Published as ‘Industrial Relations Policy’, in Troy Bramston, editor, The Whitlam Legacy, Federation Press, Annandale, 2013, pp. 223-234.
One of the surprises of Australian political history is that a government derided, traduced, and trounced in a smashing electoral defeat has over the passage of time come to be regarded as more substantial and worthy. A just account of the Whitlam government (1972-1975), however, requires acknowledgement of both certain grandeur and certain incompetence.
Two general points stand out. First, the inspiration was the thing. The Whitlam government motivated Labor people like no federal government before or since. That government is in extraordinary contrast to today’s era of ultra-cautious politicians who act as if ideas were long ago frightened out of them. And, second, that the best was yet to come.
The origin of some of the important successes in the Hawke-Keating period may be traced to the Whitlam era. This is nowhere better illustrated than in the field of industrial relations. At one level, the Whitlam government failed spectacularly: inflation and wages policy effectively were out of control. Yet viewed in an international context, the government was not alone in finding it hard to rein-in the bucking bull of the oil shocks of the early 1970s. The lessons of this period were incorporated into the labour movement’s approach to governing when the Australian Labor Party (“ALP”) was returned to office.
Five important areas in which the Whitlam government had long lasting impacts were:
1. Constitutional-related Powers
The government laid the basis for extending the Commonwealth’s industrial relations jurisdiction through relying on international treaties and the corporations power of the Australian Constitution. For example, the International Labour Organisation (ILO) Convention 111 dealing with unfair discrimination was ratified. Gough Whitlam had long argued that government should extend its legislative competence by implementing conventions and treaties. As to the use of the corporations power under the Constitution concerning industrial relations, Whitlam canvassed the matter in this way in 1972:
…the applicability of this corporations power in the industrial sphere has, of course, yet to be tested. Nevertheless, it would appear probable that the Commonwealth could establish a system of registration of voluntary industrial agreements not simply on the basis of the conciliation and arbitration provision in the Constitution, but on the basis of the corporations power. [In the Concrete Pipes Case in the High Court] could lie the seeds of a new dominance in our industrial affairs of a co-operative rather than an adversarial spirit… (Whitlam, 1972).
This turned out to be prophetic, even though it was the Howard government which was to use the corporations power to full effect in the Workplace Relations Act [Work Choices]. Utilisation of the corporations power continued in the reforming Rudd-Gillard industrial legislation, the Fair Work Act.
Occupational health and safety became a federal issue, even if major, comprehensive legislation only come through in the 1980s. Some argue that the wave of administrative and legislative change in the 1980s occurred due to the influences of industrial, radical and women’s-movement campaigns in creating a climate in which the issue of workers’ health and the safety of their place of work could be favourably raised (Pearse and Refshuage, 1987). More important were the Woodhouse report on Compensation and Rehabilitation in Australia: Report of the National Committee of Inquiry (1974) suggesting a national system to prevent accidents and compensate the injured as well as the influence of the United Kingdom enquiry into health and safety law chaired by Lord Robens (Browne, 1973).
Right from the start, the principle of equal pay for work of equal value was pushed hard; in its first days, the new government re-opened the Australian Council of Trade Unions (ACTU) initiated equal pay case pending before the Commonwealth Conciliation and Arbitration Commission (“the Commission”). The claim was upheld there. The principle was further pursued on the basis, for example, that there has been gendered undervaluation of work in female-dominated industries and occupations.
4. Industry Protection
Through sweeping tariff cuts, the government began the dismantling of the protectionist compact, beginning the opening of the Australian economy which accelerated in the Hawke and Keating periods a decade later, and continued, to some extent, in the Rudd-Gillard administrations. Gough Whitlam, as he makes clear in his memoirs, considered that Australia’s protectionist tradition had exhausted the limits of its efficiency; what he could not foresee was that his first election win would coincide with a global commodity price slump and steep oil price increases, the combined effect of which suddenly made Australia poorer. Reforms were championed despite the impact of cuts on key sectional interests of the trade union movement (for example, in the highly unionised vehicle, textile and clothing trades industries).
The underpinnings of Australia’s current comprehensive superannuation system arose from the establishment in 1973 of the National Superannuation Committee of Inquiry, chaired by Professor Keith Hancock, a labour economist and subsequently a Deputy President of the Commission. Hancock reported to the Fraser government, recommending a partially-contributory universal pension system with an earnings-related supplement. A minority recommendation suggested a non-contributory flat rate universal pension, a means-tested supplement and encouragement of voluntary savings through expanding occupational superannuation. The Fraser government deemed the proposals too expensive and complicated; the conservative consensus was that there was not a vote superannuation reform. (See McCallum, 1993). A national system of superannuation was one of the greatest achievements of the Hawke-Keating era.
