Well thank you very much Mr Langoulant, Mr President, ladies and gentlemen. I want to thank the Chamber for so generously and quickly responding to the opportunity for me while I'm in Western Australia and I know the great interest of Western Australians in industrial relations reform. I wanted to say something particular today about the changes to our existing unfair dismissal laws. And I do that against the background of recognising, as I know all of you do, that the proposition that in 2005, or indeed at any time in our economic history, that we can legislate job security is an idea without any merit. And I'm sure that I don't need to remind an audience such as this that the only guarantor of a good reliable job is a buoyant labour market. And the best, indeed the only guarantor of a buoyant labour market is a strong, growing and productive economy. And any workplace relations system is only as good as the contribution that it makes to Australia's economic strength. And all the regulations in the world won't preserve somebody's job or won't prevent somebody's wages falling if the economy is weak. And we only have to go back to the experiences of the early-1980s and the early-1990s when we had an infinitely greater level of labour market regulation than we have now to recognise the truth of that proposition.
Unfair dismissal laws, which are the particular focus of my remarks today, cannot magically preserve good jobs. And high productivity is the key to the generation and the protection of good jobs. And whatever their intended purpose, unfair dismissal laws have acted in a very significant way to slow the entrepreneurial pulse of the economy. And to make many of our firms, particularly smaller ones, less competitive and to directly impede the creation of jobs. And too often these laws have trapped small entrepreneurs in a legal minefield and they have added complexity and financial burden to what should be a straight forward business decision, namely whether or not to take on an extra worker. And as we all know the most important right a worker has is the right to a job in the first place. And research by the OECD and the World Bank demonstrates a direct correlation between high degrees of market regulation and unemployment levels. The case studies of Germany and France on the one hand, both of which have highly regulated labour markets and very high levels of unemployment - Germany's is now almost 11 per cent, in nominal terms as high as it was during the Great Depression, and France's is not much better - compare that with the labour market experience of Great Britain which has an unemployment rate half that of Germany's or France and of course a significantly less heavily regulated labour market and also of course with the labour markets of the United States. Our own unemployment level now, at five per cent, could be lower if we had a less regulated labour market. Although it is now, as you know, less regulated than it used to be. So there's really no better example of the law of unintended consequences in action than the laws that work against workers and employers in the name of protecting people against unfair dismissals.
Economic reality says that employers need hardworking, honest staff to operate their businesses. And the most valuable asset of any business is good staff. I'm saying very regularly around Australia in support of our labour market changes that perhaps as never before in 2005 we live in Australia in a workers' market. Unemployment is at a 30 year low, real wages have risen by almost 15 per cent in the last nine and a half years, and the onset of the process of ageing of the population and the beginning of the retirement of baby boomers out of the labour market means that we're not going to see a serious regression from that situation. Indeed the challenge of the future will be to find enough workers, not only in the skilled areas but also increasingly in unskilled areas. And I make particular reference to this to put into context the general debate that is going on at present about the need for protection of workers and the need for the existing industrial relations laws. Because economic reality says that demand for Australian workers will only grow in the longer term and in short the future of the Australian workforce has never been brighter than what it is at the present time. None of this suggests of course that there will be any support or warrant given to unscrupulous behaviour by a small minority of employers, just as there are some of those, in equal measure, there have always been some unscrupulous employees. But your experience will be and my experience going around the country has always been that the vast majority of employers do the right thing by their workforce.
