Speech delivered in 1986.
Last week at the ACTU Executive the Treasurer, Paul Keating, commented that the Accord “is more a state of mind than a formal document”. He then got down to business and delivered an assessment of the economy.
I understand that the Executive expressed dissatisfaction which many of the current economic trends and the government’s handling of them. Chief among the criticisms were the failure of the government in the industry development area and the current high interest rates which, among other things, is having a deleterious effect on the housing industry.
Last week’s event also highlights a number of things relevant to this conference.
First, I believe that Keating is right to identify the Accord as symbolic of a state of attitudes concerning the relationship between the political and industrial wings of the Labor movement.
In other words the Accord cannot be looked at simply as a doctrine, a set of prescriptions concerning economic, the social wage and other policies.
One of the major reasons for the Accord’s success is that it has been able to fit in with the traditions and ethos of the labour movement.
Remember, last week’s Executive meeting contains a disparate range of members: getting Bill Kelty, John Halfpenny, John MacBean, John Maynes and so on to agree to anything substantial, let alone something as detailed as the Accord, is some achievement.
It can be explained with reference to the Accord influencing and being a part of our traditions as well as our recent experience.
The second observation is that the Accord is not only a state of mind.
The Accord sets down policies in the areas of:
- Wages, including the concept of the social wage.
- Taxation and government expenditure.
and supportive policies covering:
- Industrial relations legislation;
- Industry development;
- Social security;
- Occupational health and safety;
- Health; and,
- Australian Government Employment.
Anyone who has read the Accord document cannot dismiss the policy prescriptions in these areas as vague and fluffy.
Specific commitments are demanded of government. And a means of judging the success of the Accord – primarily unemployment reduction and maintenance and improvement in living standards – is also contained within it.
As Paul Keating was reminded last week, the Accord is a compass for the union movement in the achievement of our primary objectives.
When the government has been found wanting in an area, we have not been short on criticising this.
Much of the legitimacy of our criticism is that a particular policy or action or lack of policy or inaction, as the case may be, does not meet the standards and appropriate strategy set down in the Accord.
The third point worth highlighting about Keating’s meeting with the ACTU last week is that it is significant in the context of the regular meetings which take place between the union movement and the Federal government in the economic, taxation, industry policy’s and other areas.
The union movement through the Accord is demonstrating our intention to be the authors or part-authors of events, rather than ineffective critics or victims of events.
This involvement of the union movement in the affairs of the nation has become the official ideology of the government.
As the Prime Minister, Mr Hawke, put the position shortly before his term began as Prime Minister:
I do not suggest Labor has all the answers and this, for the simple reason that we are dealing with matters in which the central ingredient is that imperfectible element, human nature. But this very fact of itself is useful in setting the right directions.
It seems to me there are normally three conditions likely to produce sensible attitudes in individuals in their relations with others – first, as much knowledge as possible of the context of their relations; second, an opportunity for involvement in decisions affecting that context and the relationship; and third, a perception that there is a consistency or compatibility between the rules according to which the parties to the relationship conduct themselves.
Believing this to be true and that groups will tend to act according to the same impulses and responses as the individuals in them I have attempted to ensure that these considerations provide the conceptual underpinning for the approach to industrial relations of the next Labor government.
In the more prosaic language of the Accord:
The parties to this Accord are aware of the difficulties which abound in finding solutions which meet the social and economic goals to which both are committed. We state this difficulty not by way of apology but to indicate the understanding we share of the difficult task ahead, and the consequential importance of the shared commitment to facing those difficulties through humane policies based on consensus.
So, as I think this discussion demonstrates, the Accord has become part of the ethos of the mainstream labour movement, its policies are a major guide for ACTU strategy and priorities with the Federal government and the consensus approach of government where the ACTU and unions have been involved in many important decisions taken by government have led the union movement to be in a much stronger and influential position than ever before in our history. How fragile this position may be is an issue discussed later in this paper.
I also mentioned that the Accord not only recommends certain actions, it also sets down certain outcomes to be expected as a result of the policy approach of the Accords.
These are chiefly (i) maintenance and improvement in the standard of living of Australian workers and Australians generally; and (ii) a systematic reduction in unemployment.
I believe that the first aim has so far substantially been achieved. Though the possibility of a decline in the overall standard of living is a real problem in 1986 and beyond.
