Australian Labour and Employment Relations Association National Conference 2011

Speech
  • Minister for Tertiary Education, Skills, Jobs and Workplace Relations
  • Leader of the Government in the Senate

Acknowledgments

I acknowledge the traditional owners and custodians of this land— the Wadjuk people of the Nyungar nation — and pay my respects to their elders, past and present.

I welcome the Australian Labour and Employment Relations Association as a new body in the industrial relations policy scene in Australia, and I expect it to build on the many fine achievements of its preceding body, the Industrial Relations Association of Australia.

As a Labor minister and a proud Western Australian making a speech in Fremantle, I can’t let the 7th of October pass without mentioning that today is the 70th anniversary of the day that John Curtin, the former member for Fremantle, became Prime Minister of Australia.

John Curtin was one of our greatest national leaders.  He led Australia through the Second World War.

He was the federal member for this seat of Fremantle from 1928 to 1931 and (again) from 1934 to his death in July 1945, just a few weeks before World War II came to an end.

Curtin not only commanded a nationwide war effort, his government put in place the measures for post-war reconstruction that fostered a shared prosperity that has made Australia what it is.

Curtin was intent on ensuring that Australia emerge from the war free from the unemployment problems of the 1930s. He aimed for a policy of work for all who wanted it, arguing this could be achieved in peacetime as it had in war.

This, coupled with Curtin's legacy of uniform national taxation and expanded social welfare services, embodies the principles of fairness, shared prosperity and a genuine safety net for the benefit of all Australians.

These are the very same principles that underpin Labor’s workplace relations reforms.

Since coming into office our Government has worked with determination to reshape and reform the industrial relations landscape in this country.

Our challenge remains continuing to support and create prosperity in which all Australians can share.  We need to invest in training our workforce and build a productive, competitive economy that delivers better paid more highly skilled work for all Australians.

Yesterday the Government sought the views of industry and union leaders at the Future Jobs Forum.

We discussed the very real challenges we face in our economy. The challenges which flow from the patchwork nature of our economy. The reality that while some sectors are experiencing record growth, others are struggling under the weight of the high Australian dollar.

There was a shared understanding that these are challenges that we must confront together.

That we need to move beyond the shallow, point scoring political debate to work in unison to create sustainable jobs in sustainable and competitive industries.

Lifting productivity growth and improving labour productivity are essential elements to meet this challenge.

The productivity challenge

I’m sure you are aware that we’re in the middle of a national debate about productivity and why it appears, on paper at least, to be stagnating.

Labour productivity grew at only 1.5 per cent per annum over the 10 years to 2009–10, compared with 2.1 per cent over the previous decade.

At present, it appears to jump around from quarter to quarter depending on the measures used and short-term impacts like droughts, floods and cyclones

There are lots of factors at play of course—one of which is the statistical effect of major increases in resources sector investment.

Another is the legacy of neglect we inherited in hard infrastructure – our roads, rail, ports and telecommunications network.

It is true that we need to address labour productivity because it will strengthen our economy.

What is not true is that productivity decline is the result of the introduction of the Fair Work Act.

There has been no shortage of Opposition members, past and present, who have justified their calls to return to WorkChoices by blaming the FW Act for declining productivity.

But for all their ideological statements, there is precious little substance to support any of their claims.

The reality is that long-term structural improvements in productivity require long-term reforms.

I understand the importance that many prominent employer groups place in continuing to make our workplaces more flexible.

Flexibility is the Government’s objective too. Flexibility that comes with fairness.

While the Government has indicated its willingness to review the practical workings of the Fair Work Act, to refine its processes and operation, to have an evidence based discussion on improving the system ensuring it is working to its full potential - the Gillard Government will not resile from the Act’s essential elements.

We believe that the Fair Work system gets the balance right between workplace flexibility and workplace rights – that is the fairness the Australian people demand.

A return to some of the most extreme elements of WorkChoices would put hard working Australians and their take home pay at risk. It would also do nothing to boost productivity.

Putting the squeeze on the Australian workforce is not the answer.

The Governor of the Reserve Bank, Glenn Stevens, recently had this to say, and I quote:

The desire for more productivity is not a call for working harder. Australians already work pretty long hours by international standards. Productivity per hour, which is what counts, is not improved by adding more hours, but by finding ways of making the hours that are already being contributed more effective.[1]

He is absolutely right.

So, how do we make the hours hard-working Australians already put-in have greater economic impact?

