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Australian Industrial Relations Commission Transcripts |
AUSCRIPT PTY LTD
ABN 76 082 664 220
Level 4, 179 Queen St MELBOURNE Vic 3000
(GPO Box 1114J MELBOURNE Vic 3001)
DX 305 Melbourne Tel:(03) 9672-5608 Fax:(03) 9670-8883
TRANSCRIPT OF PROCEEDINGS
O/N VT03393
AUSTRALIAN INDUSTRIAL
RELATIONS COMMISSION
JUSTICE GIUDICE, President
VICE PRESIDENT ROSS
VICE PRESIDENT McINTYRE
SENIOR DEPUTY PRESIDENT WATSON
SENIOR DEPUTY PRESIDENT HARRISON
COMMISSIONER LEWIN
COMMISSIONER HOFFMAN
C2001/4617, 5719, 5720, 5721, 5722,
5803, 5810, 5830, 5833, 5834, 5843,
5844, 5845, 5846, 5847, 5849, 5929,
5933, 5934, 5935 and 6130
TIMBER AND ALLIED INDUSTRIES AWARD 1999
THE HOSPITALITY INDUSTRY - ACCOMMODATION,
HOTELS, RESORTS AND GAMING AWARD 1998
BUILDING SERVICES (VICTORIA) AWARD 1994
LAUNDRY INDUSTRY (VICTORIA) AWARD 1998
CHILD CARE INDUSTRY (AUSTRALIAN CAPITAL
TERRITORY) AWARD 1989
THE VEHICLE INDUSTRY - REPAIR SERVICES
AND RETAIL - AWARD 1983
TRANSPORT WORKERS AWARD 1998
RETAIL AND WHOLESALE INDUSTRY - SHOP
EMPLOYEES (ACT) AWARD 2000
HORSE TRAINING INDUSTRY AWARD 1998
CLERICAL AND ADMINISTRATIVE EMPLOYEES
(VICTORIAN) AWARD 1995
VICTORIAN LOCAL AUTHORITIES AWARD 2001
STORAGE SERVICES (GENERAL) AWARD 1999
GROCERY PRODUCTS MANUFACTURE -
MANUFACTURING GROCERS AWARD 1996
COMMERCIAL SALES (VICTORIA) AWARD 1999
RUBBER, PLASTIC AND CABLE MAKING
INDUSTRY AWARD 1999
THE VEHICLE INDUSTRY AWARD 1992
CLOTHING TRADES AWARD 1999
GRAPHIC ARTS (GENERAL) AWARD 2000
METAL, ENGINEERING AND ASSOCIATED
INDUSTRIES AWARD 1998 - PART I
METAL, ENGINEERING AND ASSOCIATED
INDUSTRIES AWARD 1998 - PART III
Applications under section 113 of the Act
to vary the above awards re living wage
case matters (s.108 References)
MELBOURNE
10.02 AM, TUESDAY, 9 APRIL 2002
Continued from 8.4.02
PN2614
PN2615
MR CHESTERMAN: That is correct, your Honour. There was also another question directed to me by Senior Deputy President Watson, and I would have to say at this stage I have been unable to obtain a definitive answer on that, but I understand from Mr Kates that, if there were - in the survey, in his view, there were approximately 12 of our members. So if that satisfies the Commission, I have no further submissions.
PN2616
JUSTICE GIUDICE: Yes, thank you, Mr Chesterman.
PN2617
MR LAW: If the Commission pleases.
PN2618
JUSTICE GIUDICE: Yes, Mr Law.
PN2619
MR LAW: Restaurant and Catering Australia is a peak national organisation representing the interests of restaurateurs and caterers across Australia. The R and CA is a federation of state associations, all working together on national issues on behalf of their members. Whilst Restaurant and Catering Australia is not a registered industrial organisation, many of its constituent state associations are.
PN2620
The Australian Taxation advise that 29,551 restaurants, cafes or catering businesses had registered for the GST by early 2001. This provides the most accurate estimate of the number of such businesses in Australia. Of these the Restaurant and Catering State Associations have 6000 direct members. The geographical distribution of membership is representative of the distribution of business between states and territories.
PN2621
Restaurant and Catering Australia has not previously made submissions to this Commission with regard to the safety net review. This year, however, the industry believes that the situation it faces is so bleak that every effort should be made to minimise cost increases that can be externally impacted. As a result representatives of the industry in the states have asked the Association to make representations on their behalf.
PN2622
The argument presented in this submission is that the restaurant and catering industry is proportionally worse off than other industries, and proportionally bears a greater burden from the dollar increase in the safety net. The conclusion drawn is therefore that the industry should only be subjected to a proportion of the increase granted. The restaurant and catering sector has a cost base that is absolutely dominated by cost of labour, a very high proportion of employees on percentage penalty rates, particularly casual employees, a high proportion of operational level employees, a very marginal profitability, and it is highly competitive.
PN2623
In addition to attempting to impact on potential labour cost increases, the Association is also attempting to effect change to the costs of insurance, including workers compensation, superannuation and general taxation, including fringe benefits tax. The ACTU claims that last year workers received a lower wage increase than any other sector in Australian society. Restaurant and Catering Australia contends that in the restaurant industry at least this is not so, and that it was working proprietors that received the lowest wage increases. The average worker received an increase of 6 per cent over 12 months to August 2001. The above table is all employee results.
PN2624
Working proprietors in the restaurant industry struggle to maintain their businesses and struggle to continue to employ the average seven people they have engaged. The ACTU claims that in the last 12 months, according to the wage costs index, wage costs have risen by 3.6 per cent, and that their claim for $25 per week could mean a 3.8 per cent increase in labour costs. Restaurant and Catering Australia believes that the impact of the safety net increase of $25 per week in the restaurant and catering sector would yield an overall increase far greater than 3.8 per cent.
PN2625
The flow-on effect of the increase to a large number of employees, magnifying the impact through the application of penalty rates and compounding the increases through superannuation contributions and workers compensation premiums would conceivably mean that the $25 per week would equate to a 5 per cent increase in the wages costs for restaurateurs and caterers. As detailed later in this submission, average net profit as at December 2001 is estimated at 1.4 per cent.
PN2626
A further 5 per cent increase in the costs of labour, also justified later in this report, equates to an increase in the proportion of labour costs to turnover in the order of 30.6 per cent to 32 per cent. This would move net profit from 1.4 per cent to significantly below 1 per cent. In fact it is likely to create a break-even situation. Such an increase, coupled with other cost factors detailed in this submission, would reduce the profit before tax of an average restaurant or caterer to well below 1 per cent of turnover. This would significantly reduce the earnings of the 17,500 working proprietors of restaurants.
[10.08am]
PN2627
Less than 1 per cent profit before tax of the average restaurant in reality would mean that many restaurants would cease to be viable. In many more cases the level of distribution of profits back to the operators places them as an individual or part of a partnership below the poverty line. Restaurant closures in the context of the high level of demand for restaurant services would have a number of impacts including a surge in the number of restaurant employees including displaced operators in the unemployment pool, a reduction in competition and therefore upward pressure on prices which in a prominent retail area would have an inflationary impact.
PN2628
These impacts in the restaurant and catering industry are specific to this sector due to the nature of the competition, the marginal profitability of businesses and the casualised nature of the labour market. The impacts as noted above are in conflict with the first two established principles which the Commission has determined in relation to cases to be considered under the Workplace Relations Act 1996. Wages in the restaurant and catering industry - - -
PN2629
JUSTICE GIUDICE: Mr Law, you at this stage are simply reading from the written submission that - - -
PN2630
MR LAW: That is correct, Commissioner. There have been no changes made to that, except a couple of minor additions I have made at the end of that submission.
PN2631
JUSTICE GIUDICE: Yes. Well, speaking generally, we regard the written submissions as sufficient, and this is an opportunity for you to deal with any matters which either need clarification, or might need some further emphasis.
PN2632
MR LAW: I do not believe there are, your Honour. I would just like to - if that is the case, I would just like to move on to my conclusion. It will take about a minute and a half.
PN2633
JUSTICE GIUDICE: No, well there is no inhibition. But I just thought I would make that point to you.
PN2634
MR LAW: No, that is understood, your Honour. Most of the facts that I believe are quite clearly spelled out in our submission. I would just like to turn to the conclusion, and particularly in relation to the proportionality that we have been putting forward. So if I could just refer you to pages 12 and 13 of our - of my submission, and then I will conclude, and that will end my submission.
PN2635
JUSTICE GIUDICE: Yes.
PN2636
MR LAW: The facts that are - the facts that restaurant turnover is increasing, but this business, while significant, is slower than the growth in business - in business numbers. This has meant that the average restaurant has experienced less than - less, and not more turnover, than the - than that profitability also has been compromised. Selling prices in 2001 were static, and the input costs in the two most significant cost categories, the cost of food and labour costs, increased significantly. 7.5 per cent, and 6 per cent respectively. At already low levels of profit before tax, 4.8 per cent in 1998, the industry was at the end of 2001 in dire straits, and is in no position to absorb further increases in wage rates.
PN2637
Restaurant and Catering Australia contends that any increases granted to the safety net should only be applied proportionally to the restaurant and catering industry for the reasons noted above. It is understood that other parties will argue that any increase in the safety net should be to minimum wage levels only, and should be in the order of $10. Further, it is understood that the part of the justification for this reasonable increase is that any greater increases would certainly have inflationary impacts.
PN2638
Restaurant and Catering Australia would argue that the impact of any such increase would be proportionally enhanced in this industry. And that, as the outcome of the last estimated 3 per cent increase was 6 per cent in this industry, and that only 50 per cent of the increase should be applied to restaurant and caterers. Before finishing this submission to the Living Wage Case 2002, I would like to refer to section 3 of the Workplace Relations Act, the principal object of this Act:
PN2639
The principal object of the Act is to provide a framework for co-operative workplace relations which promotes the economic prosperity and welfare of Australia by (a) encouraging the pursuit of high employment, improving living standards, low inflation, and international competitiveness, through higher productivity and a flexible and fair labour market.
PN2640
And:
PN2641
(d) providing the means to ensure the maintenance of an effective award safety net of fair and enforceable minimum wages and conditions of employment.
PN2642
The wage increase being sought by the applicant unions, we - will not lead to furthering the objects of the Workplace Relations Act 1996, in that an increase of this nature being sought, the Association truly believes will lead to further staff reductions by small business owners. Restaurant and Catering Australia do support the objects of the Workplace Relations Act 1996, and in particular, the maintenance of an effective award safety net.
PN2643
However, in this case, the claim being sought by the unions is excessive. Consideration should be given by this Full Bench to the proposal of Restaurant and Catering Australia to a proportional increase of 50 per cent of that to be awarded by this Commission for application to the restaurant and catering industry for the reasons stated above. Just to finalise, Commissioner, in relation to retrospectivity, we would support the views of the ACCI in this regard, and would strongly oppose any retrospectivity.
PN2644
SENIOR DEPUTY PRESIDENT WATSON: Mr Law, what does the proportional increase of 50 per cent mean. If the Commission were to award $10 generally, it could only vary restaurant awards by $5. Is that - - -
PN2645
MR LAW: That is the intention of the application, your Honour.
PN2646
SENIOR DEPUTY PRESIDENT WATSON: And on what basis is that put?
PN2647
MR LAW: Well, we base that on wage increases that came out in the last wage increase, which was estimated around 3 per cent, to 3.8 per cent. We believe that the figure, when it was related to the restaurant and catering industry referred - would relate closer to 6 per cent. We believe that was too high for our members at that time. So - - -
PN2648
SENIOR DEPUTY PRESIDENT WATSON: But the 6 per cent was average earnings growth, wasn't it, which would reflect hours. It would also reflect increases being paid by restaurateurs beyond that required by the award.
PN2649
MR LAW: I believe you are correct, your Honour. But again, it was felt by our industry that the 6 per cent that we estimated flowed on to our members as a result of the last increase was excessive, and therefore, we are asking a proportional increase only be awarded from this Bench, for our industry.
PN2650
SENIOR DEPUTY PRESIDENT WATSON: Yes. Thank you.
PN2651
MR LAW: I have nothing further to add and I would like to seek leave to withdraw from these proceedings, if the Commission pleases.
[10.14am]
PN2652
JUSTICE GIUDICE: Mr Law, just one other matter. Restaurant and Catering Australia is a peak organisation. Does it have a constituent association in each state?
PN2653
MR LAW: That is correct. I represent Restaurant and Catering Queensland. We are a registered union of employers in Queensland, and the same applies in New South Wales, South Australia and so on.
PN2654
PN2655
JUSTICE GIUDICE: Yes, Mr Murdoch.
PN2656
MR MURDOCH: Might I start on a personal note by owning up to the fact that it was my mobile phone yesterday afternoon. I sincerely apologise to the Commission for that, in the spirit of, I suppose, there has to be a first time but I wish it hadn't been here and it won't be repeated.
PN2657
JUSTICE GIUDICE: These things happen, Mr Murdoch.
PN2658
MR MURDOCH: Well, I emphasise, your Honour, I wish it hadn't been here. Might I commence on behalf of the Commonwealth by tendering the four submission documents. There are the two 1 March 2002 documents, namely the submission and the appendices.
EXHIBIT #COMMONWEALTH3 SUBMISSION OF 01/03/2002
EXHIBIT #COMMONWEALTH4 APPENDIXES OF 01/03/2002
PN2659
JUSTICE GIUDICE: There are no other documents at this stage?
PN2660
MR MURDOCH: Not at this stage. There are two other documents that I have to tender. I am in your hands as to whether I put them up now or in context through the submissions.
PN2661
JUSTICE GIUDICE: I think as you come to them.
PN2662
MR MURDOCH: Thank you. There are four points that I would like to make by way of introduction to our oral submissions. The first is that the needs of the low paid will, in our submission, be more effectively addressed by a $10 per week safety net adjustment capped at the C10 level. Their needs are likely to be exacerbated by a $25 per week across the board increase as proposed by the ACTU. Secondly, in our submission, unemployment will be higher if the ACTU claim were to be accepted than what it would be if the Commonwealth proposal is accepted.
PN2663
Thirdly, the incentive to bargain will be dampened if the ACTU claim succeeds. In contrast, the Commonwealth approach would, if implemented, encourage more award employees and their employers into agreement making. Fourthly, to deal with the economy, we submit that the resilient Australian economy, with its underlying strength, will be better positioned to ride out the current conditions of international uncertainty if the Commission adopts the Commonwealth proposal. We will contend that the economy will be weakened and more vulnerable if it has to withstand the shock of the $25 per week across the board increase to all awards.
PN2664
By way of overview of our oral submissions, I will be undertaking a number of tasks. I will initially be making a minor correction to our earlier submissions. I will be responding to criticisms levelled at the Commonwealth case by the ACTU and the states. I will be pointing out several serious flaws in the oral submissions of the ACTU and the states. I will endeavour to put into context the oral evidence of Mr Taylor and Ms Gabbitas. I will also highlight key elements of the Commonwealth case and, in so doing, emphasise the important role that the tax transfer system plays in addressing the needs of low income families.
PN2665
So far as the correction is concerned, it is related to paragraph 8.4 in Commonwealth4, which was our March submission. You may not necessarily have to go to it but in that paragraph there is a quote that reads:
PN2666
One of the factors which is relevant to the adjustments of the award safety net is the need to encourage the making of agreements between employers and employees at the workplace or enterprise level by maintaining an incentive to bargain.
