Econ 243 Ass 1 Lana Roelandts 2011

Lana RoelandtsECON 243, 2011220032777External

ECON 243

ASSIGNMENT

2011

LANA ROELANDTS

WORD COUNT: 3174


Compare the Howard Government’s WorkChoices legislation for Australia’s industrial relations

with the Fair Work Australia legislation of the Rudd/Gillard Government. In your answer show

that you understand the significance of the differences.

The Howard government’s amendment to the Workplace Relations Act 1996, the Workplace

Relations Amendment (WorkChoices) Act 2005 was a substantial change to Australian industrial

relations structure and policy. The WorkChoices legislation made significant alterations to the

previous Workplace Relations Act. The most notable alterations were the reduction in the number of

awards, the introduction of Australian Workplace Agreements as a primary determinant of wages

and conditions, the elimination of the Australian Industrial Relations Commission’s role in setting

wages and conditions for employees, abolishment of the “no-disadvantage test”, and the

abolishment of unfair dismissal laws.

Under the Workplace Relations Act 1996 20 matters regarding wages and hours were included in

awards for employees. However, under the WorkChoices 2005 legislation the number of matters

that could be included in an award was reduced significantly, from 20 to just 5. This meant that

employees were required to negotiate all other working conditions through enterprise bargaining

negotiations in their Workplace Agreements.

Enterprise bargaining has slowly become more prevalent in Australian Industrial Relations over the

last twenty years. It was brought to the forefront in the Industrial Relations Reform Act 1993,

however the WorkChoices legislation made enterprise bargaining the primary determinant of wages

and conditions. This meant individuals would be required to negotiate their terms of employment.


AWAs were seen as detrimental industrial relations legislation, as if an individual refused to sign

their workplace agreement, then employers could simply terminate employment within the firm.

The negotiation task was made even more difficult through the changes to one of the key industrial

relations regulatory bodies, the Australian Industrial Relations Commission. “WorkChoices effectively

eliminated the AIRC-and state industrial tribunals-from wage-fixing process, and replaced the award

system as a ‘safety net’ with the Australian Pay and Conditions Standard”. (Sappey et al, 2009, p.224)

This was a significant legislative and structural change, as the key role of the AIRC set minimum

wages and conditions, and conciliation and arbitration duties in settling industrial disputes. The

Howard government introduced the Australian Fair Pay Commission to determine minimum wages

and conditions for employees, instead of the AIRC, and the arbitration and conciliation functions of

the AIRC were limited.

The abolishment of the “no-disadvantage test” became a crucial element of WorkChoices, as its

abolishment created the possibility of loss of award conditions and standards under AWAs. “It was

the no-disadvantage test that retained the relevant award as a person’s safety net. Before the

commission could approve a collective agreement, or before the Employment Advocate could

approve an AWA, they had to satisfy themselves the deal would leave the workers at no overall

disadvantage compared with the provisions of their award... Now, however, the no-disadvantage

test is to be replaced by an ‘Australian fair pay and conditions standard’. That is the collective

agreement or AWA can’t provide for pay rates lower than those set by the Fair Pay Commission or

conditions of leave and standard hours worse than those specified in the new legislation.” (Gittins,

2005)

After the Howard government lost power in November 2007, the then Rudd Labour government set

out to remove some of the injustices put in place by the WorkChoices legislation. The first important


thing was to abolish the Workplace Agreements and revert to a system of awards as the safety net

for workers. This was an attempt to make Australian industrial relations more equitable for more

Australian workers.

Under the Fair Work Australia legislation, the number of allowable matters was increased to 20

allowable matters to be written into every employment control for minimum conditions. “...the

National Employment Standards (NES) form part of the safety net, with ten minimum employee

entitlements covering all employees engaged by a constitutional corporation, that cannot be

bargained away with enterprise agreements (with a further ten minimum conditions for employees

covered by new, modern awards).” (Sappey et al, 2009, p.412)

Perhaps the most notable reform in industrial relations from WorkChoices to the Fair Work Australia

(FWA) legislation was the introduction of Fair Work Australia, which is a tribunal which was put in

place to replace the Australian Fair Pay Commission and the AIRC. In other words, it was put in place

to be a federal tribunal that oversees the Australian workforce, and carries out functions such as

setting wages and conditions, dispute resolution process, industrial action complaints and processes

in dealing with industrial action, and enterprise bargaining functions. FWA has become the national

regulator of industrial relations functions.

Another notable reform was the inclusion of small businesses in unfair dismissal claims under the

FWA legislation, whereas small businesses were exempt from unfair dismissal claims under

WorkChoices.

