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THE COMMONWEALTH ARBITRATION COURT- LEGAL TRIBUNAL OR ECONOMIC LEGISLATURE?*

" T h e evolution of this Court from a n industrial tribunal l imited to the particular task i n each case, to a n institution having i n eflect wide legislative powers, is a n interesting one which someone will one day explore."'

This article is an attempt to make such an exploration. The attempt has been made because it is believed that the evolution of the Court provides a phenomenon which is more than "interesting"; it involves some of the most vital questions affecting the social and economic welfare of Australia. The metamorphosis of the Court into an institution with powers and functions far beyond the limited intentions of the fathers of the Constitution has been a major event in the constitutional and economic history of Australia in this century.

In what follo~\s, the whole range of the Court's activities is not investigated; the question is studicd particularly in terms of the development of the concept of the basic wage, a treatment recom- mending itself on three grounds. First, considerations of time and space preclude a useful analysis of decisions in matters of margins for skill, standard hours, preference for unionists, and other aspects of the Court's work. Second, the concept has been the Court's principal instrument in seeking to discharge its fundamental duty of preventing and settling industrial disputes and for that reason warrants detailed consideration. The basic wage-Mr. Justice Higgins first used the term in 191 I-is predominantly the creation of the Court. There is no mention of the concept in the Constitution, and although the original legislation referred to a minimum wage it was not until 1949 that Parliament attempted tc give any definition of the term. Third, the translation of this concept, with which the name of the Court has become inevitably linked, into an actual wage rate is the function that more than any other has made the Court such a significant institution.

The schematic approach of this article may be stated briefly. An examination of the reasons for, and the methods of, establishing the

* The article is a study of the institution known before the amending legislation of 1956 as the Commonwealth Court of Conciliation and Arbitration. Throughout the article the institution is normally referred to simply as the Court.

1 Extract from the judgment of the Court in the 1947 Standard Hours Inquiry, 59 Commonwealth Arbitration R. 581, at 588.

Court is followed by an analysis of the factors which have resulted in a radical departure from this original conception. A detailed consideration of the criteria used by the Court in determining the basic wage then leads finally to an explanation of the current problem and to suggestions for resolving the difficulties created by the evolution of the Court in the manner described.

I. CREATION O F THE COURT.

A Frenchman, Albert Metin, writing in 1901 observed that "Australasia has not contributed much to social philosophy, but she has gone infinitely further than any other country in the practical field."2 Metin was right in so far as he drew attention to the essentially empirical basis of the underlying assumption that all men were entitled to fair and reasonable conditions of life. Where there were palpable obstacles to the realisation of the assumption they were removed- hence the successful agitation for removal of the franchise restrictions and the property qualifications for the Legislative Assemblies in the various colonies before the close of the 19th century. The creation of the system of compulsory arbitration in Australia fits precisely into this pattern. The particular conditions which produced this empirical solution in conformity with the basic egalitarian assumptions stand out quite clearly. The year 1890 ushered in a four-year period of strikes and lock-outs in the maritime, shearing, and mining industries, involving the colonies in the greatest industrial disturbances in the century of their existence. I t is difficult, now, to comprehend the magnitude of the dislocation caused and the intensity of feelings aroused by the industrial strife of these four years. However, out of the crushing defeat of organised labour in direct industrial action two things emerge clearly and they are, for our purposes, of paramount importance. First, the period produced a liberal reaction to the un- necessary sufferings of industrial warfare and a widespread conviction that unlimited recourse to force for the settlement of disputes in industry should not be tolerated again-that freedom should not be euphemistically equated with licence for either side to impose its will upon the other without regard for the public interest. Second, Labour was equally convinced that the time had come to abandon its tra,di- tional reliance on industrial action alone. I t had thrown its weight behind the campaign to secure the vote for all men and had seen the authority of Parliament readily invoked against it during the strikes. The unions concluded that the vote must be used to return representatives of labour who would have a direct voice in the future exercise

2 LE SOCIALISME SANS DOCTRINES, 256.

of that authority. Within a year of the great Maritime Strike of 1890, Labour had entered the political arena in New South Wales and dramatically captured the balance of power in the Legislative A~sembly.~

The outstanding result of this dual reaction was the intervention of the State in the regulation of industrial relations-and, particularly, the establishment of the Commonwealth Court of Conciliation and Arbitration soon after the federation of the colonies a t the turn of the century. Labour soon showed its responsiveness to, and positive endorsement of, State intervention,' but the actual translation of the concept into a practical scheme was the work of liberals outside the union movement. Foremost among these was Charles Cameron King- ston of South Australia who introduced the prototype of most later legislation into the Legislative Assembly of that State in 1890.

The creation of the Court can thus be seen as a consistent mani- festation of certain basic assumptions and attitudes of the Australian community. These assumptions include the acceptance and expecta- tion of a large measure of governmental activity in a country where great distances and the scattered isolation of much of the population discouraged private enterprise from some fields hitherto regarded as its special prerogative.When the events of 1890-94 offended the social ethos of the community, the provision of legislation whereby the state would intervene to secure the just settlement of industrial

3 In a message refusing a union request for a conference during the 1891 Queensland shearing strike, Sir Thomas McIlwraith, a member of the Government and the Pastoralists' Association, had said: "The unionists do not make the law. Let them alter i t as much as they can constitutionally, but they cannot give the law to the Government . . . " - Sydney Morning Herald, 2nd March 1891. The unions had already come to the same conclusion and in New South Wales had organised Labour Electoral Leagues with a view to contesting the elections for the Legislative Assembly in June 1891. In the result Labour candidates were successful in 36 of the 45 seats contested, and with 49 Freetraders, 51 Protectionists, and 5 Independents in a House of 141, the election had without any doubt yielded Labour the balance of power. One wonders how seriously McIlwraith had taken his exhortation to Labour but it had been fulfilled sufficiently for another newspaper to observe somewhat piously four months later: "In so far as there is any connection between the strike and the political Labour upheaval, we are entitled to congratulate the country upon the fact that the law-breakers of last year are the law-makers of this year." - Sydney Daily Telegraph, 1st July 1891.

4 C f , the speech of the Labour member W. A. Holman on 23rd August 1900, in 105 NEW SOUTH WALES PARLIAMENTARY DEBATES (First Series) 2226, at 2237.

5 Railway construction and operation, for instance, became predominantly a governmental activity.

disputes was therefore regarded as a logical extension of the function of government. Labour took up the solution of the liberal reformers and, using the parliamentary instrument that it ha,d helped to create, took advantage of the split between the existing parties on the t a r 8 question to transcribe that solution into the law of the country. I t remains to be seen how that transcription was effected; or more precisely how an appropriate power was written into the constitution of the coming Commonwealth and how that power was used in the first federal Parliament to establish the Commonwealth Court of Conciliation and Arbitration.

I t should not be assumed from the foregoing that the members of the Federation Conventions held during the last deca,de of the last century consented easily to the inclusion of the arbitration power in the Constitution. The plea of '(States' rights'' was a constant and often stultifying one; and indeed the debates of the three Conventions in 1891, 1897, and 1898 reveal that the subsequent creation of the Court was made possible only by the relentless efforts of a few convinced idealists, particularly Kingston and Higgins (later to become the most famous judge of the Court he sought to establish). After decisive rejections at the two earlier Conventions the power was only included by a 22-19 decision at Melbourne in 1898-a switch of two votes and Australia would not have had a, federal Arbitration Court6

The most significant feature, however, which emerges from a study of the debates is the distinct contrast between the limited intentions of the constitution-makers and the comprehensive system which has been evolved from the provision they so reluctantly granted. This provision, as finally passed by the 1898 Convention, was incorpora~ed in section 5 I of the Constitution containing the enumerated legislative powers of the Commonwealth. The Parliament of the Commonwealth was to have power inter alia, to make laws with respect to:

(xxxv) Conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State. One of the main arguments adduced by the opponents of the

clause was that industrial disputes were not interstate in character- tliey were local in origin and would not have the same characteristics in different States and therefore were a proper subject for State adjudication. Those supporting the measure were prepared for the

6 Of course this ignores the possibility that a subsequent referendum may have given the Commonwealth power to deal with industrial matters. How- ever the fate of referenda designed to increase the existing power (cf. infra) suggests the remoteness of such a possibility.

most part to accept this argument. They urged, however, that the few exceptions constituted the compelling reason for the inclusion of the power in the Constitution. I t was argued that industrial disputes in the shipping and shearing industries were, by the very nature of those industries, essentially interstate in their ramifications and beyond the competence of any one State authority to settle completely. The evidence is entirely convincing that the recent disputes of intercolonial dimensions in these industries were directly responsible for the reluctant decision to include this head of power in the Constitution. I t is equally clear that those who framed the Constitution imagined that the power would be exercised in regard to those two industries, perhaps coal as well, and no others-at no stage of the Convention debates - was any reference made to any other industry as a likely area for the exercise of the power. And the inclusion of the power, it was imagined, would do no more than enable the federal Parliament to settle, probably by the creation of ad hoc tribunal^,^ any interstate dispute that might arise in these industries.

The colonies had suffered grievously in the maritime and shearing strikes, and in the consequent mood of frustration and determination to prevent a repetition of such disasters the reforming zeal of Kingston and Higgins was able to work its leavening process. Initially, the traditional conservatism of some delegates, their virtual laissez-faire attitude to the role of government in industrial matters, and the jealous respect for " States' rights" were stronger even than this desire to save industry from further disruption. The ultimate acceptance of the power at Melbourne can be attributed to several factors. First, New Zealand had introduced in 1894 a scheme of conciliation and arbitration which up to the time of the Melbourne Convention had not produced the dire results predicted by those inflexibly opposed to the system. Second, Labour, with a proposal for a system of conciliation and arbitration as a major part of its platform, was assuming increasing electoral significance and a strategic political position in the division between free traders and protectionists. Delegates in the exalted role of constitution-builders, whatever their personal preju- dices, could not easily forget that they were politicians. Third, it was

7 Kingston's speeches at both the 1897 and 1898 conventions - NATIONAL AUSTRALASIAN CONVENTION DEBATES (Adelaide), at 782, and 1 AUSTRALASIAN FEDERAL CONVENTION DEBATES (Melbourne 1898), at 185 - indicate that at that stage he envisaged a system of successive ad hoc tribunals rather than a permanent court. Isaacs (later a Judge of the High Court), alone of all those participating in the debates, seems to have anticipated the single Court - cf. his remarks in 1 AUSTRALA~IAN FEDERAL CONVENTION DEBATES (Melbourne 1898). at 188.

obvious that regardless of what happened in the federal sphere some States at least would adopt, or proceed with, schemes of intervention in industrial matters. Undoubtedly delegates from these States were predisposed towards voting for the federal measure in the hope of achieving some degree of uniformity in competitive industrial conditions throughout the States. And finally, the coincidence of the Melbourne Convention with a crippling engineering strike in England may have dispelled any compla.cency that had developed in Australia since the disasters of the first years of the decade.

Such then were the motives, conceptions, and intentions of the men who included the industrial power in the Constitution. The power was soon utilised, for in the first Parliament of the Commonwealth, in July 1903, Kingston as Minister for Trade and Customs in the Barton Government moved in the Housc of Rcprescntatives that leave be given to bring in a. "Bill for an Act relating to Conciliation and Arbi- tration for the prevrntion and settlement of industrial disputes." For a measure primarily concerned with conciliation it had an unusually stormy career. Seventeen months and eight days elapsed before the Bill received the royal assent and in that time it acquired an impres- sive list of casualties-one minister resigned, two governments fell, and in fact it was steered through Parliament under four different Prime Mini~ters .~

Undoubtedly the thinking of most parties interested in federal legislation on this subject had developed since the 1898 Convention and in some particular respects this was evidenced in the Act as finally passed. During the Convention debates many delegates had conceived of the industrial power being exercised directly by Parliament itself but this notion had come to be recognised as inadequate and was abandoned. Similarly the concept of ad hoc tribunals was replaced by provisions for a permanent Court in the person of a Justice of the High Court. It would be a mistake, however, to assume from these changes and the recurrent invocation of the Convention debates by some members that the legislation embodied the anticipations of a system fundamentally different from that envisaged at the Convention. Labour was in a position, holding the parliamentary balance of power, to secure from Barton, and later Deakin, the introduction and endorsement of a measure which would at least secure all that was

8 Kingston resigned on account of disagreement with Cabinet as to the inclusion of certain matters within the Bill; the Deakin and Watson Governments were defeated in the House during debate on the Bill; and the four Prime Ministers responsible at various stages for its passage were Barton, Deakin, Watson, and Reid.

possible in the terms of placitum xxxv. And Kingston, the father of this type of 1egisla.tion in Australia, as the chief draftsman of the Bill was ready to write 1arge.Wrganised labour having embraced political action was not, in dealing with legislation in Parliament, stringently wedded to intentions expressed by Convention participants. In fact W. M. Hughes could go so far as to say in the face of this persistent argument: "What the Convention intended, or did not in- tend, has nothing to do with the que~tion."'~ The point was that members generally recognised that the High Court would finally determine the ambit of the federal jurisdiction and this provided a cogent reason for a plenary exercise of the constitutional power. The Bill was framed in such a manner that the Court would be legislatively empowered to handle any disputes that the High Court might determine, upon an interpretation of the Constitution, were rightly within its jurisdiction. But in fact it was generally contemplated that the demands made upon the Court would be infrequent and even Hughes himself anticipated that "the chief reason for this Bill will pass away when the example of the Commonwealth, as a whole, as well as that set by New South Wales and Western Australia is followed by the remaining individual States."ll

11. THE GROWTH O F T H E COURT'S AUTHORITY.

( a ) Constitutional and Legal Developments.

The wording and intent of any constitution is conditioned by the particular situation and climate of opinion existing a,t the time of its creation. This is true of the Australian constitution and, as we have seen, particularly true of the conciliation and arbitration placitum. With the development of the society whose affairs the instrument is to govarn there arise new circumstances demanding new concepts of legislative powers and their distribution. In Australia this demand may be satisfied in one of two ways. Either the a,ctual division of powers between Commonwealth and States in the Constitution may be altered by popular referendum or by the reference of matters to

Q T h e words "industrial disputes", "industrial matters", and "industry" were defined so widely in the Act that it could comprehend potentially any dispute in industry depending on the interpretation by the High Court of the words "extending beyond the limits of any one State."

10 (1903) 16 COMMONWEALTH PARLIAMENTARY DEBATES 4762. 11 (1903) 17 COMMONWEALTH PARLIAMENTARY DEBATES 3381. This is not to

say that there were not some who could see that they were "building larger than they knew."

the Commonwealth by the Parliaments of the States;12 or, on the other hand, the High Court may deliver interpretations of the Con- stitution that enable existing provisions to be a,dapted to the unfolding requirements of the community.

