Prime Minister’s Economic Forum, Brisbane 12 -13 June 2012

Building & sharing Australia’s prosperity

Australia in the Global Economy

Foreword  

This  Prime  Minister’s  Economic  Forum  is  a  welcome  opportunity  to  engage  on  important  issues  confronting  Australia  in  the  21st  century.  

The  Australian  union  movement  is  pleased  that  the  Australian  government  recognises  the  significant  benefit  of  government,  business,  unions  and  others  in  the  non-­‐government  sector  working  collaboratively  to  tackle  these  challenges.  

Unions  bring  a  unique  perspective  to  the  table.  Like  business,  it  is  in  the  interests  of  the  working  people  we  represent  to  see  our  economy  innovate,  grow  and  deliver  prosperity.    

Our  unique  concern  is  to  ensure  this  is  done  in  a  way  that  affords  everyone  the  opportunity  to  participate  and  contribute  to  this  growth,  and  to  share  the  benefits  fairly.  

This  means  our  tax  system  should  not  unduly  hamper  growth,  but  also  not  reward  vested  interests  while  leaving  others  behind.    

It  means  ensuring  that  our  education  and  training  systems  are  providing  Australians  with  the  opportunity  to  gain  new  skills  and  use  them  to  contribute  to  the  economy.  

It  means  a  system  of  workplace  laws  that  respects  every  Australian’s  right  to  be  treated  fairly,  with  dignity  and  in  a  way  that  allows  them  to  meet  their  family  obligations  and  other  commitments  outside  of  work.  

This  social  contract,  and  the  desire  to  improve  our  overall  economy  and  every  individual’s  standard  of  living,  means  productivity  improvements  are  crucial  and  sharing  the  benefits  of  those  improvements  is  equally  important.    

We  recognise  that  all  the  issues  confronting  the  economy  will  not  be  fixed  in  one  day.  For  that  reason,  unions  are  keen  to  have  ongoing  dialogue  with  employers  across  a  range  of  industries  after  this  forum  concludes.  As  we  discuss  in  this  paper,  we  believe  consultative  committees  at  an  industry  level  would  go  a  long  way  to  foster  collaboration  and  innovation  to  the  mutual  benefit  of  business,  workers  and  the  Australian  economy.  

If  we  balance  our  common  interest  in  a  growing  and  innovative  economy,  which  delivers  opportunity  and  prosperity  for  all,  then  Australia  will  be  well  placed  to  continue  leading  the  world  as  an  economy  and  society.  

 

Dave  Oliver    

ACTU  SECRETARY  

JUNE  2012  

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Building  &  sharing  Australia’s  prosperity    

Today’s  economy  &  future  challenges  

On  many  measures,  the  Australian  economy  is  faring  well.  Unemployment  is  lower  than  it  was  for  most  of  the  1980s,  90s  and  2000s.  Since  the  end  of  2007,  our  economy  has  grown  by  around  10%  in  real  terms,  while  the  OECD  as  a  whole  has  grown  by  only  1%.  We  have  a  larger  pipeline  of  planned  investment  in  the  economy  than  ever  before.  

Yet  we  know  that  challenges  face  the  Australian  economy  and  Australian  society.  Up  to  40%  of  Australian  workers  are  in  insecure  jobs  without  paid  leave  entitlements  or  enough  certainty  about  future  income  to  satisfy  either  formal  criteria  for  lending  institutions,  or  an  informal  sense  of  security  which  allows  individuals  to  feel  comfortable  taking  time  off  work  for  leisure  or  illness.  While  some  workers  enjoy  some  aspects  of  flexible  arrangements,  many  would  prefer  to  have  stable,  reliable,  secure  jobs.  There  is  an  economic  cost  to  denying  individuals  the  ability  to  make  long-­‐term  plans  for  their  lives.    

Insecure  work  has  created  an  economic  house  of  cards  hurting  both  businesses  and  workers,  and  our  overall  economic  capacity.    

The  lack  of  a  stable,  loyal  workforce  removes  the  incentive  for  employers  to  invest  in  education  and  training,  while  the  lack  of  a  stable  income  prevents  individuals  from  making  that  investment  themselves.  This  prevents  workers  from  gaining  skills  and  progressing  through  a  career  structure,  and  making  way  for  the  next  generation  of  workers.  A  further,  negative  consequence  of  this  is  high  youth  unemployment  and  a  shortage  of  skilled  workers  –  two  key  problems  in  our  economy  at  present.  

While  high-­‐trust,  high  skill  workplaces  are  the  best  environment  for  high-­‐productivity,  a  lack  of  job  security  usually  creates  a  workplace  environment  where  fear  and  confrontation  act  as  a  barrier  to  collaboration  and  innovation,  as  well  as  contributing  to  poorer  health  and  safety  outcomes.  

Job  security  is  one  aspect  that  should  be  a  key  goal  in  an  overall  strategy  to  grow  our  economy.  Equity  is  another.    

While  average  wages  have  increased  by  12%  in  real  terms  since  2005,  the  real  minimum  wage  has  only  risen  by  1%.  This  has  increased  the  gap  between  our  lowest  paid  and  the  average  worker.  Again,  as  well  as  personal  costs,  there  are  real  economic  costs  associated  with  the  disharmony  that  inequity  creates  in  our  society.  For  many  reasons,  inequality  is  something  we  should  aim  to  reduce  as  we  continue  to  grow  our  economy  in  the  21st  century.  

Maintaining  some  balance  between  different  sectors  of  the  economy  is  also  an  important  economic  goal.  Despite  good  overall  growth,  the  multi-­‐speed  economy  means  not  everyone  is  doing  well.  The  dramatic  appreciation  in  the  value  of  the  Australian  dollar  has  put  significant  pressure  on  trade-­‐exposed  sectors  like  manufacturing  and  tourism.  Government  has  a  key  role  to  intervene  in  the  

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economy  to  ensure  we  sustain  a  diverse  economic  base  and  do  not  rely  on  booms  or  fall  victim  to  busts.  

