little more than initiative, a mobile phone and a computer. But they also include blue collar workers in industries that only a few years ago were written off as part of the 'old economy'.
They include the almost 2 million Australians working for themselves, often as independent contractors, franchisees or consultants. More than a million Australians now run small businesses from home, often because they can better balance work and family responsibilities.
What unites our enterprise workers, and what has helped to lift Australia's economic performance, is an attitude of mind.
They recognise the economic logic and fairness of workplaces where initiative, performance and reward are linked together.
They understand the need for firms to strive for better ways of doing things; that each workplace has to meet competitive challenges in its own way.
They have a long-term focus, knowing that short-term gains without regard to productivity are illusory if the result is inflation and jobs at risk.
Most importantly, they grasp that high wages and good conditions in today's economy are bound up with the productivity and success of their workplace.
Those of us who have long made the case for freeing up the Australian labour market always felt that the most important change would be a cultural one.
Change the institutions and over time you change the culture from the remote, adversarial and legalistic way employment relations were handled in the past.
Give employers and employees a tangible stake in what happens at the workplace and you give them a shared incentive to improve its performance. With this in mind, the Government's workplace relations reforms have three broad objectives. First, they are designed to encourage the further spread of workplace agreements in order to lift productivity and hence the living standards of working Australians.
Second, they remove impediments to further job creation, especially in small and medium-sized businesses and especially for those Australians on the margins of the workforce.
And third, they seek to provide Australia with what any modern, competitive nation needs in the 21st century - a single set of workplace relations laws. Let me address each of these in turn.
Encouraging workplace agreements
Looking back from 2005, what was the great labour market reform debate of the 1980s all about? In essence, it was about the impact on the Australian economy and on working people of a shift towards more decentralised bargaining arrangements. We now know that the spread of workplace negotiations has helped to underpin an Australian economic renaissance. Our relative prosperity is rising again, after decades of falling living standards compared with the rest of the industrialised world. I have no prouder boast than that the real wages of Australian workers have risen by more than 14 per cent under this Government. This has been affordable for the simple reason that productivity has risen strongly.
Not only that, but we have avoided the sort of destructive wage-price spirals that often derailed past economic expansions under the old, centralised wage-fixing system.
In today's economy, to be indifferent to the spread of workplace agreements is to be indifferent to the well-springs of national prosperity. We know this because the link between workplace bargaining and higher productivity is strong and compelling.
Between the 1970s and the early 1990s, under the old system, Australia's labour productivity (GDP per hour worked) grew at about 1.2 per cent per annum. In contrast, from the mid to the late 1990s, productivity growth accelerated to average about 3 per cent per annum.
If we had not had this additional productivity growth in the 1990s, Australian households would have been around $7,000 worse off on average by now. This productivity surge was not part of some global phenomenon. Australia was a world leader, outperforming even the much lauded productivity performance of the United States.
We know too that productivity growth has been highest in those sectors that have moved furthest in the direction of workplace agreements. Sectors with more decentralised arrangements have done better than sectors that still rely heavily on the old award-based arrangements.
Research conducted for the Business Council has found that a 10 percentage point reduction in award reliance in an industry between 1990 and 2002 was associated with an increase in average annual productivity growth of 0.5 percentage points.
Other studies have shown that productivity levels in firms in which all employees are on enterprise agreements were almost 9 per cent higher than comparable firms where employees relied on awards. We also know that those on workplace agreements receive higher wages.
None of this should come as a surprise. Workplace agreements allow parties to deal with circumstances and needs that are unique to that workplace and its employees. Tailoring changes to employee and customer requirements, job redesign and work organisation changes, incorporating new technology, accommodation of work and family responsibilities - all these issues cannot be dealt with effectively above the workplace level.
A common error - one that my opponent Mr Beazley always makes - is to regard workplace reform as a one-off. Have a few meetings of the industrial relations club, remove a few 1950s work practices, and the job is done.
He could not be more wrong. The job is never done. Despite a turnaround in productivity performance, we are still a long way shy of the world's most productive economies. On recent estimates (2002, GDP per hour worked), our productivity level is about 83 per cent of that in the United States, which is only slightly above where we were in 1950.