In understanding and in explaining the reasons why we seek to change the unfair dismissal laws can I do two things? Can I remind you of some of the history of these laws and can I give you a snapshot of some of the war stories that have come out of workplaces in relation to their operation? As I've said on a number of occasions in the past in seeking to change the unfair dismissal laws, we're not challenging some ancient right that was put in the Magna Carta by the Barons of Runnymede in the 13th Century. It's very important to remember that the present laws were not the product of some great deliberative process or any sudden upsurge in the ranks of bad employers in Australia. They date back only to my predecessor Mr Keating as Prime Minister in 1994 and the handy work of then Industrial Relations Minister, Mr Laurie Brereton. They were a product of both a political payback and a policy failure. You will remember that in the early 90s we had almost a million people out of work and that Australia's unemployment rate had risen to 10.9 per cent in the year before the federal unfair dismissal laws were introduced. In other words these laws were introduced at a time of very high unemployment in this country. They were a very belated and wrong-headed response to that high level of unemployment, but they were also, let me remind you, and I'll be reminding the Australian public of this, they were also pay-back, and a secret pay-back at that, to the union movement for its support of the Keating Government in the 1993 election campaign. It's worth remembering that the Keating Government ratified the relevant Convention of the International Labour Organisation in February 1993, on the eve of the 1993 election. This was an abuse of the external affairs power, undertaken during an election campaign and without any consultation with State and Territory Governments. And Australian employers and the public did not learn of the Government's action until after the 1993 election. And it was Jennie George, the then ACTU Vice President, who said, and I quote, "... we won the election in March and this bill is a payback for the commitments that were made by the Government in the course of that election campaign", unquote. So we have a set of laws that were not put there until 1994, they were put there as a result of a secret arrangement made during an election campaign in the caretaker period and they were not based in any way on any kind of deliberative process.
Now as you know in the time we've been in office, and certainly until the last election, we have tried on many occasions to change the existing unfair dismissal laws. We made some changes with the help of the Australian Democrats in 1996 and 1997. But our attempts to bring about really substantial change have on 40 occasions been rejected by the Senate. And as a result we faced a likelihood of that being repeated had it not been for the result of the federal election, and in particular the Coalition winning four out of six Senate seats in Queensland which give us, as Peter Costello has put it so very well, a bare majority of one on a good day. So much for those people who say that we have "brutal and untrammelled " control of the Senate. But we do have an opportunity because of that outcome to bring about these changes. And of course in doing these changes we are going to challenge a culture of complaint and litigation which has developed to the point where some firms will go to any lengths to avoid hiring extra staff.
For a disgruntled employee, the downside from lodging a claim is minimal. For a business, the time and cost of defending a claim, even one without merit, is substantial. It is not unusual for businesses to face costs of over $20,000 in defending a case of unfair dismissal all the way to arbitration. And for many it is much easier to settle the matter for a few thousand dollars with some 'go away money'. And in this sense formal applications are only the tip of the iceberg as they refer only to claims where litigation has commenced. In cases that do go to arbitration, and many of you will have experienced this, there is a tendency for procedural issues to be elevated above the substantial reasons behind the dismissal. And rather than focus on the merit of the case, industrial tribunals fall back on whether or not complex and varied procedures - such as multiple warnings - have been followed. The end result is this culture of complaint and litigation that loads extra costs and uncertainty onto those who society relies on to create wealth and jobs by taking risks with their own livelihoods.
Let me give you some, just a few of those war stories. In February of this year, the Australian Industrial Relations Commission ruled that an intoxicated employee should be reemployed despite having committed acts of physical and verbal sexual harassment. The relevant incidents occurred in the street of a country town after staff had arrived for the next day's work and as they were walking to their employer-funded accommodation. In its wisdom, the Commission ruled that the dismissal was unfair because the sexual harassment, quote, "was essentially private, in circumstances that did not allow an extended right of supervision over the private activities of the employee", end of quote. In other words, it was claimed, the employer was not in a position of supervision over the employee. The trouble is that sexual harassment laws give employers no such out, leaving them exposed to a situation of double jeopardy. We have reached an absurd point when getting rid of a staff member whose conduct could make an employer guilty under sexual harassment laws can leave the employer in breach of unfair dismissal laws.
In another case a few years ago, a male employee was dismissed for sexually harassing a female fellow employee at a training course. The woman was subjected to obscene language and aggressive behaviour to the point where she was forced to seek assistance from hotel management. Having previously been warned about threatening and offensive behaviour, the man was dismissed. Again, in its wisdom, the Industrial Relations Commission found this to be harsh and unjust. The relevant Commissioner claimed that the male employee was not guilty of sexual harassment because the words he used were ones of general abuse and because he allegedly believed the female, it's true, he allegedly believed the female employee not to be in her room. The Commissioner ordered reinstatement despite the obvious unease expressed by the woman about working with the man.