PN2667
We attributed that in the submission as a quote coming out of the decision. It should be noted that the passage actually came from the minority decision, and, of course, I note that that minority decision was one of Ross VP. However, I point out that there are parts in the majority decision that explicitly recognised the need to encourage the making of agreements between employers and employees at the workplace, in particular paragraph 5.6 in print P1997. The issues that related to wages and living standards are of central importance in the Commonwealth case. In its submissions before the Commission the ACTU asserted that the Commonwealth disparages the needs of the low paid.
[10.22am]
PN2668
That criticism is completely unwarranted. The Commonwealth has repeatedly acknowledged that low income families do experience financial pressure. That is why the Commonwealth is supporting a $10 per week increase capped in a way that would direct the benefits of the increase to low income families. The Commonwealth is, however, concerned that a large safety net adjustment will cause additional financial hardship by hampering employment growth and raising unemployment. The same financial stress data from which the ACTU draws evidence clearly shows that unemployed and other jobless people are at greater risk of financial stress than low paid workers are. And I refer there back to our original submission at paragraph 6.16. Indeed, the ACTU has not contested that proposition.
PN2669
Furthermore the ACTU has not presented any evidence that the relative position of low income families has worsened in the time frame which is relevant to this safety net review. On the other hand the Commonwealth has referred in our original submissions paragraphs 6.24 to 6.27 to a number of studies showing that income disparity has not increased since the middle of the 1990s. Last week the ABS released a new publication styled "Measuring Australia's Progress" which confirms that income disparity did not increase between 1994-95 and 1997-98. Rather than examining disposable income measures which include at least some of the impact of the tax transfer system depending on how they are constructed.
PN2670
The ACTU relies on a narrower measure of living standards, and that is earnings, to argue that the low paid are falling behind the rest of the community. In answer to that we contend that earnings are a partial indicator of living standards but can provide some useful information. Wage rates and wage measures are much less useful indicators. As we have explained in our March submission paragraphs 2.87 to 2.89 earnings reflect changes in the composition of the labour market and the labour market experience of individual workers. Wage rate and wage measures are related to types or categories of jobs.
PN2671
However, the ACTU compare trends in average earnings with changes in wage rates especially C10 and C14 and argues that they have not kept pace with average weekly ordinary time earnings growth. The Commonwealth compares like with like. It has shown that both C10 and C14 have grown broadly at the same pace as the wage cost index. And I refer there to our March submission chart 2.4 on page 43. And that has occurred since the commencement of the wage cost index series in 1997. The wage cost index reflects wages growth right across the workforce regardless of payment method. The ACTU has also argued that award wages except at the lower levels have not kept pace with inflation.
PN2672
The wages safety net, in our submission, is designed to assist low paid workers by helping to meet their needs. It is, in our submission, doing this. For instance, as the ACTU's submission indicates - and that is in their original submission table 2.3 page 28 - last year's safety net adjustment either maintained or increased the real value of award wages at the C10 level and lower. That the ACTU continue to argue that safety net adjustments should reflect wages growth across the labour market is tantamount to arguing that award rates should be varied to reflect market rates.
PN2673
At paragraph 8.11 of our March submission we remind the Commission that under the Act it is not intended that the safety net should be adjusted on the basis of market rates, a factor recognised by a Full Bench of the Commission in the landmark decision in the Paid Rates Review print Q7661 page 15. Moreover the Commonwealth has shown in our March submission at paragraph 6.38 that real earnings have increased over the longer term and by that I mean since the late 1980s. Yesterday the ACTU withdrew its evidence relating to growth and hourly earnings. My friend Mr Watson in particular withdrew tables R 2.2 and R 2.3 that the ACTU had submitted.
PN2674
It is though important to return to those tables in an effort to tidy up the issue once and for all. We have prepared equivalent tables to R 2.2 and R 2.3 using the correct data from the ABS. I tender updates of those tables using ABS data.
[10.30am]
PN2675
PN2676
MR MURDOCH: It is not explicitly pointed out, but might I say that table 1, of course, is the update of R2.2 and table 2 of R2.3. Tables 1 and 2 show strong growth in real hourly earnings of 6.7 per cent or better between 1996 and 2000. This real growth is much stronger than that which occurred between 1991 and 1996, at least at the bottom half of the distribution shown in table 2. In short, the hourly earnings data support the Commonwealth's original claim that real earnings have grown at all levels since the end of the 1980s.
PN2677
If I can just go back, I think earlier I may have on two occasions referred to our March submissions. I had meant to say in that context the 1 March submissions.
PN2678
JUSTICE GIUDICE: Yes.
PN2679
MR MURDOCH: I will proceed now to our further views on the macro-economic outlook and the industry implications of award increases. The Australian economy recorded growth of 4.1 per cent through the year to the December quarter 2001. That is sourced in appendix RA to our reply submission. Compared to the rest of the world, the Australian economy is, in our submission, well positioned.
PN2680
But it also needs to be borne in mind this is a relative comparison across countries, and in that context, to quote a short passage from the Treasurer's speech last Thursday - in full text that is in ACCI exhibit 5. The Treasurer said, among other things:
PN2681
The international environment is still a very sticky one, and will take considerable care in economic management over the next 12 months. The international environment is a very difficult environment. A Japanese recession, the Unites States very weak, Europe very weak. It is true Australia is the best performing economy in the developed world, but you do not want to think we are out of the woods. It is still a difficult environment.
PN2682
The latest official forecast of the economy is the mid-year economic fiscal outlook. Prepared in the immediate wake of the September 11 terrorist attacks, the MYEFO forecasts gross domestic product to grow by 3 per cent in 2001/2002, and a return to around trend growth rates by around 2002/2003. The subsequent release of the September and December quarter national accounts suggest that this forecast is achievable.
PN2683
Importantly - and again as the ACTU has highlighted - Australia's economic fundamentals are sound. However, notwithstanding the relatively robust economy, the main risks surrounding the outlook for activity and employment continue to be the international outlook and the extent of moderation in the housing sector. Dealing with each of those factors in a little more detail, the performance of Australia's major trading partners can impact on Australian exports and terms of trade.
PN2684
Exports of goods and services in seasonally adjusted terms fell in both the September and December quarters by 1.6 per cent and 3.2 per cent respectively, despite the exchange rate remaining supportive of exports. Tentative signs are starting to emerge that the downturn in the world economy has bottomed, and a recovery may be under way. The international environment remains uncertain, and difficulties therefore continue.
PN2685
Australia derives a significant amount of its national income from trade. Consequently the international environment has a significant impact on our economic well being, and included in that is an impact on employment. So far as the housing sector is concerned, we note that it has underpinned Australia's recent economic growth. The moderation of the housing sector forward indicators in recent months, combined with the phasing out of the enhanced first home owner's scheme, suggests that the sector is at or near peak in activity, and so may no longer be as important a driver of economic growth.
PN2686
MYEFO forecast employment growth to be 3/4 of a per cent in 2001/2002. The preliminary labour force survey showed that employment rose by 0.2 per cent in February to be 1.8 per cent higher than a year earlier, with the unemployment rate declining to 6.6 per cent. However, while welcome, the labour market improvements are clearly fragile as evidenced by the degree of volatility in full-time and part-time employment and changes in the participation rate.
PN2687
The potential for further reductions in unemployment should not be jeopardised through wage increases not supported by productivity increases. In this regard we note that, notwithstanding the relatively robust employment performance, employment in agriculture, forestry and fishing retail, and transport and storage declined in February. We note further that these industries employ a significant proportion of award employees.
PN2688
The ACTU has argued that the relatively strong economy means that an increase of $25 for all award wages is justified and affordable. The ACTU however fails to distinguish between the performance of the aggregate economy and that of individual industries. While the performance of the aggregate economy has been robust, the performance of individual industry has been mixed, and in particular the performance of award-dominated industries has been much weaker than the average.
PN2689
It is perhaps telling that the ACTU failed to adequately address this critical point in either its reply submission or in its oral presentation. The reason may be simple: the award-dominated industries cannot afford the substantial wage increase sought by the ACTU. We submit that for wage increases to be affordable they must be supported by productivity increases.
PN2690
In recent years, the Commission has often made reference to Australia's high levels of productivity growth in assessing the economic impacts of safety net adjustments. Some examples of that were in the May 2000 decision, Print S5000, at pages 19 and 70, and in the April 1999 decision, Print R1999, pages 25 and 32. There is no doubt that it is for this reason that the ACTU highlights the Australian economy's strong productivity record over recent times, and suggests this productivity growth justifies high wage growth.
PN2691
In response we say that it would if the productivity growth had occurred in award-dominated sectors. But it has not. Aggregate productivity levels provide little guidance, in our submission, for the consideration of award increases. Rather, the distribution of productivity growth by industry is more relevant. As noted in the Commonwealth's original submission, chart 5.5 on page 99, only 0.4 per cent of all award employees are employed in the three highest productivity growth industries.
PN2692
The productivity in award-reliant industries has been relatively low. By way of contrast, 21.9 per cent are employed in the three lowest productivity growth industries. This trend in industry productivity growth seems to be continuing. Productivity on a per capita basis, according to the December quarter national accounts, shows that the three industries with the lowest proportion of award employees recorded the highest labour productivity growth.
PN2693
In contrast, two of the three highest award intensive industries actually recorded negative labour productivity growth. There is another way to look at the same issue. In its submission, the ACTU makes much of the fact that profit shares have been increasing at the expense of labour income. I would refer to their figure 4.9 at page 71 of their submission.
PN2694
On this basis, the ACTU argues for significant award increases. Unfortunately, such analysis also fails to take account of the industry composition of profit shares. As outlined in the Commonwealth's initial submission in Chart 5.6 on page 101, while profit shares have been increasing in some industries, they have been constant, or falling, in others. Critical to the Commission's deliberations should be the fact that the profit shares in the award reliant industries have been stagnant or falling. Since the 1990s the profit share has only increased in the utilities, finance, insurance, and communications services industries.
PN2695
These industries have a combined award reliance of 2.2 per cent. To suggest that, as the ACTU appears to be doing, profitability is high and therefore award wages should be increased, is clearly erroneous. It will affect precisely those industries least able to afford further wage increases. Our written submissions have also highlighted that the events of 11 September, and the Ansett collapse, have reduced the number of overseas tourists in Australia, and changed the nature of domestic tourism by increasing the popularity of holiday destinations within driving distance of urban centres.
PN2696
Tourism affected industries, including accommodation, cafes and restaurants, cultural and recreational services, as well as the transport sectors, are therefore facing particularly uncertain times. As a result, while the economy overall is solid, demand in these industries has been, and will continue to be affected by the lower and changed nature of tourism. As these industries are particularly award reliant, providing large award wage increases may result in a double whammy effect. A significantly increased wage bill in the face of lower demand.
PN2697
Sizeable job losses may be the natural consequence, particularly in rural and regional Australia. Importantly, however, the enterprise bargaining system provides the flexibility and incentives for workers to achieve productivity improvements, and to negotiate better wage outcomes at the workplace or enterprise level. We submit then that the safety net reviews should therefore be aimed at providing a safety net. Not at seeking to emulate wage increases achieved through enterprise agreements, as measured by whatever measure, whether it be the wage cost index, AENA, or the average weekly ordinary time earnings.
PN2698
Only through such an approach will wage increases be sustained, and not lost through inflation and job losses. An important part of the Commonwealth written submissions was the contentions that were put forward in relation to the social safety net. That has been the subject of comment by both the States and the ACTU. And consequently, we have some further points to make and to emphasise in relation to that aspect of our submissions. And I turn in particular to the important implications of the interaction between minimum wages, which is the industrial safety net, and the social safety net.
PN2699
In doing so, the Commonwealth welcomes the ACTUs acknowledgment that minimum wages and the social wage are complementary mechanisms for addressing the needs of the low paid. In this regard though it is important to be clear about the respective roles of the Commission and the Commonwealth. There is also a need, in our submission, to be clear about the requirements of the Workplace Relations Act when it comes to safety net adjustments. Despite differences over quantum, and the capping issue, all parties appear to accept the need for an increase in the minimum award safety net, and/or the Federal minimum wage.
PN2700
The very fact that the Commission embarks upon a safety net adjustment triggers the statutory requirement that the needs of the low paid be considered by the Commission. And that, of course, arises under section 88(b)(2) of the Act. We emphasise that the low paid have a need for secure employment. A safety net increase, which takes away around 37,000 jobs, mostly from the low paid, would in our submission be inconsistent with the Act. The legislative imperative imposed by the Act on the Commission is one to have regard to the needs of the low paid.
PN2701
It is not an imperative to be exercised in a vacuum. Paragraph (a) of section 88(b)(2) of the Act sets a relevant context, and that is, living standards generally prevailing in the Australian community. With the context identified, the Commission is also, pursuant to the Act, to consider the case with express objects. And they include a clear public interest to protect, employment goals to pursue, and a constant task of promoting enterprise bargaining. Clearly then the Commission is possessed of discretionary powers, which are to be exercised with the objects, goals, context, and stipulated criteria appearing in the Act, and those factors are to be considered and given appropriate weight.
PN2702
Adjusting the safety net must therefore be done in a way that gives appropriate recognition to the relative effectiveness of the tax transfer system, and safety net adjustments, in providing a safety net for low income members of the community. It is widely accepted the social safety net provides an effective means of targeting assistance to those who most need it. It is equally widely accepted that the wages system, the industrial safety net, does not effectively target assistance to those who need it most. And I would refer back to the detail in paragraph 639 to 642 in our original submissions.
PN2703
Of critical importance is the need to minimise the impact of the safety net adjustment on unemployment. Increased unemployment is a likely consequence of a safety net adjustment. The $10 per week increase in the safety net, as proposed by the Commonwealth, will have a much lesser impact on unemployment than the approach of the ACTU. We submit that the Commission's statutory duty under section 88(b)(2) encompasses the obligation to balance the principles in the Act in making safety net adjustments. A measured approach to the amount of the safety net adjustment, and capping, to more directly deliver the safety net adjustment to the low paid will minimise the consequential increase in unemployment. A vital element in the Commission's approach to the issue of the low paid is protecting, as far as possible, their job security. The ACTU approach would push far too many low paid workers into joblessness. It would also lessen the prospects of casuals, who are likely to be low paid award workers, to obtain employment.
PN2704
Some casual workers change employers, or move in and out of work relatively frequently. We submit that a large safety net adjustment would inhibit such movements. The Commission is, of course, responsible for the industrial safety net that, as acknowledged by all parties, is complementary to and interacts with the social safety net. The Commonwealth's responsibilities including maintaining an adequate and effective social safety net that targets assistance. However, while the social and industrial safety nets are complementary, the Commonwealth does not agree with the implications of the ACTUs reply submission at R.36, where it says that, and I quote:
PN2705
The stark reality is that neither the Commonwealth or the Australian Industry Group makes any concrete proposal for improving assistance to those on low incomes.
PN2706
The quote continues:
PN2707
Their arguments in this regard are little more than smoke screen for the inadequacy of their proposed adjustments to award rates.
PN2708
That statement seems to imply that the social safety net is inadequate in its assistance to those on low incomes, and that the Commission should take into account the lack of a so-called concrete proposal for such an increase. The Commonwealth does not agree that the social safety net is inadequate. The adequacy of the Social Security system is maintained by regular indexation of allowance and pension rates. Also, the internationally recognised strength of the Australian Social Security system is that it effectively targets assistance. The effectiveness of the social safety net is also demonstrated by the fact that income dispersion has not widened to any significant degree. And by that we mean no statistically significant change, since the - - -
PN2709
VICE PRESIDENT ROSS: Mr Murdoch, I am sorry. Just on that point, can I just test my understanding on the Commonwealth's submission about that issue? That the Commonwealth accepts that there has been a widening of the dispersion of earnings, and does not dispute that earnings inequality has increased. But, argues that there has been no significant change in income inequality that - taking into account the effect of the - or the effects, among other things, of the tax transfer system. Is that the essence of - or at least, no significant change in income inequality since '94/95. So it is the second part of the last decade.