In a global economy that increasingly values specialisation and flexibility, perseverance with workplace reform is essential if we are to narrow this productivity gap further and respond to challenges such as the rise of China and India as great economic powers.
The centrality of productivity to success in a globalised economy was starkly illustrated by Martin Wolf of the Financial Times. In his recent book, Why Globalization Works, he asked how workers in high income countries can compete with Chinese workers:
'It is true that, on average, a worker in Chinese manufacturing cost only $730 annually between 1995 and 1999, while a German worker cost $35,000, an American one $29,000 and a British one $24,000. Is it then not perfectly evident that German, American and British wages will be driven down to Chinese levels? It is not merely not obvious; it is untrue.
Chinese labour is cheap because it is unproductive. If an American worker produces $81,000 of value added annually, a German worker $80,000 and a British worker $55,000 while a Chinese worker produces only $2,900 it is not at all difficult for the workers of the high income countries to compete, even if their wages are vastly higher. The evidence on the relationship between productivity and wages is overwhelming.'
Australia is also on the cusp of a great demographic transition with the retirement of the baby boomers. This will require evolutionary change where laws and institutions are regularly assessed against the needs of workplaces.
What is important for ongoing productivity growth is a continuous process of cooperation and commitment to implementing change. Encouraging the spread and improving the quality of workplace agreements is about sustaining productivity growth in an environment that encourages innovation, the acceptance of new technology and the development of worker skills.
The Government's 1996 reforms made workplace agreements the focal point of our system, overcoming many deficiencies of the Keating-era changes which limited the spread of agreement-making.
By reducing the scope for third parties to interfere in agreement making, it clarified where responsibility lay in this process. By simplifying awards, it limited scope to regulate all aspects of the workplace. And by ensuring that a broader range of agreements was available, with provision for the first time for agreements between individual employees and their employer, it made agreement-making more attractive and accessible.
Our 1996 reforms also made it easier for flexible, family-friendly practices to be introduced at the enterprise level. About 83 per cent of federally certified agreements now contain at least one family-friendly provision such as carers' leave, part-time work or time-off in lieu.
But the 1996 Act was never intended to be the last word.
The making of workplace agreements is still more cumbersome than it should be. There is still too much reliance on awards that are complex, detailed and prescriptive. And awards, as the Melbourne Institute's Mark Wooden has noted, 'continue to be used in ways that undermine the need for enterprise bargaining'.
We still have a system where the percentage of private sector workers covered by awards only (24.6 per cent) is higher than the share on registered collective agreements (22.6 per cent).
We still have a system where too few workplace agreements are comprehensive, rather than merely add-ons to awards.
We still have a system where industry-level, pattern bargaining by unions imposes too many 'one size fits all' agreements.
And we still have a system where third parties of all stripes can insert themselves too easily into processes to the detriment of cooperation between employers and employees.
The system isn't exactly broke. But it does need an overhaul.
That is why the Government is taking steps to encourage widespread agreement-making with maximum procedural simplicity.
Under our proposed reforms, all collective and individual agreements will now be approved on lodgement with the Office of the Employment Advocate. We intend also to further streamline awards and matters under awards. For too long, understanding our award system has required the mind of a medieval theologian, the patience of Job and a well fed industrial lawyer.
The Government will remove several matters from awards that are covered by existing legislation. To further simplify awards, a 12-month review will be conducted of the existing awards and award classification structures.
We are not abolishing awards. The option of an award - as opposed to a collective or individual workplace agreement - will still be available. And award-based wages will rise in the future.
But the path to better jobs and higher wages is the path of workplace agreements.
A fair safety net for agreement-making will include a range of legislative requirements and safeguards for employees. For the first time, minimum conditions to protect the rights of workers will be set in law.
As well as minimum wages, a new Fair Pay and Conditions Standard will include minimum standards for annual leave, personal and carers' leave, parental leave and maximum ordinary hours of 38 hours per week.
This will be the test for all agreements. It will make it easier for employers and their employees to compare any agreement against this new safety net.
And it demonstrates yet again that these are evolutionary, not radical, changes that maintain strong safeguards for workers.
Unfair dismissal laws and the setting of minimum wages
Removing obstacles to further job creation is the second objective of our workplace reforms.
We must remember that 'fairness at work starts with the chance of a job in the first place'.