Attempts to alter the Constitution by referendum have been generally unsuccesful, and this has been particularly true in relation to industrial matters. The State Parliaments have not made any voluntary reference of powers and in fact particular judicial interpretations by the High Court have been a necessary condition of the extension of the Arbitration Court's jurisdiction and influence. This section will therefore deal first with these attempts to alter by referendum the Commonwealth-State distribution of industrial powers and, second, with the constitutional interpretation of those powers by the High Court. The Constitution merely expresses in certain words the right of the Commonwealth to legislate with respect to industrial disputes. Within the limits of those words, as interpreted by the High Court, an elected Parliament may exercise the power in any manner it chooses. It may give the Arbitration Court new functions or require the Court to exercise its jurisdiction in a particular manner. Indeed it may abolish the Court.13 In the third place the relevant legislative amendments passed by the federa,l Parliament to the original Com- monwealth Conciliation and Arbitration Act 1904, will be examined.

Section 128 of the Constitution provides that a proposed law for the alteration of the Constitution having first been passed by an absolute majority of each House of Parliament14 must be approved both by a majority of electors in a majority of States and by a

12 By sec. 51 (xxxvii) of the Constitution the Commonwealth has power to legislate with respect to:

"Matters referred to the Parliament of the Commonwealth by the Parliarnent or Parliaments of any State or States, but so that the law shall extend only to States by whose Parliaments the matter is referred, or which afterwards adopt the law."

13 In form, if not in substance, the 1956 amending legislation did precisely this.

1 4 The section also provides that the Governor-Geenral may submit a proposed law for alteration to the electors if one House twice passes the law by an absolute majority (with an interval of three months between the two votes) and the other House twice "rejects or fails to pass i t or passes it with any anlendment to which the first-mentioned House will not agree." In 1914 the Senate presented an address to the Governor-General requesting, inter alia, that a proposed law to alter placitum xxxv be submitted to the electors, having been twice passed as required by the Senate and the House of Representatives having twice failed to pass it. The request was refused.

majority of all people voting. More than a dozen Bills have been introduced into the federal Parliament under this section with the object of initia-ting a referendum to alter the distribution of the power to legislate with respect to industrial matters and on six occasions such proposals in one form or another have been put to the popular vote.

In 1910, the first time a referendum was held to alter placitum xxxv, Western Australia was the only State to approve a proposal that would have given the Commonwealth unrestricted power to legislate with respect to labour and employment, including wages. In 1913 the voting, on an even more comprehensive proposal, was much closer, the States being equally divided, with Queensland, South Australia, and Western Australia in favour. A very slight swing in the Victorian voting would have been sufficient to carry the measure.16

There was an even narrower margin in the aggregate vote in the referendum of 1 g 19. This was a proposal slightly less comprehensive than that of 1913 and identical in terms with one passed by both Houses of Parliament in 1915 but withdrawn by proclamation from submission to the electorate. In a total of just under two million valid votes there was less than thirteen thousand separating those in favour of and those against the proposed alteration. Victoria, Queensland, and Western Australia voted in favour, but it would have required a substantial change in the pattern of voting in any of the other States to affect the result. In 1926 only New South Wales and Queensland favoured the extension of the Commonwealth's industrial powers; in both the 1919 and 1926 referenda the issue was complicated by the inclusion of proposals relaiing to trusts and combinations.16

The two most recent referenda affecting the industrial powers were conducted in 1944 and 1946. In the former year the omnibus proposition put to the electors and calculated to give the Common- wealth additional powers to handle the transition from war to peace

15 A change of less than 6,000 votes in Victoria in a total valid vote of more than 600,000 would have altered placitum xxxv to give the Commonwealth Parliament power to legislate with respect to:

"Labour, and employment, and unemployment, including - (a) the terms and conditions of labour and employment in any trade,

industry, occupation, or calling; (b) the rights and obligations of employers and employees; (c) strikes and lock-outs; (d) the maintenance of industrial peace; and (e) the settlement of industrial disputes."

18 In 1919 out of a total of 2,030,911 votes cast, 195,394 or almost lo%, were informal.

included a provision for power to legislate with respect to "employment and unemployment." The additional powers were to accrue to the Commonwealth for a period not exceeding five years from the ter- mination of hostilities; but the proposals were rejected, only South Australia and Western Australia voting in favour of the temporary redistribution. The referendum of I 946 was also unsuccessful in respect of the industrial powers of the Commonwealth although for the first time one of the conditions for amendment of the Constitution was satisfied in that a majority of those voting were in favour of the proposal.17

No clear pattern emerges from the voting in these six referenda. One remarkable, and perhaps surprising, feature is the fact that except in 1926 Western Australia has always voted to increase the powers of the Commonwealth Parliament with respect to industrial matters. The people generally have proved more intractable than the judiciary, and placitum xxxv has remained unchanged in form if not in interpretation.

* * * * The essential nature of any federation is to be found in the

distribution of legislative powers between the central and State governments. Specific powers may be given under the Constitution to the States, with the residual powers accruing to the central government; or, as in Australia and the United States, it may be the central government whose powers are strictly enumerated. These enumerated powers may be exclusive, i.e., State legislation may be eliminated from the particular field, or they may be limited powers permitting of concurrent participation by the States. I t has already been seen that the power given to the Commonwealth Parliament to deal with industrial affairs was a limited one confined by placitum xxxv to legislation with respect to "conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State." In consequence, the Arbitration Court

established under the Act of 1904 as the agency by which the Com- monwealth sought to exercise this power has never had the sole control of industrial relations in Australia, a function which it has shared

17 The votes for and against the alteration were respectively 2,060,275 and 2,035,860, with New South Wales, Victoria, and Western Australia having Yes-majorities. A change of 6,692 votes in South Australia out of a total of valid votes of 371,669 would have added a new placitum to sec. 51 of the Constitution giving the Commonu~ealth power to legislate with respect

with the instrumentalities established by the laws of the States.ls Clearly, an excess of jurisdiction could be involved either in the legislation passed under the power by Parliament or in a.wards or decisions of the Court itself.

Granted this constitutional situation it was evident that the nature and extent of the influence of the Arbitration Court would depend upon the interpretation that the High Court was prepared to put upon the words adopted in 1898. I t has been indica.ted that the first federal members of Parliament, aware of the ultimate authority of decisions by the High Court, had drafted the original Bill in the widest conceivable terms. Not only was appeal to the High Court recognised as inevitable but the decisive importance of that institution in the future expansion of Australia did not pass unmentioned. With no small degree of prescience one newspaper observed in 1904:

"The tendency of our national development for generations to come will be determined by the principles which are a.dopted by the High Court in construing the Cons t i tu t i~n ."~~

In no direction has this prophecy been more completely vindicated than in relation to the Commonwealth Arbitration Court.

Placitum xxxv has been the cause of more litigation than any other single provision in the Constitution. I t has been the bread and butter of constitutional lawyers in Australia; Justices Dunphy and Wright have said "each word has cost a ransom."20 The placitum can lay claim to notoriety not only by virtue of the volume of litigation it has attracted but equally because of the vacillations and direct reversals in the judgments given under it. Out of this welter of decisions however have emerged certain principles that have been fundamental to the growth of the Arbitration Court's authority and jurisdiction. These principles and the whole judicial process by which the Court's jurisdiction has become extended have been described

to: "Terms and conditions of employment in industry, but not so as to authorize any form of industrial conscription."

1s The principal instrumentalities in each State are: New South Wales The Industrial Commission of New South Wales. Victoria . . . . Wages Boards. Queensland . . The Industrial Court of Queensland. South Australia . . The Industrial Court of South Australia. Western Australia The Arbitration Court of Western Australia. Tasmania . . . . Wages Boards.

19 Sydney Daily Telegraph, 28th April 1904. 20 The expression, originally used in reference to the Statute of Frauds, was

quoted by Dunphy and Wright JJ. in T h e Jubilee of Industrial Arbitration in the Federal Sphere, (1951) 25 Ausr. L. J. 360, at 362.

before21 and for the purposes of this analysis the process is no more than summarised.

The sine qua non for jurisdiction to vest in the Arbitration Court is the existence of an "industrial dispute." The early interpretation of this term as meaning something in the nature of industrial warzz corresponded to the Convention conceptions and carried the implication that the facilities offered by the Court could not be utilised until relations between the parties had deteriorated to the point of actual stoppage; this was gradually broadened with the High Court being prepared to acknowledge that the existence of disagreement between the parties could found jurisdiction. The position that it had come to adopt was stated clearly in 1930. The High Court then said that to constitute an industrial dispute which could invoke the federal jurisdiction of the Arbitration Court there must be disagreement between people or groups of people, who stand in some industrial relation, upon a matter asising out of or affecting the re la t i~nship .~~ The disa.greement may in fact cause a strike or other industrial dislocation "but these are the consequences of the industrial dispute, and not the industrial dispute itself, which lies in the di~agreement";~~ and the disagreement is usually evidenced by a duly formulated and "genuine" demand.

A dispute to be cognizable by the Court must be one "extending beyond the limits of any one State." Both in the Convention and in Parliament it had been recognised that the construction put upon these words by the High Court would be crucial. Two interpretations of the phrase are conceivable. Either it can be construed to mean disputes which originate in one State and then spread beyond the borders of that State, or it could be given the more comprehensive construction of embracing all disputes which exist simultaneously in more than one State. This second construction was supported vigorously by Isaacs J. in the Builders' Labourers' case in 1 9 1 4 ; ~ ~ in this case and

21 See the chapter on INDUSTRIAL RELATIONS by R.M. Eggleston in ESSAYS ON THE

AUSTRALIAN CONSTITUTION (1952); and 0. DE R. FOENANDER, TOWARDS INDUSTRIAL PEACE IN AUSTRALIA (1937) .

22 For example, the statement of Griffith C.J. (one of the framers of the Constitution) in Federated Saw Mill, Timber Yard, and General Wood- workers' Employees Association of Australia v. James Moore & Son Pty. Ltd., (1909) 8 Commonwealth L.R. 465, at 490-491: "The term . . . connotes something in the nature of industrial war, existing or threatened."

23 Caledonian Collieries Ltd. v. Australian Coal & Shale Employees' Federation (No. 1) , (1930) 42 Commonwealth L.R. 527.

24 Zbid,, at 552-553. 26 The King v. Commonwealth Court of Conciliation and Arbitration and

another of the same year26 it was held that to satisfy these words of

thc placitum it is not necessary that there should be interstate com-

petition in the product or service of the industry in question, or even that the operation or conditions of the industry in one State should

have a direct action or reaction on the operations or conditions of the

industry in another State. The proposition of Isaacs J. was adopted

explicitly by the High Court in 1 9 3 0 ~ ~ when it was held that the words

mean a dispute existing in two or more States or, simply, covering

Australian territory comprised within two or more States.

Once the High Court had interpreted the Constitution to mean

that the term "dispute" required no more than the disagreement in-

volved in the formal service of, and non-compliance with, a log of

genuine demands, and that the concept of "interstateness" was satisfied

by the simultaneous existence of such "disputes" in two or more States,

the floodgates if not opened wide had a t least been given a hefty judicial shove. In the light of these decisions the jurisdiction of the

Commonwealth Arbitration Court could be invoked by the process

of either side serving genuine and unacceptable demands upon the

other in two or more States. These are the main intrrpretations that

have extended the jurisdiction of the Court so far beyond the intention

of the Constitution-framers; there are however some important ancil-

lary features in this development.

The one provision in the original Act which, more than any

other, was regarded as a possible instrument for the spread of the

Court's influence was that giving power to declare a common rule throughout an industry.28 I t must therefore have been with some

relief that those opposed to the establishment of the Arbitration Court

greeted the decision of the High Court in I 9 I o declaring this common

rule provision to be beyond the power of the Commonwealth Parlia-

ment.29 This decision was given by the High Court on a case stated for

the Australian Builders' Labourers' Federation, (1914) 18 Commonwealth L.R. 224, at 240-249.

26 The King v. Commonwealth Court of Conciliation and Arbitration and the Merchant Service Guild of Australasia, (1914) 18 Commonwealth L.R. 273.

27 See note 23, supra. 28 Sec. 38 (f) of the 1904 Act. 29 Australian Boot Trade Employees' Federation v. Whybrow & Co., (1910)

11 Commonwealth L.R. 311. An unsuccessful attempt to have this decision overruled was made in R. v. Kelly, ex parte The State of Victoria, (1950) 81 Commonwealth L.R. 64.

its consideration by Higgins J. as President of the Arbitration Court. In his capacity as a judge of the High Court Higgins participated in the case, and while concurring with the judgment of the other members on the Bench30 he lamented that "without power to declare a common rule, or its equivalent, it will often be impossible for the Commonwealth Court to settle disputes, or, at all events, to settle disputes sa.ti~factorily."~~ Actually legislative provisions and Arbitration Court procedures held valid by the High Court have supplied an "equivalent" of the common rule.

In the first place it was early held that the provisions in the Act for the registration of associations as organisations and for their incorporation when registered were a valid exercise of the incidental power.32 The judgments in this case recognised that Parliament had designated the associations of workers and employers as the collective bargaining units through which the system was to operate. As such the decision is perfectly straightforward but interesting developments are associated with the extent to which these units have been considered capable of implicating other parties in the jurisdiction of the Arbitraiion Court.

The early decisions had indicated that a dispute could only arise between a union and an employer if the latter actually employed members of the union. In a 1925 decision however the High Court held that a union of employees in an industry registered under the Act can make demands upon employers in that industry who do not employ members of the union; and that non-compliance with these demands creates an industrial dispute to which those employers are parties bound by any award which the Arbitration Court makes in settlement of the dispute.33 And in 1935 the High Court again held in a case where the union had served a log on employers some of whom did not employ members of the union that the Arbitration Court ha,d jurisdiction to make an award binding equally on those who did not employ union members and as to the terms of employ-

30 Griffith C.J., Barton, O'Connor, and Isaacs JJ. 31 11 Commonwealth L.R. 311, at 345-346.

32 Jumbunna Coal Mine, No Liability v. Victorian Coal Miners' Association, (1908) 6 Commonwealth L.R. 309.

33 Burwood Cinema Ltd. v. Australian Theatrical and Amusement Employees' Association. (1925) 35 Commonwealth L.R. 528.

ment of all employees including non-unionists.34 The High Court also upheld thc validity of an amendment to the Act providing that industrial agreements made between the parties and filed with the Arbitration Court should bind any successor, assignee, or transmittee of the business of a party bound by the agreement, including any corporation which acquired or took over the business of such party.3s

The other line of interpretations which indirectly have helped to overcome the effect of the common rule decision concerns the relationship of the Court and the States. In the first place the original ex- clusion of State employees from the jurisdiction of the Court, based not upon anything peculiar to placitum xxxv but on implications from the early conception of federation, was reversed in 1920 by the decision in the Engineers' case.36 Second, the general doctrine of the supremacy of Commonwealth law has been developed most strongly in relation to the arbitration systems. In 1 9 2 6 ~ ~ the High Court held that an award made by the Arbitration Court had the status of a la-w of the commonwealth and therefore prevailed over a. State law by virtue of section 109 of the Const i tu t i~n .~~ The possibility of obeying both laws without disobeying either was rejected as a test of inconsistency, and the constitutional position was stated by Isaacs J. in the following terms :

"If, however, a competent legislature expressly or impliedly evinces its intention to cover the whole field, that is a conclusive test of inconsistency where another legislature assumes to enter to any extent upon the same field."39

34 Metal Trades Employers Association v. Amalgamated Engineering Union, (1935) 54 Commonwealth L.R. 387. Note the restriction on the possible implications of this decision by the recent decision of the High Court in The Queen v. Graziers' Association of New South Wales, ex parte Australian Workers' Union, [1956] Argus L.R. 534. The High Court held - on the basis that a union does not represent persons who are not members of the union - that the service by employers upon a union of logs including a demand that a proposed award should be binding upon employers in respect of all employees whether union members or not, and the union's failure to accede to it, did not result in an industrial dispute giving authority to make an award insofar as it related to non-union employees.