PN2710
MR MURDOCH: That appears to capture the fundamentals of our position.
PN2711
VICE PRESIDENT ROSS: Okay. In relation to the point you are dealing with now, which goes to the adequacy of the social safety net, do I take it that that is also at the heart of your comments in the reply submission directed at the AIGs submission, where there is a suggestion in their submission that employers would prefer to see the $10 adjustment which they contend, going -all of it going to low paid employees, rather than $7 going to low paid employees, and $3 going to the government through the taxation system.
PN2712
And implicit in that seems to be some opposition that there should be an improvement or adjustment in the social wage. And - whereas the Commonwealth maintains that the current arrangements are satisfactory and don't require adjustment. Is that - - -
PN2713
MR MURDOCH: We certainly maintain that the current arrangements are adequate. And that social wage is maintained by - well, that the adequacy of the Social Security system is maintained by regular indexation of allowances and pension rates. So our clear contention is there is adequacy associated with the present arrangements.
[11.00am]
PN2714
VICE PRESIDENT ROSS: What do you then say about the next part of the next step in AIG's submissions is, and is built on what you have identified, seems to me the general consensus amongst the parties that the industrial safety net or the award minimum wages interacts with and is complementary with the social wage safety net, or the social safety net. AIG submits that the Commission should give or afford more recognition to that interrelationship, and by doing that they say that may encourage ideas such as the five economists and the other proposals that they mention in their submission. What does the Commonwealth say in relation to that issue?
PN2715
MR MURDOCH: We certainly say that they are complementary, and we certainly say that there should be recognition of the interaction between the two. As to the - - -
PN2716
VICE PRESIDENT ROSS: I maybe something that you want to come back to, Mr Murdoch. I should just take you to the specific paragraphs of AIG's submission. It is at 1.5 and 1.6 is the observations, or that is at least where they are summarised, and if you are going to come to it later I am happy for you to do that in your own time.
PN2717
MR MURDOCH: Well, rather than me be reading those two paragraphs now and holding things up, it would probably be better if I took that one on board.
PN2718
VICE PRESIDENT ROSS: Certainly.
PN2719
MR MURDOCH: But I will come back to it.
PN2720
VICE PRESIDENT ROSS: Thank you.
PN2721
MR MURDOCH: Thank you. I think I was making the point that the effectiveness of the social safety net is also demonstrated by the fact that income dispersion has not widened to any significant degree since the mid-1990s despite increase earnings dispersion. The Commonwealth not only maintains the social safety net but has a record of improving it. For example, the Commonwealth has reformed the youth allowance in a way that has simplified and enhanced income support arrangements for young people.
PN2722
Also the over effectiveness of the social safety net was considerably enhanced by the new tax system, which among other things included the measures operative from 1 July 2000 that significantly increased marginal and average tax rates for many low and middle income - I will say that again. From 1 July 2000 there were a number of measures introduced. In one instance they significantly reduced marginal and average tax rates for many low and middle income earners.
PN2723
They also significantly improved assistance for families by restructuring and simplifying family benefits. The family related changes, improved incentives to work, and increased instance to many low and middle income earners. The 1 July 2000 changes also improved work incentives for people on pensions, and further increased pension and allowance rates. Pensions and allowances are 2 per cent higher in real terms than they would have been without the new tax system changes.
PN2724
The Commonwealth has also significantly enhanced assistance for working aged people relied on the social safety net to move from welfare to work. The job network is cost effectively providing individualised assistance to unemployed job seekers. Last year's budget allocated $1.7 billion over four years to the Australians working together package of practical measures designed to increase the social and economic participation of working aged income support recipients.
PN2725
The Commonwealth recognises the important contribution that clear financial incentives for paid work can make to improve the well-being of those who are jobless or in a precarious position in the workforce. And included in that, of course, is the need to assist the families of such people. However, while the new tax system has delivered improvements in this regard the Commonwealth has acknowledged that there are still some areas of concern. In its pre-election policy statement entitled "Our Future Action Plan, Strong Families and Communities" the Government said that it would firstly that it wanted to remove existing disincentives to people moving from welfare dependence to paid work. And secondly that it was also committed to making up-front investments that deliver future returns to tax payers and people from welfare dependence to economic and social participation.
PN2726
I have got to make the Commonwealth's position clear. The Commonwealth is not asking the Commission to award a $10 per week increase rather than the ACTU's $25 claim on the basis that a short fall exists and needs to be topped up through the social wage. As I have already indicated the Commonwealth does not agree with any assertion that the social safety net is inadequate in terms of benefit levels. The Commonwealth disagrees that increases in the social safety net should be an explicit part of these proceedings.
PN2727
It does, however, ask the Commission to consider the important implications of the interaction of the social and industrial safety nets. The key point made in the Commonwealth's submissions is that because of the existing interaction between the social and industrial safety nets the ACTU's claim would provide only marginal increases in disposable income to some low paid families that remained in work. That is a wage increase of the order sought by the ACTU would not provide well-targeted assistance to those most in need but would seriously disadvantage many families by significantly increasing unemployment.
PN2728
The ACTU fails to acknowledge that the approval of its claim would lead to the numbers of low paid workers being reduced as disadvantaged people lose or are denied employment therefore become or remaining unemployed and unpaid. No pay is a far greater contributor or disadvantage and financial stress than low pay. In stark contrast to the Government's welfare to work policy the ACTU propounds a work to welfare policy. The Commonwealth contends that in making its decision the Commission is required by the Act to give due regard to the protection of job security for the low paid by taking into account the impact of the ACTU's claim on unemployment.
PN2729
The Commonwealth accepts that any pay rise is likely to reduce employment and potential employment, and will thereby lead to a greater call on the social safety net. However, a modest carefully targeted pay rise will provide some assistance to those in work without substantially damaging the prospects of people out of work or the prospects of people seeking work. The Commonwealth is seeking such pay rise. It is not, as the ACTU suggested to the Commission last Tuesday, arguing that wages should be stuck where they are. Quite the contrary. The Commonwealth seeks a $10 per week increase on the terms that we have explicitly outlined.
PN2730
I turn now to the arguments that have arisen during the case on the matter of the reduction in the value of non-cash benefits. The ACTU has argued that the Commonwealth has been inconsistent in evidence that it presented in chapter 6 of our written submission about the effectiveness of the tax transfer system in addressing the needs of low income families. The ACTU's stance seems to arise from a misinterpretation of the material presented in paragraph 6.32 to 6.34 and in table 6.1 and 6.2 of the original Commonwealth's submission.
PN2731
Table 6.1 and 6.2 were presented as snapshots of how the tax transfer system acts to redistribute income in a particular year. They were not presented to illustrate changes in these redistributive processes over time. If the Commonwealth wished to do this it would have presented information from different years together in the one submission. All of the substantive discussion in the information in table 6.1 and 6.2, and that is the discussion in paragraphs 6.33 and 6.34 of our submission, deals with the redistributive effects at a point in time.
PN2732
Importantly the Commonwealth draws no comparison of the results in table 6.1 and 6.2 with information from earlier years. Nevertheless, the ACTU refers to paragraph 6.23 and footnote 15 to portray table 6.1 and 6.2 as part of a time series. This text does nothing more than point out that the tables are updated versions of previous tables. And I would observe there that the updates are due to new ABS data identified in source notes to the actual tables.
PN2733
Paragraph 6.33 and footnote 15 also state that the tables incorporate the new tax system. As the ACTU notes this is not a new feature and it was intended to be seen in this way. And I would note further that a simple comparison of these tables with their equivalents in last year's submission would reveal this. Now, the ACTU also points to the concluding sentences of paragraph 6.34 which do refer in a general way to changes over time. However, these sentences were meant to refer to the entire discussion of living standards including that presented in paragraphs 6.24 and 6.31. And I would note that they were immediately preceding the material identified by the ACTU.
[11.15am]
PN2734
And those paragraphs at 6.24 and 6.31 do consider the question of changes over time. An objective reading of the material cited by the ACTU would clearly show that a time series analysis is not conducted in 6.33 and 6.34. The ACTU also raises a substantive issue in the course of criticising the Commonwealth on this matter. This concerns the apparent difference between Ann Harding's article in The Australian, ACTU R6.47 in which she describes changes over time and the distribution of non-cash benefits. And that sends advice to the Commonwealth, that being Commonwealth R6.56 to R6.60.
PN2735
That methodological and data complications prevent valid comparisons of the estimates which have been prepared at different times. There is, however, no inconsistency in our submission between Ann Harding's article and the advice provided by NATSEM to the Commonwealth. And that is because they are based on separate sets of information. The ABS has prepared a time series of non-cash benefits using the 1998/99 data and a methodology much more similar to that used in their previous estimates. That is, in the 1993 and 1994 and 1998.
PN2736
We have received advice from NATSEM that may, and we believe indeed should, serve to clarify this question. What I propose to do is to tender an e-mail of 8 April. The Commission, of course, is welcome to read all of it but I will highlight the passage that we want to rely on.
PN2737
JUSTICE GIUDICE: Hardly an ideal way for the Commonwealth to be providing material to us, Mr Murdoch.
PN2738
MR MURDOCH: I realise that, your Honour. I had originally intended to simply quote three or four lines of it but then I thought that might lead to a criticism that we had taken something out of context. The passage that we are relying on appears near the foot of that and it is the part that reads - it would have been seen - these results would have been cited by Ann Harding in the article in The Australian referred to by the ACTU. These estimates are not the same as those made publicly available by the ABS in their release of household expenditure data and which were used by NATSEM for the 2001 tables.
PN2739
MR MURDOCH: To tidy up on some unfinished questions from earlier coming back to Vice President Ross's question, the Commonwealth agrees with the Australian Industry Group's proposal that the Commission should take into account the interaction of the industrial and social safety nets. As to the remaining matter raised by the Vice President, our response is that we can't speculate on the future direction of Australian Government policy as postulated by the Australian Industry Group.
PN2740
VICE PRESIDENT ROSS: Yes, it was more the first part of AIG's proposition that I was directing my question to.
PN2741
MR MURDOCH: What, the five economists - - -
PN2742
VICE PRESIDENT ROSS: No, no, the proposition that the Commission should afford more recognition to the interrelationship and the movements in one and their impact on another rather than any specific proposal.
PN2743
MR MURDOCH: Yes. I think we have responded to that, thank you.
PN2744
VICE PRESIDENT ROSS: Thank you, Mr Murdoch.
PN2745
MR MURDOCH: I am moving now to the matters which have arisen concerning the C10 cap and the related issues of the - - -
PN2746
JUSTICE GIUDICE: Mr Murdoch, just before you do that. Are you coming back to something you mentioned - I took it to be part of your opening but I may have been wrong about that. It was the reference to paragraph 6.16 in your submissions which had a - that paragraph includes a reference to section 88 of the Act which I wanted to ask you about. You may be coming back to that, I don't know.
PN2747
[11.22am]
PN2748
MR MURDOCH: Well, your Honour, it might assist in case the matter just gets shuffled aside and I don't want that. If your Honour had a query could I have it and then I can assist.
PN2749
JUSTICE GIUDICE: Yes. Well, the - - -
PN2750
COMMISSIONER LEWIN: Mr Murdoch, I wonder is it your view, or the Commonwealth's view perhaps, that there is any change in terms of attitude that is being sought here having regard to the history of the Commission's decisions and pronouncements on social welfare dimensions of arguments that have been put to it in the past? Are you asking for a new direction?
PN2751
MR MURDOCH: I think what we are asking for is more explicit emphasis and our contention is that that is necessary having regard to the picture that is presented in relation to the state of the economy, the state of the labour market, the vulnerability of the lower paid and what we see as the stark impact that would be likely to flow if the ACTU claim was to succeed. So it can't truly be characterised as a change but we make no apologies for the fact that we are placing much more emphasis on that matter in our case and indeed inviting the Commission to weight it as a central consideration in its deliberations.
PN2752
COMMISSIONER LEWIN: The reason I ask that question is because there is a statement about this in last year's Safety Net Adjustment decision, is there not, in the conclusion to the chapter on the needs of the lower paid? And also, it seems to me in my recollection of the history of both basic wage and living wage cases the question of the social welfare dimension of the argument that has been put to the Commission in the past had been addressed fairly and squarely on a number of occasions.
PN2753
MR MURDOCH: Commissioner, I do not take issue with the fact that it has been addressed before but we have been at pains to emphasise in this matter that there is a particular priority that needs to be given to targeting the low paid - the needs of the low paid rather than adopt a blunt approach. And to target one needs to have regard to the more pointed way in which the social safety net can aid the low paid as distinct from the way in which an increase of the magnitude advocated by the ACTU may not assist them in a targeted way and in some instances would be to their detriment.
PN2754
I am sorry, your Honour, you - - -
PN2755
JUSTICE GIUDICE: It is not your fault, Mr Murdoch. The reference in paragraph 6.16 to section 88 I take it is a reference to 88B(2)(a). It refers to one of the matters that the Commission is required to have regard to and that refers to a need to provide fair minimum standards for employees in the context of living standards generally prevailing in the Australian community. I am not quite sure what the reference in paragraph 6.16 to the position of the unemployed was in that context. It seemed to suggest that in looking at the standards generally prevailing in the community one should look to the standards enjoyed by the unemployed. It may be that the sentence hasn't quite come out right bit that is what it seems to say.
PN2756
MR MURDOCH: Yes. My first observation would be that it is not a precise citation because we are clearly not referring to the Commission's annual report, which is section 88. As to whether it is A or B - - -
PN2757
JUSTICE GIUDICE: Yes. Well, it may be referring to something else. Anyway, perhaps you could come back to that.
PN2758
MR MURDOCH: I think we will take that on board, yes.
PN2759
JUSTICE GIUDICE: We are going to adjourn in a few minutes in any event, Mr Murdoch, so you can have a look at that.
PN2760
MR MURDOCH: I will come back to that.
PN2761
JUSTICE GIUDICE: Yes. Since we have interrupted you and you were about to go onto something else I think we might take the morning adjournment now.
PN2762
MR MURDOCH: Thank you, your Honour.
SHORT ADJOURNMENT [11.28am]
RESUMED [11.42am]
PN2763
MR MURDOCH: Your Honour, thanks for the opportunity to go back to paragraph 6.16. The immediate reference should of course be the section 88B, but within the section the call in aid, particularly subsection (2), and within subsection (2) each of the paragraphs (a), (b) and (c), and you will notice that the words that are quoted in paragraph 6.16 near the middle of the paragraph repeat the words out of paragraph (a), and that is: "Context of living standards generally prevailing in the Australian economy".
PN2764
But we do go further in paragraph 6.16, and we put forward the contention that people outside the workforce are part of the community, and that the Commission is required under the Act to take into account the impact of its decisions on those outside the workforce as well as those in paid employment. To put that into statutory context, I should mention also section 88B(2)(b), which requires the Commission to have regard to the economic factors including levels of productivity and inflation and the desirability of attaining a high level of employment.
PN2765
We take the view that the desirability of attaining a high level of employment has an implicit flipside, namely the desirability of minimising actions that may increase the level of joblessness. Also, as we have emphasised in our oral submissions earlier this morning, paragraph (c) considerations are relevant; paragraph (c) requires the Commission to have regard to, among other things, the needs of the low paid when it is just in the safety net.
PN2766
Your Honour, I should mention also that section 90 also bears on the topic in paragraph 6.16 in that under section 90 of the Act, in the performance of its functions, the Commission shall take into account the public interest, and then of course there is an amplification on what the public interest encompasses, and included in that is both the objects of the Act and also a more specific reference in 90B, namely the state of the national economy and the likely effects on the national economy of any award or order that the Commission is considering or is proposing to make, with special reference to likely effects on the level of employment and on inflation.