The second aim has not been achieved. Improvements in the economy and employment growth have certainly been exceptional, particularly in the light of the final years of the Fraser government. But the objectives set down in the Accord are awaiting achievement “over time”, as the saying goes. I will deal with this question in a moment.
In comparison with labour movements in other western countries, the Australian unions have emerged stronger in the 1980s than the decade before and able, by and large, to protect the standard of living of the average worker. This is a record unmatched by the union movement in any other major western country.
Look at the evidence. In the United States the labor movement is stagnating, as measured by the percentage of the workforce unionised.
Only 18% of the workforce is unionised. The Reagan administration and conservative state governments are legalising unfair work practices, which are destroying working conditions won in the era of the New Deal.
Similarly in the United Kingdom, where Prime Minister Margaret Thatcher has successfully reduced the power of the union movement as savagely demonstrated in the course of the British miners dispute.
Likewise throughout Europe and Japan conservative governments are insistent on reducing the influence of the labour movement and the bargaining power of unions.
The defeats of our brothers and sisters in other parts of the world are cautionary experiences. This is particularly so given the emergence of a confident, aggressive radical right within most of the conservative parties around the world which champion deregulation and believe in cracking the power of the union movement. All of this underlines the importance of having our priorities right and adopting the best strategy for the times.
In Australia, over the course of the last three years there has been established:-
The reintroduction of a centralised wage system
- In September 1983, a 4.3% wage increase
- Followed in September 1984 of a 4.1% wage increase.
- Compensation for the discounting of the CPI due to Medicare in the form of an average $7.60 tax cut in November 1984
- In April 1985 there was a further 2.6% wage increase
- The last increase was of the order of 3.8%.
And as we are aware, further adjustments will take place this year and 1987 in accordance with the existing wage fixation principles and what is known as the Accord Mark II, namely the agreement between the ACTU and the government last September concerning superannuation, productivity, discounting and taxation.
The point to emphasise here is this: There have been regular increases in wages to match cost of living rises together with the other policies implemented by the government. The Australian union movement on the evidence of recent Australian experience and international comparisons is not doing too badly.
The recognition of – or belief in – this achievement is another reason underpinning the overwhelming support for the Accord in the labour movement.
Also important in this context is the belief that there is no alternative strategy which could achieve similar results.
It is the second area of the Accord’s aims that I would now like to assess.
The whole rationale for the Accord as set out in its opening statements is to win the battle against unemployment.
The document comments:
The nation is thus caught in an unemployment trap, which if past trends continue, will grow worse as inflation tends to increase to even higher levels at any given level of unemployment.
It is agreed that this situation is one of paramount concern given the prime importance placed by both parties on the objective of full employment.
The continuance of widespread unemployment is abhorrent, and economic policies which rely on unemployment to control inflation are completely rejected.
Rejecting the ineffective monetarist approach of the Fraser government the Accord states:
The parties have also agreed that no new policy approach, however radical and innovative will be capable of meeting, in the short-term, the parties’ prime objective of full employment. Overseas and domestic factors continue to produce the sobering conclusion that while an alternative policy approach would enable a sustained recovery to occur and would reduce the plight of the unemployed no rapid solutions are to be found for a return to full employment. Continued application of policies such as set out in this document would enable attainment of currently unattainable objectives.
In the last three years there has been a spectacular turn around on the economic and employment fronts.
First, there were growth rates of an average 5% per annum over this period, in contrast to the negative GDP growth in the last quarter of 1982.
Second, employment and increased participation in the labour market has grown significantly.
In the year before the Accord there was a reduction in employment with 190,000 jobs lost.
Over the last three years more than half a million new jobs have been created.
By any standards this is a tremendous turnaround.
Unemployment levels, however, remain unacceptably high.
Although there has been a drop in unemployment from 10.4% in early 1983 to about 8.2% today, and this in the context of increased participation in the labour market, it is nonetheless the case that there are hundreds of thousands of Australians without work and seeking it.
With last month’s release of figures that showed a slight rise in unemployment, there is a growing unease in the labour movement as to whether the unemployment trend downwards has stopped and the reverse is slowly happening.
Nonetheless the achievement in the employment area was a major point in favour of the Accord emphasised in the debates at the last ACTU Congress.
That Congress reaffirmed the original Accord and the Accord Mark II, the Old and New Testaments governing our lives in the trade union movement.
Congress, in the Wages and Salaries Report, declared that:
The Prices and Incomes Accord is to be seen as a rational means of continuing the current economic recovery, and establishing the basis for certainty and stability in the recovery facilitating the objectives of the Accord, together with
a) the generation of increased growth and employment; and
b) the lowering of inflation.