In another case, four employees who were in charge of operating heavy and dangerous machinery were dismissed for repeatedly breaking a company's no-alcohol policy during work hours. Despite the company following what the Commission described as 'copybook' processes when terminating the employees, reinstatement was ordered.
As these cases demonstrate, the losers are not simply the employers. The losers are also the hard-working fellow employees who do the right thing. They can suffer most from the actions of an angry and disruptive employee, either directly or indirectly if they are forced to pick up the slack at work. Under these laws, even when an employer wins, more often than not they lose. For example, a small car dealership in Victoria employing 24 people was forced to lay off staff after losing the franchise for one of the makes of the vehicles it sold. A staff member who was responsible for selling the particular brand of cars was made redundant with the employer observing all the correct procedures. Despite this, the former employee initiated an unfair dismissal case seeking compensation. This was rejected by the Commission following an arbitration hearing which involved additional time and expense for a business under considerable financial pressure. The employer won, but not before incurring costs of $13,500.
Especially pernicious, of course, is the all-too-common occurrence of employers deciding that they have little option but to pay 'go away money' as a way of extracting themselves from a vexatious claim. And last year, the proprietor of a small manufacturing company in Victoria wrote to the Government about his experience with the current laws. An employee had been dismissed for serious misconduct including the falsification of timesheets, stealing company property, bullying other employees, constantly being late for work and abusing the proprietor's wife. Despite appearing completely justified in the dismissal, the business owner was told by his lawyers that as he had not made the dismissal process 'watertight' it would be far less expensive to settle with the employee. As well as the time the expense of the legal representation, the business owner found it necessary to pay $5,000 to the sacked employee. Not surprisingly he says that he will never hire an extra employee again.
These are not isolated cases. Surveys of business attitudes on speculative unfair dismissal claims have been too numerous and their findings too consistent to be ignored. A recent survey of around 900 businesses by ABL Limited found that two in three businesses had paid out, or knew of businesses that had paid out, 'go away money'. Thirsty-seven per cent said that 'go away money' occurs regularly and another 30 per cent said that it occurs occasionally.
Because of all of these circumstances, which would be very familiar to many of you in this room, the Government has decided to exempt businesses with up to 100 employees from the current laws. This recognises the practical reality that it's often at 100 that firms acquire a human resources or personnel capacity. One hundred is the upper limit of the definition of a small business, according to the Australian Bureau of Statistics. Exempting businesses from regulatory obligations based on the number of employees is a very well accepted one. Australian Governments, for example, have never required Equal Employment Opportunity reporting by businesses employing fewer than 100 staff. Redundancy and tax laws are other areas where obligations vary according to the size of business. And far be it from me to frequently resort to references from the former Government, but let me remind you that the ILO Convention ratified by the Keating Government in secret in 1993 itself envisages exemptions for businesses of a certain size.
In moving to change the current regime, the Government also has a clear message for employers who might think, mistakenly, that they will have extra latitude to treat their workers badly. Our message is that such employers have no place in a modern, productive Australian economy. We will maintain a strong framework of protection against unlawful termination, which should be distinguished of course from unfair dismissals, on grounds such as trade union membership, family responsibilities, pregnancy, temporary absence from work due to illness or injury, religion, gender and so on. It will still be unlawful to discriminate or sack an employee in any business for these reasons.
And I will announce separately and at the end of this speech a proposal to provide expanded assistance for people who have legitimate claims for unlawful termination under a scheme to be administered by the Office of Workplace Services, and in addition we will also conduct an education campaign similar to some of the campaigns conducted when the GST was announced to advise employers of their rights and obligations both in relation to the unfair dismissal changes and also the maintenance of the unlawful termination proposals.