Key  industries  will  require  innovative  policies  to  help  them  weather  the  perfect  storm  of  global  economic  turmoil  and  the  effects  of  the  mining  boom.  The  Australian  Aluminium  Industry  Plan  proposed  by  the  AWU  is  an  example  of  the  opportunity  governments  have  to  intervene  in  Australia’s  long-­‐term  interest.  

In  addition  to  these  current  challenges,  we  will  need  a  long-­‐term  strategy  to  grapple  with  the  implications  of  an  ageing  population,  and  of  a  large  shift  in  the  balance  of  economic  activity  towards  our  region.  

For  the  Australian  economy  to  continue  to  prosper,  we  need  to  make  sure  that  our  policy  settings  are  right  today.  Are  we  doing  enough  to  support  skill  formation  and  infrastructure  investment?  Can  governments  do  more  to  support  innovation  in  industries?  How  can  we  further  spread  the  benefits  of  the  boom,  to  make  sure  that  no  Australian  is  left  behind?    

These  are  the  questions  that  Australian  governments  should  be  asking.  

In  this  brief  paper,  unions  have  outlined  the  key  issues  we  believe  should  be  part  of  any  debate  about  the  future  of  our  economy,  as  well  as  respond  to  the  agenda  items  the  government  has  suggested  at  this  important  forum.  We  look  forward  to  working  with  all  participants  to  tackle  these  issues  over  the  next  two  days  and  beyond.  

 

A  fairer  Australia  –  addressing  rising  inequality  

Australia  has  long  prided  itself  on  being  an  egalitarian  nation,  the  land  of  the  fair  go.  Australians  are  deeply  attached  to  the  idea  that  anyone  who  is  willing  to  work  hard  should  enjoy  a  decent  life,  and  that  any  Australian  should  be  able  to  fulfill  their  aspirations  regardless  of  the  circumstances  of  their  birth.    

This  fundamental  Australian  value  is  under  threat  from  rising  inequality.  Among  the  advanced  economies,  Australia  has  a  moderate  level  of  inequality  and  a  moderate  level  of  social  mobility.  But  inequality  has  been  rising,  particularly  in  the  last  decade.  If  this  trend  is  allowed  to  continue,  it  could  put  Australia  on  the  road  to  being  a  very  different  country,  one  with  a  ‘working  poor’.    

Worrying  trends  in  Australia  include  the  following:  

• In  the  past  thirty  years,  the  share  of  national  income  that  goes  to  the  top  1%  of  individuals  has  doubled.  The  top  1%  of  individuals  now  received  around  9%  of  total  income.  

• The  average  remuneration  of  executives  in  ASX100  companies  rose  from  17  times  annual  earnings  in  1993  to  42  times  annual  earnings  in  2009,  according  to  the  Productivity  Commission.  

• Minimum  wages  have  grown  less  rapidly  than  average  wages,  so  low-­‐paid  workers’  earnings  have  fallen  behind.  In  the  mid-­‐90s,  the  National  

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Minimum  Wage  was  around  54%  of  the  average  full  time  wage.  In  2011,  that  had  fallen  to  44%  of  the  average.  

• Wealth  inequality  is  also  significant  -­‐  the  top  20%  of  households  hold  around  62%  of  the  wealth,  while  the  bottom  60%  of  households  hold  only  18%  of  the  wealth  between  them.    

Australian  workers  and  their  unions  share  an  interest  with  business  and  governments  in  sustainable  economic  growth.  However,  prosperity  must  be  widely  shared.  Addressing  rising  inequality  should  be  at  the  heart  of  any  agenda  for  the  future  of  the  Australian  economy.  Doing  so  will  involve  continuing  to  build  a  fairer  tax  system,  addressing  the  issue  of  insecure  work,  helping  Australians  get  the  skills  and  education  they  need  to  obtain  high-­‐productivity  jobs,  lifting  minimum  rates  to  reduce  the  growing  gap  with  the  average  wage  and  protecting  rights  at  work.  

Fairer  for  everyone  –  addressing  workforce  participation  and  pay  equity    

Any  serious  economic  strategy  must  consider  the  need  to  lift  the  rate  of  participation  amongst  individual  groups  of  workers,  not  just  overall.    

Rates  of  participation,  particularly  in  better-­‐paid  occupations  are  still  lower  for  women,  as  well  as  the  young  or  aged.  

Pay  equity  is  crucial  to  lifting  participation  rates,  and  ensuring  that  our  economy  takes  full  advantage  and  values  the  contribution  of  all  members  of  our  society.  

Access  to  affordable  and  quality  childcare  is  an  obvious  issue  affecting  women’s  participation.  The  value  of  work  done  by  childcare  educators  is  important  not  just  for  the  educators  who  work  in  the  sector,  but  also  for  the  quality  of  education  of  the  children  who  will  make  up  the  future  workforce.  

We  must  make  sure  that  our  economy  values  the  contribution  that  everyone  can  make,  and  invests  in  it.  

A  fairer  tax  system  

The  principal  goal  of  the  tax  system  is  to  raise  sufficient  revenue  to  fund  the  provision  of  high-­‐quality  public  services  and  the  social  security  system  (the  ‘social  wage’).  If  current  levels  of  social  provision  continue,  Australia  will  need  to  raise  more  tax  (as  a  proportion  of  GDP),  in  order  to  fund  the  costs  associated  with  the  ageing  population.  Adequate  tax  revenue  will  be  vital  to  deliver  on  other  areas  of  social  need  such  as  the  National  Disability  Insurance  Scheme.  

The  tax  system  is  also  one  of  the  key  ways  that  governments  can  address  inequality  and  promote  opportunity.  As  Dr  Ken  Henry  said,    

“Leaving  fairness  solely  to  the  market  to  determine  should  be  unacceptable  to  a  civilised   society...The   tax-­transfer   system   is   the   principal  means   of   expressing  societal  choices  about  equity.  The  tax-­transfer  system  is  a  reflection  of  the  kind  of  society  we  aspire  to  be.”  

