Ideas, Creativity, Productivity - My Remarks to CPAC 2019

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Acknowledgements / other speakers:

  • Andrew Cooper – Director, CPAC Australia
  • Matt Schlapp – CPAC Host and Chairman of the American Conservative Union
  • Dan Schneider
  • Congressman Mark Meadows
  • The Hon. Tony Abbott
  • The Hon. John Anderson AO
  • Craig Kelly MP
  • Warren Mundine AO
  • Jacinta Price
  • Janet Albrechtsen

There’s another person I’d like to acknowledge, and that is Senator Keneally. The woman who doesn’t know the difference between hate speech and speech she hates. The woman who has made it abundantly clear why politicians shouldn’t have the option of censoring the scope of political debate – because if she had the chance to do so she’d do it in an arbitrary, totalitarian way.

Let me be very clear – I won’t agree with everyone in this room. But I support our right – everyone’s right – to express their ideas, to debate one another, to be creative, sometimes right, sometimes wrong – because we are all better for the process of free speech in action.

And attempts to de-platform are just so counterproductive. They encourage people to not even enter a room unless they’ve checked every speech, opinion, tweet ever issued by every attendee lest they be tarred with the faux pas of another. That’s stupid, counterproductive and impractical. And if, as a politician, you are doing your job right, you should be talking to people from all walks of life, all the time. Politicians should especially spend time with people they disagree with – because sitting in a bubble filled with people nodding in agreement serves no-one. And, because when someone is seriously wrong, they need to be heard, then challenged to adopt better ideas.

One of the strengths of a conference like this is the opportunity to toss around some ideas, offer some creativity. I’m so pleased with how the PM, the treasurer, Josh Frydenberg, our finance minister, Mathias Cormann and our new IR minister, Christian Porter, have got stuck into their responsibilities. The suggestions I’m making aren’t a criticism of any of them – I think they are doing a great job.

Rather, I offer some ideas as to where we could go next, and offer some encouragement to be open-minded about the achievable but significant ways in which we can improve Australia’s productivity.

Oh, and if you bought a ticket expecting me to start a race riot – I’m afraid you’ll be disappointed. It’s just not my style. This speech was always about ways to improve Australia’s productivity. The only person who ever thought it was about being hateful was Senator Keneally – and she took it upon herself to manage the advertising for this event. You can direct any complaints to her office!

Now, more seriously.

There’s a moral and political imperative to improve Australia’s productivity. It’s not a term that’s well understood, and it seems to make most people glaze over.

It’s moral, because:

  • It will deliver more jobs to those who need them most;
  • It’s necessary to deliver higher wages to people who are struggling with the cost of living;
  • It will help to reduce the cost of living.

It’s political, because if we don’t create real improvements in wages and help people cope with the cost of living, we will pay a political price.

It’s part of the reason the Coalition was entrusted with government over Labor’s high taxing agenda.

The most obvious area of productivity improvement is in industrial relations.

Labor’s instinct to re-regulate work is harmful, not just to marginally employed people but to sectors specifically.

 

Industrial relations

There are real and concerning issues arising from the state-based industrial relations regimes. One example is the over-regulation of the labour-hire sector. A national labour-hire company faces seven different regulatory regimes with which they must comply.

Three states have passed specific laws labour-hire laws in Australia: Queensland, Victoria and South Australia, without there being a clear reason for doing so other than Labor’s dislike for labour-hire, and a desire to want to make it more difficult for them. Each one makes it an offence to engage in the labour-hire trade without a licence or to engage the services of an unlicensed labour-hire firm.

Whilst the offences themselves are similar, there are considerable variations between the penalties for offences between the jurisdictions. A key difference is that in Victoria, no criminal penalties apply whereas, in Queensland and South Australia, some offences attract terms of imprisonment either in addition to or instead of pecuniary penalties. In all cases, the penalties below are the maximum that may be imposed.

And it's not clear why there should necessarily be special regulation of labour-hire. It’s not as though it poses a higher risk to safety or a likelihood of exploitation that doesn’t exist elsewhere.

Awards are in need of improvement.

If I had a dollar for every time a constituent came to me to complain that the Modern Awards system is unworkably complex, I’d be doing well. The Gillard government’s attempt to aggregate many awards into the Modern Awards ultimately delivered the worst of all possible worlds.