I want to leave you, in relation to unfair dismissals, with a wonderful quote that I found in a newspaper article. And it was the reaction of a small businessman to the stance being taken by our political opponents on the issue of unfair dismissal laws. And I quote, it's as follows, and these words will have a lot of resonance with many of you - "having taken all the risks, small business employers bitterly resent being depicted as monsters who dismiss an employee on a whim. While a minority may be unpleasant characters, the majority would be insane to treat employees badly, nor do they. However if an employee regularly arrives late, is rude to customers, does sloppy work, puts their fingers in the till, or is simply unpleasant to work with, then an employer should have the right to terminate their employment - without endless counselling, letter writing and other warnings culminating in absurd and excessive payouts beyond traditional severance entitlements." End of quote. This is I think the voice of economic reality that the opponents of unfair dismissal laws, including of course the Labor Party, have not wanted to hear. They are the words of someone who sees a political party lacking all empathy for those trying to make a living in business. They just happen to be the words of a former Minister in the Hawke Labor Government, they are the words of Barry Cohen, who used to run, before he entered Parliament, an extremely successful clothing business. He is one of a rare breed, indeed a species close to extinction, in fact I think he was one of the last members of a Labor Caucus to have any real first-hand experience in running a small business.
I've chosen today, ladies and gentlemen, and I thank the Chamber for the opportunity to do so, to say something specifically about the changes we proposed for the unfair dismissal laws. But before I conclude my remarks, and I would invite you to put any questions you might want to to me, can I just remind you of the overall context of these changes. The changes we propose to the industrial relations laws are significant. They are not however extreme, they are not radical. They will still leave Australia with a more highly regulated labour market than either New Zealand or the United Kingdom. They have three main elements - I've described the changes we propose in relation to unfair dismissal laws, the second important element is that we will be replacing the existing 'no disadvantage' test with a new Australian standard test which will make agreement making far easier and less complicated and a lot simpler than it is at present. And will in essence remove the, I think, overemphatic link between the awards system and agreement making. We will not of course be abolishing the awards system, the awards system will still be available for a large section of the Australian workplace. But it will become easier to enter into workplace agreements. And importantly also we are introducing, because we're going to legislate to use the corporations power, we are introducing a national system. Now I know there are some who have reservations about that. I respect those reservations but I think they are misplaced. In the long run the best guarantee that a future government of a less friendly attitude towards business might be minded to use national power under the constitution to institute an anti-business industrial relations system. The best guarantee that that won't occur is in fact to institute on a national basis a better industrial relations system, see it working efficiently and with benefit to the community, and thus make it politically impossible for a future government to reverse that process. And if you think that is unrealistic let me remind you of the experience of the Blair Labour Government in the United Kingdom. One of the first things that Mr Blair did when he became Prime Minister was to make it to clear that because the industrial relations changes of the Thatcher Government had been so successful and had clearly worked to the benefit of the British economy he had absolutely no intention of reversing those laws. And in a very famous speech to the trade union congress in London in 1997 he used the phrase that I used in my speech when he said "fairness in the workplace starts with the chance of a job", and that he made it clear to the trade union movement then that he had no intention because of the successful of the Thatcher Government laws of reversing that process.
We as a country have come a long way in the last 20 years. I have never been reluctant to give credit to the former government for some of the reforms that it carried out - such as deregulating the financial system and reducing tariffs. And I would remind you that we in Opposition supported those decisions, we did not try to obstruct them because we believed that they were in the interests of the economy. When you add those reforms to the reforms that we have carried out over the last nine and a half years, you've had almost 20 years of change and reform. And that 20 years of change and reform have produced the economic strength we now have. There are a lot of people who are saying to me well that's fantastic John, you've done a great job with the economy, unemployment is down, the economy is booming, we're doing well, why don't you just stop all this reform business and let us enjoy the benefits of it? Unfortunately of course as many of you will understand immediately that is the path to going backwards. Iit's a backward process. I often invoke the example of West Germany as it then was in the 1970s when I first became a junior Minister in the Fraser Government, everybody said the economic model to be followed was the Federal Republic of West Germany. They had this fantastic economy, their productivity was high, they were exporting their heads off and they were out competing the rest of the world. And that was the case in the 1970s, it's no longer the case. And the reason was that they made the mistake that we don't intend to make - they rested on their oars, they thought they'd reformed enough, they didn't think any further reforms were necessary and as a result you now see the economy of a now reunified Germany much weaker, relatively speaking, than what it was in the 1970s. And that in essence is the mistake we must not make. We have got a lot of benefit out of reform, we need further reform and nothing is more likely to purchase an additional burst of productivity in this country than further industrial relations reform.