35 George Hudson Ltd. v. Australian Timber Workers' Union, (1923) 32 Commonwealth L.R. 413.

36 Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd., (1920) 28 Commonwealth L.R. 129.

37 Clyde Engineering Co. Ltd. v. Cowburn, (1926) 37 Commonwealth L.R. 466. 38 Sec. 109 provides: "When a law of a State is inconsistent with a law of the

Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid."

39 37 Commonwealth L.R. 466, at 489.

And third, the High Court in the same year upheld the validity of a provision in the Act whereby the Commonwealth Arbitration Court could make an order restraining a Sta,te industrial authority from dealing with an industrial disputc40

In a contribution to the discussion initiated by the article of Justices Dunphy and Wright" the assertion is made by Eggleston that "it is only really a technicality which prevents the Court (and the conciliation commissioners) from exercising jurisdiction in all matters."-'? The decisions summarised in this section have had the effect of so radically altering the initial conception and extent of the Court's authority and influence that this conclusion appears, indeed, to be ~navoidable.'~ Such a conclusion follows logically from the process which has been adopted in practice and sanctioned in theory, of attracting the jurisdiction of the Court, and the inference that the only obstacles to this comprehensive jurisdiction are ones of organisation seems equally well-foundrd. There are obviously some occupations that by their nature do not warrant the trouble and expense of federal unionisation. Where, however, interstate unions in any industry are formed and registered as organisations under the Act there would appear to be nothing to prevent the jurisdiction of the Court from being invoked.

+ + + + In the light of changed conditions or current political exigencies

Parliament has periodically altered the original Commonwealth Con- ciliation and Arbitration Act of 1904. Altogether there have been thirty-two Acts amending the legislation under which the Court operates. The alterations embodied in these Acts vary in importance and in this context it is not necessary to consider all of the changes which from a general point of view have been intrinsically important.

40 The King v. Commonwealth Court of Conciliation and Arbitration, ex parte The Engineers (State) Conciliation Committee, (1926) 38 Common- wealth L.R. 563.

4 1 Note 20, supra. 42 25 AUST. L. J. a t 373. 43 This is, of course, subject to the limitation that disputes must be "indus-

trial" in character - so that not all types of employment can be brought within the amplitude of the placitum as now construed. The High Court has for instance held that employees in the business of banking or insurance can be engaged in an "industrial" dispute - Australian Insurance Staffs' Federation v. Accident Underwriters' Association: Bank Officials' Association v. Bank of Australasia, (1923) 43 Commonwealth L.R. 517; but i t was held on the other hand that State school teachers are not engaged in an "indnstrial" occupation which can attract the jurisdiction of the Court - Federated State School Teachers' Associatiori of Australia v. State of Victoria, (1929) 41 Commonwealth L.R. 569.

We are here concerned only with those changes prescribed by Parlia- ment that have directly affected the extent of the Court's jurisdiction and especially its development of the concept of the basic wage.

In 1910 the definition of industrial dispute was extended to include "any threatened or impending or probable industrial dis- p ~ t e . " ~ * This provision, still appearing in the Act, constituted a distinct legislative accretion to the Court's potential jurisdiction at a time before the judiciary ha.d given the words "dispute" and "extending beyond the limits of any one State" their subsequent broad interpretation. The validity of the provision was upheld by the High Court three years later.45 The next significant legislation, passed in 1914:~ involved two important developments. In the first place the Act widened the clauses specifying the organisations and persons bound by an award of the Court to include successors, assignees, or transmittees of a party so bound, including a corporation taking over or acquiring the business. The High Court's decision validating this type of extension was actually given in respect of a similar amendment dealing with industrial agreements voluntarily entered into and registered with the Court, but the reasoning seems to apply equally to the case of awards.47 The second change inestimably facilitated the sound and stable functioning of the Court. Up to this time it had frequently happened that an award would be made, after considerable time and expense had been incurred, only to be set aside subsequently as a result of a successful appeal to the High Court on the ground that the Arbitration Court had not had jurisdiction to hear and determine the dispute. The legislation of 1914 inserted a new clause in the Act providing that when an alleged industrial dispute was submitted to the Court an application could be made to the High Court for the declara'ion of the existence of a cognisable dispute, or on any question of law arising in relation to the dispute or to the proceeding or to any award or order of the Court. The decision of a single Justice of the High Court was to be final and conclusive. Of course the significance of the amendment lay in the fact that the President of the Court was himself a Justice of the High Court and could thus by an appropriate declaration ensure that the proceedings of the Court would not be rendered abortive by a subsequent juris-

Act No. 7 of 1910, sec. 2 (b) . 46 Merchant Service Guild of Australasia v. Newcastle and Hunter River

Steamship Co. Ltd., (1913) 16 Commonwealth L.R. 591. 46 4ct No. 18 of 1914. 47 Hudson's case, note 35 supra - this amendment was effected by Act No.

29 of 1921.

dictional appeal. The validity of this provision was upheld by the full High Court in 1 9 1 6 . ~ ~

The substantial alterations to the Act in 1926 were designed in part to overcome the difficulties created by the 1918 High Court decision in Alexander's case.4Q In that case the High Court held that the arbitral power was ancillary to the legislative function but that the enforcement of awards was a judicial power; and that this judicial power could not be exercised except by judges having life tenure, the High Court rejecting the submission by counsel, Dixon (now Sir Owen Dixon, the present Chief Justice of the High Court), that the conditions of judicial appointment contained in section 72 of the Constitution did not preclude an appointment for a term of years.50 As the President and Deputy-Presidents were appointed for seven-year periods only with the possibility of reappointment, the High Court held that the federal arbitration tribunal while competent to exercise the legislative function of making awards was not, as constituted, a court within the meaning of the Constitution with the right to exercise the judicial power of enforcement. I t was in the light of this decision, which has now to be read together with the decision in the Boilermakers' that the legislation of 1926 revised the nature of appointment to the Arbitration Bench. The terms "Presi- dent" and "Deputy-Presidents" were abolished and replaced by "Chief Judge" and "Judges", and the conditions of appointment were made precisely in terms of section 72 of the Constitution. The qualification required for the Bench was that the person a.ppointed should be a barrister or solicitor of the High Court or of the Supreme Court of a State of not less than five years' standing.

The 1926 amending legislation also made the first provision for the direct intervention of a representative of the Commonwealth Government before the Court. The Attorney-General was authorized to intervene in the public interest in any proceeding "in which the

48 Federated Engine Drivers' and Firemen's Association of Australia v. Colonial Sugar Refining Co. Ltd., (1916) 22 Commonwealth L.R. 103.

49 Waterside Workers' Federation of Australasia v. J.W. Alexander Ltd., (1918) 25 Commonwealth L.R. 434.

50 Sec. 72 reads in part: "The Justices of the High Court and of the other courts created by the Parliament - (i) Shall be appointed by the Governor-General in Council; (ii) Shall not be removed except by the Governor-General in Council, on an address from both Houses of the Parliament in the same session, praying for such removal on the ground of proved misbehaviour or incapacity."

51 The Queen v. Kirby, ex parte Boilermakers' Society of Australia, [I9561 Argus L.R. 165.

question of standard hours of work in any industry or of the basic wage is in dispute." This was the first time that the term "basic wage" had appeared in the Act although it had been a fundamental factor in the work of the Court for nearly twenty years.62 Upon any such intervention any person or organisation or association of employers or employees might be permitted by the Court to be heard and to examine and cross-examine witnesses.53 These provisions are deemed to have introduced the machinery which enabled the Court to hold the type of general inquiry that has come to be associated with the periodic determination of the basic wage.54 While it is true that the process has in fact been utilised for this purpose it could be argued that the Court had power to conduct such inquiries as the Act stood previ0usly.~5

The latter half of the 1920's was a period of exceptional industrial unrest and the reaction of the Commonwealth Parliament was expressed in two further substantial amending Acts within four years of the 1926 legislation. In 1928 the Bruce-Page government secured the passage of legislation implementing the most extensive changes since 1 9 0 4 . ~ ~ I t was remarkable generally for severe increases in the penal provisions of the Act but we are concerned here with four other features introduced at the same time. All of them were directly or indirectly designed to achieve a greater measure of uniformity in the regulation of industrial affairs throughout the Commonwealth.

First, the Court was required67 to secure as far as possible uniformity throughout an industry with respect to hours, holidays, and general conditions of employment; to take note of State apprentice- ship schemes; and to take into consideration the probable ''economic effects" of awards or agreements on the community generally and the

52 Surprisingly enough Justices Dunphy and Wright in the article referred to (note 20 supra) make the mistake of asserting that the term was first used legislatively in the amending Act of 1928.

63 Any question in respect of which the Attorney-General had intervened was to be heard and determined by the Chief Judge and two other Judges.

54 See, for instance, 0. DE R. FOENANDER, STUDIES IN AUSTRALIAN LABOUR LAW AND RELATIONS (1952), 96.

55 Sec. 23 (1) of the Act as passed in 1904 still provided: "The Court shall, in such manner as it thinks fit, carefully and expeditiously hear inquire into and investigate every industrial drspute of which it has cognizance and all matters affecting the merits of the dispute and the right settlement thereof." I t seems probable that this clause (appearing in substantially the same terms in sec. 39 of the present Act) could be read to sustain a general inquiry by the Court.

56 By Act NO. 18 of 1928. 57 Ibid., sec. 22.

industry (or industries) concerned. The proviso to this last clause is particularly interesting in the light of developments considered below: "Provided that this section shall not affect the practice of the Court in fixing the basic wage." Second, as a result no doubt of the favour- able High Court decision in 1926," the original clause giving the Court power to direct a State industrial authority to refrain from dealing with a dispute was repealed and replaced by a more comprehensive provision; where a State industrial authority was dealing or was about to deal with an industrial dispute, or part of a dispute, or with a matter provided for in a Court award or the subject of proceedings before the Court, an order could be ma,de by the Court restraining the State authority which should thereupon cease to proceed with the matter and any award, order or determination of a State authority made in contravention of such an order would, to the extent of the contravention, be void.59 Third, again in the light of a 1926 decision by the High CourtB0 an amendment was made to the original clause providing that laws, awards, orders or determinations of a State industrial authority inconsistent with an award or order of the Court should be invalid to the extent of the inconsistency. The ambit of the clause was extended to render invalid any such provision by a State authority "dealing with any matter dealt with" in orders or awards of the Court, and an application could be made to the Court for a declaration of invalidity under the section. And finally, in some contrast to the coercive nature of the two latter amendments it was provided that members of the Court might confer with State authorities with a view to securing co-ordination in the terms of their respective awards-a discretion which presumably could have been exercised unofficially in any case.

The Bruce-Page government was defeated in rgrg on the issue of its proposals to hand over to the States all control of industrial matters except those concerning the maritime industry. Reluctant to increase the powers of the Commonwealth by referendum the Aus- tralian people seemed equally determined to retain the degree of federal authority that had accrued as a result of the Court's operation. The Scullin (Labour) government that took office after the elections in its turn secured extensive alterations of the Act. In part this legislation consisted of deletions or modifica.tions of provisions inserted by

58 EX parte the Engineers, etc., note 40 supra. 69 The reference to "industrial dispute" in this section was subject of course

to the definition of the term in the Act, i.e., the dispute in reference to which an order was made would have to be an "interstate" one.

60 Cowburn's case, note 37 supra.

the 1928 Act, particularly those relating to penalties and the super- vision of organisations, but again there are four particular features of special interest.

First, the 1930 Act deleted the clause inserted in 1928 requiring the Court to take into consideration the probable economic effect of awa.rds or agreements. The clause had been inspired by the concern that decisions of the Court were given out of the context of the general economic situation, but Parliament now removed the directive on the ground that the Court should arrive at what it considered a proper decision in the circumstances of the case, the economic effects of these decisions being the responsibility of the legi~lature.~' Second, the constitution of the Court when exercising jurisdiction in respect to the basic wage was specifically laid down in the Act for the first time. I t was provided that the Court could not make an award altering the basic wage or the principles on which it was computed, or vary or interpret an award when it would involve any such alteration, unless the question was heard by the Chief Judge and not less than two other Judges. The provision applied equally to the alteration of the standard hours of work in any industry, but amending legislation of 1920" already required this matter to bc heard and determined by a Court of not less than threc including the Chief Judge. I t is true that the amendment of 1926 directed that the hearing and determination of a question involving the basic wage upon which the Attorney- General had intervened in the public interest should be undertaken by the Chief Judgr and t\vo other Judges, but if the Attorney-General did not exercise this right the Act beforr 1930 gave no direction as to how the Court should bc constituted when altering the basic wage. Third, a new clause gave the Governor-General power to appoint three conciliation commissioners. The commissioners had no jurisdiction to determine matters involving standard hours or the basic wage and although they wcre not simp!y limited to the function of con- ciliation6Gppeal could be made to the Court from their decisions. Finally, the Act provided in some detail for the appointment by the Governor-General of Conciliation Committees consisting of equal numbers of employers and employees with a conciliation commissioner as cha.irman."" Committees could be designated to an industry

61 The whole question of the Court's economic responsibility is considered at length in a later portion of this article.

62 No. 31 of 1920. 63 The Iirst commissioners, appointed under a clause inserted by the 1926 Act,

were limited to this function - this clause was repealed by the 1930 Act. 64 The legislation of 1928 had also provided for the establishment of Con-

or part of an industry and no limitation was placed upon the number that could be appointed for it was hoped to achieve a greater measure of industrial peace by bringing representatives of the two sides, other than the disputing parties, together. The experiment was extremely shortlived for in the same year the High Court held that the clause under which the committees were constituted was an invalid exercise of the power to legislate with respect to conciliation and arbitration on the ground that they were empowered to settle a dispute without any hearing or determination between the d i s p ~ t a n t s . ~ ~ A Bill seeking to overcome this constitutional objection was passed by the House of Representatives in the following year but rejected by the Senate.

After the spate of legislative interference between 1926 and 1930 there were no further alterations of any significance for the next seventeen years. This quiescence ended with the passage of extensive amending legislation in 1947" involving a reconstitution of the Court and a complete revision and renumbering of the sections of the Act. Under this legislation the scope of the Court's functions was considerably restricted by the appointment of sixteen Conciliation Com- missioners with very wide powers. The only matters in respect of which the Court, for the purpose of preventing or settling an industrial dispute, could make an award were:

( a ) alteration of the standard hours of work,

( b ) alteration of the basic wage for adult males or the principles upon which it was computed,

( c ) long service leave with pay," and

( d ) determining or altering the basic wage for adult females or the principles upon which it was computed.