The Political Framework
In the 1970s, Australia’s economic policy was hugely shaped by labour relations issues. Yet power over industrial relations was then very much a States-based affair, with restrictions on the scope of Commonwealth powers, and strong State award and tribunal systems. Of the State tribunals, the then Industrial Commission of New South Wales was the most significant in regulating and setting wage patterns.
Briefly, in the Whitlam era in the 1970s, 80 per cent of workers were covered by awards made by state and federal tribunals. Some 54 per cent of Australia’s workforce was unionised. Unions had a monopoly of representation rights before such tribunals. The notion of ‘collective labour law’ was alive. Even in the Whitlam government’s first stirrings in using the Constitution’s corporations power for industrial relations purposes and the external affairs power through ILO conventions, this was to strengthen and extend the existing system. The rationale for strengthening labour law was that employees possessed less bargaining clout than employers. Industrial tribunals would therefore provide structural protection against arbitrary and unfair use of power on the part of employers.
There were four main procedures to collectively increase money wages:
i) National Wage Cases;
ii) industry awards or agreements;
iii) specific award reclassifications or work value cases; and
iv) over-award wage bargaining.
Where, in the literature of the period, there are references to Australia’s three- tier bargaining system, this alludes to 2 and 3 being joined.
Apart from the last six months of government, in economic and labour relations policy there was poor leadership at Ministerial level. Inflated by Australia’s 1960s mining boom, Whitlam’s ambitious spending promises collided with a global recession. There were four Treasurers and three Ministers for Labour in three years. The duumvirate in December 1972 of Whitlam and deputy leader Lance Barnard engendered a sense of high expectation coupled with a too slight regard to the risks and consequences. This affected the thinking and style of Ministers. For example, Cameron’s actions as Labour Minister in using the public sector to spearhead changes, including generous pay rate increases were nobly inspired, but not enough thinking went into staging the reforms and assessing their wider economic impact. As employer, the Commonwealth government pioneered four weeks’ annual leave, annual leave loading, maternity leave and redundancy provisions. In doing so, the Minister for Labour poured fuel on the troubled, inflation-prone waters. Catch-up campaigns in the private sector soon followed.
Much more so than today, the unions were then sharply divided along ideological issues, including wages and foreign policy. Serious, exceptional worker-intellectuals – Laurie Carmichael (Australian Metal Workers’ Union – AMWU), John Maynes (Federated Clerks’ Union), Pat Clancy (Building Workers’ Industrial Union – BWIU), John Ducker (Labor Council of NSW) and so on – many driven by ideological principle, laboured throughout the union movement, lights burning late as they prepared to do battle industrially and on various political and social fronts.
On the eve of the change of government in December 1972, the unions believed that an incoming Labor regime should not act as a barrier to their various industrial relations campaigns. After 23 years in opposition, there appears to have been a ‘kid in the lolly shop’ perspective held by both Minister Cameron and many in the union movement. The strongest unions pursued a 35-hour week. In the oil and energy sectors, the government initially supported such campaigns.
Two years earlier, at the 1971 ALP federal policy conference held in Launceston, the party committed itself to a new programme based on:
1 a vague concept of a ‘new’ system of industrial relations – with the suggestion that there be a full review;
2 easing restrictions on union amalgamations. Demarcation disputes were supposed to be minimised through amalgamation;
3 securing the repeal of secondary boycott legislation;
4 strengthening direct bargaining;
5 reducing government interference in the bargaining process; and
6 encouraging conciliation as the first step before going to arbitration
These were carefree sentiments and there were tensions and contradictions between parts of the policy. There was a paradox in simultaneously supporting both a strong tribunal system and permissive over-award flexibility. The incoming government had not thought things through. The review of industrial relations was one of the few ALP platform-proposed inquiries that was not formally commissioned by the government on coming to office. Lansbury, in comparing its record to the policy promise sketched in the 1971 policy noted that the achievements were “relatively slight” (Lansbury, 1975, p. 291). There was no radical transformation. But surely the bigger question was how ideas dreamt up in good times might be introduced in riskier economic circumstances.
So far as industrial relations were concerned, there were three phases of the Whitlam government: (1) the first term period to the May 1974 double dissolution election which was the unscrewing of the inflation cork out of the bottle; (2) from May 1974 to June 1975, the fizzing, wages spiral feeding inflation; and (3) from June 1975 onward, the ensconcing of economic rationalists in key positions and their attempt to fashion, on the run in a heady atmosphere, an incomes policy or social contract.