 

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Some  key  facts  about  the  Australian  tax  system  are:  

• Australia  is  one  of  the  lowest  taxing  advanced  economies.  In  2009,  Australia’s  total  tax  revenues  (including  all  levels  of  government)  accounted  for  25.9%  of  GDP.  The  OECD  average  was  33.8%.  Australia’s  tax/GDP  ratio  was  the  sixth  lowest  of  the  34  OECD  countries,  well  below  the  ratios  in  the  UK,  New  Zealand,  and  Canada,  and  only  just  above  the  United  States.  

• In  each  year  of  the  current  Labor  Government,  the  tax/GDP  ratio  has  been  below  the  levels  recorded  in  every  year  of  the  previous  Coalition  Government.    

• In  the  2000s,  personal  income  tax  changes  delivered  much  larger  tax  cuts  to  high-­‐income  and  very  low-­‐income  earners  than  to  workers  on  average  earnings.  The  household  compensation  package  associated  with  the  Clean  Energy  Future  package  delivered  tax  cuts  to  low  and  middle-­‐income  households,  targeting  tax  relief  to  those  who  need  it  most.  

• The  effective  tax-­‐free  threshold  has  risen  significantly  in  recent  years  as  a  result  of  the  increases  in  the  Low  Income  Tax  Offset.  It  will  rise  further  when  the  statutory  threshold  is  tripled  from  1  July  2012.  In  real  terms,  the  effective  threshold  in  2012-­‐13  will  be  more  than  double  the  level  it  was  in  2005-­‐06.  

• Barriers  to  workforce  participation  exist  for  some  workers  (and  potential  workers)  in  the  form  of  high  effective  marginal  tax  rates  (EMTRs).    

• Super  contributions  have  been  subject  to  a  ‘flat  tax’  of  15%.  The  Labor  Government  is  making  this  more  progressive,  by  effectively  abolishing  tax  on  super  contributions  for  low-­‐income  earners  and  reducing  the  concession  for  very  high  income  earners.  

• The  tax  system  provides  incentives  and  opportunities  for  individuals  to  disguise  their  labour  income  as  business  income,  including  through  ‘sham  contracting’  arrangements.  

• Aspects  of  the  tax  system  that  relate  to  housing  are  arguably  inequitable  and  inefficient.  Negative  gearing,  it  is  often  argued,  increases  the  cost  of  housing  without  expanding  its  supply.  Stamp  duties  can  provide  a  barrier  to  people  moving  for  work.  A  broad-­‐based  land  tax  with  a  high  threshold  could  be  both  progressive  and  efficient,  yet  we  do  not  have  one.  

• Australia  is  unique  among  advanced  economies  in  that  we  do  not  tax  bequests.    

Unions  have  called  for  future  reforms  to  include:  

• Further  increases  in  the  tax-­‐free  threshold,  but  not  as  part  of  a  ‘flattening’  of  the  personal  income  tax  system;  

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• Changes  to  make  super  contributions  tax  even  more  progressive,  by  having  the  super  tax  rate  rise  in  line  with  an  individual’s  marginal  rate  (as  recommended  by  the  Australia’s  Future  Tax  System  Report);  

• Reductions  in  the  barriers  to  workforce  participation  faced  by  low-­‐income  earners,  including  through  changes  to  the  withdrawal  rates  for  social  security  payments;  

• A  Housing  Tax  Forum  to  comprehensively  evaluate  the  effectiveness  of  current  arrangements  and  examine  the  proposals  put  forward  by  Australia’s  Future  Tax  System  Report;  

• Changes  to  the  business  tax  system  that  support  jobs  and  growth,  while  ensuring  that  business  continues  to  pay  its  fair  share;  

• Reforms  to  prevent  ‘sham  contracting’  and  other  tax  avoidance  activities;  • The  adoption  of  the  Australia’s  Future  Tax  System  Report  

recommendations  on  the  taxation  of  savings  income.  This  would  see  capital  gains  tax  rise,  but  would  see  taxes  on  other  forms  of  savings  income  (like  bank  interest)  fall;  

• The  adoption  of  a  version  of  the  ‘Buffett  Rule’,  that  would  ensure  that  millionaires  who  principally  derive  their  income  from  capital  gains  pay  at  least  as  much  in  tax  (as  a  proportion  of  their  incomes)  as  ordinary  working  Australians.  

Unions  are  eager  to  participate  in  a  debate  about  business  tax  changes  that  would  promote  employment  and  support  industries  to  cope  with  structural  change.  However,  we  believe  that  the  share  of  tax  revenue  that  is  paid  by  business  should  not  be  reduced.  In  other  words,  any  reductions  in  company  income  tax  should  be  funded  by  a  reduction  in  concessions  received  by  business.  

Fairer  workplaces      

We  can’t  build  a  fairer,  more  prosperous  Australia  without  an  industrial  relations  system  that  promotes  job  security,  facilitates  collaboration  and  cooperation  among  employers,  employees  and  their  unions,  and  provides  a  decent  safety  net  for  all  workers.    

Some  commentators  have  erroneously  portrayed  the  current  industrial  laws  as  being  inflexible  and  harmful  to  productivity  growth.  The  evidence  suggests  this  is  not  the  case.  

Australian  productivity  growth  surged  in  the  mid-­‐1990s,  and  has  fallen  ever  since.  Work  Choices  didn’t  revive  productivity  growth,  and  the  Fair  Work  Act  hasn’t  damaged  it,  as  shown  in  Figure  1.  In  the  year  to  March  2012,  labour  productivity  rose  at  the  fastest  rate  in  a  decade.    

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Figure  1:  Labour  productivity  growth  in  the  market  sector  

 

The  rate  of  productivity  growth  has  slowed  since  the  1990s,  but  eroding  workers’  rights  is  not  the  way  to  restore  it.  Instead,  the  high  road  to  productivity  growth  includes  a  renewed  focus  on  skills  and  education,  innovation,  removing  bottlenecks  in  our  national  infrastructure,  and  a  collaborative  approach  between  workers,  employers,  and  government.  The  resources  boom  has  also  had  an  adverse  effect  on  Australian  productivity,  although  some  of  this  effect  will  be  reversed  as  projects  are  completed  and  begin  to  generate  output.  