PN2767
JUSTICE GIUDICE: I suppose we are all fairly familiar with those, Mr Murdoch, but it was really a question of whether you were putting forward some construction of 88B(2)(a), which required us to include consideration of the position of the unemployed in looking at that paragraph. I only draw attention to it because it seemed to me that (a) is concerned with providing fair minimum standards.
PN2768
MR MURDOCH: Well, your Honour, we certainly do contend that the Commission is required to take into account two factors relevant to what you have just mentioned. There is the position of those who are currently unemployed, and there is also the situation of those who are currently employed who could finish up unemployed as a result of any decision of the Commission. And the reason I mentioned 88B(2)(b) and (c) is that (b) and (c) don't confine themselves to the wage-earner relationship.
PN2769
They are, as is apparent on the face of them, concerned expressly with the level of employment, and the level of employment has two sides, as I have emphasised. The level of employment clearly reflects those who have a job and also those who don't. So that there is a statutory requirement that the Commission have regard to, in the basket of economic factors, the question of the level of employment. And you are given a goal, with respect, and the goal is the desirability of attaining a high level.
PN2770
Now, in our submissions, we have approached it on the flipside, that is minimising any actions that will increase the number of jobless but nevertheless that is directly related to the statutory goal, the statutory desirability objective which goes to attaining a higher level of employment. So, yes, we are concerned with those outside the workforce. Yes, we submit that the Commission has a duty to take into account employment and unemployment-related issues, particularly in the context of their being consequences of an order that the Commission might make, or a decision that the Commission might arrive at.
PN2771
Your Honour, might I return briefly to the question that Commissioner Lewin raised before the break, to add to my answer the fact that the content of the social safety net hasn't stood still. Yes, it was discussed in submissions last year. Yes, it was commented on in the decision. However, in my rundown on developments in the social safety net in recent times that I gave earlier this morning, I mentioned that there have been enhancements in the social safety net by way of content and amount.
PN2772
As a result of that it is, in my submission, a social safety net structure that has become even more targeted, that provides enhanced support, and consequently the Commission should revisit it, particularly in the context of the relationship between the social safety net and the industrial safety net. I will return to the issues of the proposed C10 cap, the definition of the low-paid, and the incentive to bargain.
PN2773
I will start by dealing with an aspect upon which the ACTU appears to agree with the Commonwealth, and that is that the thrust of their submissions seems to be that a prime focus of the decision should be on the needs of the low-paid. When queried by the Commission, the ACTU didn't define who should be regarded as low-paid, and I am referring there to transcript paragraphs 806 and 809.
PN2774
Now, the explanation for the failure of the ACTU to do that may be because the ACTU is also seeking pay rises for persons earning in excess of $50,000, namely for example, at the C1 point A level. In contrast the Commonwealth is unequivocal. We contend that the needs of the low-paid are best protected by the highly effective tax transfer system and the process of the safety net review in combination.
PN2775
For this reason the Commonwealth is seeking a cap at C10. It does not take this position lightly, but we do so in the context of the real world. The cap is a particularly timely proposal for this safety net review given the state of the economy and the labour market. We submit that, if growth is sustained, there will be more opportunity for better skilled and more mobile employees who are currently award-dependent to secure wage increases through agreement making.
PN2776
In generally the formally recognised skills that are the basis of the C10 and higher classifications should enable workers with these skills to gain access to agreement-making. In turn, greater use of agreement-making will help to foster the productivity improvements necessary for strong economic growth. Further growth in productivity is essential if Australia is to retain its strong economic position. We submit that even in the short term a cap increase is likely to have a beneficial effect on the labour market by limiting the employment losses associated with an across-the-board safety net increase.
[11.57am]
PN2777
The labour market recovery is very much in its early stages. For instance full time employment has yet to show any concerted growth and is still below the level of a year ago. It is important that this recovery is not hampered by an across the board wage increase which is not matched by productivity improvements. The principle objects of the Workplace Relations Act express the Parliament's intention to establish a framework for cooperative workplace relations which gives primary responsibility for industrial relations and agreement making to employers and employees at the enterprise and workplace level.
PN2778
The corresponding role for the award system is as a genuine safety net of minimum wages and conditions. With the centrality of agreement making in the current system under the Act, the Commonwealth firmly believes that the incentive to bargain needs to be given more weight in the Commission's deliberations and we are proposing that this is reflected in the wage fixing principles. In its submissions the ACTU fails to acknowledge the primacy of agreement making in the current workplace relations system, and fails to recognise the Commission's role in encouraging agreement-making.
PN2779
COMMISSIONER LEWIN: Mr Murdoch, could I just interrupt there for a minute, because we go round this quite often in various decisions historically. But do you mean by "agreement making" the making of certified agreements or Australian workplace agreements only?
PN2780
MR MURDOCH: It is broader than that, Commissioner. Indeed, in the objects of the Act there are passages that leave that issue in little doubt.
PN2781
COMMISSIONER LEWIN: That is in section 3, isn't it?
PN2782
MR MURDOCH: That is in section 3(d), for wages - well, I will start again. The heading of section 3:
PN2783
The principle object of this Act is to provide a framework for cooperative workplace relations which promotes the economic prosperity and welfare of the people of Australia.
PN2784
And then (d), this is one of the means by which that is to be achieved:
PN2785
By providing the means, (1) for wages and conditions of employment to be determined as far as possible by the agreement of employers and employees at the workplace or enterprise level upon a foundation of minimum standards.
PN2786
Now, can I stop there and say that does not say any particularly methodology. It does not say certified agreement. It does not say AWA. It leaves open the possibility of other forms of agreement. And, of course, (d) is completed with the words:
PN2787
and (2), to ensure the maintenance of an effective award safety net of fair and enforceable minimum wages and conditions.
PN2788
There is also in 3(c) of the Act a part that reads:
PN2789
Enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances, whether or not that form is provided for by this Act.
PN2790
So that presumably that would encompass agreements that might be registered under state legislation or agreements that are not registered at all.
PN2791
COMMISSIONER LEWIN: Commonwealth contracts of employment.
PN2792
MR MURDOCH: Yes, though I readily concede that with the unregistered agreements there might be practical difficulties if there is an inconsistency with an industrial instrument that is registered or certified. But certainly the Act contemplates a spread of agreements, or potential agreements, far wider than certified agreement or Australian workplace agreements.
PN2793
COMMISSIONER LEWIN: So measuring the success of the Act in terms of fostering an agreement is not confined to the rate of growth of certified agreements or AWAs.
PN2794
MR MURDOCH: In terms of agreement making one would take into account all forms of agreement, though the ability to measure unregistered agreements may not exist.
PN2795
COMMISSIONER LEWIN: I think it does, doesn't it. The ABS actually identify individual agreements which are not registered.
PN2796
MR MURDOCH: Commissioner, I am not sure about that. I will endeavour to find out. In any event what counts in response to your question is they are all indicators.
PN2797
COMMISSIONER LEWIN: Yes, and the purpose of my question was to be assured that it is not proposed by the Commonwealth that we should confine our assessment of the effect of safety net adjustments on the rate of growth of certified agreements and AWAs.
PN2798
MR MURDOCH: Well, they are not the sole indicators but they are very important indicators.
PN2799
COMMISSIONER LEWIN: Thank you.
PN2800
MR MURDOCH: In terms of their spread across the industrial landscape they are - well, in terms of the progress that has been made to date they appear to be at the forefront of the measures that seem to have widespread coverage in the workforce, in terms of large numbers of people. It is surprising the ACTU and its supporters choose to selectively ignore the emphasis on agreement making which we believe was well established and supported by all parties before the introduction of the 1996 legislation.
PN2801
The Commonwealth has contended at paragraph 8.19 of our original submissions that while there may be other factors constraining bargaining it is important that safety net adjustments do not outstrip wage increases likely to be sought through bargaining. The data that we have presented shows in certain sectors, notably retail and hospitality, that this would in fact be the case under the ACTU proposal.
PN2802
JUSTICE GIUDICE: Mr Murdoch, just looking at those two sectors. Is there any tension between the submission you are now making and the submission you made earlier that the impact of the safety net would be in areas where there was no capacity to meet the increased cost?
PN2803
MR MURDOCH: I do not know that there would be, your Honour, but that question goes to a number of issues and - - -
PN2804
JUSTICE GIUDICE: Well, it is the question of whether we can ever encourage bargaining in areas which it is submitted there is no capacity to pay any more. Or any more than $10.
PN2805
MR MURDOCH: Just taking that. I am hesitating because we are get into micro-type issues and it is not always possible to generalise. But take, for example, retail where there appears to be an acceptance that there is a disappointing take-up of agreements or agreement making sector. Having said that, that is quite a large sector, and there are in that sector some agreements. Now, the X factor there is whether, indeed, there is capacity to bargain and through bargaining to increase productivity, and to thereby justify and support improved wages and conditions.
PN2806
We do not accept the view that those industries that have a high incidence of award only coverage are basket cases from the point of view of potential agreement making and potential productivity improvement. Our view is that there is still considerable potential for further introduction of agreement making, enterprise bargaining and productivity improvement through that means.
PN2807
In earlier questioning this week Commissioner Lewin raised some matters concerned with the status of federal certified agreements. The particular questions were at page - I am sorry they were questions in the transcript 1023 and 1025.
PN2808
JUSTICE GIUDICE: What date was that, Mr Murdoch?
PN2809
MR MURDOCH: That was - I will just check that, if I may, your Honour. It may have been last week, I am sorry. The days tend to blend together.
PN2810
JUSTICE GIUDICE: When you are enjoying yourself. I think it was the 4th.
PN2811
MR MURDOCH: Thank you, your Honour, I am indebted for that. In any event, the questions were:
PN2812
How many federal certified agreements have had their replacement status checked?
PN2813
We are able to make some data available to clarify the issue of first time agreements. The position appears to be this. Of all current wage agreements on the workplace agreement data base at 30 September 2001, 41 per cent, and that represents 4,813 agreements, had been checked for replacements. Of these 41 per cent, and I want to make it clear my eyes are not skipping back to the previous line, we get 41 per cent again, 41 per cent, or 1,978 agreements were found to be first time agreements.
PN2814
Further of all employees covered by current federal certified wage agreements, 85 per cent were covered by agreements that had been checked for replacements. Of these employees 14 per cent were covered by first time agreements. It appears that the higher proportion of employees under agreements which have been checked which is a reflection of the long term practice of always completing a replacement check on large agreements, those that cover over 500 employees. It may also reflect a higher proportion of small agreements among first time agreements.
[12.12pm]
PN2815
The Commonwealth in its written reply submission in chapter 8 provided illustrative material to support its arguments on the impact of safety net flow-ons to certified agreements. There was no suggestion that this was intended to be representative. It appears that the ACTU were trying to argue that any flow-on of safety net adjustments to agreements should be ignored by the Bench. We submit that the fact is that the official flow-on from automatic safety net provisions is only the very tip of the iceberg.
PN2816
Flow-on is occurring in both formal and informal agreements, and is of growing concern to employers, and in that respect we refer to the AIG submissions, paragraphs 5.8 and 8.12; the ACCI submissions, paras 2.82 and 4.9 to 4.11, and 5.9 to 5.21; and also to the Retail Motor Industry submission at section 7.
PN2817
SENIOR DEPUTY PRESIDENT WATSON: Mr Murdoch, why do you say it is of growing concern to employers? It has been a consistent theme for some time, I would have thought.
PN2818
MR MURDOCH: Well perhaps it is growing because the impact of it is becoming more recognised as a source of impact shock from safety net adjustments.
PN2819
SENIOR DEPUTY PRESIDENT WATSON: And what is the evidence of that?
PN2820
MR MURDOCH: Well, in relation to that, we have relied on the submissions that I have cited from other parties. It is not a matter that we have, in our primary submissions, gone to in great detail ourselves. I will, though, take on board the question and, if we are able to further support it, I will give a reference to it.
PN2821
SENIOR DEPUTY PRESIDENT WATSON: One of those, Mr Chesterman has agreed that the flow-on, as it were, was a result of labour shortages. He suggests wage increases would have been paid in any case.
PN2822
MR MURDOCH: I will go back on that, your Honour, and check that specific reference, and I will also ascertain whether there are any further materials that support the proposition.
PN2823
SENIOR DEPUTY PRESIDENT WATSON: Yes, thank you.
PN2824
MR MURDOCH: It may have already been clarified by the President, but the date of those questions that I dealt with earlier was Thursday, 4 April. I want to go, at this stage in our submissions, to some matters which arise out of the questioning of Mr Taylor and Ms Gabbitas, the witnesses that were provided by the Commonwealth in response to requests from the ACTU. In the ACTUs oral submissions, Mr Watson quoted from the evidence of those two Commonwealth witnesses. Our view is that the quoting was done on a selective basis.
PN2825
The Commission may recall the Commonwealth agreed to the appearance of these witnesses to assist in clarifying the economic impact of the ACTUs claim. This followed the Commonwealth's responses to all questions asked, and the ACTUs rejection of the Commonwealth's offer - and we say that it was a reasonable offer - to meet with the ACTU on Tuesday, 2 April, at its convenience in order to further assist in this process. And might I say what I am referring to there are the matters that are detailed in the correspondence which I have previously tendered.
PN2826
In selectively quoting from the evidence of Mr Taylor, Mr Watson attempted to assert that the Commonwealth's forecast for aggregate wages growth in MYEFO must already include the full impact of the ACTUs claim, and I refer there to transcript page 386. We submit that this was not the case as Mr Taylor stated, that the forecast is prepared from a whole of the economic perspective after weighing up relevant risks and uncertainties, and therefore it does not contain an explicit component for award wages. And the reference there is to Mr Taylor's evidence at transcript paragraph 379 and 384 to 385.
PN2827
I would also note that a little over three weeks before these hearings began, Mr Watson was advised in writing, in response to his earlier written request, that the relevant MYEFO forecasts were made public on 17 October 2001. That is, they were finalised prior to 17 October 2001. The ACTUs $25 claim was announced on 24 October 2001, and the correspondence that I have referred to earlier, of course, is Commonwealth exhibit 1.
PN2828
In his evidence, Mr Taylor used the ACTUs claim as a key example of a significant risk that might prevent a forecast from being achieved, and that is at transcript reference 381. Mr Watson has also misconstrued the evidence of Ms Gabbitas, in that he says that it confirms that the ACTUs claim has negligible impact on the economy. I refer to paragraph 578 and paragraph 582, that being the evidence of Ms Gabbitas, and also to the ACTUs submissions at paragraphs 1003 and 1005.
PN2829
The flaw in the chain of logic employed in the ACTUs submissions is that the ACTU selectively provided material as part of the exhibit that it had tabled in ACTU9. When this part of the ACTUs faulty partial analysis was modelled by Treasury, it was shown that the impact of this component of its claim - and I stress this component of the ACTUs claim - would be to put at least 5000 people out of a job. This is hardly a costless outcome.
PN2830
Mr Watson has asserted that, based on his knowledge of how the Reserve Bank operates, and based on the ACTUs calculation of the impact of its claim on inflation, the Treasury modelling of its claim is unrealistic, and that is his submission at transcript paragraph 1003 in the ACTU case. But since 1993, the Reserve Bank has had the objective of keeping underlying consumer price inflation between 2 to 3 per cent on average over the cycle, a rate sufficiently low that it does not materially distort economic decisions in the community.