The policy also stated
Congress recognises the ongoing potential in a prices and incomes policy approach to further create jobs and maintain living standards through a wages – prices – incomes package, taxation reform, increased financial support for the public sector, improvements in unemployment and other social welfare benefits and an economic policy designed to resuscitate and stimulate Australian industry.
The questions to be asked in 1986 and beyond are is this possible? And what is to be done?
First of all it is worth considering some of the current problems affecting the economy:
The balance of payments situation is the most worrying of recent trends.
This has been the trend of the last twelve months, with the decline in the value of the Australian dollar, the increased cost of imports and the lack of export growth.
Indeed with the recent dramatic reduction in the price of oil, the cost of importing imports will decline and further impact on the Australian manufacturing industry.
It is also likely that the value of Australia’s coal exports and the total amount exported will also decline.
In the medium term and in long run Australia’s export performance and ability to find import replacement will determine the level of domestic economic activity and hence future employment levels.
These problems have highlighted the failure of the Australian government’s overall approach to industry development.
The second major economic problem is Australia’s inflation level, which is well above our major trading partners. This is relevant to the chances of Australian industry effectively competing for overseas markets.
The third major factor is the high level of interest rates, which is having a dramatic effect on the housing industry and the ability of businesses generally to expand and thereby increase employment. High interest rates are certainly depressing new investments by Australian industry.
This list by no means exhausts the number of problems currently facing the Australian economy; but they do highlight the need for the Accord’s emphasis on industry policy.
It is significant that the Agreement concluded between the government and the ACTU last year contained the following statement:
Industry Development. The ACTU and the government recognise that maintaining high levels of growth on a continuous basis requires policies which will enable industries to increase their market shares both at home and abroad. Such policies should focus on import replacement and exports in the capital goods sector.
I believe that throughout 1986 and beyond the battle for import replacement and growth in exports will be fought harder by the union movement than ever before. To do otherwise is to invite further economic decline and unemployment.
Accordingly, I believe that future union strategy related to the Accord must be tied to employment.
The following options are put forward:
- Industrial Supplies Offices
There should be more support by governments for Industrial Supplies Offices (which have been established by every State government but Tasmania) and the Commonwealth should establish its own ISO.
ISOs have been set up to assess the capacity of Australian industry to manufacture local content, to determine what imports could be replaced by Australian products and services and to co-ordinate activity in these areas.
The Commonwealth has a major responsibility to establish a national data base in this area and complement the work in the various states.
Various governments should be reassessing their own purchases and deliberately aim to increase Australian content through an appropriate preference policy.
Of particular importance here is the need to coordinate the purchases of large statutory authorities such as the railways and the electricity supply industries.
This requires Commonwealth initiative and co-ordination to maximise local content.
2. Unions need to take action to force employers to maximise local content.
Recently in the Hunter Valley bans were placed on the erection of coal shovel equipment by the company Harnischfeger which eventually led to that company, the MTIA, unions, the Coal Association and the NSW and Federal governments to agree to establish a Local Content in Mining Equipment Working Party which is expected to report in a few months time. I am confident that worthwhile results will come from this Working Party.
This dispute highlights the way that unions by taking selective industrial action can assist the position of the heavy engineering industry and manufacturing industry generally.
3. With the likely result of a 3% productivity improvement in the form of superannuation sometime this year, there will be a significant growth in the investments of superannuation funds.
The union movement has been critical of the problems associated with the lack of investment in the economy and industry generally. This is related to the investment approaches of superannuation funds which together are by far and away the largest investors on the various stock exchanges.
I believe that consideration should be given to requiring a percentage of superannuation funds, perhaps 5% of investments, to be directed to manufacturing industry and new industries possibly through the AIDC [Australian Industrial Development Corporation] or some other body.
This proposal requires further investigation, however it is the basis for a strategy aimed at lifting investment activity in manufacturing industry.
I understand that in Michigan in the USA, this approach has been adopted by the Democratic administration in that State.
No doubt this proposal will be criticised as drawing investments away from “safe” investments and thereby imprudent.
The principle I am enunciating, however, is that unless investments are placed in the economy of this country, economic growth occurs and new industries are established, the value of traditional areas of investment are devalued.
Accordingly the prudent approach may be to take the action I am proposing.
4. Action should be taken by the Federal Government to selectively introduce quotas in order to minimise problems with Australia’s balance of payments.