Reforms put in place by the Rudd/Gillard Labor government under the FWA legislation, although not

completely abolishing all aspects of the WorkChoices legislation, it did however, correct some great


injustices and restore a degree of equity between employers and employees in the workplace.

Discuss the importance of national competition policy since 1995 and the role of the Australian

Competition and Consumer Commission.

Prior to 1995, competition laws and policy in Australia were administered differently than they are

now. Before 1995, competition policy was regulated by the Trade Practices Commission and the

Prices Surveillance Authority. The two pieces of legislation enforcing the rights of these regulatory

bodies were the Trade Practices Act 1974 and the Prices Surveillance Act 1983. It is the merger of

these two regulatory bodies, which occurred in 1995, that has given shape to the current national

competition policy regulation in Australia.

“In 1992 the Commonwealth Government set up a committee to inquire into a national competition

policy... The recommendations of the committee, contained in the Hilmer Report, were accepted by

COAG (Council of Australian Governments) in February 1994.” (Lewis et al, 2010, p.74) The Hilmer

Report stated “the need for a broad approach to regulation.” (Lewis et al, 2010, p.74) It also

“recognised that Australia is a single integrated market with state and territory boundaries

diminishing in importance” and that “many trade restrictions had been removed or diminished

making the traded goods sector more competitive”. (Lewis et al, 2010, p.74) Based on the Hilmer

Report, the federal parliament passed the Competition Policy Reform Act 1995. “The CPRA is an

amendment to the TPA and includes within it the Prices Surveillance Act.” (Lewis et al, 2010, p.74)


This legislative amendment was crucial because the Trade Practices Act (TPA) has been one of the

key pieces of legislation regarding Australian competition policy. “The TPA is concerned with the

behaviour of firms rather than prohibiting certain industry structures. Thus, a monopoly is not

actually prohibited; rather, it is the uses of monopoly power to, say, fix high prices, that is

prohibited.” (Lewis et al, 2010, p.71) The TPA legislation’s functions were to deal with elements such

as the misuse of market power, mergers and acquisitions, unconscionable conduct, anti-competitive

agreements, as well as many other areas. The amalgamation of the TPA with the Prices Surveillance

Act (PSA) under the CPRA, included the ability to investigate price rises, to monitor the prices, profits

and costs of firms, and to hold inquiries regarding the supply of goods and services to the functions

the Act was to oversee. It was agreed, that with the amalgamation of the TPA and PSA, that the

regulatory bodies entrusted in distributing the legislation should also be amalgamated, in order to

create a nationwide competition policy regulator. This is how the Australian Competition and

Consumer Commission (ACCC) came into existence in 1995.

The role of the ACCC is defined on its website as “The ACCC promotes competition and fair trade in

the market place to benefit consumers, business and the community. It also regulates national

infrastructure industries. Its primary responsibility is to ensure that individuals and businesses

comply with the Commonwealth's competition, fair trading and consumer protection laws.” The

ACCC website also states “The Australian Competition and Consumer Commission is an

independent statutory authority. It was formed in 1995 to administer the Trade Practices Act 1974

(renamed the Competition and Consumer Act 2010 on 1 January 2011) and other acts.” The ACCC

“was formed as part of the implementation of the National Competition Policy program.” (Lewis et

al, 2010, p.71)


A somewhat important legislative change occurred on 1st January 2011 with regards to competition

policy. The Trade Practices Act 1974 was renamed as the Competition and Consumer Act 2010 (CCA).

Although the content of the Trade Practices Act did not undergo severe legislative change, the

change in the TPA’s name must be noted when dealing with aspects of national competition policy.

This move can be seen to reflect the regulatory functions of the ACCC, by specifically highlighting the

nature of the legislation’s governance of competition and consumer welfare and policy.

Exclusively, the CCA gives the ACCC the authoritative power to deal with “unfair market practices,

industry codes, mergers and acquisitions of companies, product safety, product labelling, price

monitoring, and the regulation of industries...” This is especially important, when failing to do so

could disadvantage consumers and impede upon consumer welfare, and the welfare of other firms

in the market. For example, collusive behaviour between market leading firms, such as price-fixing

and other similar behaviours not only impact upon consumers, but they also have negative impacts

on the competing firms in the market, as this behaviour has the ability to negatively impact upon

efficiency. It is the ACCC’s role and function to limit this kind of behaviour and make competition

policy in Australia as equitable as possible, with a few exception.


What was the regime of labourist-protectionism? Discuss why it was replaced by a neo-liberal

globalisation policy in the 1980s.

Labourist-protectionism has been in existence before the federation of Australia in 1901. However,

at the start of the 20th Century, the State and Federal governments began to play a larger role and

have a greater influence on the Australian economy. With regards to economic protection of

emerging Australian industries, tariffs were introduced as a mechanism to encourage the purchasing

of domestic products by placing a tax on imported goods. This effectively was a means of protecting

domestic producers and firms, especially in emerging industries in the primary sector, such as

agriculture, mining of resources etc.