Striking  claims  

Other  claims  about  the  effect  of  the  current  IR  laws  on  the  Australian  economy  are  also  unsupported  by  the  evidence:  

• Since  the  Act  came  into  effect,  there  has  been  an  average  4.4  working  days  lost  to  industrial  disputes  per  1000  employees  per  quarter.  This  compares  to  an  average  of  13.7  days  during  the  Howard  Government.  This  is  a  striking  figure,  particularly  when  you  consider  that  some  days  have  been  lost  as  a  result  of  employer  militancy,  as  in  the  QANTAS  dispute.  

• There  has  been  no  ‘wages  breakout’.  Wages  growth  has  been  solid,  but  moderate,  with  the  WPI  rising  in  line  with  its  long-­‐run  average.  Real  unit  labour  costs  are  lower  than  they  were  when  the  Howard  Government  left  office.  Inflation  is  around  the  bottom  of  the  RBA’s  target  band.  

• Australia’s  unemployment  rate  is  one  of  the  lowest  of  any  advanced  economy.  

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The  Fair  Work  Act  provides  a  good  foundation  to  build  on  in  the  area  of  industrial  relations.  Unions  reject  the  idea  that  the  way  to  build  a  more  prosperous  and  fairer  Australia  is  to  erode  rights  at  work.  

A  better  and  fairer  education  system  

While  we  do  not  wish  to  extensively  discuss  reform  of  the  primary  and  tertiary  education  system  in  this  paper,  it  is  noteworthy  that  a  significant  review  of  Australia’s  education  system  has  been  completed  and  is  awaiting  Government  action  on  its  recommendations.    

Consistent  with  the  recommendations  of  the  Gonski  Review  of  Funding  for  schooling,  unions  believe  that  there  must  be  greater  investment  in  school  education  and  the  adoption  of  an  explicit  resource  standard  lined  to  education  attainment,  to  ensure  that  achievement  of  the  National  Goals  for  Schooling  is  a  realistic  objective  for  all  students.    

Funding  (which  should  be  automatically  indexed  annually  to  actual  cost  increases  in  school  education)  across  different  schools  and  sectors  must  be  distributed  fairly  and  equitably  through  a  consistent  approach  to  assessing  student  needs  and  through  having  regard  to  the  level  of  resources  available  for  students.    

Better  coordination  between  State,  Territory  and  Commonwealth  governments  is  crucial.

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Prime  Ministers’  Economic  Forum:  Australia  in  the  Global  Economy    

A  brief  outline  of  union  views  on  this  forum’s  sessions  

Session  1:  Australia’s  Patchwork  Economy  and  the  High  Dollar  

The  Issues  

For  the  first  twenty  years  after  the  Australian  dollar  was  allowed  to  float,  an  Aussie  dollar  bought  70  US  cents,  on  average.  The  AUD  is  now  around  parity  with  the  US  dollar.  The  real,  effective  exchange  rate  (real  TWI)  is  now  56%  higher  than  it  the  average  for  the  period  1983  to  2003.  

Figure  2:  Real  effective  exchange  rate  

 Source:  RBA  Statistical  Table  F15  and  ACTU  calculations.  

 This  dramatic  appreciation  in  the  value  of  the  Australian  dollar  has  undermined  the  competitiveness  of  Australian  firms  in  trade-­‐exposed  industries  and  has  put  jobs  at  risk.  Manufacturers,  in  particular,  have  found  that  the  strong  dollar  poses  significant  challenges.  Tourism  is  similarly  affected.  The  finance  industry  has  ‘offshored’  some  Australian  jobs,  partly  in  response  to  the  high  exchange  rate.    

In  response  to  these  widely  acknowledged  pressures  on  trade-­‐exposed  industries,  some  commentators  have  sought  to  downplay  the  effects  of  the  strong  currency  on  employment.  Manufacturing,  it  is  often  pointed  out,  has  been  declining  as  a  share  of  total  employment  for  several  decades,  as  shown  in  Figure  3.    

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Figure  3:  Industry  shares  of  total  employment  

 

Source:  RBA  statistical  tables,  ABS  6202,  ACTU.    

However,  while  it’s  true  that  manufacturing’s  share  of  employment  has  been  declining  for  decades,  the  absolute  number  of  Australians  employed  in  manufacturing  was  reasonably  stable  from  the  early  1990s  until  around  2008,  at  about  1.05  million  people.  The  absolute  decline  in  the  number  of  persons  employed  in  manufacturing  is  not  merely  the  continuation  of  an  old  trend  –  this  represents  something  new,  and  something  significant  to  the  working  lives  of  many  Australians.    

Figure  4:  Number  of  persons  employed  in  manufacturing  in  Australia  

 

Source:  ABS  6202.  

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The  mining  boom  has  brought  substantial  benefits  to  Australia,  but  public  policy  should  ensure  that  those  benefits  are  fairly  distributed  and  that  our  economy  is  not  ‘hollowed  out’  by  the  effect  of  a  high  currency.  We  need  a  vision  for  the  Australian  economy  that  looks  beyond  the  resources  boom.  How  can  we  ensure  that  Australia  will  continue  to  have  a  diverse  economic  base  that  provides  secure,  high-­‐productivity,  high-­‐wage  jobs  for  Australian  workers?  How  can  we  maximise  the  opportunity  for  our  goods  and  services  producers  to  access  foreign  markets?  

The  business  tax  system  has  a  bias  against  equity  financing  and  in  favour  of  debt  financing.  It  also  taxes  normal  returns  at  the  same  rate  as  above-­‐normal  profits.  There  is  a  case  for  moving  towards  a  new  business  tax  system,  such  as  an  Allowance  for  Corporate  Equity  (ACE)  that  would  address  these  issues.  A  properly  designed,  revenue-­‐neutral  ACE  could  increase  the  taxes  levied  on  economic  rents,  while  reducing  taxes  on  marginal  businesses.  