They resulted in often ridiculous complexity and occasionally nonsensical requirements, as they tried to please every union that had a vested interest in or historical attachment to one of the predecessor awards.

If we are being honest, we should accept that this unreasonable complexity has to have played a part in at least some cases of staff underpayment that we see reported. Small and medium-sized businesses often come to me and say that the awards system is so difficult for them to navigate that they are either paying expensive consultants that they cannot truly afford to help them with their payroll, or they are terrified that they might be making an error because they know that the consequences – civil, criminal and reputational – would crush them.

Yes, some people deliberately do the wrong thing and underpay staff – and that’s absolutely unacceptable – but there’s plenty of evidence that complexity is causing errors that manifest as workers getting short-changed.

The benefits of getting business owners and managers away from obsessing over the payroll by simplifying awards and getting them back into their operations would be significant for our productivity.

There’s scope for making enterprise bargaining agreements fit the nature of major construction or project-based work.

There’s no reason why major projects, particularly in construction, shouldn’t have project-long EBAs. And yet, that is not how it’s currently done. Doing so would allow each project certainty about the labour costs they face, and prevent unions from using a mid-project EBA renegotiation to engage in inappropriate industrial action knowing that they have the builder over a barrel because the costs of delay at that point are extreme.

It is unacceptable that there remains uncertainty about what it means to be a casual worker in this country.

We should be beyond the point of making arguments for the value of casual employment. While it's not for everyone, for many workers, it is a preference. There are substantially higher rates of pay in exchange for the greater certainty and loadings that come with permanent work. For some employers, whose work fluctuates, it is vital to workforce management.

And yet, the Workpac case – in which the Federal Court held that a casual employee who worked a regular timetable was in fact a permanent employee with entitlement to the leave, benefits and other loadings that come with permanency – created great uncertainty. The court did not engage with the question of whether the employees in this situation had to give up the casual loading in order to get these benefits, making something of an election. Indeed, the casual observer of the decision would have read it to mean that a casual worker could just get both.

You can imagine the problems this caused. Law firms started looking for staff for whom they could run claims for historical back pay reflecting the right to these benefits – in effect inviting casual workers to take a double-dip – having already been compensated for their benefits and uncertainty with the casual leave loading, they could come back and have another go at being compensated for those things.

Employers had no certainty about the rate at which they should be paying their casual staff.

And unions loved it, because they hate casual employee arrangements anyway, mostly because they are less likely to be union members.

The coalition proposed a sensible solution. Let casual employees with a regular timetable over a period of 12 months or more (the kind intended to have been caught by the case) make a choice. Those who wanted to remain casual could do so – on their original terms. Those who wanted to become permanent, getting the benefits but also the lower hourly rate, could elect to do so.

It was fair. It put power back into employees hands where there was a risk that the casual category might be being used in ways for which it was not intended. And it gave certainty for employers that they would not face double-dipping claims.

And, Labor refused to agree to it, citing some mealy-mouthed issue about whether it was going to work.

Uncertainty about what it means to be a casual employee needs to be resolved if we are to make it as easy as is possible for new staff to be taken on. Right now, it is a block to workforce growth.

The answer should be simple. You are a casual employee if you are contracted to work as one, and paid as one. At the moment, there are a range of tests and considerations that go into determining the issue that means an employer can’t be sure about the matter until a court has decided on it. That’s just not a reasonable basis upon which to run a business. There’s nothing unfair about the simplicity of this definition either, in the context of there being a right of election in the hands of employees who find themselves casual for the long term, and working the patterns of a permanent employee.

Indeed, many workers say they’d choose to stay casual, pocketing the extra cash for the mortgage or school fees now, on the basis that they know they’re the kind of employee that doesn’t draw down hard on the leave and other entitlements that come with permanency.
You cannot overestimate how important the option of hiring a casual is to a small but growing business. They want to put someone on, but they don’t have the certainty for themselves about what their outlook will be like in the months ahead. But if we are to grow as an economy, we need to make it as simple as possible for a business to take that risk. Fair, certain terms around casual employment are vital to that task.

It would be remiss of me not to acknowledge the block to growth that is the application of unfair dismissal laws to small and medium-sized businesses. Just as uncertainty about casual employment arrangements stops a business from hiring, so too does the threat of litigation from a staff member that’s not working out.