Acts and Actions
One of the most significant reforms came by way of skills training. In part, this was a reaction to the employment consequences of the tariff cuts as well as the collapse in profits and viability of Australian businesses. The National Employment and Training (NEAT) scheme and the Regional Employment Development (RED) scheme were two programmes that (in different manifestations) continue to this day.
In May 1973, the Minister for Labor, Clyde Cameron, introduced amendments to the Conciliation and Arbitration Act to remove penal sanctions and to exempt unionists from most tort actions. They were rejected in the Senate, with the Democratic Labor Party (“DLP”) Senators combining with the Liberals and Country Party in opposition. Cameron eventually got his way albeit in the much emasculated amendments being passed after the 1974 election.
Clyde Cameron, for 30 years a foe of collegiate voting for union leadership, wanted union elections to be made subject to direct vote by members. The strongest opposition to this proposal came from the far right and far left, particularly from the communist and National Civic Council unions.
A longstanding union complaint was the issue of penal clauses against strike action. In s.45(D) of the Trade Practices Act, a person, defined as including an industrial organisation, would be acting unlawfully if, in concert with a second person, it engaged in conduct that would hinder or preventa third person supplying goods or services to a fourth person (who is not an employer of the first person or the second); or a third person acquiring goods or services from a fourth person (who is not an employer of the first person or the second). Many, not just conservatives, saw such secondary boycott action as a particularly unacceptable form of industrial action. Unions believed that such secondary action, aimed at a third or fourth party, to put pressure on the main target, was necessary in the ordinary bargaining process to put pressure on an employer. After all, the unions argued, sometimes the employers were closely related.
Relations between the ALP government and the unions’ umbrella organisation, the ACTU, were sometimes fraught. There was, however, usually strong support for the unions by government advocates in national wage cases. Two significant signs of treating the other side generously occurred with the appointment of the ACTU president, Bob Hawke, to the Board of the Reserve Bank and Whitlam, in September 1973, becoming the first prime minister to address an ACTU Congress. Despite intense union pressure to decide otherwise, Hawke supported the government’s tariff cuts. The Trade Union Training Authority (TUTA) was established in 1975 with national training headquarters just outside Wodonga and offices and training facilities across the country. The Fraser government cautiously allowed TUTA to continue after 1975.
All sorts of contortions were involved between political and industrial labour as they manoeuvred over prices and incomes policy. Confusingly, by narrow margins, the Parliamentary Labor Party Caucus adopted in September 1973 a resolution proposing extensive Commonwealth powers over prices. The Prime Minister announced that this would be put forward to the electorate as a referendum question. Faced with the prospect of DLP support in the Senate if such powers were joined to comparable powers over incomes, the Whitlam snatched at the chance to put both – Commonwealth powers over prices and over incomes – as two separate referendum questions. The ACTU however, actively campaigned against the second and only lukewarmly supported the first. Even the ALP national office declined to fund a major advertising campaign, preferring to husband resources for the half Senate election due in mid 1974. Unsurprisingly, it was a shambles with both referenda defeated in December 1973.
The Turbulent Transistion
It is apposite to sketch the industrial backdrop to the emergence of the Whitlam government as trouble was already arising during the turbulent transition from the end of one era and the emergence of another.
Between 1954 and 1967, there was relative economic and political stability in Australia, with regular arbitral adjustments to steadily increase wage levels. But with the long boom in mining and agricultural prices came new wage pressures. The 1967 Metal Trades Work Value Case set a new benchmark for wage adjustments with ‘relativities’ compared to the base rate of pay of a skilled tradesman in that industry.
In the early 1970s, the ACTU was an extremely small outfit, with fewer than 10 paid employees. It was more of a co-ordination body than a representative one, albeit with a powerful role at National Wage Case hearings. If it seemed larger this was due to its charismatic, activist president, Bob Hawke and its dour, respected and competent secretary, Harold Souter, who prepared the arguments before the industrial tribunals.
Early 1973 had these factors in play: (1) the repercussions of the strategic deferral by unions of wage demands in the lead up to the 1972 election; (2) the still adjusting consequences of the Metal Trades Award ‘flow on’ in the industrial relations system; (3) confidence born in boom times; and (4) a rapid rise in food prices.