All other matters were placed within the exclusive jurisdiction of the Conciliation Commissioners. As distinct from the 1930 amendments which had similarly attempted to emphasize the conciliation aspect there was no provision in the 1947 Act for appeal to the Court

ciliation Committees; these however were to be appointed by the Chief Judge and were not envisaged as having such an important role as those under the 1930 Act (which repealed the 1928 provision).

65 Australian Railways Union v. Victorian Railways Commissioners, (1930) 44 Commonwealth L.R. 319.

6s NO. 10 of 1947.

67 By the 1947 Act, (c) was limited to the question of annual leave with pay. No. 18 of 1951 extended i t to cover other periodical leave with pay, sick leave with pay, or long service leave with pay. No. 34 of 1952 restricted it to the last item.

from decisions of the Conciliation Commissioners. The absolute dichotomy thus created in the exercise of the Commonwealth's industrial powers was severely criticised by many pe0ple,6~ including the Chief Judge in his first annual report to Parliament under the new There are difficulties inherent in such a diffusion of jurisdiction not all of which were overcome by the 1952 amendments which made provisions for appeals to the Court from awards, orders and decisions of a Conciliation Commis~ioner .~~ The argument, concerned as it is with the division of functions between components of the federal arbitration system, is not however specifically relevant to this study, for the concept of the basic wage and its determination, in terms of which the development of the Court is being examined, were not directly affected by these changes.

For precisely the same reasons the most recent amending legisla- tion71 does not require detailed consideration in this context. For the most past the legislation does no more than effect the structural alterations in the system made necessary by the High Court decision in the Boilermakers' Case that the Arbitration Court could not constitutionally exercise, together with its arbitral functions, the judicial power of enforcing awards.72 To overcome the problem created by this decision the amending legislation established two new bodies-the Common- wealth Conciliation and Arbitra,tion Commission, and the Common- wealth Industrial Court, giving to the latter all judicial powers of enforcement and interpretation of awards, and to the former the functions of conciliation and arbitration proper. Those members of thc Arbitration Court not appointed to the Commonwealth Industrial

68 See for example 0. DE R . FOENANDER, STUDIES IN AUSTRALIAN LABOUR LAW AND RELATIONS (1952), 88 et seq.

69 Sec. 108 of the Act - as i t then stood - required the Chief Judge and the Chief Conciliation Commissioner to present each year to the Attorney- General for presentation to Parliament a report on the working of the Act and in particular the extent to which the objects of the Act had been achieved. By sec. 70 of the Act as amended and renumbered by the 1956 legislation, an equivalent duty is imposed upon the President of the new Conciliation and Arbitration Commission.

70 No. 24 of 1952. This Act also gave the Arbitration Court power to make a conclusive decision as to whether a Conciliation Commissioner was empowered under the Act to exercise jurisdiction in relation to a particular matter. As the 1947 legislation previously stood the High Court held that i t could correct a refusal to exercise jurisdiction based on a mistaken view of the jurisdictional distribution under the Act: The King v. Common- wealth Court of Conciliation and Arbitration, ex parte Ozone Theatres (Aust.) Ltd., (1949) 78 Commonwealth L.R. 389.

71 NO. 44 of 1956. 72 The Queen v. Kirby, ex parte Boilermakers' Society of Australia, [1956]

Argus L.R. 163.

Court were made "presidential members" of the Commission and these members constituting the "Commission in Presidential Session" were given, in exactly the same terms as before, exclusive jurisdiction in regard to the basic wage, standard hours, and long service leave.7a Conciliation Commissioners under the previous system became merely Commissioners under the new legislation and from their awards appeals may be made to the Commission constituted by not less than three members at least two of whom must be presidential members. I t is quite clear therefore that, significant as the Boilermakers' decision is from the point of view of constitutional law generally, the internal rearrangements which the decision has caused in the federal arbitration system do not significantly affect a study of this kind. The problem here is rather one of terminology; I will continue for the purposes of this article to use the term "the Arbitration Court" (or simply "the Court"), aware that the currently correct expression, particularly in respect to the authority exercising jurisdiction in basic wage matters, is the slightly more cumbersome "Commonwealth Conciliation and Arbitration Commission in Presidential Sessi0n."7~

The only other amendment to the legislation which needs to be mentioned is in some respects the most curious. Although the concept of the basic wage had been utilised by the Court since 1907 and, indeed, had been the foundation upon which the structure of awards had been built, no definition of the term was included in the Act until 1949. I n that year the clauses delimiting the respective jurisdiction of the Court and the Conciliation Commissioners were amended by including this definition of the basic wage for an adult male:

"that wage, or that part of a wage, which is just and reasonable for an adult male, without regard to any circumstances pertain- ing to the work upon which, or the industry in which, he is employed."75

73 Compare sec. 25 of the Act as it stood before the amendments and renumbering of 1956, and the present sec. 33.

74 A strange feature of the 1956 legislation is that the previous provisions relating to the existence of the Court of Conciliation and Arbitration are not abolished. I t is provided that presidential members of the Commission may be appointed as Judges of this Court which would have power to give an interpretation of an award or decide questions of law referred to i t by the Commission. So far no such appointments have been made despite the retention of the mandatory direction in sec. 89 (previously sec. 17) : "There shall be a Commonwealth Court of Conciliation and Arbitra- tion."

75 By NO. 89 of 1949. The definition appears in the same terms in the present sec. 33.

In fact, as we shall see, this added nothing to the concept already developed by the Court and the seeming redundancy of the provision is confirmed by the fact that although it was introduced during the course of the 1949-50 Basic Wage Inquiry it had no influence on the final determination by the Court.

* % * *

The authority and influence of the Court, apart from the intrinsic merit of its own conduct, can be affected by decisions of the people, the Parliament or the High Court. The people, with fluctuating emphasis, have rejected successive appeals for alteration of the Con- stitution. Parliament has periodically intervened to amend the legislation under which the Court functions and similarly we have seen that this intervention has varied in degree, some amendments clearly having had a profound effect upon the operation of the Court. But in the evolution of the Arbitration Court to a position of pre-eminence in the sphere of industrial regulation and economic and social significance in Australia, the r61e of the High Court has been decisive. The inconsistency of interpretation exhibited by that tribunal in fulfilling this r61e need not be developed here except perhaps to observe that, at least in the early years, the dispassionate and objective construction of the Constitution by the various members of the Bench corresponded surprisingly with their previously discernible political predilections. The eloquent Deakin, never quite sure of the constitutional implications of the measure he sponsored at the time, nevertheless spoke with a prophetic certainty when he said in Parliament:

"We may easily come to see that, what a section of the Constitu- tion may not be held to authorize to-day, it comes to authorize when it has further d e ~ e l o p e d . " ~ ~

( b ) Non-Legal Factors.

Decisive as they have been in the extension of the Arbitration Court's jurisdiction, constitutional interpretations by the High Court have done no more than make that extension legally possible. Granted that an interstate dispute conferring the jurisdiction sanctioned by the High Court could be created by the service of genuine but unacceptable demands by a registered organisation in more than one State, the actual extent of the invocation of that jurisdiction depended on the wag in which industrial associations developed in Australia. In the Convention and original parliamentary deba,tes the tendency had been to think of industries which were interstate in character and as these were strictly limited the potential jurisdiction of the Court was

minimised. Interstate disputes are another thing and the High Court in making this distinction provided the theoretical grounds for en- hancing the Arbitration Court's responsibility. At the same time trade union development has ensured that this theoretical possibility became an accomplished fact.

The one man in the parliamentary debates on the original Bill who more than any other grasped the significance of the system then being introduced was Sena,tor M ~ G r e g o r . ~ ~ The Bill, he said, would have "a much greater scope" than most people imagined and the condition of that extension would be the growth of unionism on a federal basis. In words that could hardly have been more prophetic he explained that workers would bring themselves under the operation of the Act by organising in interstate unions. When the constitutional limitations of placitum xxxv were hopefully paraded before the Senate McGregor dismissed them as the vain words of unrealistic draftsmen: "The men who framed that legislative power did not know what they were doing. They did not understand what unionism meant."78 The following table gives some indication of what unionism has actually meant : -79

77 A Labour Senator from South Australia, subsequently a federal president of the Australian Labour Party.

78 (1904) 22 COMMONWEALTH PARLIAMEKTARY DEBATES 5837. 79 The table is constructed from information contained in the Labour Reports

of the Commonwealth Bureau of Census and Statistics. Information is not available for 1907 for columns (2), (3) or (4). I t should be realised that the differences between (3) and (4) are accounted for by the facts that (a) not all interstate unions necessarily register under the Act and (b) some intrastate unions are so registered. A union with branches in two or more States is regarded as an interstate union.

I (3)

?,;\$$ trade unionists in interstate unions

71 75 79 85 8 I

84 89

Year

1 907 '9'3 1916 I 920

1930 1936 '945 I952

(4) % of total

t,","dTbtiioqf- ists i n unions

registered under the

Act

59 70 80 88 82

90 82

Number of trade union members in

Australia

194,602 497,925 546,556 684,450 855,757 8 14,809

1,200,395 - 1,637,542

Number of inter-state or

t r ~ ~ l ~ ~ ~ ~ n s

78 8 I

99 I I I

"3 I 2 0

142

The outstanding fact is the tremendous growth of trade unionism in Australia during this century. Although available figures for the years before 1912 are more in the nature of estimates it is certain that since the Harvester judgment was delivered in 1 9 0 7 ~ ~ the absolute increase in the number of unionists has been more than 800%. By 1953 the principle of unionism had been accepted to such an extent that approximately two-thirds of Australian workers were trades union members.s1

The most significant feature of this development has been the complete vindication of McGregor's prophecy that the trade union movement of Australia would expand and organise in a manner that would work a transformation in the r81e of the Commonwealth Arbi- tration Court. As the degree of unionisation has increased so has the proportion of total union membership registered under the Act risen. This has not necessarily meant that all unions so registered operate under awards made by the Commonwealth Court; a special survey conducted by the Bureau of Census and Staiistics showed that in 1954 the percentages of male employees covered by Commonwealth awards on the one hand and State awards on the other were identicaLS2 Although State and Commonwealth awards have the same numerical coverage the influence of the Commonwealth Court has been enhanced significantly by the authority accorded to its decisions by the States. While they were not bound by the actual decision most State tribunals used the Harvester standard as the basis for their awards in the period after 1907. The friction caused during the depression by the fixing of divergent Commonwealth and State wage rates was allayed to a considerable extent by legislation in Victorias3 and New South

so See p. 450, injra. 81 The Labour Report for 1953 (No. 42) shows that 67y0 of male, 40y0 of

female, and 60% of all wage and salary earners were members of unions. The degree of unionisation appears even stronger when it is remembered that certain employees - e.g., in some professional occupations - are not eligible for union membership, and others reside in localities not covered by an appropriate union. The figures showing the number of unionists as a percentage of all wage and salary earners for the years prior to 1951 are not completely comparable having been calculated on a slightly different basis, but i t may be noted that the figures for 1912 (the first year for which these statistics are given) for males and females respectively were 43.99y0 and 8.41y0.

82 The percentage was 44.3, the balance of male employees not being covered by any awards, determinations or registered agreements. 37.2% of female employees were covered by Commonwealth awards and 54.9y0 by State awards - see Incidence of Industrial Awards, Australia, April 1954, published by the Commonwealth Bureau of Census and Statistics.

83 Factories and Shops Act, No. 4275 of 1934.

Waless4-where two-thirds of all Australian wage and salary earners reside-providing for the incorporation of the Commonwealth Court's basic wage in State awards. Tasmanian Wages Boards have usually adopted Commonwealth awards, and while this exact identity is not always found in the remaining States it is significant that the two federal basic wage increases granted in 1946 and 1g50s5 were followed by similar decisions in these States.86 (The problem created by the refusal of most States to give the same degree of authority to the Com- monwealth Court since its abandonment of the quarterly automatic basic wage adjustment system in 1953 is considered in the final part of the article) .

As a direct result of the federal-type growth of unionism and indirectly because of the power accorded to it by the States, the Court has increasingly become the authority determining the working conditions of organised labour. In making its decisions the Court is called upon to analyse, interpret, and forecast the state of the national economy and on that basis to determine the conditions upon which Aus- tralian industry shall be conducted and its product distributed. The Court has fulfilled this function primarily by its periodic determination of the basic wage and it is to a juridical analysis of the basic wage that we now turn.

111. THE BASIC WAGE. Two criteria have been historically associated with the determina-

tion of the basic wage by the Court:- ( a ) the needs of the wage-earner according to some accepted

standard of living, and (b) the capacity of industry.

In no other respect is the lack of understanding of the Court more evident than in the confusion which usually attends an explanation of the way in which these two criteria have been used. On the one hand it is sometimes assumed that the Court's explicit rejection in 1934~' of the Harvester standard, with which the "needs principle" has usually been associated, and the adoption then of the "capacity criterion," is an adequate explanation of the practice that has in fact been followed. On the other hand while the Court has not been guilty of this naive error it has in its own judgments contributed abundantly to the misunderstanding on the subject.

84 Industrial Arbitration (Amendment) Act, No. 9 of 1937. 85 See p. 466, infra. 86 See Labour Report No. 41 of 1952, at 95-101. 87 See p. 465. infra.

This confusion in the utterances of the Court is a direct result of its attcmpts to fulfil with some semblance of theoretical continuity new functions that have in the course of time accrued to it or which it has on occasion taken upon itself. In this process there has been a recurrent failure to make clear that in the line of judgments deter- rnining the basic wage it has not simply been a question of following one principle or the other but that both criteria havc always been relevant fa( tors. But to say that both criteria have always been in the mind of the Court is not to deny that a t certain times one has bren a more dominant consideration than the other. I t could be said, in other words, that whilc the Court has always had regard for both principles one has sometimes been the effective and the other the passive criterion, depending on the function which the Court has considered itself to be discharging in the current economic circumstances. In making a decision in conformity with the requirements of the particular situation, as it has conceived them, the Court has emphasized the more appropriate principle. The root of the interpretative chaos that persists to the present day lies in the fact that the Bench has then attempted to give these decisions something more than this mere ad hoc validity. In the attempts to establish some sort of theoretical continuity this distinction of emphasis on the two criteria in particular decisions has been ignored and the passive criterion has been represented as the effective determinant. In the result the decisions themselves have been given interpretations which they cannot logically bear.