Faced with the risk that they won’t be able to get rid of an underperforming staff member without giving them a handsome payout or enduring the legal costs of defending their call, many employers just don’t put someone on – even where they want to.
No one puts off and employee that is truly adding value unless the business is in dire straits. It should be enough, especially in small and medium-sized businesses, to make a call that a person isn’t the right fit.

 

Ensuring Integrity Bill

The Ensuring Integrity Bill is critical, and deals with some of the Heydon Royal Commission’s most serious concerns.

The Royal Commission into Trade Union Governance and Corruption conducted by former Justice Heydon, spanned nine months and held 70 public and private hearings, involving 229 witnesses.

Seventy-nine recommendations were handed down ranging from banning individuals from being office bearers if they are found guilty of crimes with sentences of more than five years, to deregistering organisations which thumb their noses at court orders and decisions.

And 30 individuals were referred to other agencies, including police, with more than 50 potential civil and criminal matters to be prosecuted.

To put this in context, the royal commission into banking handed down 76 recommendations and referred 41 matters on for investigation.

Labor was quick to demand fast action following the banking royal commission, but it’s crickets from them when it comes to making the unions more accountable.

I’ve got no problem with unions being a part of our economic landscape. But they have to honour their promise to members, and can’t be operating as thugs or standover men.

So we must clean up the unions.

Justice Heydon said in his report to the government:

“… in many parts of the world constituted by Australian trade union officials, there is room for louts, thugs, bullies, thieves, perjurers, those who threaten violence, errant fiduciaries and organisers of boycotts.”

As late as last month, the CFMMEU had 79 of its representatives before the courts in 37 separate cases brought about by the Australian Building and Construction Commission for an alleged 800 separate contraventions of workplace law.

What are these offences? Justice Heydon’s report listed even seemingly minor matters. For example, a CFMMEU organiser insisting a bricklayer who charged $4 per block laid increase his rate to fall in line with a unionised bricklayer at $6 per block. This effectively fixed the price on the site and removed competition, artificially increasing costs for builder and purchaser alike.

It might seem small – but multiply that per brick cost across the project, and then multiply it across the number of buildings constructed, and we start to have a real drain on productivity.

He also identified more significant offences – for example, a breach of privacy and trust when building industry super fund, CBUS was strong-armed by CFMMEU officials into giving the names and addresses of fund members to them so they could be used to foment industrial unrest on worksites.

These practices are not just illegal, but they’re bad for productivity – keeping costs down and maintaining efficient worksites.

And while alone some of them might not seem like a big deal, the CFMMEU alone has accumulated 2000 of these offences, and $16million in combined fines in recent years.

A Federal Circuit Court judge described the CFMMEU as

“the most recidivist corporate offender in Australian history” and possessing a record that “ought to be an embarrassment to the trade union movement”.

There are signs from some in the union sector they are embarrassed and very worried about being tarred with the same brush as the more militant construction unions.

The Australian Nurses and Midwifery Union is currently lobbying Tasmanian Senator Jackie Lambie to not vote with the government on the Ensuring Integrity Bill.

They have said:

“…none of us condone the behaviour of the CFMMEU and certainly appreciate that there needs to be greater compliance and transparency - but not at the expense of those of us who are doing the right thing.”

Interestingly it isn’t the current head of the ACTU Sally McManus lobbying Senator Lambie, but the most recent former head of the ACTU and now Labor MP Ged Kearney.

Possibly because McManus is on the record as saying that she only believes in the rule of law for laws of which she approves.

Another way that the role of unions could be made more efficient is to facilitate greater competition between unions. The ‘conveniently belong’ rule has been used to maintain effective union monopolies in most industries, and with no obvious justification. Indeed, it can allow some of the worst union behaviour to go unchecked by the civilising force that is competition.

There are many people who want to be a member of a union simply to have access to professional insurances and legal advice if something were to go wrong. Some representation at bargaining time is desirable for some, but they’re not in the market for militancy, nor do they want to become permanent donors to the Labor party or the funders of a permanent squad of Labor aligned campaigners. And yet, in most industries, this simpler option isn’t available.