Productivity and the knowledge economy

The first answer is by investing in education and improving skill levels.

Greater effort on education and skills development is one of the best ways to increase productivity over the long term. That’s what our education revolution is all about.

I won’t take you through the full details of the Government’s substantial investments in education, but I do ask you to imagine for a moment the economic potential of the changes we are making.

Early childhood education, kindergartens, schools, TAFEs and universities have all had major funding increases since 2007, matched by major regulatory reforms to improve their quality and flexibility.

Taken as a whole, these funding increases and regulatory changes comprise the most important economic and social reforms of recent decades.

In higher education our goal is to increase the proportion of young Australians with university qualifications to 40 per cent by 2025.

In apprenticeship training, the Government is putting great effort and resources into improving Australia’s trade training system, including modernising our all-important apprenticeship system.

As a result of our investment Australia’s apprenticeship and traineeship numbers are up significantly in recent years despite the Global Financial Crisis—from 410,000 in September 2006 to around 448,000 in September 2010, the highest level ever recorded.

And this includes a 15.7 per cent increase in commencements last year alone.

These are transformative changes with immediate economic benefit and with even greater economic potential.

Through modelling conducted for my department, Econtech has estimated that full implementation of the Government’s policy agenda across education, training and participation could deliver an average increase in GDP of:

  • up to 4.1 per cent per annum over the period 2010 to 2024; and,
  • up to 8.6 per cent per annum over the period 2025 to 2040.

In other words, investing in skills and building a better skills system will pay a very significant economic dividend.

But we also have to address education and training with greater vigour because it is a social need that addresses wider concerns. It is vital to fulfilling our nation’s promise to offer a decent and secure life to every citizen.

Productivity and the FWA

The second answer to our productivity needs is to properly and fully utilise the framework of the Fair Work Act.

Productivity growth is a key objective of the Fair Work Act and a prime consideration in all of the Act’s major sections, including modern awards, bargaining, minimum wages and transfer of business.

At the heart of the Act is collective agreement-making at the enterprise level achieved by good faith bargaining. This is the best way to promote greater workplace flexibility and deliver higher productivity and higher growth in skilled jobs over the longer term.

The bargaining and agreement making frameworks of the Fair Work Act is designed to encourage employees and employers to negotiate enterprise agreements that deliver productivity benefits for businesses, improved skills and better pay for employees.

Take its major provisions. Under the Act:

  • employers and employees can choose to make enterprise agreements that are specifically tailored to the skills and productivity needs of their particular workplace;
  • they are free to agree on the content of their agreements, as long as it is about permitted matters and their agreement does not contain any unlawful terms;
  • they can seek productivity improvements in return for any increase in entitlements; and
  • collective agreements allow employees and employers to negotiate working arrangements at the enterprise level that tie wage increases to improvements in skill and productivity.

And this is what is happening on the ground. Let’s look at the results from the most recent Trends in Enterprise Bargaining Report.

  • Approximately 95 per cent of Fair Work agreements approved provide for flexible engagement and almost 72 per cent of agreements provide for flexible working hours.
  • Almost 90 per cent of agreements approved under the Fair Work Act incorporate training provisions that deal with the more effective use of skills.
  • 40.3 per cent of agreements approved under the Fair Work Act, covering 30.2 per cent of employees, contain a specific clause outlining a commitment to raising productivity.
  • Over 60 per cent of current Fair Work Act agreements contain the model flexibility clause or a term with greater flexibility than the model clause.

On this evidence the system is working. There are more than 25,000 enterprise agreements covering 2.6 million Australian employees.

The FW Act requires this level of commitment to flexibility – what we need to determine is whether employers and employees are taking up the opportunities the Act provides and if not, why not.

Despite these record levels of bargaining there is still moderate and contained wages growth which in turn has a moderating effect on inflation. This is especially important in a growing economy.

The average annual wage increases in the private sector in the March 2011 quarter remained constant at 3.8 per cent.

The variability of this moderate wages growth across industry sectors confirms that the new workplace relations system provides necessary flexibilities.

In other words, wage outcomes are linked to industry circumstances. While some areas of the labour market are experiencing higher than average wages growth, there is no evidence of wages pressure spreading to other parts of the economy.

Despite a few high profile and, in the case of Qantas, increasingly bitter disputes there has in fact been a continuation of the long term downward trend in industrial disputation.