No decision has suffered more in this process of misinterpretation than the original case in which the concept of the basic wage was formulated, and therefore any analysis aimed at clarifying the development of that concept must necessarily begin with a somewhat detailed exposition of the ratio decidendi in the 1907 Harvester Case.ss I t is more than academic dissatisfaction with the received interpretations that makes such exposition a first essential, for the decision has a. wider significance. The principles of wage determination which were to be followed explicitly for the next twenty-seven years were laid down in this case, and despite the recorded decision of the Court in 1934 to adopt the capacity criterion, the living wage principle and wage structure enunciated in 1907 are still fundamental to an understanding of industrial and social relations in Australia today. The

8s Ex parte H.V. McKay, 2 Co~nmonwealth Arbitration R. 1 . The case is so called because McKay, the applicant, was a manufacturer of agricultural implements.

principle Higgins J. then asserted, that a man must be paid in return for his labour a wage consistent with his obligations as a member of a civilized community, has become inextricably woven into the social fabric of the Australian people.

Although the judgment delivered in the Harvester Case constituted the fundamental basis upon which the Court subsequently constructed its system of wage determination by arbitration and conciliation, and indeed provided the very organon of that system, the actual case was not itself one of arbitration. The case was heard under the provisions of the Excise Tariff Act which was passed by the Federal Parliament in 1906, as an exercise of the taxation power, in an attempt to establish the "New Protection". The Act imposed excise duties upon manufacturers unless they could show that the wages paid in their factories were "fair and reas~nable" ,~~ and application could be made under the Act to the President of the Court for a declaration of compliance with this condition. The applicant did not raise the issue of the validity of the Act in the hearing before Higgins J. but having failed to secure the declaration refused to pay the excise duties. In an action brought by the Commonwealth in the High Courtgo for the payment of these duties it was successfully pleaded that the Act was invalid, the Court holding (by a majority of three to two) that it was not a taxation Act but an act to regulate labour conditions and as such beyond the competence of the Federal Parlia- ment. However, the principles enunciated in the Harvester Case were not disturbed by this constitutional decision. They were applied by Higgins J. in the following year, in the first actual arbitration case to come before the Courts1 and remained inviolate until the 1934 Basic Wage Inquiry.

Parliament had given no legislative elaboration of its intent other than the rather nebulous expression that conditions of remuneration should be "fair and reasonable." To Higgins J. this seemed a manifest confusion of function, for he conceived the r81e of the judiciary to be that of applying and, when necessary, interpreting specific enactments of the Legislature:

89 T h e "old" Protection, as Deakin put it, contented itself with making good wages possible - the "new" Protection sought to make them actual.

90 T h e King v. Barger, Commonwealth v. McKay, (1908) 6 Commonwealth L.R. 41.

91 T h e Marine Cooks, Bakers and Butchers' Association of Australia v. Commonwealth Steamship Owners' Association, (1908) 2 Commonwealth Arbitration R. 55.

"The first difficulty that faces me is as to the meaning of the Act. The words are few, and at first sight plain of meaning; but, in applying the words, one finds that the Legislature has not indicated what it means by "fair and reasonablew-what is the model or criterion by which fairness and reasonableness are to be determined."92

The genius of this judgment is in the "model or criterion" which it supplied to fill the gap left by legislative default.

In the construction of this model Higgins J. began with the obvious assumption that the provision was designed for the benefit of employees in the industry, and must be meant therefore "to secure them something which they cannot get by the ordinary system of individual bargaining with employers." For if Parliament had thought that this was "fair and reasonable" there would have been no need for the provision and the course of wages could have been left to the usual unequal contest of the market. Therefore, he concluded, the standard of fair and reasonable must mean something else and he could think of no standard appropriate other than his now famous dictum "the normal needs of the average employee, regarded as a human being living in a civilized community." According to the judgment, counsel and all concerned were unable on his invitation to suggest any other standard. The State, he said, by such stipulation must surely mean wages sufficient for food, drink, shelter, rent and -

clothing, and "a condition of frugal comfort estimated by current human standards. This, then, is the primary test, the test which I shall apply in ascertaining the minimum wage that can be treated as "fair and reasonable" in the case of unskilled labourer^."^^ Those who had acquired some special skill would have to be paid more.

Higgins J. added that his view of his duty under the Act seemed to be supported by a critical examination of the words "fair and reasonable" used in collocation elsewhere. He referred to an English Act which provided that an agreement between solicitor and client as to costs could be set aside unless the solicitor could show that they were "fair and reasonable." In a case brought under the Act the Court of Appeal had held that "fair" referred to the mode in which the

92 2 Commonwealth Arbitration R., at 2. Higgins's attitude as Judge did not altogether correspond with his previously expressed opinions as advocate. In the parliamentary debate on the Bill he had said that the Court would be of an "exceptional character" because "It will not have to interpret and apply definite and express laws, but will practically have to direct and conduct living industries:" (1904) 16 COMMONWEALTH PARLIAMENTARY DEBATES 1027.

93 2 Commonwealth Arbitration R., at 4.

agreement had been obtained, and "reasonable" meant that the amount payable should not be out of proportion to the work done.g4

"Applying the reasoning to the present case," said Higgins J., "1 cannot think that an employer and a workman contract on an equal footing, or make a "fair" agreement as to wages, when the workman submits to work for a low wage to avoid starvation or pauperism (or something like it) for himself and his family; or that the agreement is "reasonable" if it does not carry a wage sufficient to ensure the workman food, shelter, clothing, frugal comfort, provision for evil days, etc., as well as reward for the special skill of an artisan if he is one."95

Higgins J. then had to fix the wage that would satisfy the requirements of this concept. His initial assumption was that the wage should be sufficient to maintain a labourer, his wife and three children.96 He had then tried, he said, to ascertain the cost of living for such a unit. Confining himself to rent, groceries, bread, meat, milk, fuel, vegetables, and fruit, he found that the average weekly expenditure of nine housekeeping women (for a home of five persons) was 32s. gd. He gave a long list of items not includedg7 and observed that with a weekly wage of 36s. a mere 3s. 7d. remained to cope with this miscellaneous e x p e n d i t ~ r e . ~ ~ Without conducting a specific inquiry into this aspect, he clearly considered such a sum to be quite insufficient.

The president found confirmation for his opinion that the wage paid by the applicant was inadequate in an examination of the wages paid by some public bodies: "Then, on looking at the rates ruling elsewhere, I find that the public bodies which do not aim at profit, but which are responsible to electors or others for economy, very generally pay 7s." He continued: "My hesitation has been chiefly between 7s. and 7s. 6d.; but I put the minimum at 7s., as I do not think that I could refuse to declare an employer's remuneration to be fair and reasonable if I find him paying 7s. Under the circumstances,

94 In re Stuart, [I8931 2 Q.B. 201. 95 2 Commonwealth Arbitration R., at 4. 96 In his book, A NEW PROVINCE FOR LAW AND ORDER, 6, Higgins did not

claim that this unit was the result of any scientific statistical investigation; it rested he said on Walt Whitman's "divine average."

97 Light, clothes, boots, furniture, utensils, rates, life insurance, savings, accident or benefit societies, loss of employment, union dues, books and newspapers, fares, sewing machine, mangle, school requisites, amusements and holidays, intoxicating liquors, tobacco, sickness and death, domestic help or any expenditure for unusual contingencies, religion or charity.

98 The wage being paid by McKay was 6s. a day for a six-day week.

I cannot declare that the applicant's conditions of remuneration are fair and reasonable as to his l a b ~ u r e r s . " ~ ~

Having fixed thc living or basic wage at a, levelloo which he considered sufficient to meet the requirements of his concept Higgins J. was prepared to leave the question of remuneration for special skill to bargaining bctwecn the parties. While the Court has subsequently entered this area of negotiation the structure which emerged from the decision, i.e., ( a ) a basic wage common to all workers, and (b ) a secondary wage, or margin for skill, remains an intrinsic feature of wage determination in Australia. The structure remains but in the course of later additions the architect's original blueprint has been variously misconstrued; in order to establish at this point the nature of thc Har~testcr judgment an early reference will be made to some of these misinterprrtations. On the one hand it has been said that the decision was based on the capacity of industry to pay, while on the other it is alleged that what Higgins J. really did was merely to ascertain thr wagc paid by rrputable employcrs.lol Neither interpretation is supportrd by the words of the judgment, passages of which distinctly refutc both points of view.

The former interpretation is suggested by Anderson,lo2 who says, "His decision (i.e., that of Higgins J. in the Harvester Case) was rcally based on thc capacity of industry to pay that wage (42s. per week) supported by a rather inadequate inquiry into the cost of food, groceries, fuel, and rent, to the average unskilled worker who had to maintain himself, a wif? and about three children. There was no inquiry into the cost of miscellaneous items."103 Now while it can fairly be suggested that by present standards of investiga.tion the inquiry madc by Higgins J. himself was extremely modest, it should be pointed out that every opportunity was afforded for the evidence of tha.t inquiry to be refuted. Of the "very interesting evidence given as to thc cost of living" Higgins J. said in his judgment that it had "been absolutely undisputed." He continued: "I allowed . . . the applicant's counsel an opportunity to caIl evidence upon this subject even after

99 2 Commonwealth Arbitration R., at 6-7. 100 The rate of 421- a week involved an increase of more than 16% over that

being paid by the applicant, and was the amount claimed in the hearing by the unions.

101 The arguments are similar for it is implied that "reputable employers" pay the highest wage within the capacity of industry.

102 G. Anderson in hi\ chapter Industrial T r i h u n n l ~ and Stnndnrds of Living in AUSTRALIAN STANDARDS OF LIVINC, issued by the Australian Institute of International Affairs (1939) .

103 O p . cit., 68.

his case had been closed; but notwithstanding the fortnight or more allowed him for investigation, he admitted that he could produce no spccific evidence in contradiction. He also admittrd that the evidence given by a land agent as to the rents, and by a butcher as to meat, could not be c~ntradicted." '~~ The suggestion that the real basis of the decision was the capacity of industry to pay is more completely refuted, however, by an earlier passage in the judgment. Higgins J. had rejected suggestions that the company's books should be examined to disclose its profits, saying that there was nothing in the Act to suggest a scheme of profit-sharing, but that there was far more ground for the view that under the section fair and reasonable remuneration had to be paid before profits werc ascertained, and remarking further, "I shall ignore any consideration that the business will not stand what I should otherwise regard as fair and reasonable remuneration."lo5

' I t should be emphasized again that the Harvester judgment was not given in an arbitration casr and that Higgins J. gavr his decision in accordance with a legislative reference to a "fair and reasonable" wage. When he came to apply the Harvester standard as the founda- tional wage in arbitration cases proper we find that Higgins J. made more explicit reference to the relevance of the capacity criterion. In the first of these cases he elaborated his position by intimating that he did not consider the capacity of industry to be irrelevant.lo6 The essential point, however, is that neither in the Harvester Case nor in the Marinr Cooks' Case, in both of which the employers admitted their ability to pay whatever wage was fixed by the Court, had it been necessary for Higgins J. to consider capacity. In the latter he said, "This admission relieves me of a great difficulty. Of course, if the admission had not been made, I should have had to make a close investigation of the financial position of the companies."lo7

This carte blanche admission meant that the only sense in which capacity entered the decision was as a passive criterion setting some upper limit which was not in question. Higgins J. was able to formu- late his social concept, and of it he said, "There is . . . nothing violent or fanciful in my standard. I do not regard it as my duty to fix a high wage, but a fair and reasonable wage; not a wage that is merely enough to keep body and soul togethcr, but something between these

104 2 Commonwealth Arbitration R. at 6. 105 Zbid., a t 5. 106 In the Marine Cooks' Case at 64, he said: "I should like it to be underslood

that I never laid down that the capabilities of an industry are not to be taken into consideration."

107 Marine Cooks' Case, at 64.

two extremes."108 Higgins's attitude to the relevance of the capacity criterion was by no means consistent in the first few years. In the year following the Marine Cooks' Case he pointed out that it was the industry as a whole whose possible profits or returns might be taken into account and unless there were very exceptional circumstances no differentiation would be made between individual employers in an industry.l0"n the same case the basic wage was referred to as "a thing sacrosanct" and "beyond the reach of bargaining."l1° Two years la.ter the President confirmed the sacrosanctity of the wage by indicating that so far as the capacity of industry was an effective criterion it should only be considered in relation to marginal wages, expressing himself in these words: " . . . There is always, according to my system, a further enquiry which respondents may demand-Can the industry ( I do not mean the individual employer) bear the wages which would otherwise be fair? The answer to this latter question, probably, ought not to affect the amount of the basic or living wage; but it may, under special circumstances, as where an industry is struggling for existence, be, perhaps, allowed to affect the amount of the additional wage . . . "11' And so Higgins J. established that the Haruester standard had created, on the basis of the reasonable needs of a labourer in a civilized community, a wage that was "sacrosanct." I t was a wage that had been conceived on this concept of needs without having to take detailed account of capacity as this had been originally admitted; and, further, when it was incorporated into the awards of the Court as a result of arbitration proceedings it was affirmed to be a wage that should not be affected by considerations relating to the capacity of industry.l12

The second interpretation, suggesting that what Higgins J. did was merely to ascertain the wage paid by reputable employers, was given credence by some later members of the Court. In the 1934 Basic Wage Inquiry the following passage is to be found in the majority judgment of Chief Justice Dethridge and Mr. Justice Drake-Brockman: "He then [i.e., after Higgins J. had accepted the family unit of five] appears to have concluded that inasmuch as

108 Harvester Case, 2 Commonwealth Arhitration R. at 16. 109 Bamer Branch of the Amalgamated Miners' Association v. Broken Hill

Proprietary Company Ltd., (1909) 3 Commonwealth Arbitration R. 1 , at 31. 110 Ibid., at 32. 111 Australian Workers Union v. Pastoralists' Federal Council, (1911) 5

Commonwealth Arbitration R. 48, at 73. 1112 It should be noted that Higgins's allusions to capacity reflected the original

constitutional intentions in so far as he referred, not to industry as a whole, but to the capacity of a particular industry.

labourers' households of average size had in fact somehow been maintained upon the wage of 7s. a day paid by reputable employers in sheltered industries, he could therefore take that amount as being sufficient."l13 This quite clearly misses the point of the Harvester decision, for in so far as Higgins J. referred to wages paid by other bodies it was to seek confirmation for a decision arrived at in terms of his own criterion. After the initial part of his judgment in which he made it perfectly clear that the standard of "fair and reasonable" implied and imposed an absolute and primary charge upon an employer, he went on to consider the various trades concerned in the operations of making agricultural implements. The first was iron- moulding, which at once raised, he said, the question of determinations by the Victoria Wages Board,l14 and he then observed, " . . . the conditions under which each Board acts have to be carefully scruti- nized. There is an Agricultural Implements Board, but it is under the operation of the "reputable employers" section (s.83) ."IT5 He mentioned the coercive influence of this section upon a determination by the Board and proceeded, "This restriction upon the free action of the Board deprives the Board's determination of almost all value in the eyes of an outside investigator, and especially in the eyes of one who has my duty to perform. If my view of my duty in ascertaining what are fair and reasonable conditions as to remuneration, as stated above, is right, how can I fulfil that duty by accepting the average rates which employers think fit to give on individual bargaining with men seeking work? I should attach, I think, overwhelming value to conclusions freely formed by experts in the trade, representing the opposing interests; but I decline to accept the mere conclusions of employers, just as I should decline to accept the mere conclusions of employees."l16 And again, in the closing passages of the judgment, it is suggested that the applicant, as part of his efforts to seek industrial economies, had fallen into the practice of not paying his employees more than was sufficient to induce them to work for him-applying the same principle as in the purchase of raw materials. Although praising the initiative and enterprise of the applicant in developing his successful business organisation, Higgins J. declared, "But it cannot be too clearly understood that I cannot declare wages to be fair and reasonable because

113 1934 Basic Wage Inquiry, 33 Commonwealth Arbitration R. 144, at 148-149. 114 These were wage-fixing tribunals operating in the State of Victoria under

legislation passed there in 1896. 215 Under this section the Board could fix a wage at the rate paid by "reputable

employers". 116 Harvester Case, 2 Commonwealth Arbitration R. 1, at 8.

the manufacturer is fair and reasonable."l17 I t is a completely untenable thesis to maintain in the face of these specific portions of the judgment that Higgins's method of determining a fair and reasonable wage was to ascertain the rate paid by reputable employers.