Compare, though the improvements for Queensland nurses since the NPAQ was established in competition to the Queensland Nurses and Midwives Union. Charging a fraction of the fees, offering the insurances, legal help and bargaining representation but none of the money that’s siphoned off to the unions’ political or less reputable activities.

I’m not anti-union – I’m just against unions exploiting vulnerable workers for their own ends.

This brings me to another element of union corruption: the use of workers’ funds.

For a long time, unions have provided funds for their members to access at times of injury or redundancy, legal fees when facing dismissal and so on.

But Justice Heydon found these entitlement funds were being rorted by the unions. At least $30million of workers money is siphoned annually from the unions audited accounts, into these other funds.

In just one example, Justice Heydon found hard evidence of five generic funds attached to the Australian Workers’ Union alone. They were set up outside the audited accounts and were established for unspecified purposes. Even members of the union may not be aware of these funds’ existence.

Employers were forced to make contributions to these funds, often through enterprise agreements in certain sectors. And because of the secret nature of these funds, they’re often deployed for the benefit of union officials rather than the members they are meant to serve.

If a chief executive of a bank had a secret slush fund to tap into for home renovations or to make donations to political parties, do you think Labor would turn a blind eye?

The Morrison Government has reintroduced the Ensuring Integrity Bill which will clean up the systemic corruption in the union sector, but Labor will have none of it.

Most of the recommendations handed down from Justice Heydon have been incorporated into the three schedules of the bill.

Schedule 1 provides for disqualifying union officials who demonstrate a disregard for the law, and expands the grounds for automatic disqualification.

If you’re a recidivist lawbreaker, you shouldn’t be running an organisation where you are entrusted with the funds and rights of others. The standard should be nothing less than what we expect of company directors.

Schedule 2 provides for organisations to be deregistered, again for systemic or cultural corruption.

Schedule 3 provides for the administration of dysfunctional organisations.

The union sector is crying foul over the bill, but the simple fact is it will apply to employer groups equally as it does to workers’ unions. It passes the pub test.

And if we don’t deal with union lawlessness, it will be our productivity – and the take-home pay of all Australians – that suffers for it.

None of this is anti-worker. It is about getting the best possible deal for them, and doing everything we can to maximise their take-home pay.

 

Superannuation

Which leads me to superannuation.

We need to be honest and open-minded about the impact of increasing the compulsory superannuation contribution.

There is no doubt that taking responsibility for your income in your old age is the right thing to do. But it’s become something of a sacred cow that can’t be criticised, even if the object is to improve it.

In 2010, the Gillard Government legislated for employer contributions to increase from 9 per cent to 12 per cent by 2020.

These increases are expected to be covered by employers, so it will either come from cuts to employee numbers or their profits.

Add to that 3 per cent, the oncost of CPI increases to wages and you have a cumulative impact year on year.

Further, that 3 per cent increase, would also be subject to payroll taxes at the state level, which will then be impacted by the threshold and scales in each state.

This will impact upon jobs and wages, just as it did when it was introduced in 1992.

The Coalition deferred the latest increases until 2025, but it will still have an impact on employers’ bottom lines and in the case of marginal small businesses, it might mean the difference between hiring another employee or not.

We also need to be honest about the inefficiency of the superannuation sector in Australia. It is among the most expensive in the world, and providing it with more funds to manage before requiring it to lift its game will give it more financial and political power without the price of improved member balances (especially through lower fees).

According to the Australian Superannuation Fund Association, there are $2.8 trillion dollars tied up in superannuation and this amount increases by more than $1billion a quarter.

Fees, and in particular variable fees, are inefficient and expensive. They’re also big business for the funds and their owners, raking in $30billion a year from active and dormant accounts.

Australians pay the highest superannuation fund fees of all of the OECD countries.

An increase in fees of just 0.5 percentage points can cost a typical full-time worker (starting work today) around 12 per cent of their balance (or $100,000) by the time they reach retirement.

Then there are the fees for advice.

In 2017, 10 retail funds collected around $1.4b of advice fee revenue – members were charged approximately $341 per account. Industry funds do it too – and most members don’t even know they pay for it, let alone use it.

Then there are the dormant accounts – of which there are 10million unintentionally dormant superannuation accounts being charged variable fees of a percentage of the balance.

When fees are applied to these inactive accounts, they eat at the balances quite significantly.