Those are not my words. They are the words of Tony Blair, a social democrat with the courage to tell his country's Trades Union Congress in 1997 that rolling back the Thatcher reforms would hurt the most vulnerable sections of British society.
Any Australian Government that gives up on labour market reform gives up on what is not just an economic challenge, but a social imperative - namely, finding jobs for all of our fellow citizens who can and want to work.
The most reliable road out of poverty is a job.
The Australian job machine has performed very well over the last decade.
1.7 million new jobs since March 1996; 10 million Australians in work, more than ever before; unemployment at a 30 year low of five per cent with almost two consecutive years of unemployment at or below six per cent.
But I think we can do better. I don't know what Mr Beazley, the Labor Party and the union movement think because they don't seem to talk about job creation anymore.
Our workplace relations reforms, together with the Welfare to Work measures in this year's budget, are designed to further increase workforce participation. Compared with many developed countries, Australia still has a lower proportion of its working age population in employment. A large number of Australians say that they would like to work more, or that they would be available to start work if jobs became available.
And most critically, too many Australians - especially too many children - live in jobless households.
Governments - as distinct from trade union officials - have a particular responsibility to take account not just of the interests of the labour market insiders, but those of the outsiders as well.
That is why we will end the Keating Government's failed experiment with job-destroying unfair dismissal laws. Far from protecting jobs, these laws have stopped jobs being created.
Commonsense says that in deciding whether to hire a worker, employers will take into account the costs if that worker proves unsuitable. They will want to minimise the risk of a speculative unfair dismissal claim, especially when hiring those on the margins of the workforce.
Firms are concerned not just with the direct cost of defending an application or settlement, where that occurs, but costs in terms of time, paperwork and disruption to working relationships. A survey by the Australian Industry Group this year found that of industrial relations issues of high or moderate importance to its membership, the highest number (89.1 per cent) nominated speculative unfair dismissal claims.
Without deep pockets or dedicated human resources departments, small and medium-sized businesses lack the capacity to cope with such claims. In rare moments of candour, Kim Beazley, Stephen Smith, Tony Burke, Peter Beattie and Greg Combet have all acknowledged the problems that the current regime poses for small business.
These laws have a chilling effect on job creation by adding extra uncertainty for firms wanting to employ staff. Employers are more likely to rely on family and friends as a result. Alternatively, existing workers may bear a burden by having to work longer or harder.
Firms are also likely to rely more heavily on temporary and casual staff. Both the World Bank and the OECD have found that strict employment protection laws result in fewer permanent jobs being created. Those who bear the burden tend to be the young, the low-skilled and the long-term unemployed.
I am not one who demonises the growth in casual employment in our society. It reflects the contemporary needs of many employers and employees alike.
But to those who bemoan this trend I say this: you of all people should be interested in getting rid of bad laws that hinder the creation of permanent jobs. Either way you look at it, the cost of the existing unfair dismissal laws falls most heavily on firms and individuals who can least afford it.
To make it easier for businesses to hire people, the Government will exempt businesses with up to 100 employees from the unfair dismissal system. To deter speculative claims on businesses with more than 100 employees, we are also increasing the probation period for new employees from three to six months - a change in line with international standards.
Again, this change needs to be put in perspective. We are talking about laws that date back to 1993, not the tearing up of some ancient right enshrined in Magna Carta by the Barons at Runnymede.
There is no watering down of protection from unlawful termination. Workers will continue to be protected from unlawful termination on grounds such as temporary absence from work due to illness or injury, family responsibilities, pregnancy, gender, race and union membership.
Australia's current economic strength also gives us an opportunity to establish a better way of setting minimum wages than the current adversarial, ambit-based procedure.
The Government supports the maintenance of a minimum wage, as well as increases in the rate at which that wage is set. We recognise, however, that unsustainable minimum wage rises can destroy jobs and that there are better ways to support low-income earners without putting jobs at risk.
We should always remember that unemployment, rather than low wages, is the major cause of low incomes in Australia. In fact, minimum-wage workers are not concentrated in low-income households. A significant proportion live in households with relatively high incomes.
The new Australian Fair Pay Commission will be charged with striking the right balance between the needs of the low paid and the employment prospects of the low-skilled and unemployed.