Some  structural  change  will  always  be  a  reality  in  a  dynamic  economy  like  Australia’s.  Workers  and  their  families  need  assistance  to  handle  the  labour  market  transitions  that  will  result.  With  our  lack  of  a  true  unemployment  insurance  system,  and  a  Newstart  Allowance  that  is  meagre  and  restricted,  unions  are  concerned  that  workers  who  lose  their  jobs  aren’t  being  given  sufficient  assistance.  There  have  been  concerns  raised  about  the  design  of  the  Job  Services  Australia  system  –  is  it  appropriately  designed  to  help  people  gain  skills  and  permanent,  secure  jobs?  

 

Areas  to  be  addressed:  

Unions  look  forward  to  discussing  and  debating  the  following  issues:  

• Ensuring  that  the  benefits  of  the  boom  are  distributed  fairly;  • The  role  of  industry  policy  in  supporting  employment  and  maintaining  a  

diverse  economic  base;    • Government  assistance  for  workers  and  their  families  who  are  negatively  

affected  by  structural  change;  • The  removal  of  barriers  to  labour  mobility;  and  • The  need  for  measures  to  ensure  a  true  level  playing  field  in  international  

trade,  such  as  the  Government’s  anti-­‐dumping  reforms.  

 

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Session  2:  Economic  Transformation:  Innovation  &  Collaboration  

Key  points:      

• Industry  collaboration  • Opportunities  for  clean  technology  • Maximising  local  participation  • Choosing  the  high-­‐performance  model  over  the-­‐race-­‐to-­‐the-­‐bottom  

approach  on  productivity    The  Issues    Global  economic  uncertainty  and  volatile  AU$  makes  long-­‐term  investment  in  new  technologies  and  production  methods  less  likely.  This  generates  powerful  incentives  to  compete  on  costs  rather  than  quality,  knowledge  and  innovation.  This  helps  to  explain  why  manufacturing  in  Australia  has  lost  over  100  000  jobs  in  the  past  4  years  –  and  further  losses  are  expected  in  the  years  ahead.        Compared  to  leading  industrial  nations  such  as  the  US  and  Germany,  a  high  proportion  of  firms  in  every  sub-­‐sector  of  Australian  manufacturing  are  SMEs:  firms  that  typically  find  it  difficult  to  fund  R&D  and  therefore  difficult  to  increase  their  participation  in  global  value  chains.  Many  Australian  SMEs  serve  only  local  markets  -­‐  which  results  in  few  opportunities  to  build  scale  and  innovative  capacity.    The  present  problems  facing  manufacturing  have  been  aggravated  over  the  past  15  years  by  historic  underinvestment  in  capital  stock  and  declining  levels  of  investment  by  firms  in  workforce  skills.    The  2008  Cutler  Review  of  the  National  Innovation  System  found  the  system  to  lack  coherence  and  a  sense  of  common  purpose.  In  particular,  it  found  that  many  participants  lacked  understanding  of  the  how  it  was  meant  to  function  and  how  collaboration  was  meant  to  work.      Australia  ranks  poorly  (18th  among  OECD  countries)  in  terms  of  the  total  proportion  of  firms  that  collaborate  with  and  use  the  products  of  research  organisations.      Businesses  (and  SMEs  in  particular)  report  that  they  find  accessing  and  working  with  researchers  difficult:  their  Intellectual  Property  is  prohibitively  priced;  their  work  is  often  not  geared  to  industry  needs  and  therefore  is  difficult  to  apply  quickly  and  efficiently  in  a  business  context.  Researchers  report  that  they  find  working  with  SMEs  difficult:  their  priorities  are  often  short-­‐term;  they  lack  the  in-­‐house  knowledge  and  resources  to  make  effective  use  of  new  technologies.      There  appears  to  be  a  deep  disconnect  between  Australia’s  research  in  universities  and  Publically  Funded  Research  Organisations  (estimated  to  total  $9.4  billion  in  2011/12)  and  what  is  happening  in  terms  of  employment  and  innovation  across  much  of  our  industrial  base.  

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 Firms  report  that  the  barriers  to  firm-­‐level  innovation  include:  problems  of  accessing  appropriate  finance;  access  to  skills;  costs  of  new  product  development;  uncertain  demand  for  new  products.      Ways  Forward    To  innovate  firms  need  to  be  able  to  compete  fairly  for  business  at  home  and  abroad  –  to  generate  the  cash-­‐flows  and  profits  needed  to  fund  investment  in  new  products  and  ways  of  working.  Government  can  help  firms  survive  and  innovate  by:  

-­‐ The  more  effective  application  of  Australian  Industry  Participation  policies;  

-­‐ A  more  pro-­‐active  and  effective  policing  of  dumping;    -­‐ A  greater  preparedness  by  the  RBA  to  intervene  in  currency  markets  

when  the  value  of  the  dollar  is  above  fair  value.    In  the  long-­‐term,  we  need  to  create  an  environment  that  cultivates  greater  collaboration  between  firms  so  that  they  can  pool  resources,  share  knowledge,  and  so  better  access  global  value  chains.  Measures  that  will  help  to  achieve  this  include:    

-­‐ Enterprise  Connect:  a  budget  for  EC  that  is  adequate  to  providing  the  support  many  firms  need;  increased  provision  of  specialist  assistance  to  help  bridge  the  gap  between  invention  and  application;  assistance  to  help  make  SMEs  ‘NBN  ready’;  

-­‐ A  more  user-­‐friendly  and  coherent  set  of  government  support  services  that  are  more  accessible  and  understandable  by  firms;  

-­‐ The  introduction  of  Innovation  Vouchers  to  support  interaction  between  firms  and  the  research  sector  where  firms  want  to  generate  new  processes  and/or  products  and  can  make  a  business  case  to  government  that  the  costs  of  transacting  with  a  relevant  research  body  are  prohibitively  high;  

-­‐ Support  for  ‘innovation  precincts’  that  bring  together  clusters  of  researchers,  firms  and  government  agencies  with  the  aim  of  generating  and  disseminating  new  ideas  and  practices;  

-­‐ Government  consideration  of  establishing  a  Strategic  Investment  Facility  that  will  co-­‐invest  in  activities  of  likely  long-­‐term  significance  for  the  Australian  economy  but  which  currently  have  difficulty  attracting  investment.  