The ultimate test of any normative theory of law must be the ability of its jurisprudential concepts to provide practical working rules. Previous legal theory was quite inadequate for the new realm of law established by the Act of 1904; if the creation of the Court constituted "a new province for law and order," the Harvester Case gave the new province the beginnings of its particular jurisprudence. In a sense the history of the Arbitration Court is the development of those inchoate rules into a wider, more detailed-and certainly more complex-jurisprudence. In this development the adequacy of the Harvester judgment has been questioned and Higgins's decision has been modified in important respects. But the fundamental principles he then laid down, simply because they have as already suggested become part of the social fabric, have acquired an almost divine authority in the eyes of the Court, and successive judges have regarded a seeming conformity to the Higgins decision as an apostolic blessing. We will soon have occasion to consider a few of the tortuous attempts to establish this connection.

In the years immediately following 1907 the basic wage principle then enunciated was not called in question but conviction in the virtue of the principle prompted the belief that its translation into a monetary rquivalent should be as soundly based as possible. Until 1913 it had been the practice of the Court to award the original sum of 421- despite the loss in real value of this amount as the result of rising prices. The regrettable fact had been judicially acknowledged but it was not until 1912, with the publication by the Commonwealth Sta- tistician of the "A" Series Index, that a specific statistical measure of changes in the cost of living became available. The index, based as it was on the cost of rent, food, and groceries only, was subject to obvious limitations, but in a case in the following year118 the Common- wealth Statistician used the index to show that 8s. 54d. was needed then to buy what could have been procured in I907 for 7s., and on this evidence Higgins J. fixed the wage for Melbourne labourers a t 8s. 6d. a day. The practice of fixing the basic wage by reference to the Statistician's cost of living figures, which was to remain a feature

1.17 Ibid., at 18. 118 Federated Gas Employees' Industrial Union v. Metropolitan Gas Co., (1913)

7 Commonwealth Arbitration R. 58.

of federal wage determination for the next forty years, originated in this case.

Any doubts concerning the Harvester decision that were expressed in this early period referred either to the possibility that because of the limitation of the index the standard might not in fact have been maintained or to the desirability for a more thorough cost of living investigation than Higgins J. had originally been able to under- take. Paradoxically it was as a result of the findings of a, Royal Com- mission set up by the Government to provide a sounder empirical basis for the needs principle by undertaking such an investigation that the Court began to switch the emphasis from this criterion.

The Royal Commission on the Basic Wa,ge appointed in Novem- ber 191 g made an exhaustive inquiry into the cost of living under the

. four headings of rent, clothing, food, and miscellaneous items; but as distinct from the practice of the Court in looking to the unskilled labourer as the relevant unit for the basic wage component of its awards, the Commission conducted its inquiry in terms of an "average" standard, i.e., making no distinction between skilled and unskilled employees it endeavoured to picture the "typical Australian man" and determine his reasonable standard of comfort. I n the result the Royal Commission findings were considerably above the basic wage being currently paid under the awards of the Court; for instance, the Commission found that the wage necessary to meet its standard for Melbourne would be £5. 16. 6 per week while the actual wage fixed by the Court in the same month for Melbourne on the Statisti- cian's figures for the preceding twelve months was £4 per week.

When the Court was presented with demands to make the Royal Commission findings the basic wage to be incorporated into all awards, a demand which the Commonwealth Statistician indicated was beyond the ability of the economy to sustain,llg it was inevitable that the capacity criterion would be resurrected. In the case in which the unions made this claim we find Mr. Justice Powers making this statement: " . . . the Court cannot, by any order, secure to the workers more than the industries can pay . . . "120 In this situation it was emphasized that the capacity of industry criterion, although passive during the period since 1907, was still a principle that ha.d to be taken

1,le The information submitted to the Prime Minister was to the effect that the increased annual burden involved in raising the basic wage from £4 to f5/16/0 for all employees would be £93 millions or 31% of the total value of production in 1918.

120 Federated Gas Employees' Industrial Union v. Metropolitan Gas Co., (1921) 15 Commonwealth Arbitration R. 838, at 841.

into account by the Court. Having acknowledged the ultimate authority of the capacity criterion the Court within the next year affirmed the continuing and immediate importance of the "needs principle" by two separate sets of decisions which indicated that the Royal Commission had not been altogether devoid of practical consequences.

The Commission's inquiry had made it clear that whatever the standard adopted by the Court it would not be adequately adjusted to changes in the cost of living by the methods then used which consisted of fixing the basic wage by reference to the "A" Series index figures for the preceding twelve months or the calendar year prior to the award. As any adjustment during the term of an award required a time-consuming application for variation the Commission had recom- mended that provision should be made in awards for quarterly automatic adjustments in accordance with changes in the cost of living. This suggestion, already a feature of some voluntary agreements, was adopted by the Court in 1921 and provision for quarterly automatic adjustment according to price changes indicated by the "A" Series index soon became a common feature of most awards. At the end of 192 I Mr. Justice Powers adopted another procedure aimed at securing the equivalent of the Harvester standard during the currency of an award when for the purpose of meeting increased costs that might occur during a quarter he added a sum of 31- to the amount indicated by the figures for the preceding twelve months as the Haruester equivalent.121 This amount, which came to be known as the "Powers 3s. od.," was subsequently included in practically all awards as a part of the prescribed basic wage.

These decisions of 1921 and 1922 provide a good illustration of the need for clarity of expression when examining this question of criteria. Powers's 1921 decision rejecting the unions' claims indicates the obvious truth of the statement that "the basic wage is determined by the capa,city of industry"-the phrase is true in the sense that the ultimate determinant of wages is economic capacity. I t is not necessarily legitimate, however, to use the phrase in the sense that the actual basic wage fixed on any occasion has been specifically arrived at by reference to the ascertained capacity of industry to pay that wage. This is the false reasoning that the Bench was soon to use.

With its particularly dependent economy Australia was extremely vulnerable to the effects of the world-wide depression which began to manifest itself in 1929. In the ensuing situation of falling prices, rising

12s Federated Gas Employees' Industrial Union v. Metropolitan Gas Co., (1921) 16 Commonwealth Arbitration R. 4.

unemployment, fixed burden of interest payment commitments, and overall shrinkage of national income, it was inevitable that the Court would be called upon to re-examine the level of wages prescribed under its awards. Proceedings instituted by the Railways Commission- ers of Victoria, New South Wales, Tasmania, and South Australia were enlarged, by direction of the Court to all registered organisations, into a general inquiry as a result of which by judgment delivered in January 1931 the basic wage was cut by 1o%.lZ2 This order was for a period of twelve months in the first instance, but on applications by the unions in 1g3rrlZ3 and 1 9 3 3 ' ~ ~ the Court refused to vary the order.lZ5 In these "depressionJ' reduction cases the Court was faced with a set of conditions unlike anything that ha.d previously confronted it when making a decision upon the basic wage. Up to that time there had not been a major judgment constituting a significant alteramtion

o f the Harvester decision. The Court had simply included that standard in all awards and by the adoption of a cost-of-living index, quarterly automa,tic adjustments, and the Powers's 3s. od, had sought to maintain the 1907 judgment. I t is apparent from the "depression" judgments that the Court at that time however was seeking to discharge the function of economic stabilizer in a situation of acute crisis. In the initial part of the 1931 judgment the Court said, " . . . The real issue raised in this lengthy inquiry was whether escape from the world economic crisis with added difficulties of local origin can be effected without wage reduction."126

Again in these circumstances it was natural that the Court in the context of a general economic elaboration of the current problems should emphasize the capacity criterion. In fact the Court said, "Whatever the ascertained cost of living at a certain standard of comfort may be, the Court in fixing a wage must of necessity consider

122 Basic Wage and Wage Reduction Inquiry 1931, 30 Commonwealth Arbitra- tion R. 2, 169.

123 31 Commonwealth Arbitration R. 305. 124 32 Commonwealth Arbitration R. 90. 125 The Court in 1933 did make the concession of incorporating the "C" Series - based on the Royal Commission regimen and compiled by the Common- wealth Statistician since 1921 - into its adjustment table, as i t was shown to have fallen less than the "A" Series. T h e resultant index, known as the "D" Series, was only used for one year until the decision in the 1934 Basic Wage Inquiry.

126 30 Commonwealth Arbitration R. 4, at 8. The judgment contains other references to the nature of the Court's approach in terms of the economic problem - "the one and only issue", "the vital factor", and "the one essential factor."

127 Ibid., at 30.

the productive capacity of the Comrnon~ealth." '~~ Now it is important to observe the change of emphasis coinciding with the change of circumstances in which the decision was given, but equally interesting is the beginning of the Court's tendency to minimise the empiricism of this approach by straining the ratio decidendi of earlier decisions. In reference to comparative productivity figures taken from the annual Labour Report-indicating virtually no change in per unit productivity since 1907-which seemed to impress the Court considerably, it was said, "We assume that Mr. Justice Higgins in fixing the Harvester wage-and the generally increased wage following therefrom-took into account the productivity activity per unit of the population at that time."128 To the extent that the capacity of industry was the ultimate criterion in 1907 Higgins J. "took into account" this factor- as already suggested, this is quite different from the implication that it was an actual determinant of the Harvester wage. The invalidity of the assumption is demonstrated by a passage from Higgins's judgment in a 1921 decisionlZ9 where he quoted with approval the assertion by Mr. Justice Heydon of the New South Wales court, in 1918, that the living wage of the unskilled labourer was based "not on the value of his work but on his requirements as a man of a civilized community."

The judgments delivered in the "restoration application" cases in I932 and 1933 continued the accent on the criterion of economic capacity. The emergence of the capacity principle at this time was quite paradoxical. I t will be remembered that in 1928 Parliament had introduced an amendment to the Act providing that the Court should take into consideration the economic effects of its awards except in fixing the basic wage and that in 1930 the amendment was deleted altogether. Up till this time the actual practice of the Court in fixing the basic wage had corresponded to this directive. I t was only when this practice was given specific legislative endorsement that the basic wage judgments came to be framed precisely in terms of the likely "economic effects" of the rate fixed by the Court.

While the depression crisis continued the Court conceived its function to be one of national economic stabilization and, relying on the capacity principle, refused to restore the cut made in 1931. In the apparent urgency of the situation the anomaly of fixing a capacity wage by the crude method of an arbitrary reduction in a needs standard did not seem to the majority to call for any explanation, although

12s Zbid., at 17. 129 Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd., (1921)

15 Commonwealth Arbitration R. 297, at 303.

Mr. Justice Beeby in his 1933 minority judgment expressed an un- easiness that he repeated more forcibly in another minority judgment in the following year.130 When the unions approached the Court in 1934 for the restoration of the "depression" reductions the worst of the economic crisis had passed. Although there were still disturbing features in the economic situation some improvement was obviously possible. Logically it appeared that one of two decisions would have to be made to escape from the indeterminacy of the depression decisions. Either the Court could say that the judgment to reduce the basic wage by 10% in terms of the country's economic capacity had been forced upon it by temporary exigencies and that it proposed to restore the full Harvester standard; or it could completely and finally reject this Harvester standard with its cost of living regimen and declare that the basic wage would henceforth be determined solely by reference to economic capacity. In the latter case the Court could have been expected to outline some method whereby economic capacity would be calculated on a continuing basis for the purpose of wage fixation. In the event neither of these alternatives was adopted and with the assistance of some particularly interesting reasoning the Court succeeded in handing down probably the most equivocal judgment in its history. The Court could no longer discharge its function within the relatively simple conceptual framework of a national economic calamity requiring a reduction (however effected) in wage levels. In so far as the Court had conceived of its function in these straightforward terms, so had the explanation of criteria or principles been uncomplicated-i.e., the capacity of industry, in those circumstances, had been expressed not only as the ultimate but also as the very real and immediate consideration. I t was precisely as the economic situation improved and the function of the Court became less obvious that the explanation in the judgments of the criteria of basic wage fixation became remarkably confused. Indeed the 1934 majority judgment is a monument of confusion in which the Court failed to resolve the unanswered questions posed by the emphasis of the capacity criterion in the depression decisions.

Chief Justice Dethridge and Mr. Justice Drake-Brockman in the majority judgment intimated that subsequent inquiries had shown the average family to be more accurately represented by a unit of four persons rather than the five suggested by Higgins J.; but whatever family unit was adopted, they said, the wage that could be fixed

130 Judge Beeby said, in his 1933 judgment, "I think the time has come to abandon the adjusted Harvester standard:" 32 Commonwealth Arbitration R. at 106.

"depends on the productive capacity of the community as a whole." The judgment then contains this significant passage, "With few exceptions the determinations of industrial tribunals show that this limitation has been realized-though perhaps it has not been sufficiently acknowledged by them."'31 What Higgins J. presumably had not "sufficiently acknowledged"-because it had been merely the passive criterion and not effectively in issue-was then transmuted into the actual principle of determination in the Harvester Case. The two Judges suggested that the adoption of a family unit might thus be considered irrelevant but that in fact the capacity of industry as a whole to pay "the highest basic wage" could only be approximated- "and one of the methods of approximation is to find out the actual wage upon which well situated labourers are a t the time maintaining the average family unit." I t was at this point that the judgment claimed to find an original sanction in the Harvester decision: "We may be pardoned for saying that Mr. Justice H i g g i n ~ l ~ ~ very wisely used this criterion in the Harvester case." The assertion cannot be pardoned on any logical ground. The foregoing analysis should make it perfectly clear that Higgins J. did nothing of the kind. In the Harvester decision itself and subsequently he established that the capacity of industry was not the criterion he adopted and further that it should not "affect the amount of the basic or living wage." The Harvester wage was certainly not conceived as the highest that industry could pay and it is well to repeat Higgins's words in the original judgment: "I do not regard it as my duty to fix a high wage."133 The complete inadequacy of the reasoning in the 1934 judgment is apparent. There is clearly no theoretical justification for the belief that the capacity ,of industry can be approximated by ascertaining the living standards of "well situated labourers". I t is not true to say that there is "sound economic warranty"134 for the argument which involves the logical fallacy of petitio principii. But apart from any theoretical objections this judicial compromise becomes demonstrably false when it is shown that the particular standard, i.e., the Harvester standard, which was re-adopted was neither conceived nor intended as a measure of the capacity of industry. The crowning irra-tionality of the judgment was its adoption of the C Series index "as the measure for assessment and adjustment of the basic wage."135 Not only was the

131 33 Commonwealth Arbitration R. at 149. 132 Ibid., at 150. 133 2 Commonwealth Arbitration R. at 16. 134 33 Commonwealth Arbitration R. at 150. 135 Ibid., at 153.