As a result of the penal disputes in the late 1960s and early 1970s there was a loss of authority of the Commission with many unions seeing it as doing the government’s bidding. Union rhetoric was often fiery and at the 1973 ACTU Congress Laurie Carmichael, a leader of the Communist Party of Australia and assistant national secretary of the AMWU proposed a militant industrial campaign to fight inflation. Pat Clancy, the pro-Moscow communist from the BWIU, proposed a 24-hour strike prior to the forthcoming National Wage Case. Their words and enthusiasm reflected the left wing’s instinct to ‘rev up’ supporters, hazily linking industrial campaigns with a fervour to expose capitalism’s shortfalls. Militancy was the preferred tactic. To calm the ideological waters, the ACTU leaders attempted to exert strategic, tactical and moral authority in leading, restraining and cajoling unions. All skills were to the fore.
From 1969 to 1974, wages growth rose at an average of 10 per cent annually. This pre-dated the oil shocks. Thus, it can be seen that upon entering office the Whitlam government was standing on several, shifting tectonic plates – the ongoing repercussion of the Metal Trades Award, union campaigns for free collective bargaining above award minima. Plus there were the pent up demands held in check prior to electoral victory. Then the oil shocks created an earthquake that gravely weakened and ultimately destroyed the broad consensus on both sides of Australian politics on industrial relations.
Several policy positions had for 30 years – up to this point – underpinned Australia’s public policy consensus: first, a view of ‘collective fairness’ in industrial relations and, second, the Keynesian approach to economics. Then, with stagflation and dawning realisation that the old remedies made things worse, the consensus on both began to fracture. A fair statement was that: “Unfortunately for [the] Whitlam government, the limitations of the ruling economic orthodoxy were almost immediately exposed by the onset of massive and (seemingly) inexplicable national and international stagflation…” (Costa and Duffy, 1993, p. 127). The government was incapable of dealing with the demise of the conventions of Keynesian economics. Inflation moved from one of demand pressure and foreign sector-induced price pressures to cost-push pressure. No matter how fast union catch up campaigns ran, the trellis wheel of inflation only went faster. Of the chaos in wage fixation in 1973 and 1974, one observer noted that:
…the picture was one of decentralised and unco-ordinated collective bargaining, with members of the arbitral bodies often acting as a rubber stamp, and occasionally trying to exert their own influence… because the price-wage spiral was dealt with by trade unions and employers in an unplanned and decentralised manner, wage relativities were disturbed. These disturbances led to a process of wage-leapfrogging (or the development of a wage-wage spiral) and this, too, became an independent force to be reckoned with. (Bentley, 1974, p. 377).
By the end of 1974, it was clear that as far as economic management was concerned, the Labor government had a poor record and unions were generally uncooperative.
National Wage Cases and Indexation
The Whitlam government was lucky to survive the May 1974 double dissolution election. It was a year of turbulence with strike activity at a high level (Bentley, 1974, p. 376). In the first four months of 1974 the number of days lost per worker was higher than that recorded in any year since 1929. Despite the unfavourable economic indicators, the Budget presented in August produced large increases in government spending. Treasury officials had advised a series of tax and fee increases, ranging from excise taxes to the cost of posting a letter, advice that was for the most part rejected by Cabinet. The Budget was unsuccessful in dealing with the inflation and unemployment challenges and Whitlam subsequently introduced large tax cuts in November. These were aimed at encouraging moderation in wage demands. He also announced additional spending to stimulate the private sector. This was aimed at battling rising unemployment. But it all was haphazard, flying blindly through the storm.
The backdrop to the 1974 National Wage Case includes the following:
- unemployment had risen to 4.6 per cent of the workforce (in March 1974);
- inflation topped 13 per cent for the year between 1973 and 1974;
- between December 1973 to December 1974, male average weekly earnings grew 27.7 per cent;
- between the March 1974 to March 1975 quarters, prices increased 17.6 per cent;
- the operating surpluses of companies collapsed; and
- the unions requested automatic adjustments to wages.
The Commission considered introducing a system of permanent indexation. Dabscheck notes: “[I]t is not clear to what extent the Commission was being guided by the supposed needs of the economy or the need to revamp and ensure the survival of the Commission as a viable institution” (Dabscheck, 1976, p. 299).
At the end of 1974 and into early 1975, there were tentative moves towards a social contract between the government and the unions. This was because of:
1. fear of where the wage-price-wage-price spiral would end;
2. rising unemployment;
3. the tribunals’ view that they were being marginalised: The Commission signalled that indexation would be considered in the May 1974 wage case;
4. the government saw spiralling inflation as its potential death knell;
5. strike activity was out of hand; and
6. income tax cuts were proffered as a means of moderating wage growth and the consequent inflationary pressures.
