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Australian industrial relations: no easy solutions

By Chris Lewis - posted Wednesday, 15 October 2008

If any issue illustrates the major division between Australia’s major political parties in recent years, it has been industrial relations. While considerable attention was also given to the environment and the Iraq conflict prior to the 2007 federal election, it was industrial relations that contributed most to the Coalition’s defeat, despite Australia’s trade union membership declining from 48 per cent in 1984 to 19 per cent in 2006 (13.7 per cent for the private sector and 41 per cent for the public sector).

Industrial relations is indeed a complex policy issue. This is because all governments are under greater pressure to maintain a labour market attractive to investment at a time when the global labour market continues to increase from an estimated 1.46 billion workers during the 1980s to about 2.93 billion, as noted by Richard Freeman on The Globalist online site (June 3, 2005).

Providing another policy example is industrial relations, where mere criticism of the Howard government and faith in the Rudd Labor Government is never good enough, although studies do indicate why many Australians have lost pay and conditions under the promotion of Australian Workplace Agreements (AWAs). For instance, Professor Judith Brett asserted in The Monthly (May 2007) that the Coalition’s WorkChoices legislation may be “the equivalent of Chifley’s decision to nationalise the banks, when ideology overcame good sense and tempted him to extremism”, and was part of Howard’s determination since his youth in the 1970s to defeat the union movement.


In truth, the Howard government was anxious to create what it believed were the necessary conditions to favour business investment. In addition, subsequent economic success did enable the Coalition to provide even greater social welfare assistance for Australians. As indicated in an article by George Megalogenis in The Australian (September 20, 2008), the proportion of families whose tax was offset by benefits increasing from about 38 per cent in 1996 to 41.6 per cent by 2006-2007 (39.3 per cent as of January 2004).

Quite simply, there are no easy answers to industrial relations: Labor also struggles with the issue, although the degree of reform will long remain determined by ongoing interaction between political parties, interest groups and public opinion.

After all, even Sweden, arguably the most egalitarian of all liberal democracies thus far, has moved away from two decades of a centralised and co-ordinated bargaining system to utilise enterprise bargaining after the Engineering Employers Organisation forged a separate agreement with the Metal Workers Union in 1983.

Labor governments (1983-1996) encouraged productivity improvement and enterprise bargaining, as evident by the 1987 national wage case and the 1993 Industrial Relations Reform Act which allowed negotiations without union involvement. However, they also adopted an Accord with the trade union movement which reduced real unit labour costs by 14 per cent by 1990 although also introducing other important reforms such as compulsory superannuation for workers.

Of course, despite the need to pay adequate attention to public opinion, Australian governments are guided by elite opinion. With the Reserve Bank governor Ian Macfarlane noting in 1996 that wage increases should not outstrip inflation and overall productivity gains in order to help maintain investment, recent Australian governments have been eager to limit wage increases to the desired inflation target of 2-3 per cent.

So while the Howard government was forced to negotiate with the Democrats from 1996 to get the introduction of the AWAs through - albeit with a “no-disadvantage” test to leave no worker worse off when compared to minimum awards (as previously introduced by Labor) - it was always anxious to promote AWAs much further.


Having won a majority in the Senate from July 2005 (around a time when AWAs covered just 2.4 per cent of the Australian workforce by May 2004, compared to 41 per cent by collective agreements), the Coalition was aware that wages under union collective agreements increased by 4.3 per cent between June 2004 and June 2005 (compared to 3.5 per cent for non-union collective agreements and 2.5 per cent for AWAs), despite union membership falling further to 22.7 per cent.

However, it is naïve to suggest that Labor will save the plight of trade unions, despite the union movement spending an estimated $20 million on advertising to oppose WorkChoices prior to the 2007 election. After all, with employers eager to reduce costs, the proportion of casual workers within Australia’s workforce under Labor increased from around 16 to 26 per cent between 1984 and 1996 with part-time workers also rising from 17 to 24 per cent at a time when trade union membership declined from 48 to 31 per cent.

Indeed, the Rudd Labor government has given important certainty to workers. For instance, Labor restored the right of workers to collectively bargain. In addition the “no-disadvantage” test comparison with awards ensured unpaid parental leave of one to two years, although an employer may be able to refuse the second year on business grounds if the same parent wants both years off. The government has also given parents a right to request flexible work arrangements until their child reaches school age with employer objections to be based only on reasonable business grounds.

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About the Author

Chris Lewis, who completed a First Class Honours degree and PhD (Commonwealth scholarship) at Monash University, has an interest in all economic, social and environmental issues, but believes that the struggle for the ‘right’ policy mix remains an elusive goal in such a complex and competitive world.

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