Now I imagine that there are many people in this audience who are thinking to themselves well I agree with that and I'm all in favour of it. He needs to go out and tell other people that. Now of course I know that, I do that, but I need your assistance. This is not a debate that is easily won. It's easy to stir up emotion, I've tried today to counter with some of the examples I've given, some of the absurd fear campaigns that have been run in relation to our changes concerning unfair dismissal laws. I've found in the last 10 years as Prime Minister talking to small business the thing that recurs again and again is the absurdity of these unfair dismissal laws and how they actually hurt the good staff, they discourage small firms from taking on more people and they are a prime example of where overregulation has worked to the detriment of both business and also employees.
But ladies and gentlemen, I again want to thank the Chamber for inviting me, allowing me at such short notice to come along. I thank you for coming along. I thank the Chamber for its continued support of the cause of sensible, economic reform and I'd be very happy to answer any questions you want to put to me.
Thank you.
QUESTION:
Stephen Brook, Water Corporation Prime Minister. Two questions if I may. The first is you've articulated very clearly what's wrong with the existing unfair dismissal laws. And what the (inaudible) has been is why you don't fix them and then apply them equally to all employers large and small irrespective of whether they have an H.R. department? The second question I'd ask. Say I'm an employer of less than 100 staff and I dismiss one of those employees and the remaining staff have their secret ballot and decide to go on strike over what they consider to be an unfair dismissal, how does that dispute get resolved?
PRIME MINISTER:
Well in relation to the first question, we have chosen to have a cut off point of 100 for the reasons that I have explained. I know there are some large employers who don't agree with that. I have to say that we think, taking all things into account, 100 is the right point. Firms do in practise have a greater HR and personnel capacity concerning -once they get to a certain level. And we do think there is a qualitative difference between the capacity of smaller and medium sized firms to handle these laws, and those of larger firms. We will be making a change in relation to the probationary period for new employees and the application of unfair dismissal laws for larger firms. Firms of over 100 after the new laws come into operation the probationary period for a new employee will be lifted from three months to six months and we are looking at some ways in which the procedures in relation to unfair dismissal laws for the larger firms may in fact be handled. Now you ask me what would happen in relation to the case of a firm where the employees have a secret ballot and want to go on strike because they think somebody has been unlawfully, unfairly rather, dismissed. There's nothing in the unfair dismissal procedures to address that issue. That is not an issue relating to unfair dismissal, that's an issue relating to the right, depending on the circumstances of the industrial arrangement at that particular establishment, the right of people to go on strike. If you're arguing that somebody is exposed to that possibility, well they are, providing of course the strike action is lawful. If its not lawful then there could be consequences on the other side flowing from that. But that is obviously a calculation that an employer has to take into account. But my very strong view would be that if the changes are made, overwhelmingly when people are let go because of the unsatisfactory nature of their performance, then the possibility of the rest of the workforce getting together and voting in a secret ballot to go on strike is very, very slight indeed. And I can't emphasise enough that all of my mail on this says that the people who grumble almost as much as the small employers about the current unfair dismissal laws are the conscientious staff, who's morale is affected by the behaviour of a bad employee. And you all know, that if you have a workplace of a small number of people, of ten or fifteen people, you only need one person who has a destructive attitude towards their future and the future of their workmates to create a very unpleasant climate. I mean that was certainly my experience years ago before I went into politics. Its been my experience of talking to people since. And I think the likelihood of what you've specified happening is very remote indeed.
QUESTION :
Bob Phelps Prime Minister, from (inaudible). You might need our company. We're exterminators. The question I'd ask...
PRIME MINISTER:
Don't look at me.
QUESTION:
No I was thinking about election time actually. The question I ask, I haven't read it properly at the present moment, but this $4000 that you're putting up. Now what happens in the instance that the employer actually does win the case? Does the employee still get the $4000? And does the employer get some compensation?