The industrial dispute rate in quarterly terms over the past ten years (June quarter 2001 to June quarter 2011) has trended downwards and currently stands at 6.5 working days lost per thousand employees for the June quarter 2011.

While the figure is higher than recent quarters, it remains below the most recent peak of 9.1 working days lost per thousand employees in the June quarter 2008 which was well before the Fair Work Act commenced.

The increase in the quarterly rate of industrial disputes is in line with an increased number of expiring agreements in the March quarter 2011 where 3212 agreements expired compared with an average of 1765 expiring agreements each quarter over the last three years.

Most employers and employees appear to be getting on with the business of bargaining under the Fair Work Act.

I am interested in understanding the experiences of both employers and employees in the bargaining framework, especially the issues surrounding good faith bargaining. This is one of the matters that I want the Fair Work Act review process to explore.

In summary, the Fair Work Act has produced:

  • a streamlined Awards system
  • moderate and fair wages growth
  • continued job growth and low levels of unemployment
  • record numbers of agreements

The complaints of its critics often relate not to the Act itself but to other circumstances, such as, the uneven nature of economic growth and the patchwork economy they are creating.

Looking to the future

Ensuring that the Fair Work Act is implemented, as intended, with its focus on flexibility, improved productivity and the effective use of skills, is a crucial part of the Government’s workplace relations agenda.

But there are other important workplace relations issues too, which are currently progressing, and which have major implications for productivity and workplace justice.

These include:

  • bedding down Paid Parental Leave;
  • passing new legislation to protect employee entitlements;
  • the outcome of the current pay equity case that is testing the new and enhanced equal remuneration provisions of the FW Act; and,
  • the harmonisation of Australia’s occupational health and safety laws and regulations.

I want to make a few comments on the national reform of occupational health and safety (OHS) laws.

Over the past three years the Commonwealth has worked with the states and territories, business groups and unions to develop the new legislative framework. It will replace nine [9] separate pieces of legislation and more than 400 OHS regulations and codes of practice currently in operation across Australia.

This is a major regulatory reform, with significant potential to improve efficiency and productivity.

A recent regulatory impact analysis estimates that haromonised OHS laws will add around $2 billion per annum to productivity and an extra $250 million per annum in national benefits derived from reducing red tape and improving safety standards for workers.

It is very disappointing that the Western Australian and Victorian Governments appear to be moving away from their earlier commitment to meet the COAG deadline of 1 January 2012.

The regulatory analysis shows that over 60 per cent of the reforms will involve no cost or minimal cost for both jurisdictions.

The harmonised laws will actually improve upon the legislation that currently exists in both jurisdictions, including enhanced rights of workers to cease unsafe work and a best-practice system of licensing for high-risk asbestos removal work.

Ironically, the OHS regulators in both states have endorsed the model laws but their Ministers are waivering.

The Gillard Government considers that this reform needs to be put above politics for the benefit of the community, the safety of workers and the strength of the economy.

Every week of delay represents an opportunity cost of $43 million.

The achievement of this reform will be a significant win for all stakeholders as well as a victory for common sense.

Conclusion

Since coming into office we have worked with determination to reshape the industrial relations landscape in this country.

  • We have introduced the Fair Work Act to balance fairness and flexibility —the most significant reform of workplace laws in this country in more than 100 years.
  • We have delivered what our predecessors failed to deliver - a single, national system for around 96 per cent of the private sector.
  • Almost 4000 complex, outdated awards have been consolidated into 122 modern instruments.
  • And we now have more than 25,000 enterprise agreements covering almost 2.6 million Australia employees while maintaining a long term downward trend in industrial disputation.

Our investment in education and skills, as well as our commitment to promoting skills and productivity in agreements made under the Fair Work Act is stronger than ever.

The clear challenge is for industry and unions to now work together with us to ensure that the economic and social gains that are possible under the Fair Work Act are fully realised.

This requires an understanding that productivity growth, to be sustainable and lasting, cannot be achieved by following the “low road to reform” – by making jobs less secure or by cutting employee wages and conditions or by legislative quick fixes.

Let’s find better ways of meeting the unique needs of individual workplaces and employers, of creating more flexible and innovative working arrangements and productivity gains through enterprise agreements.

The challenge to you all is to move beyond the obsession with quick legislative fixes.

As Industrial Relations professionals, I look to you to fully develop and realise the economic and social potential of the Fair Work system.

Thank you.

[Ends]

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