PN2831
The inflation target also acts to anchor private sector inflationary expectations. We have dealt with this point in more detail in our reply submissions R 4.26 to R 4.28. I would add to what we said there that there is a further supporting reference in Monetary Policy in Australia which appears in the Reserve Bank website. I further submit that, in Treasury macro-economic modelling, interest rates are adjusted to mimic historical movements, and are consistent with the Reserve Bank's objective.
PN2832
I will proceed now to deal with the impact of the claim by the ACTU if it were to be adopted by the Commission. In doing so, I start by examining the interpretation which the ACTU has put on the impact of its claim. The ACTU does not dispute the Commonwealth's calculation that the claim will add 0.48 percentage points to aggregate wages growth over and above the Commonwealth's proposed safety net adjustment.
PN2833
What the ACTU then does is to exhort the Commission to do the maths in order to arrive at an overall impact which the ACTU describes as negligible. We don't accept that approach. Before turning to the ACTU exercise in maths, it is worth noting that the consequences of the undisputed 0.48 figure is a significant reduction in gross domestic product, a rise in inflation, a reduction in the level of employment and more than 37,000 people put out of work.
[12.24pm]
PN2834
Now, many of those 37,000 are likely to have dependants. So that the impact may extend to more in the community than the 37,000 likely to be put out of work, perhaps 50,000 Australians could face a bleaker future due to the ACTUs claim. However, the ACTU describes this impact as a gross figure that should be discounted. In fact, the ACTU attempts to discount the impact of its $25 claim down to zero. It does so by claiming that the 0.48 percentage points should first be discounted by the so-called pipeline effect of 0.3 percentage points. The pipeline effect is said to be the amount of last year's decision.
PN2835
The ACTU assert that the previous year's decision becomes somehow built into the economy so award increases in the following year, they say, up to that amount, have no detrimental impact on employment or other major economic variables. If this argument is accepted, then it follows that the can reduce unemployment by merely awarding an amount less than what was awarded in the previous year. We don't, of course, accept that approach, which has been urged by the ACTU.
PN2836
SENIOR DEPUTY PRESIDENT WATSON: Isn't it relevant, Mr Murdoch, to the assessment of the net impact of a safety net adjustment upon aggregate wages growth, what is already to the past increase reflected in average earnings growth?
PN2837
MR MURDOCH: Well, it is not as simple as that, your Honour, and we are going on to deal with that and perhaps, if you are agreeable, we could wait till I have completed the exercise. If we haven't dealt with it sufficiently, come back to it then.
PN2838
SENIOR DEPUTY PRESIDENT WATSON: Certainly, Mr Murdoch.
PN2839
MR MURDOCH: The Commonwealth accepts that its position of awarding $10 up to C10 will have some employment impact, of course, a much smaller impact than that of the ACTU claim. But combined with the increase in the superannuation guarantee contribution, the $10 will result in a real wage increase. As such, if productivity within individual firms fails to match this real increase, there is likely to be an adverse employment impact. Unfortunately, there is no magic pudding. On the basis of the flawed pipeline argument of the ACTU, the ACTU would have the Commonwealth accept that the 0.3 percentage point impact can be ignored.
PN2840
The ACTU also argues that the impact of the remaining 0.18 percentage points is so small that it too should be disregarded, as its impact is said to be negligible. The ACTU invited the Commission to do the maths with them. We see that at transcript 1020. But when the ACTU does the maths, it appears that $25 has the same impact as $15 would or $10 would or zero dollars would. What, in fact, happens is, in our submission, quite different. Prior to last year's decision, a person on the federal minimum wage, the C14, was earning $400.40 per week.
PN2841
The safety net adjustment awarded that person an additional $13 per week. That was a rise of 3.2 per cent. In this hearing, the ACTU appears to say to that person's employer that they should add a further $15, not $13, to the wage and disregard its impact; that is, increase the wages to $428.40 per week but that it will have no material impact on the employer; no material impact yet it is a rise of 3.6 per cent. The ACTU go further and they say to the employer, now add a further $10 to that amount and that, of course, is 2.3 per cent. The ACTU then assert that the effect of that is negligible and can also be ignored.
PN2842
So the ACTU is putting forward the proposition that a 6 per cent pay rise on the federal minimum wage will have no material impact on an employer's decision making.
PN2843
SENIOR DEPUTY PRESIDENT WATSON: That is not what is being put, is it, Mr Murdoch? It is being put that in terms of an aggregate costs figure, which is then fed into the TRYM modelling to provide aggregate economic effects. It is not directed to an individual employer. It is understood that there are different effects on different employers, depending on their circumstances. The whole costing and modelling exercise is directed at aggregate economic effects, is it not?
PN2844
MR MURDOCH: Your Honour, the implications for the TRYM modelling are technical and, having regard to the stage of the day I am at, I would like to take that one on board and come back to it after the lunch break, if I may.
PN2845
SENIOR DEPUTY PRESIDENT WATSON: Yes.
PN2846
MR MURDOCH: It might be a convenient time to, if I can, respond more fully to one of Commissioner Lewin's earlier questions about the collection of ABS data on the informal agreement sector. I am instructed that the ABS EEH survey collects data on pay setting methods. These are broken down in the following broad categories: firstly, awards only; secondly, collective agreements, registered and unregistered; and thirdly, individual agreements, registered and unregistered. The informal sector is most closely akin to those employees paid by unregistered collective and individual agreements. However, due to the methodology adopted by the ABS in its EEH survey, it is not a precise measurement. It is hoped that the EEH 2002 survey will provide more accurate data in this regard.
PN2847
I will go now to the matter of the wage-fixing principles. The Commonwealth is seeking changes to the Commission's statement of principles in relation to the following matters: economic capacity, which affects principle 12; special cases, which affect principle 10 and have regard to the making and varying of an award above or below the safety net; and, finally, reinforcing the incentive to bargain under principle 1, and that is in regard to the role of arbitration and the award safety net. The Commonwealth's response to issues raised in reply by the ACTU is set out in chapters 8 and 9 of its reply submission.
PN2848
So far as the economic incapacity principle is concerned, we wish to make these points. On that matter, the Commonwealth is proposing five changes. Firstly, single members should be able to deal with applications affecting single businesses without the need for an applicant to apply under section 107 but retaining the scope for a party to seek a reference bench where it is contended there is significant public interest. I would refer back to paragraphs 9.16 and 9.17 of our earlier submissions.
PN2849
Nextly, the principles should recognise that when the Commission is dealing with an incapacity application - I qualify that by saying - whether affecting a single business or more than one business, it may be relevant to take into account information on economic difficulties being experienced by the industry sector or region in which the business or businesses concerned are located. That is, it should be accepted that such information may help determine the presence of adverse economic circumstances affecting the applicant business or businesses. I would refer there to our original submissions, paragraph 9.18 to 9.21.
PN2850
The Commonwealth further submits that the principles should recognise that particular regard will be given to the operational circumstances of small business in deciding in evidentiary requirements affecting them. Again I refer back to the submissions in paragraph 9.22 of our earlier submission. Additionally, the existing reference to any material relating to the particular circumstances of the case being rigorously tested should be replaced by a reference to such material being considered. Finally, an optional alternative procedure for accessing relief from a safety net adjustment should be implemented on a trial basis for businesses employing less than 20 employees. We have developed that in our original submissions, paragraph 9.28 to 9.33.
PN2851
The elements of the possible approach are set out in the earlier submissions, at paragraph 9.31. In putting forward an option in the suggested form for the Commissions's consideration, the Commonwealth has taken into account some of the distinguishing circumstances of small business, as discussed at paragraph 9.28 per earlier submissions. The Commonwealth has invited other parties, and the Commission itself, to consider alternative possibilities to address the same objectives. The common them underpinning the Commonwealth's proposed changes is that the economic incapacity principle should be made more accessible, including meeting the circumstances of small business.
[12.39pm]
PN2852
Our proposals are focused on easing the administrative, procedural, and evidentiary burdens faced by any applicant under the existing principle. The Commonwealth's view is that the apparent lack of any applications under the economic incapacity principle in the last two years, following on from, at most, a mere handful of applications in previous years, indicates that the existing burdens are excessive. In its
PN2853
JUSTICE GIUDICE: But how do you demonstrate that? Sorry to interrupt, Mr Murdoch, but there seems to be a problem with this submission, that - how do you demonstrate that a lack of applications means that the principle is undesirably tight, or difficult to comply with? As Coleman J would have said, and he did say on a couple of occasions, it is like knowing whether the light is off when you have closed the fridge door. But isn't it that sort of problem? What is - - -
PN2854
MR MURDOCH: I was about, actually, as your Honour has done, to travel back in time to say that your Honour might recall from your own days as an advocate that you are always, to a degree, vulnerable to questions from the Bench when you are asserting a negative. So, I am to a degree in that position here. But the Commission, of course, is wise to the ways of the world of the industrial community. And consequently, having regard to the matters that come before the Tribunal, might have some sympathy to the position of the small employer, the under-resourced employer, when confronted with, on the one hand, grievous economic difficulties, but on the other hand, the lack of capacity to find a way through what would appear to many of them to be a web of complexity and technicality. It is in part from those pragmatic considerations that we put the view forward.
PN2855
JUSTICE GIUDICE: Is that a convenient time for you, Mr Murdoch?
PN2856
MR MURDOCH: It is, your Honour. Thank you.
LUNCHEON ADJOURNMENT [12.43pm]
RESUMED [2.16pm]
PN2857
JUSTICE GIUDICE: Mr Murdoch.
PN2858
MR MURDOCH: In my submissions this morning when I was dealing with the C10 cap and the low pay definition issue, I made a reference to persons earning in excess of $50,000 a year, and as a cross-reference cited the C1(a) level. I should, of course, said the C1(b), so I will correct that if I may. With the questions that are outstanding, what I have proposed to do is to complete the submission, and then to endeavour to deal with all outstanding questions in one sequence, then dealing with a series of matters concerning the wage-fixing principles, and part-way through our submissions on the economic incapacity principle.
PN2859
The Act intends that the Commission will maintain an effective award safety net of fair and enforceable minimum wages and conditions of employment. That of course is the wording that comes out of section 3D(ii) of the Act. We submit that for the safety net to be effective it must have utility in addressing the general purposes of the Act which include encouraging high levels of employment. It follows that an economic incapacity principle, which is perceived as a deterrent to applications being made and which imposes unduly burdensome procedural requirements, is likely to frustrate or diminish the effectiveness of the award safety net in meeting the general purposes of the Act.
PN2860
Our submission provides a considerable amount of economic material attesting to the difficult economic circumstances of particular industry sectors and regions and for small business. The Commonwealth also relies on that material to support the proposed changes to the economic incapacity principle. The material points to the variegated pattern of the economic landscape and it lends strong support to the need the Commonwealth sees for businesses to have access to less burdensome arrangements to obtain relief from a safety net adjustment, particularly where it will save jobs.
PN2861
The Commonwealth also notes that the need to make the economic incapacity principle more accessible is strongly supported by the ACCI, notably at paragraph 5.32 of its reply submissions. The ACCI also supports the proposal by the Commonwealth and by the AHA and the Motor Inn Motels and Accommodation Association to change the existing reference in the principle regarding the rigorous testing of material dealing with particular circumstances of each case.
PN2862
The Commonwealth agrees with the point made by the ACCI at paragraph 5.7 that there is no reason for the principle to refer to any different standard of evidence than that generally applicable under the Act. ACCI also supports at paragraph 5.52 and 5.53 of its reply submission the Commonwealth's proposed amendments relating to the evidentiary requirements for small business and for an alternative procedure to be available as an option for small business.
PN2863
The Commonwealth in turn supports the ACCI proposed amendment in respect of the present need for all decisions allowing for some relief from a safety net adjustment to be subject to review at a date determined by the Commission at the time it decides any application. Certainly to the extent that this requirement may be inconsistent with the Commission at times being satisfied, when dealing with an application in the first instance, that a case has been made out for deferral of a safety net adjustment for a fixed period, a further review should not be mandatory.
PN2864
As ACCI proposed in its reply submission at paragraph 5.64, consideration could be given to reserving liberty for a party to apply for a review where circumstances change. The Commonwealth notes the changes proposed by the AHA and the Motor Inn Motels and Accommodation Association to the economic principle at 3 of its submission, including to give wider recognition to the relevance of the impact or potential impact of a safety net adjustment on employment.
[2.22pm]
PN2865
The AHAs proposal is complementary to the Commonwealth's own proposals in respect of the weight that is appropriate to be given to material addressing economic adversity across an industry sector or region in determining economic incapacity, regardless of whether the Commission is considering a claim from a single business or more than one business. The Commonwealth also notes that the material in its submission relating to the economic state of the tourism industry in certain regions that are heavily dependent on tourism is consistent with the AHAs description of the plight of four and five star hotels.
PN2866
I turn now to the continuing issues concerning the principles but especially to special cases and the making and varying of an award above or below the safety net. As to special cases and the making or varying of an award above or below the safety net, the Commonwealth's proposed changes are directed at clarifying some ambiguities that have emerged in the interpretation of the principles. The focus of the Commonwealth's proposed changes regarding the treatment of special case applications is to provide for any affirmative decision that a claim constitutes a special case, and may be determined as such, to be made by the President or a Full Bench.
PN2867
This will overcome the uncertainty the present arrangements can give rise to where the President declines the section 107 application and the matter is referred back to a single Member to determine. We cited an example of that in our submissions at paragraph 9.41 and 9.42 when we referred to the decision of Commissioner Cargill of 9 January 2002. The relevant reference in that decision is print PR913088, page 22, paragraph 26. We have set out more detail on that particular example in our earlier submissions.
PN2868
In the absence of any indication whether or not the President considered the circumstances of the application were sufficient to justify a special case, doubt can arise as to the status of the claim and how it should be determined. In the Commonwealth's view, there is also a need to clarify that under principle 10 a claim must be considered as one above or below the safety net when what is sought is additional to or would subtract from what is already contained in the award and none of the exceptions are allowed for in principle 2.
PN2869
In the Commonwealth's view, this appears to have been the intention of the Commission's principles since at least the 1997 decision. In particular, the Commission decided to apply an award by award test to define the award safety net. The matter has not been reconsidered in subsequent cases. Accordingly, the Commonwealth submits that the inclusion of the additional words proposed by the Commonwealth should be regarded as non-controversial. The change sought simply gives more precise expression to what has been the Commission's intention, we believe, since 1997. We proceed next to the matter of the incentive to bargain.
PN2870
JUSTICE GIUDICE: Mr Murdoch, the proposal that you have just been dealing with seems to give a fair amount of authority to the President to determine whether or not a special case exists. Perhaps that is implicit in what is there at the moment. I don't know.
PN2871
MR MURDOCH: It is. Well, it is certainly implicit in what we have said, your Honour, and we didn't see any difficulty with that, provided the role of the President is clearly spelled out. Going then to the incentive to bargain, so far as reinforcing the incentive to bargain is concerned, the Commonwealth's proposed change to the principles is prompted by what we see as a tendency in recent Safety Net Review decisions for less explicit emphasis to be placed on encouraging bargaining. In the Commonwealth's view, greater emphasis on encouraging bargaining would be consistent with the Act's purpose of ensuring that primary responsibility for determining matters affecting the employer-employee relationship rests at the workplace level.
PN2872
I deal next with the ACTUs proposed change to principle 8, which goes to the timing of safety net adjustments. The Commonwealth notes that, like the Commonwealth, the Australian Industry Group and ACCI strongly oppose the ACTUs proposed change to the principles to allow for retrospectivity where applications for safety net adjustments are made within a reasonable time but are not dealt with by the Commission until after the anniversary date of the previous safety net adjustment.