Harvester standard re-adopted but the needs principle was even more securely incorporated into the practice of the Court by ensuring that future alterations of the basic wagc would correspond more closely than in the past with changes in the cost of living because of the more comprehensive regimen in the C Series index. The misinterpretation and re-adoption of the Harvester standard136 nullified the assertion that the new criterion of the Court was the capacity of industry as a whole to pay the highest basic wage and makes it difficult to attach any weight to the Court's suggestion that it began with this judgment from a "fresh starting point."

The Court's next judgment handed down in 1937 is perhaps the least complicated of all the major basic wage decisions. As a result the Bench has subsequently found extraordinary difficulty in accom- modating this particular judgment in its tendentious interpretations of the Court's earlier decisions-the Bench found in 1953 that considerable ingenuity is required to avoid the clear meaning of the words used in 1 9 3 7 . l ~ ~ The judgment conceded the validity of the union's applica.tion that economic recovery since 1934, reflected in national income figures and export prices, had been sufficient to justify more than the full restoration of the basic wage operating at the time the 10% reduction was ordered, by ordering increases of 6s. od. in New South Wales, Victoria, and Queensland, and 4s. od. in South Austra- lia, Western Australia, and Tasmania. In the course of the judgment the 1934 decision is clarified, for the "new start" of that year is revealed quite unequivocally as the restoration of the Harvester standard and is designated as the "needs" basic wage. The addition was awarded as a "prosperity loading", varying according to a rough estimate of the different economic capacities of the stronger and weaker States, and, in contrast, was not subject to automatic adjustment. Henceforth the total basic wage was to consist of two distinct elements, an adjustable "needs" portion and constant prosperity loading-the syn- thesis of 1934, the uneasy theoretical coincidence of cost of living and capacity criteria, had given way to the clearest dichotomy. This decision marked the first occasion on which the basic wage was increased on grounds other than an intention to maintain the Harvester standard. Both the needs and capacity principles were considered and although the resultant basic wage remained primarily a needs wa.ge

136 The wage that was fixed by the 1934 judgment was equivalent to the earlier adjusted Harvester standard without the 10% depression reduction, minus the Powers' 31- .

137 See p. 470, infra.

the criterion of capacity was for the first time a positive factor in the determination of the Court.13s

This new readiness to stress the significance of the two criteria was not apparent in the next major basic wage decision, given in 1941,l~"nd again it is evident that the dicta from the Bench concerning this matter reflect, very largely, the circumstances of the moment. The uncertainty in the early days of the war was sufficient to make the three JudgesW0 revert to the 1931 type of emphasis on the predominance of the capacity principle; the Judges, after referring to the general economic and war situation, refrained from dismissing outright the unions' applications for an increase in the basic wage and adjourned them sine die.141 The 1941 decision calls for two further comments. The first is that Chief Justice Beeby in his assertion that economic possibilities had in the end "always been the determining factor"142 was guilty of using the loose terminology which fails to distinguish between the meaning of the word "determining" in its ultimate sense and the other connotation involving the idea of an immediate and positive criterion. Second, it is interesting to note the Chief Justice's suggestion that future fixations of the basic wage would be "greatly simplified" by the initiation of the child endowment scheme announced by the Commonwealth Government-the I 949-50 inquiry covered a period of twenty months and the 1952-53 inquiry fifteen months.

I t is quite clear that up to the time of the 1941 decision the Court had been using, either expressly or indirectly, the needs criterion

188 This refers to the case of increases in the basic wage - of course the capacity criterion was dominant in the depression reduction decisions.

139 44 Commonwealth Arbitration R. 41. 140 Separate judgments were delivered by Beeby C.J. and by O'Mara and

Piper JJ. 141 Subsequently the Commonwealth Government issued National Security

Regulations, under the comprehensive defence power, pegging wages at levels existing on 10th February 1942. With the conclusion of the war the Government in March 1946 empowered the Court to make awards altering the basic wage or the principles upon which it was computed. Later in the same year during the hearing of the Standard Hours (40-Hour Week) case the Court intimated that in the public interest a reconsideration of the basic wage was a matter of increasing urgency. The Commonwealth Attorney-General applied for the restoration of those applications adjourned sine die in 1941 that were still current, and upon an application by the Australian Council of Trade Unions for an interim basic wage declaration, the Court awarded an interim increase of 71- per week. The basic wage inquiry which commenced in 1949 and in which judgment was delivered in 1950 awarding a f 1 increase in the basic wage therefore emergs as the Court's ultimate determination in the dispute adjourned in 1941.

142 44 Commonwealth Arbitration R. at 47.

in the determination of the basic wage. I t had been intimated repeatedly, however, that the existing method could not meet the needs of the worker with a large family and the Court went so far as to say in 193 1, "If the basic wage system is to persist, national consideration of a system of child endowment appears to be the only method by which the wage can be equitably fixed."143 I t was usually in the context of this problem that the Bench delivered the confusing statements concerning the criteria adopted by the Court. The introduction of Commonwealth child endowment in 1941,'~' to the extent that it clearly affected this problem, and the whole concept of the needs principle made it necessary for the Court to revise its equivocal attitude.

The post-war judgments illustrate that the Court actually adopted the capacity criterion as the dominant and effective consideration in the fixation of the basic wage (although it was intimated in both 1950 and 1953 that the needs principle had not been abandoned) ,146 and this is certainly attributable in part to the initiation of the endowment system. The important point is that this period has marked the final stages of the unmistakable evolution of the Court into an institution affecting, fundamentally, the whole economic and social life of the nation; and although the Bench has generally been reluctant to acknowledge this fact expressly, it has been aware that mere lip-service to the principle of fixing the highest basic wage within the capacity of industry as a whole is inapposite to the discharge of this r6le. I t has been observed already that this isolation of the capacity principle

143 SO Commonwealth Arbitration R. at 31. Chief Judge Beeby suggested in the 1940-41 Inquiry that on the accepted standards of living, looking at i t from a needs point of view only, the current basic wage was adequate for a family unit of three but offered only a "meagre existence" for a family unit of four and that beyond that number hardship was often experienced: See 44 Commonwealth Arbitration R. at 50.

144 When the scheme first came into operation in July 1941 the rate of endowment was 5s. a week for each child, other than the first, under the age of 16; the rate was increased to 7s. 6d. a week in June 1945 and to 10s. a week in November 1948. In June 1950 endowment of 5s. a week was provided for the first child.

145 The following passage appears in the 1953 judgment: " . . . it must not be thought that in this matter of basic or minimum wage assessment the Court has decided to exclude altogether from its mind the purchasing-power of the wage in relation to the reasonable expenditure which even a typical unskilled and lowest paid worker must incur to fulfil his own needs and those of such a family as it may be his responsibility to support:" 77 Commonwealth Arbitration R. 477, at 495. The Bench suggested that if a drastic reduction of wage costs was unavoidable, justice and reasonableness might require the reduction to be effected in secondary wages and other special rates.

did not produce any simplification in the post-war basic wage inquiries. One obvious clement complicating these proceedings has been the varying conceptions of function held by different members on the Bench.146 But the more fundamental explanation is that since the Court, for the reasons noted, has come to adopt the capacity criterion as the positive determinant of the basic wage it has been hampered by the lack of any ready-made index whereby the criterion can be casily translated into an appropriate wage rate. The task of the Court has been further complicated by the fact that earlier judgments do not give any consistent picture of what was meant by the phrase "capacity of industry." Chief Justice Beeby in his 1941 judgment drew a distinction between the productivity and capacity ~ 0 n c e p t s . l ~ ~ How- ever, the Bench has since tended to use the terms synonymously148 and has referred repeatedly to the lack of any composite index giving an adequate statistical content to the concept in the senses that it has been used by the

In the result, therefore, as the significance of its decisions has be- - come more apparent and as it has come to rely more specifically on this criterion, the Court has found itself committed to conducting comprehensive economic inquiries in an attempt to ascertain the capacity of industry as a whole.150 Mr. Justice Dunphy indicated in 1950 what the Court meant by the phrase "as a whole":

"When the Court has looked at the question of whether the basic wage is the highest that industry as a whole can afford to pay, it has never decided that unless the whole of industry was pros- perous no increase could be granted . . . Our co-ordinated wage system which results in the fixation of minimum rates of pay depends upon averaging, and whilst the Court looks to averages in deciding the needs of a worker, so it must average out the situation as it affects the employer."151

461 See pages 475-476, infra. 147 44 Commonwealth Arbitration R. at 49. 148 In the 1953 judgment (7'7 Commonwealth Arbitration R. 477) the Court

referred a t 491 to the test of "national productivity", and at 494 to the dominant factor of capacity.

149 The Commonwealth Bureau of Census and Statistics discontinued after 1946 the tables formerly published relating to the gross value of Aus- tralian production per head of population and per person engaged in material production - " . . . i t has been found that the methods previously used in constructing these indices do not give reliable results under conditions experienced in recent years:" Labour Report (1952) No. 41, at70.

150 Higgins had referred to the capacity of a particular industry. As the Court's authority and jurisdiction have aeveloped so the references to capacity have been made to comprehend industry as a whole.

161 68 Commonwealth Arbitration R. 698, at 832.

The 1953 judgment confirmed this principle and at the same time attempted to formalise the process by laying down seven specific "indicators" in terms of which these inquiries would be conducted in future.l5"he outstanding result of that confirmation was the abolition of the system of automatically adjusting the basic wage in accordance with quarterly changes in the C Series index. The express ratio decidendi of the judgment was that while the quarterly automatic adjustment system may have been appropriate to a wa,ge determined according to the needs criterion, it was illogical to vary in the same manner a wage fixed on the economic capacity p r i n~ ip1e . l~~ I t is illuminating to analyse in some detail the interpretation of the earlier basic wage judgments, handed down by the Court on this occasion as the basis for its decision.

The judgment found it impossible to show the continuous adoption of the capacity principle as the effective determinant of the basic wage but considered it important to establish at least the original authenticity of the criterion. To this end the Bench endorsed the 1934 majority interpretation and denied the primary significance of the needs principle in the assessment of the Harvester wage.154 The futility of this interpretation has been indicated and indeed the Bench having done this much could not go to the limit of maintaining that capacity had always been the determinant.15j I t acknowledged that there was an apparent justification for the automatic adjustment system "inasmuch as the basic wage concept had come to be regarded as being of a "living" wage . . . without specific regard to the capacity

152 The seven "indicators" were (a) Employment, (b) Investment, (c) Pro- duction and Productivity, (d) Overseas Trade, (e) Overseas Balances, ( f ) Competitive Position of Secondary Industry, and (g) Retail Trade.

153 "The further the Court has withdrawn from relating the basic wage to the fulfilment of any particular standard of needs, the less has become the justification for keeping the nominal wage "automatically adjusted" during the currency of an award . . . In other words, the principle or basis of assessment having been economic capacity at the time of assessment, it seems to the Court altogether inappropriate to assume that the economy will continue at all times thereafter to be able to bear the equivalent of that wage, whatever may be its money terms." 77 Commonwealth Arbitra- tion R. at 497.

154 77 Commonwealth Arbitration R. at 488. The Court said that the Har- vester wage was fixed " . . . as has been indicated in the 1934 Basic Wage judgment upon the basis of 7s. a day in fact paid by "reputable employers in sheltered industries."

155 Referring to Chief Judge Beeby's assertion in the 1940-41 Inquiry that economic possibilities had always in the end been the determining factor the Court said, "It would have been more correct to have said, Always since 1931."

of the economy in general"156 (understandably the judgment gives no indication of the point at which this apostasy occurred). The uncertainty was largely dissolved, according to the Bench, by the 1931 judgment which contained for the first time an exposition of "a predominant principle of basic wage assessment, namely . . . that the level of wages, and of the basic wage in particular, must be such as the economy can sustain";157 the 1934 majority judgment, wherein "the test of national productivity [was] so unequivocally proposed", completed the t r a n ~ i t i 0 n . l ~ ~ Having made some concession to the operation of the needs principle in the period before 1931 the Court was apparently determined to maintain the consistent primacy of the capacity criterion since that time. Whereas the section of the judge- ment dealing with the decisions before 1931 is perhaps no more than surprising, that part which concerns the 1934 and 1937 decisions demonstrates an almost unbelievable propensity for attempting to reconcile the irreconcilable.

Referring to the 1934 decision of the Court the Bench said, "Its abandonment of the specific purpose of maintaining the "Har- vester" standard was to be recognised in the 1937 case . . . In seeking to give this interpretation the Bench had to explain the fact that the Court in 1937 had designated the wage fixed in 1934 as the "needs" portion of the total basic wage. This was dismissed as an unfortunate error of terminology.160 Nor was the Bench disconcerted by the explicit statement in 1937 that the 1934 wage "was regarded by the Court as closely approximating the equivalent of the then Harvester standard (without the Powers's 3s. od.)" With an equal facility the 1953 judgment explained: "But this is a different matter, remarked upon as coincidental with, and not as forming the basis of, the fixation of the portion of the new basic wage which the Court called the "needs" portion."lel I t is surely unreal to hold that this identity was coincidental when the 1937 judgment in distinguishing between the two sections of the total wage for the purposes of automatic adjustment intimated that the basic wage, apart from the pros- prrity loading, was "imposed for the purpose of providing for

166 77 Commonwealth Arbitration R. 477, at 490. 157 Ibid., at 490. 158 Ibid., at 491. 159 Ibid., at 491. 160 The Bench said that this portion was "somewhat inappropriately" so

named: Ibid., at 491. 161 Ibid., at 492.

fundamental needs."le2 To put the proposition in another way: If

( I ) A. ("needs" basic wage) is "imposed for the purpose of providing for fundamental needs", which is also the purpose of B. (Harvester standard) ,la3 and

( 2 ) A. is regarded by the Court as "closely approximating" B., and

(3) A, constitutes 93.3% of C. (total basic wage),le4 then it would seem that C. bears some relationship to B.

