PRESENTATION TO THE 2012 APPEA WORKFORCE DEVELOPMENT & PRODUCTIVITY CONFERENCE AMMA Executive Director, Industry, Minna Knight “Productivity at work – challenges and opportunities under the Fair Work regime” Thank you and good afternoon. AMMA, or the Australian Mines and Metals Association, is the national resource industry employer group and has been a vocal advocate for reform to the Fair Work legislation since its enactment. Many of APPEA’s members are also member companies of AMMA but more importantly, we all stand united as organisations within one of Australia’s most prosperous industries – an industry that demands better policy solutions for effective workforce outcomes. Today I will explore how the Fair Work Act impacts on the productivity and competitive position of employers in our national resource industry. Paying particular attention to the practical challenges faced by employers on a daily basis, I will outline AMMA’s key recommendations to reform the legislation and get our industry’s productivity back on track. Industrial Action, Excessive Claims & Impact on Productivity Those who question the impact of Australia’s industrial relations laws on workplace productivity should reconsider the recent experience of Farstad Shipping, a member of AMMA who 18 months ago was involved in industry wide negotiations concerning vessel operators’ collective agreements in offshore construction in the oil and gas sector. In bargaining with the Maritime Union of Australia (MUA) under the new Fair Work Act 2009 , Farstad understandably resisted claims for a 30 per cent pay increase plus a $500 per day construction allowance. Agreeing to these claims would have, in some cases, doubled the already generous salaries of each seafarer working on its vessels and resulted in significant wage blow outs in the construction and blue water aspects of its operations. After some token attempts by the MUA to ‘bargain in good faith’ , Fair Work Australia rubber stamped an application for the MUA to take strike action
against Farstad. The strike action that followed cost the company upwards of a million dollars a day and resulted in a serious downturn in its productivity. The company went to Fair Work Australia with an application to suspend the strike activity, known as a cooling off period. In throwing Farstad’s application out, Senior Deputy President Kaufman not only noted that it was well within the law for the union to attempt t o ‘bleed’ and ‘soften up’ the employer during bargaining, but that such activity was central to reaching a resolution under the legislation. From a productivity perspective, this is an employer’s worst case scenario. But this is not a rare event; we saw it again with Qantas last year and we are seeing it again with BMA in 2012 and numerous other employer across the country. Industrial Relations – The Underlying Influence The impact of a nation’s industrial relations framework on workplace productivity has always been hotly contested among IR and economic circles. While some commentators put the onus on managerial competency, leadership and culture for an effective workforce, others argue excessive regulatory burdens make this impossible. In either case, a fter beginning its steep decline in the early 2000’s, Australia’s productivity levels remain at their lowest since 1989. Views on productivity have been dominating headlines of our national newspapers for weeks , and as late as yesterday we’ve heard d iffering views on the impact of industrial relations regulation, otherwise referred to as an underlying influence by most economists, has on workplace productivity. The most recent stoush began when Treasury chief economist David Gruen attributed the lack of national productivity to the inferior management performance of many small Australian businesses. 1 Business groups, leading economists and resource industry identities have responded quickly, identifying the government’s overregulation of Australia’s trading environment as a major problem. Problems identified include taxation issues along with a set of workplace relations policies that, by removing any flexibility around how business can use its labour capital, have made it impossible to react to new market 1 Cara Waters, Treasury blames small business for Australia's poor productivity, 11 July 2012
opportunities; innovate for shifting consumer trends; and ultimately compete with multi-national firms. 2 Productivity and the resource industry It is commonly accepted by economists that the great new investment opportunities found within Australi a’s resources sector in the early 2000’s was a significant cause in the reported decline in productivity growth. This occurred not through a lack of innovation or adverse economic conditions, but the great deal of new capital investment being put into Australian projects that would not see any comparably measurable productivity outcomes for some time. To this day, capital investment in our sector continues to set record after record, with the value of approved projects in the advanced stages totalling $260 billion and an additional $250 billion worth of projects in the investment pipeline. T he opportunity is certainly there for Australia’s resources projects to pull the country out of this unassailable productivity slump. In the last five years, the number of people directly employed in the resources industry has increased from 136,000 in 2007, to 266,000 as of May this year. By 2016, this is forecasted to be at least 350,000 and the federal government has indicated that for every single direct mining job created in our industry, up to an additional 3 jobs are created along our extended value chain. Some interest groups might take this great opportunity for granted, but these economic benefits are not a given and we must ensure the underlying determinants of workplace productivity are enabling, not constraining, the ability of our resources employers to deliver them. This is where the impacts of the Fair Work Act are critical. Impacts of the Fair Work Act 2009 Port Jackson Partners economic consultant Angus Taylor recently told an AMMA Conference that “combined with significant workforce requirements, productivity is critical to realising the full potential of the (resource sector’s) growth opportunity”. 3 2 Geoff Winestock, Productivity: bosses blame the system, 12 July 2012 3 Angus Taylor, Earth, Wind, Fire, Water: Economic Opportunities and the Australian commodities cycle
Despite the detriments of the MRRT and Carbon Tax, the most significant threat to our industry in delivering these projects are workforce issues – the majority of which are either directly caused by the Fair Work Legislation or significantly escalated by the workplace environment the framework has created. Employers in our industry are dynamically addressing those factors in their immediate determinants of workplace productivity – those challenges we can overcome through effective management, forward planning and innovation. AMMA is involved every day with members who are utilising new training and initiatives, accessing temporary skilled migration and a variety of workforce planning and development strategies to address critical skills shortages. However in one of the most capital and labour-intensive industries in the country, uncertainty and risk created by the Fair Work legislation and the increased militancy of trade unions is a serious constraint within the underlying determinants of productivity. Fair Work Flaws The Australian Business Foundation has recently identified five major flaws in the ideology of the Fair Work Act; flaws that our employers are feeling the impacts of every day. 1) The first is the presumption of conflict in the design of the legislation, which has proven to be a massive obstacle to the encouragement of engaged and empowered employees – such a feature is integral to a highly productive workforce. The ABF rightly says there is too much focus from employers and employees to satisfy Fair Work’s procedures when solving problems rather than meeting individual needs in the workplace. 4 For two years now AMMA has been conducting six-monthly research surveys with the assistance of RMIT University. Called the RMIT / AMMA Workplace Relations Research Project, the fifth and most recent report into t he Fair Work Act’s impact on resource workplaces has highlighted that the number of resource employers who rated their industrial environment as unacceptable has risen by more than five times. 4 Australian Business Foundation, Productivity and Fair Work , March 2012
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