An early example of a tariff legislation imposed to protect domestic firms was the Excise Tariff Act

1906. Under this legislation the Excise Tariff Act introduced tariffs for the newly emerging

manufacturing industry in Australia. Under the Excise Tariff Act “employers were granted tariff


protection, provided that a fair and reasonable wage was paid to their workers”. This stipulated that

firms were eligible for protection from imports only if they met the minimum fair wage requirements

set out in the Excise Tariff Act legislation.

The basic premise of labourist-protectionism was to secure the interests of the white Australian

male worker. This involved securing employment/job security, wages, and ultimately quality of life

for the white male worker. The way in which labourist-protectionism operated was to

restrict/regulate industries in Australia in the primary sector and reduce the threat of foreign trade

and investment. It was economically viable for the Australian government to engage in labourist-

protectionism as Australian workers were earning high incomes due to the primary sector exports,

such as wool, wheat, gold, minerals, coal, beef and iron ore.

Although protectionism was a way of providing protection to domestic producers in domestic

markets from the threat of international competition, over the course of the century, the Australian

government shifted away from protecting industries. “As a result of tariff protection, many other

sections of the economy suffered. Those industries that used Australian-made inputs had to pay

higher prices due to cost inefficiencies in the production of those inputs. Industries relying on

imported inputs were disadvantaged, as the tariffs placed on the imported inputs raised domestic

production costs.” (Lewis et al, 2010, p.26) Another economic burden of tariff protectionism is

“tariffs on imports raise the value of the Australian dollar, reducing incomes for exporters and

making imports more expensive.” (Lewis et al, 2010, p.26)

It is due to these factors that the protectionism policy in Australia was drastically reformed

throughout the 1970s. It was in 1973 until there was “any decisive change in public policy on tariffs.”

(Lewis et al, 2010, p.26) Under the Whitlam Labor Government, “the government reduced all tariffs


unilaterally by 25 percent.” It was around this time that Australia was experiencing what is referred

to as stagflation, effectively a wage/price spiral with inflation followed by high levels of

unemployment due to increases in wages and the subsequent increases in living costs. There was

also an increasing demand to make Australian markets more open to international competition.

Ultimately, deregulation of Australian markets was sought in an effort to make Australia more

globally competitive. In other words, a neo-liberal stance was taken in a quest for global

competitiveness by Australian markets. Neo-liberalism is the belief that the State should only play a

minimal role, that supply and demand should determine prices of things and the State should not be

regulating markets. This belief was strongly held by the Hawke Labor market, and ultimately led to

the floating of the Australian Dollar on the stock exchange, which meant that fluctuations in its price

were “determined by the demand and supply of Australian dollars in international currency

markets.” (Lewis et al, 2010, p.36) This occurred in December 1983. As Australian industries became

more competitive, there was also an increase in the requirement of legislation to provide protection

for consumers and firms in operation, eg the Trade Practices Act 1974 (Cth).

Through the lowering of tariffs and the opening of Australia’s economy, Australia has, over the

course of a century, slowly shifted from the labourist-protectionism past, to a more economically

efficient neo-liberalist outcome, and has embraced global competition through market deregulation

and a shift towards free trade, and positioned Australia in an advantageous competitive position

within the global marketplace.


Discuss the usefulness of the concept of ‘path dependency’ demonstrating its use in explaining

Australia’s history of institutional continuity and change. In your answer discuss three examples of

how the concept can be applied.

Path dependency operates on the notion that, in order to understand current systems it is important

to understand previous systems and their functions and how these systems have changed over time.

Path dependency is a useful notion for explaining Australia’s history of institutional continuity and

change, as it specifies how the tradition of concepts and ideas that have been long withstanding can,

in some cases be difficult to break away from. “Economic behaviour and policy are heavily influenced


by this historically-derived and existing structure of institutions and the choices they allow.” (Kellett,

2011, p.4) A practical example of this is the industrial relations system in Australia. The Conciliation

and Arbitration Act 1904, was the first major development of industrial relations institution in

Australia, and it put in place and industrial relations structure that would remain relatively

unchanged for over 50 years. This structure is that of government regulation regarding the

determining of employee wages and conditions through an award system and the setting of a

minimum wage standard. This function remained comparatively unchanged until the Howard

government’s WorkChoices legislation in 2005. Using path dependency, it can be said that the

WorkChoices legislation was an inefficient and ineffective reform to the industrial relations system

as, the highly centralised wage setting system that had been in place in Australia, was a long

standing and effective institution at ensuring workers received a fair minimum wage, and the

WorkChoices legislation shifted this institution and replaced it with a decentralised wage

determination system. The Howard government failed to realise that the path dependency with

regards to the previous industrial relations system was strong and much of the Australian

population, particularly the working population did not want to reform this institution. This is

because if institutions are successful in delivery desirable social outcomes, then there is no need to

change them. WorkChoices did not deliver desirable social outcomes, therefore reverting to the

previous system was necessary.