The Bench said, however, in the 1953 judgment, "The total basic wage of the Court bore no relationship to the "Harvester" standard either in concept or in fact."165 Even allowing the contention that the difference of 6.7% is sufficient to say that there was no relation in fact, it cannot be allowed that a wage which was primarily intended to provide for fundamental needs had no relationship in concept to the Harvester standard. In a later portion of the judgment the Bench retreated slightly from this untenable position by suggesting that even if the needs concept could be said to have survived by the inclusion of the adjustable "needs" wa,ge in 1937, it was clear that as a result of the 1946 and 1950 decisions the concept had had no part in the assessment of the current basic wage.la6

The 1953 judgment has been examined in this detail to show the lengths to which the Court will go to establish a theoretical nexus between essentially ad hoc decisions. I t is a reasonable assumption that the dominant consideration behind the abolition of quarterly automatic adjustments was the conviction that this system had been a major influence in the current inflationary situation. The Court de- clined to make this acknowledgmentla7 and based the abolition upon the assertion, justified in itself, tha.t it is fallacious to measure the capacity of industry by the purchasing power of money. The Bench was not content, however, merely to accept that the capacity criterion had been the dominant factor in basic wage fixation in the post-war decisions. I t propounded these strained interpretations of the pre-war judgments in order to give the decision an authenticity dating back to

162 37 Commonwealth Arbitration R. 583, at 594. 193 The Six Capitals rate fixed in 1934 was 65s.: the adjusted Harvester stan-

dard under the "A" series without the 10% reduction was 68s. 164 The total basic wage for the Six Capitals fixed by the 1937 judgment was

75s. consisting of 70s. "needs" basic wage and 5s. "prosperity loading." 1'65 77 Commonwealth Arbitration R. at 492. 166 Ibid., at 495. 167 Except to intimate that the inflationary effect of the automatic ad-

justment system was one factor amongst others, not conclusive in themselves, which "supported" the decision independently arrived at: Ibid., at 498.

the Harvester Case or at least to 1931. Although the Bench exposed the coincidence theory it did not specifically reject the 1934 judgment which had initiated the practice of adjusting a "capacity" wage by a cost of living index. Neither did it answer the obvious question- why, if the basic wage since 1931 had been a "capa.city" wage, did the Court continue to make for so many years what was explained in 1953 as such an obvious and fundamental mistake? The silence of the Bench on this point is not surprising for the answer would seem to be that the Court had not in fact regarded the basic wage as the - highest wage within the capacity of industry to pay.

In the most recent basic wage decision handed down by the Court in May of this year the silence of 1953 is replaced by a disin- genuous attempt to explain the use of the quarterly adjustment system from 1921 to 1953. Having indicated once more the error of assuming that the Harvester wage was a "needs" wage168 the judgment ack- nowledges that in fact the wage was often so regarded, and then proceeds: " . . . the transition from the continuance of the supposed "needs" basis . . . to the predominant "capacity of the economy" basis was somewhat gradual and indeed does not appear to have had a n y effect upon the amount of the basic wage until 1937 . . . y'l" The passage is unique in so far as the Court itself, for the first time, throws some light on the "abandonment" of the Har- uester standasd in 1934 and the "fresh start" of that year, and also avoids the nonsense about the "unequivocal" proposal of the productivity (capacity) principle by the majority judgment in 1934 to which it had referred in 1 9 5 3 . l ~ ~ On its own words, however, the Court was on safe ground in using the "gradual transition" argument to justify the retention of the quarterly adjustment system only with reference to the period until 1937, for it had asserted in 1953 that the total basic wage fixed by the Court in 1937 "bore no relationship to the Harvester standasd either in concept or in fact."171 Perhaps aware of the various inconsistencies of its argument the Court resorted finally to the proposition that "the system of automatic quarterly adjustments

168 Reasons for Judgment, 18. Compared with 1953 there is a certain equivoca- tion, for the Bench on this occasion merely said that the assumption "may have been erroneous." Even more unusual is the statement appearing earlier in the judgment (at 14), "The Harvester wage . . . was not fixed upon the consideration of the capacity of the community to pay a basic or foundation wage . . . "

169 Ibid., at 18 (italics mine) . 170 57 Commonwealth Arbitration R. at 491. 171 Ibid., at 492; cf. page 470, supra.

was continued because no party suggested otherwise and it was not in issue39 , .172 and, similarly, it was said earlier in the judgment: "In the

1952-53 Inquiry the Court for the first time since 1921 gave consideration to the propriety of the system of quarterly adjustments of the basic wagc on price index numbers, and it abolished it on the employers' appl icat i~n. '"~~ The assertion is quite untenable for in the 1934 judgment, as we have seen, the Court gave lengthy consideration to the question and concluded that there was "sound economic warranty" for the practice of assessing and adjusting a "capacity" wage according to fluctuations in cost of living index numbers.174 This assertion pinpoints exactly the false position of the Court and makes it impossible to accept its further statement that the "decision in 1953 to zbandon the system of quarterly adjustments was not made on a misapplica,tion of earlier decisions or upon erroneous principle^."'^^ In the economic situation confronting it in 1953 the Court according to its conceptions of certain economic principles abandoned the adjustment system. I t has been shown that the attempt to give to this decision of great national significance something more than an ad hoc validity did involve a misapplication of earlier decisions. Whether in addition the economic principles on which the decison was based were "erroneous" is not specifically in issue here but what will now be considered in conclusion is the adequacy of the Court as constituted to make such decisions at all.

IV. CONCLUSION.

While the enlargement of the Court's jurisdiction has clearly endowed it with a rdle different in kind as well as degree, the Bench has usually been reluctant to acknowledge this fact. This reluctance is well illustrated by a passa.ge from the 1934 majority judgment of Dethridge C.J. and Drake-Brockman J.: "This Court is created only to prevent or settle industrial disputes within the meaning of the expression "industrial disputes" as understood at the time when the

172 Reasons for Judgment, 18. Cf. the majortiy judgment of the High Court in the Boilermakers' Case in reference to the obvious presumption that since Alexander's Case and the 1926 legislation (szipm) the Arbitration Court was able to exercise judicial powers: "But for whatever reason it may have been, no party raised the question and it is not the practice for the Court to raise questions of constitutional validity:" [I9561 Argus L.R. at 182.

178 Ibid., 16 (italics mine) . 174 Cf. the Court's statement in 1956: "There is simply no relationship be-

tween the two methods of assessment" (ibid, 22) . 175 Ibid., 20.

Commonwealth Constitution was e~tab l i shed . ' '~~~ And in 1953, when the Court was pre-eminently fulfilling the r81e of economic stabilizer, thc judgment acknowledged the "widespread social and economic results" of thr Court's decisions, but added that "it is not the function of the Court to aim at such social and economic changes as may seem to br desirable to the members of the tribunal."177 A welcome contrast to the usual unilluminating references to its limited function is provided by the Court's 1947 Standard Hours judgment wherein the wide legislative powers acquired by the Court are emphasized.178 No better summary of the responsibilities involved in the exercise of those powers could be given than the acknowledgment by the Court that its duty and task raised "vast national issues affecting the whole economic future of the continent, the interests and mutual relations of every class of citizen, the standard of living of every man, woman and child in Australia and possibly national security itself."179 The significance of these decisions is conveyed in some measure by considering the amount of money that can be involved in the Court's judgments; it was estimated that the claims in the 1949-50 Inquiry for a £ 10 basic wage for women as well as men would have resulted in a total increase in wage distribution of £658 million per annum if granted in f ~ 1 1 . l ~ ~

I t is unrealistic in the extreme to repose these fundamentally important legislative powers of an economic character in a legal tribunal -thr qualification for membership of which is that the person appointed should be a barrister or solicitor of not less than five years standing.lsl The Court has said repeatedly that it is not concerned

17% 33 Commonwealth Arbitration R. 144. at 146. Such reasoning is completely question-begging, for the very nature of the problem is the contrast between what was "created" and what has evolved, and the corollary that the term "industrial disputes" now (and in 1934) is legally interpreted to mean something radically different from what it meant when the Con- stitution was established.

177 77 Comnlonwealth Arbitration R. at 506. On the same page the function of the Court is described in the usual inadequate terms: "its function under . . . the Act is to prevent or settle specific industrial disputes."

17s Cf. page 422, supra. 179 59 Common~vealth Arbitration R. at 591-592. 1x0 This estimate advanced during the hearing of the case was quoted subse-

quently with approval by Dunphy and Wright JJ. - see (1951) 25 Ausr. L.J. a t 368. At page 88 of the Reasons for Judgment in the 1956 case. reference is made to the estimate that an increase of 151- a week in the Federal basic wage (and of a similar amount in the State basic wage in South Australia where employees under State Awards had received no increases since the decision of the Commonwealth Court in 1953) would add approximately £50 million a year to the national wages bill.

1x1 This remains the qualification for a presidential member of the Commis- sion under the new Act - sec. 7.

with economic theories, and yet quite clearly conceptions of economic theories and policies have not only concerned the Court but have influenced its decisions. The major basic wage judgments reveal a repeated utilization of the theoretical tools of economic analysis, and nowhere is this more evident than in the judgments of the thirties. How could the Court show a greater concern with economic theory and policy than by expressing its task as the economic problem of fixing a wage level that will maintain adequate incentives for capital investment and at the same time divert sufficient income to the wage- earning section of the community with the highest propensity to consume the goods and services resulting from that investment?18* The 1953 judgment carried this senseless denial of the relevance of theory and policy to an absurd stage- ". . . we are of opinion that theories and policies should play no part in [the Court's] determina- ti~ns"'~~-for by that very judgment the Court was certainly seeking to implement a policy of price stability on the theory that automatic wage increases had been the major inflationary factor in the post-war period. The Court's difficulties have been even more complicated by the varying attitudes and conceptions of functions held by different Judges, a conflict highlighted by the diametrically opposed views expressed in the judgments of Mr. Justice Foster and the late Chief Justice Kelly. In the 1949-50 Inquiry both judges used the argument that the settlement of industrial disputes is the primary function of the Court in order to support irreconcilable attitudes and decision^.'^" The Chief Justice held that the union's arguments based on figures concerning the distribution of national income were inapposite to the Court's function of settling industrial disputes. Foster J, similarly felt that the settlement of disputes was the "central function" of the Court "which alone calls it into action" but on this identical premise he held that the problem involved in these disputes is one of "securing some equitable distribution of the national dividend between wage and salary earners and others."186 Even more significantly he added that the settlement of disputes was the "central function" of the Court to any judicially created concept of the public interest, whereas the express ratio decidendi of the Chief Justice was the danger to the economy of an increase in the basic wage and the duty of the Court therefore in the public interest to give a lcad to other authorities in

182 37 Commonwealth Arbitration R. at 590. 1'83 77 Commonwealth Arbitration R. at 509. 1% The judgments of Foster and Dunphy JJ. constituted the majority decision

in favour of a £1 increase in the basic wage, Kelly C.J. holding that no increase was justified at that time.

186 68 Commonwealth Arbitration R. at 796-797.

the community.ls6 In the 1956 judgment the Court'slS7 complete adoption of the Kelly position is evidenced by frequent references to announced Commonwealth Government policy in support of its own reasoning,ls8 and more particularly by the specific rejection of the I950 statements of Foster J. in regard to inflation.1s9

The legal profession, rightly, is jealous to maintain its exclusive powers of representation and judgment in those Courts and tribunals of the country where it is by training peculiarly fitted to fulfil these tasks. The profession would no doubt object to an economic specialist being permitted to accept a brief before the High Court to argue an appeal on the rights of a mortgagee. The community would be per- suaded of the enormity of such a confusion of function and yet it is doubtful if the economist would be less competent at unravelling the intricacies of the law of real property than the lawyer at interpreting and controlling the state of the national economy. I t is certain that the community would have less to fear from any inadequacy on the part of the economist. The Commonwealth Arbitration Court system should be retained but the functions of the Court should be limited to matters justiciable in nature and in such matters--e.g., jurisdictional disputes between unions, cases alleging wrongful dismissal-the Court should exercise an appellate jurisdiction only. The emphasis should be on conciliation and for this purpose "grievance machinery" at the plant level, which is an important part of collective bargaining agreements in the United States, should be strengthened. Where this machinery proved ineffective, disputes should be submitted to Conci- liation Commissioners, and only by leave of the Court should appeal be allowed from their decisions.

Other matters such as the principles of fixing margins for skill, standard hours, and particularly the determination of the basic wage, which are fundamental both to the problem of industrial relations and the welfare of the national economy, should be entrusted to a bureau independent of the Court. The bureau, composed of representatives of employaes and employers with a majority of Government-appointed economists and statisticians, should be a permanent body whose p~riodic decisions would be incorporated in the awards of the Court.leo

186 Ibid., at 775-776. 187 The Court on this occasion consisted of Kirby, Dunphy, Wright, and

Morgan JJ. 188 Reasons for Judgment, at 37, 76, 83.

189 Ibid., 28-29. 190 The 1947 legislation provided for the establishnient of an Office of Economic

and Industrial Research to assist the Court: sec. 106. The Office was never established and the provision was deleted by the 1956 legislation.

A prerequisite for the implementation of these proposals would be the granting of a comprehensive industrial power to the Federal Parliament by referendum. The present legal position requires the industrial power to be exercised by methods of conciliation and arbitration, and there is no guarantee that even the present degree of federal power could not be upset by the High Court reversing currently accepted interpretations. The fate of previous referenda is not encouraging, but it should be realized that the matters in issue have become increasingly national in their implication and should be dis- posed of at that level. The disinclination of five States to follow the 1953 decision abolishing quarterly adjustments has demonstrated con- clusively the futility and injustice of the present division of powers. I t would be difficult to imagine a more fertile source of industrial disputes than the existence of the widely disparate basic wage rates in fcderal and State awards which have resulted from these recent development^.^^^

These proposals are not submitted in any way as a complete solution, but it is suggested that they follow logically from this study of the evolution of the Court. Hancock has said that the prevailing ideology of Australian democracy is "the sentiment of justice, the conception of equality, and the appeal to Government as the instrument of self-realization. The ideology is simple; but the instrument is not."lQ2 The instrument is not simple nor is it immutable. At the time

l v l By the time of the 1956 judgment South Australia was the only State which adhered to the federal decision by pegging the basic wage under State awards at the 1953 level. By legislative direction in New South Wales and Victoria and by independent action of the State Industrial Tribunals in Western Australia, Queensland, and Tasmania the State basic wages had been increased to meet increases in the cost of living. The respective rates (for the capital cities) in May 1956 were:

Basic wage under Basic wage under federal award State award

New South Wales . . . . f l 2 3 0 f 12 16 0

. . . . . . . . Victoria 11 15 0 12 16 0

Queensland . . . . . . 10 18 0 11 13 0

South Australia . . . . 11 11 0 11 11 0

Western Australia . . . . 11 16 0 12 17 1

Tasmania . . . . . . . . 12 2 0 13 8 0

1.92 W.K. HANCOCK, AUSTRALIA (Modern World Series: Australian Pocket Library Edition) 63-64.

when it was becoming a nation Australia made a bold experiment to give effect to this ideology. If the experiment made in a particular set of conditions has become an inadequate instrument of self-realization, Australia should recognize the fact and equally boldly seek to improve the instrument.

R. J. HAWKE."

'B.A. , LL.B. (Western Australia), B.Lit t . (Oxon.); Resea~ch Scholar, Aus- tralian National University, 1 9 5 6 .

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