PRIME MINISTER:
Well the $4000 would only be made available subject to a very strict, and bear in mind this is about, this is for unlawful terminations. This is where you sack somebody on the grounds of their race or their gender or because they're pregnant or because they belong to a union. Now that's quite separate from unfair dismissals. And it only applies to them and the way it would work is you'd have to first of all get a certificate from the commission that you had a proper case, in other words it wasn't vexatious and then you could get up to $4000. Then you'd have available the services of somebody you'd choose from a panel of lawyers, and then if you lost the case, the question of whether costs would be awarded against you and so forth would depend on the decision of the court. It's not something that we would, I mean that would be a matter for the court to decide. So that acts as a further break on vexatious - now this is designed to respond to I think is quite a legitimate issue raised by some that okay, we accept that the unfair dismissal laws are going to be changed, we think that's good. But if you do get a genuine case of unlawful termination and somebody has no resources to say well you can take your employer to court, the reality is that many people simply can't afford to do that. And this also would be subject to a fairly strict means test. So it wont be available to everybody.
QUESTION:
We're listening to the unions reacting very strongly to the programme you're putting forward and the claim of mistruths and lies on both sides. Are we going to get a definite response from the Government in terms of the this programme going ahead without a lot of striking and reaction that's going to be detrimental to the business world?
PRIME MINISTER:
I wouldn't like to predict how the unions will ultimately prosecute their opposition to what we're doing. The experience to date has been that they have tried to argue and advertise and advocate rather than to embark on industrial disputation and I think we all hope that that will continue, although I can't rule out the possibility of some industrial action. There is talk of a national day of protest in the middle of November. If it's just that and it doesn't extend into prolonged industrial action then that would be welcome. The Government will be introducing the detailed legislation at the end of October. It's a very big re-writing exercise because the legislation is based on the corporation's power overwhelmingly and not on the conciliation and arbitration power and that requires a very substantial rewriting of the Workplace Relations Act. And we have to take care to ensure that its constitutionally appropriate and properly uses that power and when the legislation is brought down, obviously there will be time for it to be debated in both Houses. And the hope would be, subject to the approval of both houses, to see the legislation passed before Christmas. And it would come into operation in the first half of next year. I don't think the distortions of what we're proposing to do are going to disappear once the legislation appears. As well as introducing the legislation when I've mentioned, its also our hope to be able to release what could be described as a very detailed explanatory memorandum about how the legislation operates and perhaps release that a little in advance of the introduction of the legislation, although depending on how the preparation of the bill goes, I can't be certain of that. The legislation has taken a while to get ready and some people are critical of that. Can I just say that it was never possible to prepare legislation like this in secret. You have to announce the outline of what you're going to do and then you take some time to get the legislation ready and we've had a lot of people working on it, and we have to get it right. Because if there are things that are in it that are wrong, we wont get any quarter from our political or industrial opponents. My guess is that once the legislation is enacted, and people realise that its not directed against workers and its not designed to bring about wholesale sackings of people, it's not designed to prevent people balancing work and family, it will not leave people worse off, in fact has the potential to leave people who work very hard even better off. I think once that happens in about a year's time people will look back on the trade union campaign and scratch their heads and say what was all that about. And realise how dishonest it was to run such a campaign. Its easy in a situation like this to frighten people with the negative. Its much harder to reassure people with the positive. It's the experience of legislation like this that matters. I've never forgotten the experience we had with the GST. And that first weekend when it was introduced and I wandered around Macquarie Shopping Centre in my electorate in Sydney and wondered, you know, what sort of reaction I was going to get, and sort of - well to start with people were fairly indifferent to it, which is good. Its nice for people to be indifferent to you on some occasions. And I was very, very reassured by that. And then of course as time went by, as you know, a lot of people looked back and said well, you know, that wasn't as bad as we expected. Now this is not as big a structural change to our society as the GST. I mean it is not extreme. It's significant. It will be very pro-productivity. It will make a big positive difference over time. But its easy to run a fear campaign about it, and until you've really had the experience of people working under it and knowing that its not going to hurt them, its going to be easy to maintain that campaign, no matter what we say and no matter what is in the legislation.
[ends]