Another example of this path dependency can be seen with regards to large economic institutions.

Historically, for example, the Commonwealth Bank of Australia was owned by the Commonwealth

government. Historically, the Commonwealth Bank was Australia’s central bank, and was responsible

for setting interest rates, etc, until 1960. As the Australian economy continued to flourish after the

Second World War, it was seen that, in order to be more competitive within the industry it would be

a suitable solution for the Commonwealth Bank to be privatised. Although the history of the


Commonwealth Bank was that it was government-owned, the developments of rapid global

expansion of markets was an indicator that privatisation was the suitable alternative to encourage

competition, and therefore create better social outcomes for individuals through the increase in

choices and the lowering of banking rates and fees.

Vertical fiscal imbalance and horizontal fiscal imbalance are examples of explaining Australia’s

institutional history, highlighting the Australian Constitution. Vertical fiscal imbalance occurs when

the Federal Government generates more tax revenue than the state governments. Historically this

was not the case, as state governments traditionally had significant power over taxation and

development of public infrastructure. The “imbalance between States’ spending needs and revenue

powers (known as vertical fiscal imbalance) has largely arisen from the Commonwealth’s takeover of

income taxes in World War II and the High Court’s striking down of many State taxes on the basis

that they are “excises” (which are reserved to the Commonwealth under the Constitution).”

(Scherini, 2006, p.1) This shift in power enforced by the institution of the Constitution, has had a

mixed reaction, however, provision of revenue to states by the federal government was undertaken

as a means to better social outcomes for all Australians. The provision of state grants to state

governments is an effective means of correcting vertical fiscal imbalance. These grants are generally

used for the building and upkeep of public infrastructure, required to improve social outcomes for

Australian citizens.

Horizontal fiscal imbalance “arise because there are differences between states in the costs per head

of providing public services.” (Lewis et al, 2010, p.48) This can be remedied by the federal

government provision of required grants, based on requirement and urgency for funds.

The decision by the High Court of Australia to remove many state taxes, on the grounds of them

being “excises”, which, under the Constitution, are reserved for the right of the Commonwealth


government was very crucial as it displaced state funding, and significantly increased federal

government funding. This caused a significant change to the Australian financial institutions that had

previously been in place, and the concept of path dependency has allowed for this decision to be

compared to the previous method of revenue raising that had been put in place.

References

Sappey, R., Burgess, J., Lyons, M., Buultjens, J, 2009, Industrial Relatrions in Australia: Work

and Workplaces, Pearson Australia, 2nd Ed.

Gittins, R, 2005, ‘The end of the wage-setting world as we know it’, The Sydney

Morning Herald, 28 May, < http://www.smh.com.au/news/National/The-end-of-the-

http://www.smh.com.au/news/National/The-end-of-the-wagesetting-world-as-we-know-it/2005/05/27/1117129901079.html?oneclick=true#


wagesetting-world-as-we-know-it/2005/05/27/1117129901079.html?

oneclick=true#>, accessed 09/09/2011

Lewis, P., Garnett, A., Treadgold, M., Hawtrey, K., 2010, The Australian Economy:

Your Guide, Pearson Australia, 5th Ed.

http://www.abs.gov.au/ausstats/[email protected]/2f762f95845417aeca25706c00834efa/ b384b6437deeb1ceca256f4e00783f85!OpenDocument Labour Price Index: Concepts, Sources and Methods, 2004, accessed 09/09/2011

Lloyd,C., Ramsay, T. , 2009, The Transformations of Australia’s Labor Market Since 1983: From Social Democracy to Regulatory Capitalism?, University of New England

http://www.accc.gov.au/content/index.phtml/itemId/54137 accessed, 09/09/2011 Scherini, A., 2006, Reforming Specific Purpose Payments to achieve the best outcomes for the

community: A practitioner’s perspective, http://www.business.curtin.edu.au/files/scherini.pdf , last accessed, 09/09/2011

http://www.business.curtin.edu.au/files/scherini.pdf

http://www.accc.gov.au/content/index.phtml/itemId/54137

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http://www.abs.gov.au/ausstats/[email protected]/2f762f95845417aeca25706c00834efa/b384b6437deeb1ceca256f4e00783f85!OpenDocument



Econ 243 Ass 1 Lana Roelandts 2011

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