To fix this, the Morrison Government introduced the Treasury Laws Amendment (Protecting Your Superannuation Package) Act to address dormant accounts which are whittled away by fees and insurance premiums.

Dormant accounts of less than $6000, with no activity over the past 16 months will be transferred to the ATO, and they will consolidate those accounts into the active account.

This is good news for those who have superannuation accounts with funds that use unreasonable administrative requirements to make it near impossible to consolidate their funds.

 

Lawfare and Green Tape

We need to get serious about removing the bureaucratic roadblocks to growth.

There needs to be real consequences for those who would seek to use lawfare to hold up major projects, particularly in mining and water infrastructure, in an effort to cause sufficient delay and costs as to make projects uncommercial. Objectors must be required to show they are affected by a project in a direct sense, and face the reality of costs orders where their actions amount to an abuse of process.

Lawfare is a relatively new strategy of the Green movement. Where once a Greenie would chain themselves to a bulldozer to stop a building going ahead, they now tie up the approvals processes in court.

That’s not to say they don’t still chain themselves to the odd piece of heavy machinery, or more stupidly jamming their hands into a cement-filled barrel and lying on train tracks, as they have in an attempt to stop movement in and out of the Adani Carmichael site.

In the case of the Adani mine, they have had to fight challenges to the actual mine in the Federal Court from the Mackay Conservation Group, Australian Conservation Foundation (twice); and in the Queensland Land Court from Land Services of Coast and Country Inc.

The Abbot Point coal terminal has been challenged by the North Queensland Conservation Council in the Administrative Appeals Tribunal; again the Mackay Conservation Group in the Federal Court;

Alliance to Save Hinchinbrook in the Federal Court; and in the Queensland Supreme Court a challenge by the Whitsunday Residents Against Dumping.

Then there were native title issues raised by the traditional owners of the land on which the mine was proposed. The Wangan and Jagalingou people challenged the Carmichael mine for three years from the Native Title Tribunal through to the Federal Court.

Given the first announcement of the Carmichael mine was made by then Premier Anna Bligh in 2010, and the first excavations were only just being made last month, it has been a long and frustrating process not just for the mine owner Adani, but for the coal industry itself. But this isn’t ultimately about Adani the company. It’s about the thousands of our of work men and women in Townsville, Rockhampton, and throughout Central Queensland who desperately need this opportunity and many more like it.

And despite meeting all 180 environmental conditions upon it, the Queensland Government sat on the approval of the last one – a groundwater management plan – for months. Environment Minister Leanne Enoch admitted she had cried over the approval. She has also declared she will use the

Environmental Protection Agency to effect. So I think Adani can expect more green tape from them, along with many visits from the EPA, and maybe if the Commissioner for Mine Safety and Health gets her act together, a few audits and inspections from them.

No wonder some say it’s easier to do business in South America than it is in Queensland.

 

Special Economic Zones

Conferences like this present great opportunities for creativity, and for expanding our bigger vision.

We can’t ignore that the infrastructure that will matter most for our future is water and power, with transport not far behind. We’ve been investing in transport, but energy and water infrastructure require vision, drive and commitment for fruit that will be borne well down the track.

We should explore – with the buy-in of relevant communities – the potential of setting up special economic zones, in which there is a clear commitment from state and federal government to very low taxes (of all kinds), infrastructure investment, minimal red and green tape and a ‘welcome mat’ rolled out for investment.

If the site is chosen well, it can boost struggling areas quickly into economic powerhouses, and foster innovation and opportunity across the economy. Imagine what this could do for a Townsville or a Gladstone.

While it would have an experimental quality (and that’s why local support is so important), for an area doing it tough, it would be a risk worth taking, with the potential to set it up for the long term.

We need to take a creative approach.

 

Conclusion

Some of you might be a little disappointed that this talk was not more radical, not more grand. But the whole point is to show that there are small, politically achievable things that we can be doing, even in the short term, with a dramatic impact on the productivity of this nation. If politics is the art of the achievable, I regard all of these items as within reach if we are willing to make the case for their moral and political value.And there is both – improving our productivity isn’t just about generating more wealth for corporations, as the left might have you believe. It is about more jobs for those in our community who are most vulnerable and higher take-home pay for those who work, across the board. It is about producing everything we produce more efficiently, so it is more affordable for everyone in our community.

And that is deeply just.