The Commission initially resisted indexation in the absence of commitment to wage restraint. Significantly, in the relevant proceedings, Mr Justice Ludeke said to the employer advocate: “[W]e have a choice between this system and all its faults [i.e., indexation] or no system at all” (cited in Dabscheck, 1976, p. 300). This seemed to sum up the dilemma for the Commission as an institution. It increased the minimum wage to $8.00 per hour in December 1974.
Soon after the National Wage Case decision there was an immediate test with the AMWU running a campaign for over-award increases. The Commission, at the request of an employer body, the Metal Trades Industry Association (MTIA), rejected the union campaign, declaring it illegal. By October 1975, however, the President of the Commission, Sir John Moore, announced an over-award payment review of the metal industry.
The merits of ‘indexation’ occupied much of the debate within the so-called “IR Club” at the time; this was Cameron’s undoing as he refused to abide by its restraints. At the end of 1975, the system was inching towards a one-tier system of indexation each quarter according to the Consumer Price Index and, each year, a general productivity adjustment. Other grounds for wage increases were changes in work value and catch up of so-called community movements. But the system was becoming complex and complicated. With the across-the-board tariff reductions, award fragmentation became common. This fragmentation broke up industry (and in some cases multi-industry) awards into specific sector or even specific company awards.
The Fraser government simply took over the centralised wage indexation system that had been introduced in April 1975 by its Labor predecessor. The only change was that the government, with the support of the employers, secured partial rather than full indexation. This meant that wages were adjusted for about 80 per cent of inflation.
Brink of Recovery?
Perhaps the area of greatest disappointment was the dismissal of a government which may have been on the brink of recovery in terms of better management of industrial relations and the economy. In June 1975, Dr Jim Cairns was dismissed as Treasurer and in July removed as Deputy Prime Minister and from the Ministry. Clyde Cameron was sacked as Minister for Labour and Immigration in the same month. In Bill Hayden as the new Treasurer and with Senator “Diamond Jim” McClelland as the new Labour Minister, the government’s economic policy was finally in capable hands. Both strove to persuade colleagues and sceptics about the merits of governing responsibly in a market-friendly way, yet with a Labor heart. Hayden stated in his August 19, 1975 Budget speech: “We are no longer operating in that simple Keynesian world in which some reduction in unemployment could, apparently, always be purchased at the cost of some more inflation.” Within the labour movement, to re-coin a phrase, one might say that a pro-market social democrat is a socialist mugged by reality.
Joining Hayden and McClelland in the Cabinet from June 1975 were Senator John Wheeldon, Minister for Social Security, Joe Riordan, Minister for Housing and Construction, and Max Berinson, Minister for the Environment. All were able supporters of rational economic policy. Following Rex Connor’s dismissal from the Ministry in October 1975, a young Paul Keating came onboard, serving for 20 days as Minister for Northern Australia, before Sir John Kerr terminated Whitlam’s ministry on November 11, 1975.
Timing was part of the explanation for the emboldened fury of the conservatives in forcing the constitutional crisis with the blocking of supply in the Senate. There were valid reasons to call the Whitlam government to account for the Jim Cairns and Rex Connor Loans Affairs – breathtaking examples of naïveté and colossal irresponsibility. Perhaps the greater motivation to act was the fear that the government might begin to govern well. Most Oppositions react furiously to the prospects of victory slipping away. Fraser seized the moment. The Governor-General failed to counsel and warn his Prime Minister. The rest is history. A good many lessons were learnt. Of the ACTU-Federal government Accord adopted in 1983, Lansbury summarised the view of most labour relations academics: “The origin of the Accord is to be found in the demise of the previous Whitlam government… While the Whitlam government’s tenure coincided with world-wide inflationary pressures, its failure to reach an early agreement with the trade unions on a wage and price policy was an important factor in the downfall of that government” (Lansbury, 1984, p. 2).
Unfortunately, rehabilitation of the Whitlam government’s economic credentials was denied. This essay contends that in industrial relations the Whitlam government was both the worst and the best of governments. So too, were the times.
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Acknowledgement on Publication:
I gratefully acknowledged the assistance from Catherine Harding, Donna McKenna and David Plowman in preparing this essay for publication. They were responsible for insight and wisdom whereas all faults belong to the author.
I should have also referenced P. A. McGavin, Wages & Whitlam. The Wages Policy of the Whitlam Government, Oxford University Press, Oxford and Melbourne, 1987.