One of the flaws in the current policy approach of the Federal government is that it expects market forces alone to work wonders with the economy. Experience does not bear this out.
Accordingly the decline in the Australian dollar which theoretically improved the position of manufacturing industry to export has not, however, taken place.
This is because the capacity of manufacturers to export is related to domestic economic policy, related to the size and stability of the local market.
Experience around the world demonstrates this. The strong exporters have a reliable and stable domestic market.
This should be the thinking behind industry policy in this country. It is noticeably absent from the thinking of the IAC [Industry Assistance Commission] and other agencies of the free marketeers
5. The union movement should also lobby the government to tie import licenses for manufactured equipment and new technologies to commitments about local content.
This is relevant to what I have said earlier about the ISOs and the union movement taking industrial action to achieve our aims.
6. There should be more effective expenditure of monies in the employment and training areas.
I am not a fan of the Community Employment Program (CEP) which may have been a good idea in 1984 but is now an inadequate means of expending the training and employment dollar.
Which is not to say the CEP should be abandoned. It is to argue for it being scaled down in favour of other programmes in the industry development area where the investment is likely to yield more substantial results.
Further I believe that the CEP needs to be more effectively assessed with proper evaluation of each programme that is funded.
7. There is a need for a package of assistance for the housing industry to be developed.
Unfortunately the Treasurer and the Australian Bankers Association are right in saying that fewer people are depositing their moneys with savings banks and coupled with the ceiling on home interest rates, there are substantially fewer funds available for housing loans.
There seem to me to be two options in this area.
One is to deregulate housing interest rates associated with a) a means tested new home owners scheme and b) limited tax deductibility for interest repayments.
The other is to do as is intended, I understand, by the NSW Housing Minister to establish housing bonds to attract more funds for housing loans.
Both of those options have their problems but one of them needs to be adopted in order to provide funds for home loan purposes.
Finally, I believe that the trade union movement should play a major role in galvanising public opinion for the positions outlined in this paper.
The future of the Accord is to build on our achievements, learn from our experiences, and adopt the best possible strategy approach.
The recommendations here focus on things that are do-able now by ourselves, for ourselves, given our present circumstances, unaided by luck or external salvation.
In this period, a lot of what was said by the union leaders, myself included, concentrated on what might be good for the manufacturing and construction industries, broadly defined.
The world was about to rapidly change, with the rise of China which hollowed out basic tooling manufacturing in western countries, a multiplicity of technology changes, and the shift from low-value ‘banging the metal’ manufacturing, with large workshops of employees, to sophisticated advanced engineering, with smaller numbers of highly skilled workers. Much of the metal banging industry would shift to offshore locations.
Paul Keating at the end of the first decade of the twenty first century, said that Australia and other western countries thereby imported lower inflation to our shores. (I remember him saying as much on the ‘Lateline’ programme one night on ABC television.). In all in all, low value-added goods, from China, Vietnam and elsewhere, were mass produced at a fraction of the cost of goods produced domestically, in Australia and nearly everywhere else in the west, thereby reducing costs for importers, product assemblers, and for consumers.
The purpose of my speech to an audience I cannot recall (my notes do not say who was the audience) was typical of what I would say at this time. I developed an argument that the unions in partnership with government were changing Australia for the better.
Ironically, many of the wider changes, the transformation of the Australian economy, the introduction of various safety nets, meant that as the world became more civilised in Australia, the role and appeal of unions declined.
Jim McClelland (1915-1999), ALP Senator from NSW, 1971-1978, raconteur, judge, for solicitor, ex-rail worker, ex-Trot, fierce anti-communist and long-time friend of Laurie Short, controversially suggested that the decline of organised labour was emblematic of its long-term success. The world is accordingly now a better place. There is obvious truth in that argument, although the degree to which it is true is debatable.
Indeed, it was strongly contested a few days later after McClelland wrote his piece by Peter Sams in an article in the Sydney Morning Herald.
In retrospect, the 1980s were a period of transition for the country — from wage explosions, economic decline, and sharp rises in unemployment at the beginning of the decade to a mostly stable environment, a more economically literate population (including politicians and union leaders) who were more alert to problems and solutions in ensuring that the inflation genie was put back into the bottle and the worse aspects of the old industrial relations regime were discarded, with flexibility with a Labor heart.
Getting there would be a challenge however, with excessive inflation and unemployment cursing the beginning of the 1990s.