PN2873
The Commonwealth strongly urges the Commission to uphold the prospective approach to the variation of awards to apply safety net adjustments. We note that provision already exists to deal with any instances of serious delay in exceptional circumstances. The Commonwealth agrees with the point made by the ACCI in this regard that there is no principle that safety net adjustments must apply at no greater interval than 12 months.
PN2874
May I turn now to the contentions by the states and I regret that my old friend, Mr Martin, is not here to defend myself, and I wouldn't make a cheap shot about letting out the red otter with him absent. The states contend that the Commonwealth's position on capping is wrong, including because the Act contains a no disadvantage test. The most basic point I make in reply in this context is that there was nothing in the Act that requires the Commission, when adjusting the safety net, to adjust all award rates.
[2.30pm]
PN2875
The States have contended to the effect that the Commission is still beholden to the trilogy of secure, relevant and consistent despite the fact that these criteria for award rates of pay were abandoned in the Act. In the States' view, as we understand it, the Act always operates to rule out a cap. The States, however, have concurred in further compressional of relativities for skill by embracing the ACTU's $25 claim in these proceedings. At the same time as the States appear to take the position that the Commission when adjusting the safety net must not insert a cap. The State view appears to be that the Commission have to award everyone on award rates an increase irrespective of the fact that some award rates are, as I have said earlier, in the order of $1000 per week.
PN2876
In our submission the States position is compromised by the view that they take and the ACTU take that would lead to a further compression of relativities. As we understand it the States do not say that the Act requires that if the Commission were to grant $25 to an employee on the Federal minimum wage then the Commission must grant no less to an employee on $1000 a week although that is the outcome they support in these proceedings. But the States would have it that the Commission has to accept that if, for example, the Federal minimum wage is increased that because there is a no disadvantage test some increase must simultaneously be granted to an employee on $1000.
PN2877
On the approach taken in this case by each of the Commonwealth, the ACTU and the States there will be a change of relativities. It gets down, in our submission, to a matter of degree but there is no statutory requirements that relativities be preserved in any particular State or relationship. In any event in last year's case the Commission recognised that there may be circumstances in which a safety net adjustment may be appropriate only at lower classification levels. And I refer there to the 2001 Safety New Review decision at paragraph 137. In that case the Commission also accepted that a capped outcome could succeed on the merits of the case, the reference there being to paragraph 139 of that decision.
PN2878
To wind up in our submissions I would like to observe that in concluding his submissions Mr Watson for the ACTU flirted with an $18 figure. He suggested that among other things that that sum should be the new floor and that the debate should be directed at what amount above $18 should be awarded. This suggests that the $25 claim by the ACTU is an ambit claim. The Commonwealth wishes to assure the Commission that its argument for $10 per week capped at the C10 level is the Commonwealth's actual proposal. This is too serious a matter for exaggerated claims and positions that are born out of tactics rather than merit.
PN2879
Dealing with procedural matters may we speak favourably about the new direction which was taken in the directions by the Commission this year. The round of written reply submissions on our observation has been a positive contribution to the conduct of the case. We also wish to express appreciation for the availability of the website. It is, we believe, an innovation that has worked well. I think we are travelling reasonably well from a time point of view. I am just a little bit caught out in that one matter that we were having looked at we don't have something back yet. I think if I could have 10 minutes I will have that and I can deal with all the answers in one bracket. I would appreciate that short break.
PN2880
JUSTICE GIUDICE: Yes, very well.
PN2881
MR MURDOCH: thank you.
PN2882
JUSTICE GIUDICE: We will resume at about quarter to three.
PN2883
MR MURDOCH: Thank you.
SHORT ADJOURNMENT [2.36pm]
RESUMED [2.46pm]
PN2884
JUSTICE GIUDICE: Mr Murdoch.
PN2885
MR MURDOCH: Thank you, for your assistance. Senior Deputy President Watson raised an issue with me concerning the relevance of examining the impact of the ACTU's claim on individual employers given that TRYM models aggregate impact. It is true, as suggested by Senior Deputy President Watson, that TRYM models the impact of aggregate wage changes at the whole economy level without factoring in individual employer circumstances. However, the Commonwealth contends that the ACTU claim should be modelled as the additional impact over the Commonwealth's position. That is, the appropriate aggregate wage increase entered into TRYM should be 0.48 percentage points and not 0.2 percentage points as the ACTU suggests.
PN2886
The example given by the Commonwealth of a 6 per cent wage rise for a person on the Federal minimum wage is illustrative only of the concepts underpinning the ACTU's calculations. The Commonwealth is not claiming that the impact on a firm employing a person on the Federal minimum wage is necessarily a 6 per cent impact. Another question raised by Senior Deputy President Watson queried what we had said about the pipeline effect. The question, as I understood it, raised the issue of whether it is a sound basis or not for considering the impact of the ACTU's claim on the labour market and the broader economy.
PN2887
The Commonwealth does not believe that the pipeline effect is particularly helpful to the Commission's deliberations about the size of any safety net adjustment. The Safety Net Review is conducted to determine the size of the safety net adjustment which is most appropriate to current and expected economic conditions. Because of the inevitable changes to the macro economy and in particular sectors the previous years' decisions are likely to be an appropriate benchmark for the current decision. The Commission should weigh up a host of such factors on the basis of detailed submissions from parties rather than being influenced by last year's decision.
PN2888
If the Commission accepts the pipeline as a permanent feature of wage setting each year regardless of relevant economic conditions this will become a flaw for future wage and price setting behaviour raising the danger of inflationary expectations and higher interest rates that will hamper economic growth.
PN2889
JUSTICE GIUDICE: I think you might have missed out a "not" there somewhere, Mr Murdoch.
PN2890
MR WATSON: Of course we don't think he did.
PN2891
SENIOR DEPUTY PRESIDENT WATSON: Mr Murdoch, the purpose of that question was based on the Commonwealth submission based on TRYM which, as I understand it, is that the ACTU claim if granted would increase the level of inflation such that there would be an interest rate response by the RBA because it was considered its inflation rate target would be exceeded. TRYM incorporates an RBA interest rate response which in large part generates a negative product and employment outcomes. Given that context the starting point wouldn't be the 3.1 per cent inflation including the effect of last year's increase which would pass out, would it, but rather the pipeline - the net effect - would need to be examined to consider the effect on the rate of increase in the CPI to which the RBA is directing its attention?
PN2892
MR MURDOCH: Your Honour, I doubt that I can take it much further than what we have already said in our written submissions and in the submissions earlier today. The difficulty, of course, is that one can have expectations about what the Reserve Bank will do but one cannot predict with certainty.
PN2893
SENIOR DEPUTY PRESIDENT WATSON: Can I take you to table 4.4 of your primary submission. I take it from what - page 79, Mr Murdoch. I take it from what you have put the correct way to read those figures is that they are not changes upon the current position but changes as against the Commonwealth's $10 capped position. If we were to make a comparison against the current position the effect would be that if the Commonwealth position were acceded to there would be a lower inflation rate, higher employment etcetera. The Commission granting an increase in the order of last year's increase would not affect the rate of change in inflation when the ACTU claim it would add a further element to the rate - present rate of inflation. Is that the correct way of focusing on inflation to read that, that the Commonwealth would deliver a lower increase than the present level the Commission granting a similar increase - not change the present level of rate of increase and the ACTU position would increase the rate of increase?
PN2894
MR MURDOCH: I will just confirm.
PN2895
SENIOR DEPUTY PRESIDENT WATSON: Yes.
PN2896
MR MURDOCH: Yes, you are correct, your Honour. That table, 4.4, reflects the difference between the Commonwealth and the ACTU view.
PN2897
SENIOR DEPUTY PRESIDENT WATSON: One final question, Mr Murdoch. If the Commission were not persuaded by your arguments on the pipeline effect what does the Commonwealth say would be - would have been the effect on aggregate wages growth of the last safety net adjustment?
PN2898
MR MURDOCH: Your Honour, we do not have that information.
PN2899
SENIOR DEPUTY PRESIDENT WATSON: Well, Mr Watson has drawn from table 4.5 a .3 per cent. Do you have any comment about that?
PN2900
MR MURDOCH: Yes, your Honour, and the question was what do we say about?
PN2901
SENIOR DEPUTY PRESIDENT WATSON: That Mr Watson relied on that as being indicative of the gross net addition to wages costs arising from the last safety net adjustment.
PN2902
MR MURDOCH: Excuse me.
PN2903
SENIOR DEPUTY PRESIDENT WATSON: I am sorry, it is the .3 plus the .11 which you attribute to the Commonwealth's $10 capped proposition so .4.
PN2904
MR MURDOCH: Our view is that .3 covers both the 2001 increase plus accumulative impact of earlier decisions.
PN2905
SENIOR DEPUTY PRESIDENT WATSON: And so what does that do to Mr Watson's proposition that that together with the .11 is broadly indicative of the gross cost of the last safety net adjustment?
PN2906
MR MURDOCH: I am just endeavouring to get some assistance with that response.
PN2907
SENIOR DEPUTY PRESIDENT WATSON: Yes.
PN2908
MR MURDOCH: If you can just bear with me for a moment.
PN2909
SENIOR DEPUTY PRESIDENT WATSON: Yes. I heard your earlier submission that you weren't able to quantify the effect. On previous cases I think at the request of the Commission the Commonwealth has in fact produced estimates of gross impacts for varying amounts of safety net increase. I think they were reproduced at table 5 of the most recent decision.
PN2910
MR MURDOCH: Your Honour, the position is that the calculations can be done but they can't be done quickly. We would need to have them done over the next little period of time when people return to Canberra.
PN2911
SENIOR DEPUTY PRESIDENT WATSON: yes. Well, perhaps if that could be done. Just looking at table 5 bearing in mind the increases were on a lower base I would just like to more award align employees suggested a all sectors without cap percentage point contribution of .37 of $14 and .42 of 16 which would seem to suggest the figures Mr Watson relied on are in the same ball park as those previous Commonwealth estimates. Perhaps if you could have a look at that.
PN2912
MR MURDOCH: I think it would be suffer to undertake the exercise, your Honour.
PN2913
SENIOR DEPUTY PRESIDENT WATSON: Yes. Thank you.
PN2914
MR MURDOCH: I think that completes the outstanding questions.
PN2915
JUSTICE GIUDICE: It is time for you to sit down, Mr Murdoch. Thank you for your assistance. Yes, Mr Watson.
PN2916
MR WATSON: Yes. If I can deal with a few things by way of reply. Can I start by addressing the proposals in relation to changes in the rate fixing principles. Can I start with our own. Each of the opposing parties making submissions in relation to our proposed change has, in our submission, failed to understand the proposal we make. The ACTU proposed alteration provides scope for an increase in the safety net to be awarded before the date of variation but only in very limited circumstances. Firstly, only where more than 12 months has elapsed so those employers who ran arguments about the impact on employers of more than two increases in 12 months in our submission simply missed the boat.
PN2917
Secondly, only where an application has been lodged a reasonable time prior to the variation being granted and thirdly - and we didn't make this express in our proposal but we should have thought it was self evident - only where consistent with the requirements of the Act. We can't override section 146 in the principles. We don't seek to. We would be happy to have the words "subject to section 146" in there. And so in short an applicant under our proposed change will still have to make out the precise things which section 146 requires.
PN2918
The only thing that we will facilitate is an avoidance of the situation where an applicant faced with the particular circumstances where our amendment is directed is required to go through the process of making a section 107 application, having that referred up, having it referred back and the like. If they have got exceptional circumstances they can demonstrate it at first instance. That is the sum total of the change that we seek and all of the other stuff is, with respect, boxing at shadows.
[3.01pm]
PN2919
In relation to economic incapacity to pay, in our submission, the submissions advanced by the ACCI and by the Commonwealth are wholly unconvincing. When confronted with the lack of applications both the ACCI and the Commonwealth rely on a series of assertions which are not founded anywhere in evidence. The Commission does have some evidence about this situation, and that is, from the Commonwealth's own submissions where they note that in 1999 the Commission issued a statement which allowed - I am sorry, the Registry issued a fax sheet which drew to employers' attention the existence of the economic incapacity principle.
PN2920
The Commonwealth then advertised it widely, put it on their website, did other things to encourage other people, and there was still no applications. And the Commission does have some evidence about this. And the evidence is that there is an overwhelming disinterest in the use of the economic incapacity principle. There is no evidence that employers are discouraged. There is every evidence that even when they are encouraged they are not particularly interested.
PN2921
There is simply no warrant, in our submission, for the adoption of the AHA submissions as to the basis for a change in this principle. Firstly they say that the principle was adopted in a different framework. That is true, but arguably it tends against the existence of the principle at all. In that respect we note that the legislature has seen fit to prescribe those circumstances in which a reduction in safety net can occur, that is, where there is an agreement, where there is public interest. And so it is arguable that having seen fit to prescribe it, the principles themselves ought not to make further exceptions.
PN2922
But in any event we note the tension between this portion of both the AHA's submissions and the submissions of the Commonwealth, and the Commonwealth's keenness to assert the primacy of encouraging bargaining. There is, in our respectful submission, a very keen tension between the notion that somehow or other bargaining is the be-all and end-all, but when it comes to an employer wanting to go below the safety net the first thing they can do is pop into the Commission and get an arbitrated outcome.
PN2923
The submissions of the AHA referred to a bargain that had been struck between the parties in the 80s with the suggestion that somehow or other unions no longer had to live up to their part of the bargain but employers still had to live up to theirs. With respect we say that is simply wrong. Unions still have no capacity, or I should say a very limited capacity, to seek arbitrated pay rises outside of the principles. If that was the core part of the bargain, we are still stuck to it.
PN2924
And we might say that there is an element of all of the employers seeking to have their cake and eat it too, in relation to this. Logically if economic incapacity becomes more freely available then perhaps we would be in the position to contend for the economic over-capacity principle. That is, anybody who can show that they have done a bit better than the average we can come round for a second chop. And, indeed, the AHA might note that based on - and we will come to this later in our submissions - but based on the most recent December quarter national accounts growth figures, they would be in that category right now. Their growth for the year to December 2001 was more than the average.
PN2925
Next we say the submission regarding the evidentiary standard almost ended up not being put, but we understand that it was put. We just point to the inconsistency in the submission in this regard. It seems to be accepted in the AHA's contentions that pre-1983 it was permissible for the Commission to adopt what it described as a stringent approach. Post-1983 in the context of centralised wage-fixing it is appropriate to call it rigorously testing. But somehow or other going back now to a pre-1983 standard rigorously testing ceases to be a relevant or appropriate phrase.
PN2926
And there seemed to be very much in the submissions a notion that somehow or other the Commission should return to the pre-1983 position. Well, on their own material the pre-1983 decisions referred to a stringent approach. We should have thought "stringent" was a word that they would have much more difficulty with than "rigorous testing". And frankly the entirety of that submission, we think, is without foundation. It simply ignores what is the law in relation to the civil standard. The suggestion that somehow or other rigorous testing is at odds with the civil standard is a nonsense.
PN2927
Finally in relation to this, we simply observe, as was observed in interchanges between the Bench and the AHA, that the matter has been considered recently by the Commission and determined. Can we just briefly address the Commonwealth's propositions in relation to this. The import of their changes is to allow single members to consider this. We say that in a situation where you have a safety net, and given the central importance of that safety net in the legislation, applications to depart from it warrant consideration by a Full Bench.
PN2928
We further submit that there is simply no evidence of a need for any special procedures for small business, and in event section 111 provides the Commission with enormous flexibility in terms of procedure in appropriate circumstances. The Commonwealth advanced a submission regarding the capacity to lead evidence of industry sector difficulties. It is not my understanding that the law in relation to this matter, so far as the Commission is concerned, precludes the leading of such evidence. And finally, as we understand it, they, that is the Commonwealth, also join in the notion that rigorous testing is somehow inappropriate.
