Public Interest or Vested Interest

Opening Address

The Honourable Nick Greiner, M.P. Premier of New South Wales

I am delighted to be given the opportunity of opening your conference. The H R Nicholls Society has made an extremely important contribution to the debate on industrial relations which has taken place in Australia over the past four to five years. It has consistently and correctly argued that reform of the industrial relations system is essential to the improved performance of the Australian economy.

In the 1988 election campaign, and since coming to office, my government has consistently emphasised the importance of making substantial changes to the industrial relations system in this state. Such changes are urgently needed to boost productivity, to overcome excessive rigidity and centralisation in the conduct of industrial relations and to give greater recognition to the common interests of enterprise managers and their employees.

Our approach to improving the operation of the industrial relations system involves placing greater onus on management and employees and individual enterprises to make their own arrangements and to resolve their own differences with as little interference as possible from external tribunals, unions or employer organisations.

There is no doubt that the labour market and industrial relations have become the dominant issue of the 1990s and as my colleague, the Minister for Industrial Relations and Employment, Mr Fahey, recently noted:

The key issues of the 1990s for industrial relations will increasingly be 'productivity' and 'efficiency'.

Frederick Hilmer in his seminal work New Games, New Rules notes that:

'Productivity is, unsurprisingly not a national strength. In most cases, if one measures productivity by real output over real inputs, Australian workplaces are at best at parity with their overseas competitors and usually worse. This is true not only for labour but for capital productivity. Until both are encouraged to improve, why should we expect firms to compete successfully?'

He goes on to note that although most Australians seek an economic turnaround this will only occur when substantial changes take place within the workplace. I intend in my remarks to you this evening to outline those aspects of our proposed industrial relations legislation, shortly to be introduced into parliament, which will assist in improving the productivity and flexibility of individual enterprises and workplaces, and to indicate what my government has already achieved as regards these matters in the public sector.

When we were elected to office in 1988 we found the New South Wales Public Service had some very clear and fundamental problems.

There had been too much emphasis on policy and not enough on management. Too much emphasis on the political agenda and not enough on accountability, efficiency and individual performance.

The consequence of this was over staffing, inefficient work practices, excessive union power over lower grades, poor selection practices and inadequate training, research and development. We immediately set about implementing a program of corporatisation as a means of providing for better performance by the public sector in this state. A fundamental tenet of corporatisation is that the workforce of the relevant State Authority be responsible and flexible and efficient so that productivity and profitability increase.

With these principles in mind we created a senior executive service to isolate senior managers from the wage fixing system and to provide for agreed performance targets as an essential element in employment contracts. Further, the adoption of structural efficiency principles in public enterprises is designed to lead to a leaner, more responsible and flexible workforce, better morale and more efficient work practices.

Already the implementation of reforms has resulted in substantially improved performance in bodies such as Elcom and the Government Cleaning Service.

Elcom, a body which received Australian Business Magazine's 'Best Government Enterprise' award for 1989, has substantially improved its performance due to more flexible employment arrangements and incentives to employees. The result has been to turn around Elcom's $6 billion debt into a profit, the benefits of which have been passed on to the people of New South Wales by way of reductions in the price of off-peak power and reductions in commercial users' subsidisation of household users.

The signing of an agreement by the Government Cleaning Service with the Federated Miscellaneous Workers Union in June 1989 will result, when fully implemented by May 1991, in dramatic increases in productivity and a substantial reduction in cleaning costs per year. It is estimated that working hours at each location will be reduced by 40-45% and that overall cleaning costs will be reduced by $70 million per year as the result of this agreement.

The achievements which have taken place in the public sector have only come about as a result of the government sweeping away anachronisms and restrictive practices which have prevented efficiency, and increased productivity.

The reform of industrial relations in New South Wales is long overdue. That is why on attaining government we appointed Professor John Niland to produce a Green Paper on Industrial Relations Reform.

The Niland Green Paper stated that:

'what is remarkable is not that the New South Wales industrial relations system is now undergoing significant review, but that it could have taken as long as it has to reach this point'.

Prior to the 1988 election we announced that in government we would encourage an industrial relations system which places the onus on management and workers to make their own arrangements; a system which would allow them to resolve their own differences at an enterprise level.

We believe that those principles and objectives will be met by the reform legislation.

The key issue for Australia, and this is the point which is being made by organisations such as the H R Nicholls Society and people like Fred Hilmer, is that we don't want to become a third world country by paying third world wage rates, but, at the same time, if our labour costs growth remains above that of our overseas competitors the exchange rate will have to fall to maintain competitiveness. High wages growth that is not backed by productivity growth only results in inflation.

The simple fact is that the current centralised wage fixing system, which operates in this state and in Australia generally, has failed. Wage increases have consistently been above the OECD average since the early 1970s and Australia's productivity performance has been poor by international standards and in fact has fallen below the OECD average since the mid-1980's. Therefore our objective has to be to introduce measures which encourage and reward higher productivity but which, at the same time, contain wages growth.

Enterprise agreements legislation will offer the opportunity for individual workplaces to shift totally or partially from the award based arbitration system.

This does not mean that the government is declaring a free-for-all on employment conditions, or on unions. The new legislation will instead mean that genuine initiatives to bring about a more productive work environment will not be hampered by the constraints of the award system.

The enterprise agreement provisions will include a number of checks and balances to ensure that such agreements will be a genuine alternative to the award stream, not a second rate substitute. These include the requirements:

• that all agreements are free from duress and entered into voluntarily; Where employers or unions wish to remain within the award stream, they are entitled to do so;
• that all agreements must provide wage and employment conditions at least equivalent to the minimum prescribed in the legislation;
• that all new agreements containing components in pay or conditions which exceed current wage fixation principles must be scrutinised by a designated member of the commission to ensure that the agreement provides productivity or efficiency benefits which warrant the increase in employment conditions.

Enterprise agreements are likely to occur where there are mutual benefits to employers and employees. For example, where enterprises face severe competitive pressures and are being held back by the centralised system, they will be able to negotiate substantial efficiency improvements in terms of better training, career paths, job security or wages. Such agreements will also be attractive to situations where plants require a major restructuring to continue to compete in markets which have significantly altered their complexion, or where new contracts have been entered into that require new work practices.

One of the major deficiencies in Australian industrial relations is that there has been too much reliance upon third parties and on the ill-defined notion of the public interest. These deficiencies have placed too much emphasis on the resolution of industrial conflict and not enough emphasis on encouraging parties to take responsibility for developing mutual benefits and ongoing commitments, and thus furthering the national interest. This is the objective of the enterprise focus of arrangements.

It is pleasing to note that the Federal Liberal Party also sees the benefit in enterprise agreements. It recognises, as Senator Chaney noted recently, that industrial relations policy 'is first and foremost aimed at improving productivity.' This can be the only rationale for industrial relations policy in the 1990s if Australia is not to be led down Paul Keating's Argentinian road. The reform program that we are implementing comes at a critical time not only for New South Wales but for the whole of Australia. We are committed to the notion that good management and better results for people are entirely consistent with each other. This is what the reforms in the public sector are all about.

The overhaul of the industrial relations systems is about creating an environment where incentive, opportunity, and efficiency result not only in a substantial improvement in economic performance but in more harmonious relationships between employers and employees. The result is that New South Wales and Australia are the winners.