 This  model  of  collaboration  should  be  applied  across  many  key  industries  including  hospitality,  tourism,  construction,  finance,  childcare  and  transport  for  example.  Innovation  must  also  be  practiced  in  the  workplace.  ‘High  performance  workplaces’  can  deliver  significant  improvements  in  productivity  by  means  of  continuous  innovation  and  making  better  use  of  the  creativity  and  skills  of  employees.  Such  workplaces  are  better  able  to  attract  and  retain  skilled  workers  and  able  graduates.  Government  can  help  by  taking  the  lead  in  diffusing  knowledge  and  understanding  of  what  ‘high  performing  workplaces’  are  and  how  they  may  be  developed.    

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Session  3:  Investment  In  Productive  Infrastructure  

Unions  would  like  to  see  the  government  to  review  its  current  tax  and  procurement  policy  settings  with  the  aim  of  facilitating  the  greater  long-­‐term  investment  of  workers’  capital  in  our  economic  and  social  infrastructures.    

This  should  include  specific  consideration  of  the  following  potential  initiatives:  

1. The  development  of  new  forms  of  flexible  long-­‐term  government  bonds  and  other  government-­‐guaranteed  investment  vehicles  explicitly  designed  to  attract  workers’  capital  from  within  Australia;  and  

2. New  means  of  facilitating  investment  (including  government-­‐guaranteed  investment)  in  key  areas  of  social  infrastructure,  such  as  affordable  public  housing  and  quality  aged  care,  and  green  energy  initiatives.  

We  also  need  greater  collaboration  between  the  state  governments,  the  federal  government  and  industry.    

We  need  to  relieve  the  bottlenecks  at  the  state  government  level.  

Infrastructure  Development  

An  efficient  infrastructure  and  transportation  system  is  vital  in  improving  the  productivity  and  competitiveness  of  the  Australian  economy.  According  to  Sir  Rod  Eddington,  Chair,  Infrastructure  Australia,  ‘We  must  find  ways  to  make  better  use  of  existing  infrastructure,  remove  the  bottlenecks  and  gaps  that  are  holding  back  Australia’s  growth,  and  identify  opportunities  for  new  capital  investment.’  

Much  of  the  past  decade  has  seen  the  supply  side  of  the  economy  constrained  by  the  infrastructure  bottlenecks  at  our  ports  and  rail  links.  Our  major  cities  are  gridlocked  and  the  transport  system  and  the  congestion  it  causes  is  a  major  barrier  to  economy  wide  productivity  growth.  This  is  occurring  at  the  same  time  that  Australia  has  become  a  relatively  high-­‐cost  location,  mainly  because  of  the  high  dollar,  but  also  because  of  this  slump  in  economy-­‐wide  productivity  growth  partly  attributable  to  under  investment  in  infrastructure.  

Despite  these  problems,  Australia  still  consistently  ranks  as  having  amongst  the  most  livable  cities  in  the  world.  This  is  something  that  means  a  great  deal  to  Australian  workers  and  their  families.  It  is  also  a  huge  plus  for  attracting  and  retaining  entrepreneurs,  scientists,  engineers  and  other  skilled  workers  as  well  as  the  senior  management  of  global  firms.  Such  people  are  also  attracted  to  locations  that  have  a  modern  and  up  to  date  social  infrastructure.      

Unless  the  Commonwealth  and  the  States  invest  appropriately  in  the  future  of  this  social  infrastructure  and  make  this  the  decade  of  unclogging  the  transport  system,  cutting  the  congestion,  and  getting  the  rail/road/sea/air  linkages  for  freight  and  passenger  transport  world-­‐class,  we  risk  a  diminished,  economy-­‐wide  productivity  performance  and  a  diminution  of  our  deserved  reputation  for  having  the  most  livable  cities  and  all  that  brings  us  in  terms  of  both  attracting  and  retaining  human  and  financial  capital.  

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To  attend  to  these  challenges  we  need  to  address  the  following  issues.  

We  need  national  priorities  for  our  infrastructure  provision.  

This  should  ensure  that  there  is  full,  fair  and  reasonable  access  to  local  suppliers,  including  of  manufactured  building  products,  labour  and  services,  to  better  spread  the  benefits  of  the  boom  throughout  the  broader  economy.  

Inconsistent  state  government  regulations  and  legislation  also  need  fixing  so  we  have  a  national  market  for  things  like  our  rail  infrastructure.  It  is  a  major  impediment  for  the  state  and  territory  governments  to  each  decide  on  different  designs  and  specifications  for  their  railway  rolling  stock  and  different  standards  and  rules  and  regulations  for  how  the  rail  system  will  operate  in  their  state.    

It  effectively  takes  us  back  to  the  bad  old  days  of  different  rail  gauges  everywhere  and  anywhere  and  will  deny  us  the  chance  to  win  the  lion’s  share  of  the  $33  billion  that  will  be  spent  in  the  next  decade  on  renewing  the  rail  car  fleet.  

Governments  need  to  fund  their  infrastructure  requirements  and  not  get  pre-­‐occupied  with  deficit  and  debt  where  this  isn’t  a  problem.  When  governments  need  to  go  to  the  market  for  public-­‐private  infrastructure  financing,  they  need  better  planning  and  a  better  pipeline  of  projects.    

 

Session  4:  Building  the  workforce:  skills  and  education  

There  are  myriad  policy  issues  at  play  in  the  skills  area  at  present,  but  two  of  the  key  priorities  for  unions  are:    

1. Supporting  the  apprenticeship  system;  and    2. Supporting  TAFE  in  its  essential  role  as  the  public  provider  of  quality  

vocational  education  and  training.      

Support  for  apprenticeships    

To  meet  our  future  skill  needs  and  provide  employment  opportunities,  a  sustained  increase  in  apprenticeship  training  and  completion  rates  is  required  across  Australian  workplaces.    