PN2929
Can we just say this, given the, it seems, immense over-capacity of employers to come along to this place and cry poor, we should have thought that a little hint to them that they cries were going to be rigorously tested was no bad thing. In relation to the bargaining principle - - -
PN2930
JUSTICE GIUDICE: Just before you get on to that. The suggestion that has come from, I think, a couple of quarters at least, that incapacity cases in relation to single employers might be heard by a single member rather than a Full Bench. Have you given any consideration to that in the context of other submissions made about the special case principle and, in particular, the matters raised by the Commonwealth as to where a reference is not granted what supervision ambiguity existing in relation to the position of the single member who then must deal with the application.
PN2931
MR WATSON: We see them as being quite different situations. We do see the possibility for special case applications being dealt with by single members in appropriate circumstances, and we have said as much in our written submissions. But we think that an economic incapacity application goes, if you like, to the heart of the safety net system. It is an application in the particular, whether it is large or small, it is an application to avoid what has been determined as the fair safety net of minimum wages and conditions. And so in those circumstances, in our submission, it warrants the seriousness of a Full Bench in every instance.
PN2932
So we are very frank about that. And we said as much when we were responding to the Commonwealth's proposals regarding the special case that we would not accept the freeing up of the special case principle being used as a backdoor mechanism to make further economic incapacity applications. The suggestion of a principle for the encouragement of bargaining: put shortly, we don't see the need for it. These are principles which are wage-fixing principles which go to the safety net. It seems that there is no demonstrated need, based on what the Commonwealth has said about the spread of enterprise bargaining, and in our submission there is very little need to reiterate what are essentially legislative injunction in the principles.
[3.12pm]
PN2933
In relation to the special case principle, we have made some criticisms of the Commonwealth's proposal in our written submissions and we do say that it would be our submission that generally it would be inappropriate for the President to be placed in the position of determining whether there was a special case without having first been in a position to hear all of the evidence and so in that circumstance we think there is a real problem with the proposal of the Commonwealth.
PN2934
Having dealt with that issue, can I then turn to, if you like, the substantive matters going to our claim and I am going to deal with the major parties in turn, going first to the ACCI:
PN2935
Our submissions sought to establish three propositions: demonstrated need, buoyant economic circumstances and negligible economic effect.
PN2936
We say nothing in relation to the ACCIs submissions on demonstrated need, other than they have, in our submission, simply rehashed their submission in previous cases and there is nothing in what has been put which would warrant a departure from the position which the Commission has reached in every one of those previous cases regarding the needs of the low paid. Buoyant economic circumstances: the ACCI in its submission went to extraordinary lengths to talk up uncertainty in the economy and yesterday at paragraph 2090, Mr Barklamb said in his summing up, if you like, that the ACTU had not demonstrated that conditions in the Australian economy were buoyant.
PN2937
Well, as we noted in our original oral submissions, that was the very word they used. But on the very same day that Mr Barklamb was in the Commission telling the Commission that we had failed to demonstrate that economic conditions were buoyant, the ACCI released its most recent survey of investor confidence, and we have a copy of it for the Commission and it says, in our respectful submission, very different things, yet again, to that which was being put to the Commission yesterday and on days previous.
PN2938
Can I hand up a copy of a press release and the survey of investor confidence. Now, I will say they have been a tad more careful this time. They have obviously had in mind as they drafted their press release the possibility that I would stand up in reply and take you to it. But can I take you to the press release.
EXHIBIT #ACTU13 PRESS RELEASE AND SURVEY OF INVESTOR CONFIDENCE
PN2939
MR WATSON: I am sorry, your Honour. I should have formally tendered it. It is headed Australia on Path to Recovery. The opening paragraph:
PN2940
The April 2002 Survey of Investor Confidence shows that Australia is now firmly on the path to recovery. The economy is picking up. In comparison with lows reached last year, Australia is retrieving much of the ground it lost over the previous year.
PN2941
Further down, in the third paragraph:
PN2942
There is no question that businesses have recognised a growing strength in the national economy and this has spilled over into positive expectations about the growth in employment and, most importantly, in the national level of investment.
PN2943
Then in the final paragraph - this is where I suggest that perhaps they did take a little bit of an account of the fact that we might read it:
PN2944
These are buoyant -
PN2945
That word again,
PN2946
buoyant expectations that must be turned into realised facts.
PN2947
Then they go on to give their warning to both the Reserve Bank and the Industrial Relations Commission in the safety net proceedings. However, in relation to the survey itself, on the first page they say - in the first paragraph they reiterate that the results were indicative of an improving economy and one on the road to recovery. In the second sentence they say:
PN2948
The data on business conditions and confidence is resoundingly positive, which is emphasised by the return of the index on investment to a positive level after the continually unsatisfactory levels that have been recorded since the rate of interest began to climb.
PN2949
Then in the second sentence of the next paragraph:
PN2950
The data on business expectations for the national economy improved, with business expecting the economy to expand and, importantly, for improvements to be registered in employment and investment figures.
PN2951
Over the page, under the heading Climate for Investment, they say:
PN2952
The climate for investment was seen to be improving during the survey period despite the widespread anticipation of increases in interest rates over the next year and this improvement was also expected to continue over the near term, since most businesses expected the rise in rates to be small.
PN2953
There is then some further material regarding various elements, if you like, of the economy but I want to go, if I can, to page 6, which is a section where respondents deal with circumstances in their own business and they say, at the top of the page, under Full-Time Employees:
PN2954
The latest survey data indicate that there will be an improvement in labour market conditions, with the index on the expected number of full-time employees increasing to 54.7 from the 50.9 recorded in the previous survey. The latest reading of the index on full-time employees was also up on the 44.7 recorded in the corresponding quarter of last year.
PN2955
And they go on to say in their summing up:
PN2956
Australian business conditions have now begun to improve and, although there are inevitably still some hurdles that must be faced, the likelihood is that there is now a platform from which economic growth can begin to return to the strong rates of growth witnessed in the recent past.
PN2957
COMMISSIONER LEWIN: Mr Watson, I am sorry. Can I just interrupt you. On page 7, that must be an error at the bottom of the top constraints on investment, mustn't it? The bracket figures, presumably, are 2001.
PN2958
MR WATSON: Indeed, indeed.
PN2959
COMMISSIONER LEWIN: I don't know. Maybe ACCI can confirm that but that - - -
PN2960
MR WATSON: Yes, you would think so. In relation to that, I would actually - we note that wage costs has dropped - I mean, it is still in the top 10. We don't pretend it is not. But wage costs has dropped below the availability of suitably qualified employees as one of the top 10 constraints. Can I take the Commission to two tables - sorry four. Table 1 on page 10.
[3.21pm]
PN2961
The Commission will see there in overall business conditions, the very significant drop in respondents expecting poor or very poor, and the quite substantial increases in good and very good. And over on page 12, expected growth in output and business investment tables, again the very strong increase in the somewhat higher categories appeared with the very noticeable drop in the somewhat lower category. And then finally table 21, which was referred to earlier regarding expectations of full-time employees.
PN2962
Again the Commission will see strong growth in somewhat higher, about the same as grown, and significant decrease in somewhat lower. Now, in his submissions, Dr Kates asked the Commission - in an endeavour to discourage the notion of growth figures, Dr Kates asked the Commission to look at levels, not growth. That submission, in effect, is made for the first time at paragraph 12.04 of transcript. We say a few things about that.
PN2963
Firstly, we note that last year all they wanted to talk about was the negative quarter of growth that had preceded the case, and they were not interested in levels at all. Secondly, we note that in the tables that Dr Kates provides to the Commission, every one of the graphical representations, I think bar one, is actually about growth rates, not about levels. And thirdly, if we are going to talk about levels, well then let us talk about a few of them.
PN2964
I mean, I say at the outset, there is an extent to which this is a fairly meaningless discussion, but at the invitation of Dr Kates let us talk about them. GDP is at its highest ever recorded level. Total employment is at its highest ever level. Productivity expressed as GDP per hour worked is at its highest ever level. Inflation is at its second-lowest level since March 2000. Now, I will come back to that example. Interest rates, dare we say the obsession of the ACCI, are at their lowest level as the Treasurer is fond of reminding us, since the moon landing - the first moon landing, I should say.
PN2965
Now, the inflation suggestion is a good example of what we say is wrong with the approach of focussing on levels, because what it does is it ignores things such as the GST impact and the Olympics impact. You had a situation where all sorts of economic factors were impacted on by those two events, and so you had artificial peaks and then dramatic troughs later. So to then go back and say, well, as we climb out we have not got up to the artificial peak is, in our respectful submission, a completely absurd proposition.
PN2966
And that is, we say, particularly so in relation to the construction sector and the data referred to there, and to an extent also we say in relation to exports, which again we are in a situation where for perhaps slightly different reasons we are coming from a very high base or - yes, a high base, I suppose - in relation to that figure. Now, while we are on the issue, though, of levels, can I take the Bench to table 5 of ACCI4, and if the Commission could also turn up at the same time ACCI6.
PN2967
Table 5 commences on page 9. I actually want to go to the figures - or the graphical representation - on page 10. Now, the thing that absolutely stands out from that representation is that in every instance there the end figure for actual investment is significantly higher than the first estimate figure, and Dr Kates himself drew attention to this in tendering ACCI6 where he referred to the realisation rates.
PN2968
Now, in fact can we just note that the realisation ratios on the front of ACCI6, at least in relation to estimate 1 and we think in relation in fact to all but estimate 7, are incorrect and are not reflective when one goes to the second page of ACCI6. They are small differences, but in every instance they are wrong. What the second page, the actual ABS document shows, is that on average for the last five years you would expect a 33 per cent increase in the level from estimate 1 to the final actual. And what they also show is that the lowest in the last three financial years, and indeed, it must be for the last five financial years given that the five-year average is 1.33, is a 19 per cent increase in 1998/99.
PN2969
Now, we actually did a bit of checking. There has never been a circumstance where the actual figure in the whole of this ABS series, there has never been a circumstance where the actual figure was lower than the first estimate. It sort of makes sense. People lock in investment decisions on a lead time, and obviously when you ask them 12 months in advance are they going to invest, they only say yes if they are reasonable certain and they have got it locked in, and then as you go through the year people who were thinking about it change to be more certain, and people who were reasonably certain change to be absolutely certain, and so the numbers go up.
PN2970
But if you look at the estimate for 2002/3, and you apply the 33 per cent average increase, you end up with a level of capital expenditure which is off the chart. Fifty-two and a half billion dollars. Even if you only use about 20 per cent, that is around about the 1998/9 figure, you end up with about $48 billion, still the highest level there. And so in our submission what table 5 shows is what we seek, and that is, that any moderation that is likely in the growth in housing and consumption, is more than likely, in terms of GDP figures, to be compensated for what appears likely to be a significant growth in business investment. And particularly in machinery and equipment. The next broad point we would make regarding the ACCIs submissions is that they show, as we have suggested before, an obsession with interest rates. And, in respect of that, we say simply that for much of their submission, we thought they were in the wrong place, and we were tempted to give them a map of Sydney so they could find the Reserve Bank.
[3.30pm]
PN2971
But, in respect of their analysis on interest rates, can we make the following observations. Essentially it is our submission that that analysis seems to be that every bad thing will have been preceded at some stage or other by an interest rate rise, and that implies, ipso facto, causation. And they make this point in relation to their business barometer, and that is at paragraph 12.12 to 12.14. They make it again in respect of private sector investment at 13.06. They make it again in respect of the labour market at 13.22. And they make it again as a general indicator of, if you like, economic well-being, at 15.55.
PN2972
Can we deal firstly with the business barometer, and that is in ACCI 4. And it is the first, in my version of it, the first diagram after the blue tag. Now, the submission was put that you could track the business barometer, and where you had peaks followed by troughs you could invariably find that the Reserve Bank was lifting interest rates, and that was an indicator of what was going on therefore in the economy. Well, whatever the relationship between the business barometer and interest rates, can we say this? There is no relationship between the peaks in the business barometer, and indeed the troughs, and growth figures.
PN2973
And can I illustrate this by reference to a couple of figures? In March 1991, or thereabouts, the very bottom trough there, in the recent decade, growth was 3.9 per cent. GDP growth 3.9. Then you go to March '94, which is that highest of peaks. Growth was 4.2. Then if you go down to the second of the troughs, which is around December '98, growth was 5.4. And then if you go to the next of the peaks, March 2000, growth was 4.2. So, in our submission, very little weight should be placed on movements in the business barometer as indicators of growth in the economy. In relation to the submission so far as - - -
PN2974
JUSTICE GIUDICE: Just remind me, Mr Watson, is the business barometer based on the survey of confidence?
PN2975
MR WATSON: Yes. In part. It is based on three of them.
PN2976
JUSTICE GIUDICE: Yes.
PN2977
MR WATSON: And it is, as I understand it, it is based on a sort of a relatively crude average of the index, whereby you, in effect, double the positive responses, add that to the no change responses, and then, that gives you an index. And you sort of average that across all of the questions and all of the surveys. I am not sure what that shows, but that is what it is. In relation to the labour market impact, the submission was made that the labour market impact in relation to Reserve Bank rates was within a quarter.
PN2978
In our submission that is not borne out by the actual situation. When one goes to the employment data around '94 and '95, and this is at table 11, page 21, the Reserve Bank actually raised rates three times in 1994. August '94, .75. October '94, 1.0. And December '94, 1.0. So quite substantial rises, and in pretty quick succession. You will see that from table 11 on page 21 an adverse impact on employment is - on employment growth is not detectable, until one gets to the September quarter of 1995.
PN2979
And it is still a positive growth figure. It is just that you don't see any drop off in the trend. So the suggestion that somehow there were other - there is this immediate reaction and response of employment to interest rates is just not borne out by the history. Can I turn to deal with the submissions of the ACCI on productivity and the labour market? We note in relation to this, firstly, that last year the submissions of the ACCI were that they wanted all safety net wage increases linked to productivity.
PN2980
This year however, because productivity is high, it appears that that is not good enough, and that productivity that we have is, in their terms, spurious. Productivity is output per hour worked. And what that means is that you can get increased productivity where you have more produced for the same number of hours worked, or where you have the same produced for less numbers of hours worked. And there is nothing particularly magical about those options. They are inherent in the way productivity is calculated.
PN2981
And last year, in fact, what happened is more was produced for less hours. In our submission, people worked harder. Now, the fall in hours might be, and we would say is a concern in relation to what happened in the labour market last year. But to label productivity as spurious because more is produced from less hours is, in our submission, a nonsense. The productivity increase was real, it is at record levels, and Australian workers worked harder to get it that way. As the Treasurer pointed out in some recent comments, Australian business has taken the recent increases in productivity by way of increases in profits, rather than by way of increases in employment. We should not be held to account for that. The businesses who have taken increases in profits are no doubt doing well, and smiling because of it. But low paid workers should not be made to pay for that.
PN2982
In relation to the fall in hours worked so far as the labour market is concerned, what does the ACCI case amount to? Well, it amount to this. It amounts to the fact that there was a reduction last year in full-time employment, and a substitution of part-time employment. As they concede in their submissions, an outcome of increased flexibility in the labour market. Well, what is important, though, is what we will see over the next few months. And, in our submission, and indeed, in their own survey, the suggestion is that what we will see over the next few months is an increase in employment generally, with an increase in full-time employment as the economy generally picks up.