Our political and union opponents who claim that our goal is to hold down the minimum wage are suffering a severe case of historical amnesia.
Since 1996, the federal minimum wage has risen in real terms by more than 12 per cent. By contrast, it actually fell by more than 5 per cent between 1983 and 1996 under the holy trinity of Labor, the Accord and the Industrial Relations Commission.
One national system
Creating a simple, unified set of workplace laws is the third key element of the Government's reforms. Six different industrial relations systems is an anachronism for a nation of 20 million people in a region that will be the world's economic centre of gravity in the 21st century.
Our overlapping systems reflect a time when businesses operated within State boundaries; when our politics were more concerned with walling Australia off from the world, rather than competing in it.
State and Territory governments some time ago recognised the logic of national systems for taxation law, for corporate law and for financial institutions law. It's time they recognised that a single system of workplace laws is in the national interest. Six different systems mean different rules for everything from agreement-making to union entry rights to redundancy obligations. The costs from duplication, inconsistency, complexity and uncertainty are borne by employers and employees alike. Again, in their more rational moments, our political opponents recognise this. A pride of past and present Labor leaders - including Neville Wran and Bob Carr here in New South Wales - have disparaged the 'rail gauge' problem in industrial relations.
The same is true of the union movement. Let me quote the AWU's Bill Shorten in 2002: 'It is ridiculous [that] there are more than 130 pieces of state and federal legislation pertaining to industrial law. Long service leave is a good example of the illogical variation with 16 separate acts.'
I agree; it is ridiculous and illogical.
There are approximately 4000 awards in Australia, more than 1700 of them in state jurisdictions. At the moment, both federal and state awards may cover different categories of employees at the same workplace. Businesses with workplaces in more than one state have to deal with a number of award and tribunal systems.
The complexity created by multiple awards and jurisdictions is not an issue that is relevant only to those on awards. As many federal certified agreements need to be read together with relevant awards, it also affects those on workplace agreements.
Too much of what happens revolves around jurisdictional issues arising from multiple systems and not what matters in a particular workplace.
At any time and on any given issue, the responsible jurisdiction can depend on the location of employment, occupation of the employee, the industry they work in, the corporate structure of a business, whether the employer has been 'roped into' a federal award, if there is a relevant State award, or whether a business is a member of a relevant employer association.
What should be settled issues in the workplace all too often become the subject of elaborate games of 'forum shopping' where a union creates a paper dispute in order to gain from another system what they have been denied or refused in their traditional area of coverage.
A small minority may win from these games. But the cost to the nation and to constructive and cooperative relationships at the workplace is enormous. Apart from the dead-weight on productivity, multiple industrial relations systems also involve direct costs for taxpayers. With the exception of Victoria, each State maintains separate tribunals, registries and supporting bureaucracies. The taxes they soak up would be better spent on hospitals, roads and schools.
The complexity and uncertainty of different systems is bad enough. But the regulatory creep in our State systems has the capacity to strangle enterprise and productivity.
In recent years, a number of State Labor Governments, urged on by their trade union constituency, have enacted laws which 'deem' independent contractors to be employees (subject to award conditions and liable to union recruitment) notwithstanding that they have no such desire. Under Section 106 of the New South Wales Industrial Relations Act, for example, the state tribunal has the power to review 'any contract whereby a person performs work in any industry'. It can involve itself in disputes that in any other circumstances would be deemed commercial and non-industrial. This has nothing to do with States' rights. It has everything to do with union muscle and overweening state power. And it is why as part of our reforms we will build a firewall around the rights of independent contractors.
Let me stress that I believe there is a case for competitive federalism in some areas of public policy. But in an area like workplace relations which goes to the heart of our national competitiveness the case is weak and unconvincing.
To those who say that a national system could be hijacked by the Labor Party, I say this is not a time to be timid. To trust employers and employees in the workplace is to trust the Australian people.
If we look at the experience in New Zealand, we find that while 85 per cent of people originally opposed labour market reform, 18 months after the changes 73 per cent of employees were either 'very satisfied' or 'satisfied' with their working conditions and terms of employment.
The Australian people know that when a Government acts in the national interest the path of roll-back is a road to nowhere.
We all heard the wailing and gnashing of teeth when Mr Beazley declared that Australia 'could face a meltdown on 1 July'. He wasn't talking about the Government's majority in the Senate taking effect a few days ago.