However,  the  latest  figures  from  the  NCVER  show  the  number  of  people  commencing  apprenticeships  in  trade  occupations  fell  by  5.9%  in  2011  and  have  been  on  the  decline  since  September  2010  –  six  consecutive  quarters.  

In  WA,  amid  the  resources  boom  and  continuing  talk  of  skill  shortages,  there  was  no  growth  at  all  in  apprenticeship  and  traineeship  commencements  in  2011.    

We  do  not  have  a  skills  crisis.  We  have  a  training  crisis.  

The  concern  that  unions  have  is  with  those  employers  or  sectors  that  don’t  take  on  apprentices,  but  yet  are  happy  to  either  poach  skilled  workers  from  those  that  do  train  apprentices  or  use  temporary  overseas  workers.    

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For  example,  the  NRSET  report  –  aside  from  recommending  EMAs  -­‐  found  that  the  capacity  to  offer  high  wages  and  ready  access  to  temporary  migration  has  allowed  resources  companies  to  meet  their  skill  needs  with  little  thought  to  investment  in  skills  development.    

The  NRSET  report  cited  NCVER  research  that  the  resource  sector  trained  just  3.6%  of  Australia’s  apprentices,  despite  employing  5.6%  of  the  nation’s  tradespeople.  In  response  to  this,  the  recommendation  from  NRSET,  supported  by  Government,  was  that  the  resource  sector  needed  to  significantly  increase  the  number  of  apprentices  it  employs,  given  that  it  currently  employs  considerably  fewer  than  would  be  expected  given  its  share  of  trade  employment.    

At  the  same  time,  there  is  an  issue  with  poor  completion  rates  at  around  50  per  cent.    That  means  around  half  those  who  start  an  apprenticeship  don’t  go  onto  finish  it.  Almost  a  third  of  starting  apprentices  leave  in  the  first  12  months.    

What  needs  to  be  done  

The  Apprenticeship  expert  panel  provided  a  way  forward  for  dealing  with  these  issues.  The  Government  has  made  progress  in  implementing  the  recommendations  but  outstanding  issues  remain.  Unions  support  further  action  in  the  following  areas:    

 

- Introduction  of  training  levies.  They  would  be  based  on  a  simple  user-­‐pays  type  proposition  for  employers–  that  is,  if  you  don’t  make  your  own  contribution  to  the  future  supply  of  skilled  workers  by  training  your  fair  share  of  apprentices  and  trainees,  then  you  make  a  contribution  to  a  fund  that  supports  industry  training.    

- Improved  wages  and  conditions  for  apprentices  –  the  ACTU  and  unions  have  made  applications  to  FWA  to  lift  first  year  wage  rates  to  60%  of  the  trade  rate,  and  ensure  adult  apprentices  are  paid  no  less  than  the  minimum  wage  under  their  award.  This  claim  recognises  the  impact  of  low  wages  on  commencement  and  completion  rates,  the  cost  of  living  pressures  for  apprentices  on  current  award  rates  of  pay,  and  the  changing  age  profile  of  modern  day  apprentices.    

- Stronger  training  requirements  for  457  visa  sponsors  -­  employers  who  seek  to  use  temporary  overseas  labour,  including  on  EMAs,  must  be  able  to  demonstrate  their  current  and  ongoing  local  training  efforts  so  that  they  reduce  their  reliance  on  temporary  migration.  This  should  include  specific,  quantifiable  commitments  to  the  training  of  apprentices  and  trainees  

 

Support  for  TAFE  as  the  public  provider    

• In  the  past  twenty  years,  governments  at  state  and  federal  level  have  neglected  the  TAFE  system,  despite  its  position  as  the  pre-­‐eminent  provider  of  quality  vocational  education  and  training  (VET)  to  students  and  workers  across  Australia.    

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• Recurrent  funding  per  student  contact  hours  declined  by  15.4%  between  2004  and  2009,  and  by  25.7%  from  1997.    

• Government  funding  for  TAFE  has  declined  for  two  reasons  –  because  of  the  reduction  in  overall  funding  but  also  because  of  the  shift  of  government  funding  away  from  the  TAFE  sector,  and  into  private,  for-­‐profit  providers  under  market-­‐driven  policies  of  contestability.      

• In  Victoria,  the  state  at  the  forefront  of  the  move  to  full  contestability,  there  has  been  a  massive  shift  with  TAFE  market  share  slumping  from  75%  in  2008  to  only  49%  in  2011.  In  that  same  period,  the  number  of  private  providers  grew  from  225  to  528  and  their  market  share  increased  from  14%  to  40%.  

• 16  out  of  18  TAFE  institutes  in  Victoria  are  now  operating  in  deficit,  a  turnaround  since  2008  when  only  two  institutes  recorded  deficits.  Nearly  300  ongoing  TAFE  staff  have  already  lost  their  jobs  and  many  teaching  contracts  have  not  been  renewed.    

• In  the  Victorian  State  budget  in  2012,  the  Government  slashed  a  further  $300m  from  TAFEs.  This  will  result  in  further  massive  job  losses,  campus  and  course  closure,  and  will  deny  Victorian  students  and  workers  access  to  high  quality  vocational  education.      

• This  has  particular  implication  for  apprenticeship  trades  training.  Given  the  additional  expenses  and  facilities  required  to  support  quality  trades  training,  private  providers  tend  to  steer  clear  of  offering  courses  in  these  fields.  It  is  essential  that  TAFE  continues  to  be  supported  to  provide  high  quality  trades  training  in  industries  across  the  country.    

• Referring  to  the  point  made  on  job  security  earlier  in  this  paper,  it  is  noteworthy  that  up  to  80%  of  TAFE  teachers  are  employed  on  casual  or  short-­‐term  contracts  –  a  major  issue  for  attracting  and  retaining  quality  teachers  in  the  sector.  

