Event: Tim Reed interview with David Speers, ABC 7.30
Speakers: David Speers, host ABC 7.30; Tim Reed, president Business Council of Australia
Topics: Proposed changes to Australia’s workplace relations system
David Speers, host ABC 7.30: Tim Reed is the president of the Business Council of Australia, and he joins me now live in the studio. Welcome to the program.
Tim Reed, president Business Council of Australia: David, great to be with you.
David: So, inflation we're told will now hit 8 per cent by Christmas, wages though are rising by less than half that, indeed the Reserve Bank noted today that wage growth, "Remains lower than in many other advanced economies." Why do you think that is?
Tim: There's a number of technical reasons why wages move more slowly in Australia, but we have seen wage rises continue to grow. Wages have been growing over the last 20 years in Australia and in fact, real wages have performed reasonably well compared to other countries. The enterprise bargaining system in Australia, the minimum award system in Australia, means that there tend to be delays in movements coming through, but it hasn't meant over any sustained period that real wages haven't performed as they have in other nations.
David: Do we need stronger wage growth?
Tim: Everyone wants stronger real wage growth. Businesses want that, the government wants that, unions want that. The question is how do we get that and the Productivity Commission put a report out a few months ago that said if you look back since 1900, since Federation, 80 per cent of real wage growth has come as a result of productivity improvements. So, the real question is how do we drive productivity because we know that is what drives real wages.
David: But we know company profits are rising at more than twice the rate of wages according to the latest figures from the Bureau of Statistics, so is it okay for profits to rise without this productivity growth, just not wages, is that what you're saying?
Tim: Well, profits are highly volatile so profits will go up in some years and profits will come down on others.
David: They're going up at the moment.
Tim: Coming out of COVID, they are absolutely going up because profits went down when consumers weren't spending, when prices weren't rising. But profits will always be a more variable factor. If you look over the last three decades at the split between profits and wages, it's been pretty consistent across the Australian economy.
David: Well, over the last 20 years profits have risen far more than wages.
Tim: Not if you remove the impact of commodity prices.
David: Why would you do that?
Tim: Because commodity prices go up and down.
David: You don't remove that from the wages data though?
Tim: Well, what you do is flow that through in the long-term to consumers and if you do look over the long-term, right now there's a spike in commodity prices but if you look at where for example the budget expects commodity prices to go ...
David: They've have outpaced wages though for some time, not just during COVID.
Tim: If you look over an extended period of time, they have not outpaced...
David: Let's look at what the government wants to do about it. It says its IR changes will get wages moving including the provisions for multi-employer bargaining. What concerns you about this? What do you fear would happen if this becomes law?
Tim: If we go back to what drives real wage increases and it is productivity and I think every economist would agree that is what it is. Productivity occurs at the enterprise level. So, enterprise bargaining today has been designed to drive those productivity improvements and make sure they're shared by both workers and the business. And that system has worked pretty well. 10 years ago, there were some changes that meant it has worked less well in the last ten years....
David: It's been dying off for 10 years.
Tim: It's been dying off but many of the changes that the minister is proposing is to go back to some of the things that worked in the 10 years prior to that.
David: So, what do you fear would happen?
Tim: So, we're very supportive of those changes. If you then move to a multi-employer system, then what happens is you remove the flexibility for different workplaces to find solutions that will drive productivity in their workplace. And ultimately that means there'll be less, lower real wages.
David: But can't you have productivity where multi-employers and workers agree on something that's going to be a win-win?
Tim: Well actually, you get productivity by the ingenuity of individuals driving better competitive responses to one another. So, if you're all the same and you all only serve vanilla, then there is no gains to be had.
David: But on the flipside the argument is this would remove the ability of one business owner, a cleaning business, to undercut the rest of the competitors by paying the workers very little.
Tim: And remove the incentive to them investing in new products, investing in new services, investing in technologies to drive better outcomes.
David: Just not their wages.
Tim: And I think the government acknowledge this, right. In fact, in the second reading of the bill Tony Burke explicitly said we don't want it to apply in industries that compete on technology, that compete in product innovation, that compete in delivering differentiated services to the consumers. So, we want to make sure that doesn't happen. What the government has said is what they would like to do is have it apply specifically to low-wage particularly care-based, feminised industries.
David: And are you okay with that?
Tim: We acknowledge that same competitive processes haven't led to outcomes for employers.
David: So, could the bill be amended to satisfy your concern to limit it, narrow it down to just those particular sectors?
Tim: Yes, so we want to make sure businesses that use the current system well continue to use it well. We want to make sure that direct competitors aren't being dragged into uniform outcomes across the industry. We want to make sure that there aren't options or the possibility of going back to the 1970s where we have widespread industrial action right across entire industries that shut down our ports…
David: So, what sort of amendment would satisfactory those concerns?
Tim: There is broadly five sets of amendments that we have shared very openly with the government that talk to exactly that; protecting the ability of businesses to remain in a single enterprise bargaining system; ensuring that it doesn't get extended to competitive firms, particularly large competitors that will lower competition across the economy…
David: The government also argues these proposed changes would actually limit the ability to strike and I know this is one of the big concerns of the business groups, is that this would lead to widespread strikes. The government points out if disputes drag on, they could be arbitrated by the Fair Work Commission, the independent umpire. What's wrong with that?
Tim: So, there's nothing wrong ultimately with that being the case. The question is …
David: So, you don't have a problem with the umpire arbitrating decisions?
Tim: We have a problem with the process of getting there too early in a negotiating process. So, one party universally or unilaterally being able to say, ‘I don't want to negotiate. We're just going to go straight to the umpire.’ That's where we have the challenge.
David: So, what's too early? What would be acceptable to you?
Tim: Well, there has to be a process of genuine engagement, of good faith across the parties. The challenge in a multi-employer system is, are there 50, are there 200 employers who are there. Who is actually negotiating that? On the other side there might be a single union, but you might have hundreds and hundreds of employers and for them all to have the ability to have their voice to be a part of those negotiations is going to be very, very complex.
David: Finally, will the Business Council mount an ad campaign or join a campaign that's being talked about to fight against these IR changes?
Tim: We're very focused on engaging with the government to try and ensure that the next draft piece of legislation that comes forward incorporates the concerns that we have put forward. We had real problems with the first bill that the minister introduced but in the second reading of that he openly said that ‘I am engaging in consultation on five key areas.’ Those with were the areas that we hoped he would say he would engage with. So, in good faith we're going to engage with the government. What happens post the next draft, I think, is completely hypothetical but right now we're focused on trying to get outcomes for Australian workers and for Australian businesses.
David: Tim Reed, thanks for joining us.