He was talking about what would happen on 1 July 2000 when the GST came into force. If the Parliament passes our workplace reform legislation we can confidently predict three things.
The sun will rise in the east. Australian workers will be in high demand. And Mr Beazley will fall back on clich‚s and stand for nothing.
Prosperity with fairness
Over the past nine years, the Liberal and National Parties have worked hard to restore Australia's prosperity and ensure that it is spread throughout the community.
Millions of Australians on low and middle incomes have helped the Coalition win four elections. We have not let them down in the past. We will not cut them adrift in the future.
I've said what these reforms look to do. Let me say what they do not do:
* they do not abolish awards or cut award wages
* they do not abolish the right to join a union
* they do not stop a worker having a union bargain for them
* they do not abolish a right to strike
* they do not abolish the Industrial Relations Commission, and
* they do not give employers the right to treat their workers poorly.
After these reforms, Australia's labour market will still be more regulated than those in the UK and New Zealand now presided over by Tony Blair and Helen Clark, respectively.
To those who say that the Government is intent on sacrificing fairness in the name of wealth creation, I say this is a false choice for Australia.
A fair-go relies on a strong economy that creates jobs and avoids recession. And a strong, productive economy means a strong, sustainable social safety net for our fellow citizens who struggle to make ends meet.
One need only look at the unemployment rates piling up year after year in countries such as France and Germany to see that rhetoric about social solidarity can ring exceedingly hollow to those without a job. And let me remind you that no trade union, no government legislation, and no industrial tribunal protected the 1 million Australians thrown into unemployment by Labor's Great Recession of the early 1990s.
This Government believes in continuing economic reform, but in the Australian way that advances prosperity and fairness together.
Australia's journey to becoming a more open, competitive country has yielded some important policy lessons. These are lessons we in the Coalition have learned and applied in government.
We've learned that fiscal policy works best when it keeps the budget in balance over the economic cycle. We've learned that monetary policy works best when it focuses on low inflation.
We've learned that labour market policies work best when they focus on raising productivity and creating jobs.
And we've learned that the best way to help those on low incomes is through the tax-benefit system.
Questions of fairness in relation to income are best judged at the level of household or family income. And on this score, Australia has one of the most progressive tax-benefit systems in the world.
A comprehensive safety net provides substantial assistance to low paid Australians, depending on their particular personal needs and family responsibilities.
In nine years, the Coalition has delivered significant growth in disposable incomes to low and middle income earners from a combination of tax relief and increased family tax benefits.
The OECD calculates that the average Australian production worker's disposable income (after tax and benefits) is now the second highest in the developed world. For many Australian families, all Commonwealth tax is effectively rebated by the Family Tax Benefit system.
A family on a single income of $35,000 with two dependent children (one under five) currently receives more than $10,000 per year in family tax benefits. They pay no net tax until their income reaches $41,808. Some dual income families with two children now enjoy the equivalent of a combined tax-free threshold of up to $43,000 a year.
And the bottom 60 per cent of households in Australia are all net gainers from the tax-benefit system with the highest net gains going to the lowest income earners.
This is as it should be. But a fair society relies on a prosperous economy with productive workplaces. And this requires going the extra mile on workplace reform.
Conclusion
We are now in the 15th year of an economic expansion that has restored peoples' belief in our capacity to succeed in a tough, competitive world.
A few years ago, at the time of the Asian financial crisis, Australia was dubbed a 'miracle' economy. Of course, this was flattering. And, of course, this was wrong.
This era of prosperity is a great national achievement, but it has nothing to do with miracles. It is a legacy of two decades of reform by governments from both sides of politics; reforms that have unleashed the enterprise and initiative of the Australian people.
On a Saturday night last October, in another Sydney ballroom not far from here, I said that I believed this country to be on the threshold of 'a new era of great achievement'.
We will forge this era only by unleashing a new burst of productivity growth that, in turn, will benefit of all in our society.
The Australian people have shown time and again that they will accept sensible, long-term reforms that are in the national interest and that safeguard working families.
Time and again, this Government has met the test of sustaining prosperity with fairness.
We will again with our workplace reforms - the next logical step for a country that believes, not in economic miracles, but in itself.
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