 

What  needs  to  be  done    

• The  public  TAFE  system  needs  to  have  adequate  levels  of  guaranteed  funding,  with  an  immediate  reinstatement  of  funding  in  Victoria  

• The  federal  Government  needs  to  properly  scrutinise  the  implementation  of  the  national  partnership  funding  agreement  to  ensure  that  Commonwealth  funding  does  not  flow  to  any  state  or  territory,  but  particularly  to  Victoria,  unless  it  has  met  conditions  of  that  funding  agreement  to  enable  public  providers  to  operate  effectively  in  an  environment  of  greater  competition.  

• State  and  territory  governments  to  demonstrate  their  support  for  TAFE  by  requiring  that  the  national  entitlement  to  a  guaranteed  training  place  is  offered  only  at  TAFE.    

• A  proper  public  examination  and  review  of  the  consequences  of  full  competition  on  TAFE  and  VET,  including  the  impact  on  educational  quality  of  VET,  levels  of  student  support  and  teaching  infrastructure.    

 

 

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Session  5:  Competition  and  Deregulation  Reform  Agenda  

COAG  has  agreed  to  pursue  a  set  of  reforms  dubbed  the  Seamless  National  Economy,  which  consists  of  27  areas  of  regulatory  change.  16  of  these  reforms  have  been  completed.  

One  of  the  key  areas  in  this  agenda  that  is  of  interest  for  working  people  and  unions  has  been  the  harmonisation  of  occupational  health  and  safety  (OHS)  legislation.    

National  OHS  laws  were  enacted  in  5  jurisdictions  by  1  January  2012  (in  line  with  the  Government’s  timeline)  –  QLD,  NSW,  NT,  ACT  and  the  Commonwealth.    Tasmanian  model  laws  will  take  effect  on  1  January  2013.    SA  laws  are  currently  before  the  State  Parliament.    WA  indicated  in  their  budget  that  they  would  introduce  the  laws  during  2012.    Victoria  announced  in  its  budget  that  it  would  not  be  enacting  the  model  laws.  The  process  for  the  development  of  model  Codes  of  Practice  continues  through  Safe  Work  Australia.    

Other  areas  of  interest  include:  

• Environmental  assessment  and  approval  processes;  • Harmonisation  of  payroll  tax  provisions  and  definitions;  • Licenses  for  tradespeople;  • A  new  consumer  policy  framework;  • Maritime  and  rail  safety  regulation;  and  • Directors’  liability.  

Where  there  is  needless  duplication  of  regulation  across  State  and  federal  governments,  unions  are  open  to  participate  in  a  discussion  about  streamlining  and  approving  the  regulatory  system.  However,  too  often  discussion  of  regulation  proceeds  from  the  assumption  that  regulations  are  necessarily  bad  and  that  deregulation  is  necessarily  good.  This  is  a  false  premise.  Unions  will  be  vigilant  to  ensure  that  important  and  necessary  regulation  of  safety  at  work,  and  occupational  and  environmental  standards  are  not  watered  down  as  part  of  the  push  towards  deregulation.  

Areas  to  be  addressed  

The  ACTU  is  concerned  that  the  next  round  of  red  tape  reduction  may  include  harmonisation  of  workers’  compensation  regimes.  There  is  the  risk  that  such  an  exercise  could  involve  a  move  towards  the  ‘lowest  common  denominator’  in  workers’  compensation  schemes.  

Unions  have  also  identified  several  deficiencies  in  the  model  OHS  laws  that  we  will  seek  to  remedy.  These  include:  

• Industrial  manslaughter  legislation  or  its  equivalent  in  health  and  safety  or  criminal  law;  

• Union  right  to  prosecute  for  breaches  of  Health  and  Safety  law;  

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• Improved  health  and  safety  representative  rights,  improved  access  to  union  approved  training  and  increased  number  of  training  days;  

• Regional  and  roving  health  and  safety  representatives;  

• Improved  protection  against  discrimination;  

• Enhanced  union  Right  of  Entry,  including  effective  entry  to  remote  workplaces;  and    

• Ensuring  all  jurisdictions  have  specific  regulations  for  the  registration  of  TCF  factories,  in  order  to  combat  exploitation  of  home  based  outworkers  and  workers  in  sweatshops.  

 

 

Conclusion  

During  the  1980s  and  90s  economic  reform  was  done  in  a  collaborative  rather  than  confrontational  approach.  Key  stakeholders  in  every  industry  –  representatives  of  employers,  workers  and  government  –  chose  to  work  together,  rather  than  battle  to  achieve  their  own  interests  at  the  expense  of  the  other  parties.  

As  we  know,  this  period  coincided  with  one  of  the  longest  periods  of  economic  and  productivity  growth  in  history.  The  more  confrontational  approach,  created  by  a  federal  government  hostile  to  unions,  coincided  with  a  decline  in  the  levels  of  productivity  achieved  in  the  mid  90s  and  early  2000s.    

This  is  not  a  monkey  we  have  yet  shaken  from  our  back,  but  the  return  to  the  collaborative,  tripartite  model  has  seen  us  move  forward  in  key  industries  –  notably  manufacturing  –  where  an  industry  taskforce  facilitated  by  the  federal  government  and  Prime  Minister  is  due  to  report  in  the  near  future.  

Industry  councils  –  a  way  forward  to  continue  this  collaborative  approach  at  an  industry  level  

Unions  therefore  propose  that  Fair  Work  Australia  be  invited  to  facilitate  consultative  councils  in  other  industries  –  retail,  hospitality,  childcare,  aged  care  and  construction,  for  example  –  to  further  the  debates  begun  at  this  forum  in  similarly  collaborative  environments.  

Such  councils  would  allow  each  the  key  industry  representatives  (employer  associations  and  unions)  to  work  together  to  discuss  productivity  and  the  particular  challenges  facing  their  sectors,  and  develop  strategies  to  address  these  to  the  mutual  benefit  of  businesses  and  workers,  and  the  economy  overall.  

Unions  consider  Fair  Work  Australia  to  be  the  appropriate  body,  and  are  hopeful  that  the  outcomes  from  this  forum  will  allow  all  participants  to  recognise  the  value  in  continuing  this  collaboration  on  an  ongoing  basis.  

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