[3.39pm]
PN2983
Can I just make a couple of brief comments about the paper, which was ACCI7? At page 11 there is a table dealing with changes in the industrial composition of employment. Now, much has been made of award dependent sectors and how they have performed, particularly by the Commonwealth, but a little by the ACCI. We note that in this paper, accommodation, cafes and restaurants, there is a decline in full-time and a decline overall. But then, look at the comparatively strong performance of retail trade. Look also at health and community services, another high award dependence area. And look at personal and other services.
PN2984
All of those areas exhibiting a quite strong growth overall, and quite strong growth in full-time employment. Next, can I take the Commission to some portions which were not read by Dr Kates. At the foot of page 14. For the more recent period, this is a consideration of accord versus safety net, so that the more recent period is the safety net period. The contrast between what has happened to those at the minimum, and those on the 10th percentile might also imply that the so-called bite of the minimum wage, at least for full-time employees, may not be as pronounced as the Commonwealth has argued in recent years. And over the page, on page 15, there is a sentence in that last paragraph, or a few sentences:
PN2985
In 1983 a full-time non-managerial employee on the 90th percentile of the earnings distribution earned twice that of the person on the 10th percentile. By 2000 that had blown out to around two and a half times as much. Workers at the bottom end of the earnings distribution contributed more than others to the substantial decline in real unit labour costs under the period of the accord, and have helped to deliver the productivity gains which have underpinned their relatively modest gains in real earnings under the Workplace Relations Act.
PN2986
And they go on to say:
PN2987
It is difficult to see how a renewed erosion in those earnings, such as suggested by the self-styled five economists, would represent anything other than a low road solution to lowering unemployment.
PN2988
On inflation, the ACCI talked up concerns, but at paragraph 517 of the transcript, they let the cat out of the bag. Let the cat out of the bag on inflation. They say that there is good reason to believe that in the next quarter inflation will drop. And that is referred to later, although perhaps a little bit more circumspectly, at 15.52, when Dr Kates said that they hoped, and partially expected, that inflation would fall. The Reserve Bank of Australia, whose job it is to worry about monetary policy and who, in relation to that task have set targets in relation to inflation, said in their February statement that the increase in inflation was largely a result of either one-off factors, or some margin building by retailers, ie, business taking profits.
PN2989
Now, company profits were at 6.6 per cent in the December quarter. And wage costs were at 3.4 per cent. As we have drawn attention to in our original submissions, the profit share is close to historic highs. So, in that context, for the ACCI to come along to these proceedings and say, "Inflation is high; workers can't get a decent increase" in our submission is simply a case of the equivalent of the two year old not sharing. They have had their share. Now they don't want us to have ours.
PN2990
In relation to that, we also submit, contrary to what was put by the ACCI, that the decision of last year would have had a negligible impact on inflation. That was what the Commission itself held. And it simply, in our submission, beggars belief to suggest that last year's decision had anything other that a negligible impact on overall inflation figures. When one looks at the overall contribution to aggregate wages costs, when one factors in that any impact on inflation will have been about half of that. And when one factors in that any improvement in productivity will have reduced that even further, one can see that one is talking about numbers, that in the context of a number that is 3.1 are simply not really even there.
PN2991
Now, in relation to our claim, we say that Commonwealth2, and I will come back to this in detail later, but Commonwealth2 makes it clear that the impact of our claim on inflation would be an additional .1 per cent. Exactly what we have said in these proceedings, in our original submissions, that which was disavowed vehemently by the Commonwealth, but that which becomes evident when you use their own modelling of our claim compared to last year's decision. Now, in relation to the issue of productivity offsets, we note the concession made by Dr Kates at paragraph 1355, that there may be offsetting productivity in some workplaces.
PN2992
Now, he says the problem is that you can't be sure that there will be offset in productivity everywhere. But he makes, in our submission, an important concession, that there may be offsetting productivity in some workplaces. So the overall impact of our claim on inflation, once that is taken into account, falls below .1 per cent. In our submission, when viewed in that context, and viewed in the context of the history of the Reserve Bank in relation to these matters, it is exceedingly unlikely that there will be an over-reaction from the Reserve Bank to the awarding of our claim.
[3.48pm]
PN2993
That is the economic material on which the ACCI relied. Can I deal briefly with their economic effects material. The first is - the first point we make is that they still refuse to provide the Commission with a macro economic costing. They provide a sectoral costing albeit a relatively big sector but they refuse to provide the Commission with a macro economic costing. If the Commission wants to know how much this claim will add to wage costs in the economy then it needs to look at the ACTU submission or the Commonwealth submission because they are the only two submissions that make a genuine attempt to quantify.
PN2994
Now, in respect of their .75 estimate for the direct impact, if I can describe it, in the private sector can we make the following observations. Firstly, it appears implicit in Dr Kates' - what can be described as Dr Kates' supplementary justification for that number - that he accepts the Commonwealth's .59 per cent aggregate economy wide figure. On a couple of occasions he said to the Commission when you divide .5 - when you scale .59 up for the fact that you don't have the public sector in and you turn it into a private sector figure you get around .8 which is what they say.
PN2995
Well, implicitly he accepts the .59 well then we are in the same ball park because as we said in our submissions we say .5, they say .59. Based on the Commission's previous decisions in this matter .59 has to be seen as potential rather than likely actual impact and we are talking the same game. In relation to the .75 figure we say the .75 itself is an over estimate for two reasons. Firstly, because the ABS average weekly earnings data is adjusted only for 3 per cent and not a higher figure. Secondly, because there is no adjustment of the .75 figure for safety net flow.
PN2996
Now can I then, having dealt with that figure, just go to the moving feast of the other figures and this is in ACCI11. At the outset can we observe that this aspect of the claim, or this aspect of their submissions, they started out by alleging a .6 or thereabouts in direct impact and they have been scaling it back ever since and they are now down to about .27. The Commission perhaps only needs to adjourn the proceedings for a few weeks and it will be back down to almost nothing. And the reason they keep scaling it back is because the assumptions on which they base this aspect of their costing have been rubbish from start to finish.
PN2997
When one goes to ACCI11 one will see that they have continued to persist and failed to answer our criticism of their categorisation of the proportion of over-award and non-award employees from the ABS data. Those categories, over-award employees and non-award employees, are simply not consistent with the ABSs categorisation. They involve a vast overstatement of the likely proportions of those two categories because they conflate registered and unregistered individual agreements with over-award employees, and they conflate registered and unregistered collective agreements with non-award employees. It is a nonsense.
PN2998
Next, they go to the proportion of the employees per category receiving increases directly. They have accepted in this most recent version that their original proportions must have been absolute upper limits and so they have plucked the figure from the air of 50 per cent and stuck in the table. But there is no basis - no basis at all for assuming the voracity of that 50 per cent figure. Indeed, as we noted, and as the Commonwealth have, in effect, now confirmed, when one looks at the corresponding sort of argument from the Commonwealth about first round agreements, their figure is 40 per cent agreements, ie, in a sense a defacto or a proxy for employers, and when you get to employee numbers it drops to 15 per cent.
PN2999
So you can have a very significant disparity between proportions of agreements for employers and proportions of employees. To pluck a figure of 50 per cent in itself probably involves a massive overstatement of that effect. The next point we make is that it is clear from the text of the survey that what we are talking about is voluntary flow-on, not any suggestion of compulsion in accordance with the principles. The wording of the relevant questions is even though you were not obliged to, did you in any event flow it on. The pre-supposition is that you were not obliged to.
PN3000
In our submission, the Commission ought properly regard that as an indirect effect. Can we make some additional criticisms regarding the survey. We repeat our earlier criticisms. Can we, as a result of the submissions advance by the ACCI, make these additional criticisms. We note that the survey, on our adding of it, requires about 49 responses. People were told to fill it out in five minutes. That is about six seconds per response. At paragraph 1631 Dr Kates justifies that by reference to his cigarette test, that you should be able to complete the survey in the time it takes you to finish a cigarette. And at 1918, in response to a question from Commissioner Lewin, he indicates that you never ask a question that people have to get up and check anything for.
PN3001
But what this survey is on about is an off the top of the head, stab in the dark, from 350 unrepresentative businesses. And in that regard we note Dr Kates's suggestion that there is some 350,000 who are affiliated with the ACCI. The ACCI, in our submission, has completely failed to address the issue of possible non-response bias. They deal with the suggestion of bias, I think, at 1569 and 1570. But it seems, in our respectful submission, that they have misunderstood the proposition about non-response bias. That is, the likelihood that if you did not fill out the survey at all you may not have been concerned about the safety net, or that if you did fill out the survey but you did not respond to the safety net questions you may not have been concerned about the impact on the business. And there very significant numbers of people in the first category, and within the context of a very small sample size, there is about 6 per cent in the second category. Can I take the Commission to ACCI8 which is the document which was tendered in relation to the survey, and I want to go to a page which is numbered page 7, but it is a long way into the document.
[3.57pm]
PN3002
It is headed, "Did the increases in the safety net have any affect on employment in your firm." And it is a breakdown by industry. Now, the Commission will see that, for example, in the manufacturing column:
PN3003
No effect on employment, 90.2. Number of employees was lower than it otherwise would have been at 9.8.
PN3004
That seems, when one looks at it, to be relatively high number. But it when you go back and actually check, two pages back, on the number of firms you were talking about, that you realise that what that means is that four manufacturing firms responded to that question. And then when you go to Services to Business and the figure is 2.1 and you go to the number of firms in the Services to Business category you realise that that 2.1 per cent means one firm respondent in that way.
PN3005
Once you breakdown a sample size this small into this many cells you start getting incredibly small numbers in the cells. But the weighting process then scales that up as somehow indicative or representative of an entire section of industry. Those four employers who responded for manufacturing get scaled up to 9.8 per cent of the entire manufacturing industry in the country. That one firm in Services to Business gets scaled up to 2.1 per cent of the entirety of the Services to Business sector of the Australian economy. That is the statistically meaningless result of breaking down such a small sample size into so many cells.
PN3006
Now, finally, can we just observe while we are in this document that there can be very little weight placed on the outcome of the survey, given what appears to be a significant inconsistency between the reporting of the results. Can I take the Commission from where I have been through a few pages to page 10. It is a survey on the safety net, a comparison of the results. It is headed tag XX3. The Commission will see a series of tables, unweighted results, weighted by size, weighted by industry, weighted for survey results. I just ask the Commission to hold that place and go back to what was tag 6 of the original ACCI submissions. It is behind the first blue divider.
PN3007
JUSTICE GIUDICE: Has it got a page number?
PN3008
MR WATSON: It is 239. Now, if you hold them open:
PN3009
As a direct result of the safety net decision did any of your employees receive an increase in wages.
PN3010
In their first tag 6:
PN3011
Yes, 42.2. No, 57.8.
PN3012
In tag XX3, weighted full survey results:
PN3013
Yes, 47 per cent, No, 52 per cent.
PN3014
And so it goes. Flow-on to over-award employees. In tag 6 it says 30.4, 69.6. In tag XX3, 26.7, 73.3. And then of particular significance the question about employment:
PN3015
Employment in your firm -
PN3016
in the original version published in tag 6 -
PN3017
number of employees was lower than it otherwise would have, been 8.1.
PN3018
By the time we get to tag XX3 that has dropped to 6.6. So one can only begin to wonder at what is going on with the weighting. But it does not appear to produce consistent blocks. In relation to the submission advanced by the ACCI regarding the superannuation guarantee levy, in essence, it appears to us that submission is that employers have had an increase in their - or will have an increase in their labour costs as a result of the further increase in that levy, and therefore employees should not be permitted an additional wage increase because that will further add to wage costs.
PN3019
In this respect we note that the employers and the Commonwealth seem to have a new-found interest in the taxation system, and events there. And we just observe in relation to this issue, that the recent decrease in company tax was of the order of 4 per cent. So that employers have had the benefit of that, and that is a matter which ought to be taken into account when one is considering the increase in costs which will result from the superannuation guarantee levy. Can I turn now to the AIG. The first thing I want to do in relation to the AIG is tender two copies of media releases. They are stapled together. The later one is first.
[4.06pm]
PN3020
MR WATSON: If we can go to the first of them first, but it is the second document, 22 March 2002. This is the release which accompanied the release of the most recent survey of Australian manufacturing. The AIG has included one from February. They have not included the March data, and provided an update to the Commission in relation to that March data. Again, we put this in as an indication of the contrast between the assessment of the economy, which these parties make outside the case, compared to that which they make inside it. And - it starts, the 27 March release:
PN3021
Manufacturing performance so far very good. While Canberra has adopted a cautious so far so good attitude to Australia's economic performance in 2002, the latest AI Group Price Waterhouse Coopers survey shows that this is largely because the overall performance of the manufacturing is so far very good. The survey of Australian manufacturing for the March quarter shows manufacturing activity has reached an eight year cyclical peak, and was a key factor in contributing to Australia's solid growth in defiance of the global downturn.
PN3022
Then, skipping the next paragraph:
PN3023
The 12 month outlook also points to a firmer production activity throughout 2002, reflecting improved business confidence.
PN3024
And then again, two paragraphs down:
PN3025
The good news is that these gains are beginning to be translated into jobs, with one in four companies reporting job increases.
PN3026
And then there is a reference to manufacturing investment. Over on the next media release, that which deals - I am sorry. I should go over to the back page. I am sorry. And there, under the heading:
PN3027
A further improvement is expected in the June quarter 2002.
PN3028
And the Commission will see the things there referred to. They are all good things. Then the 2 April 2002 submission, press release:
PN3029
The Australia PMI for March adds weight to the good performance of industry, highlighted in the findings of last week's AI Group Price Waterhouse Coopers survey of Australian manufacturing.
PN3030
There is a reference to how much the index grew. And then, the third paragraph:
PN3031
Growth among Australian manufacturers has now been maintained for eight consecutive months. However, future gains will be dependent on demand being sustained at current levels.
PN3032
And then, in the next paragraph, there are some key findings. And following that, Heather Ridout, Deputy Chief Executive of the Australian Industry Group said:
PN3033
The March index shows that manufacturers have weathered the worst of the global slowdown, with activity boosted by strong union and a build up in stock levels.
PN3034
And I don't need to take the Commission to anything further there. And in essence, the AIG submission boiled down to an attempt, in our respectful submission, to scare the Commission from awarding a decent increase by repeated reference to the uncertainties in housing and consumption. As we have indicated in our reply to the ACCI, and indeed, as their own material indicated, if housing and consumption moderation is replaced by a pick up in investment, and/or exports, and in relation to that we say the pick up in investment looks very likely to occur, and a pick up in exports will happen if the international situation is, as it appears to be, bottoming out, then the contribution to growth of those sectors will compensate for any moderation in growth in the others.
PN3035
We note that in relation to the average increase the AIG now accepts, even using its very, we would say crude, unweighted average of the average increase in the retail sector rates, that that average increase was less than 3 per cent. At that level, the necessary conclusion is that it was below the increase received by the rest of the community, and below inflation levels. So even, despite having been quite critical of our approach in their original submissions, even on their own final submissions, the point we made about average increase, they accept.
PN3036
I am about the move to the tax transfer system and the AIGs submissions in that regard. It is a reasonably significant chunk, and I won't complete it in the three minutes before 4.15, nor, I am sad to say, will I complete my reply. I suspect I have still got - I have still got the Commonwealth to do, after I have done the AIG on tax transfer. I suspect I would be talking about an hour, if I were to continue.
PN3037
JUSTICE GIUDICE: Yes. Well, I don't think we will attempt to complete your submission tonight, Mr Watson. I take it that is a convenient time?
PN3038
MR WATSON: Yes, it is.
PN3039
JUSTICE GIUDICE: Good. We will adjourn until 10 o'clock in the morning.
ADJOURNED UNTIL WEDNESDAY, 10 APRIL 2002 [4.14pm]
INDEX
LIST OF WITNESSES, EXHIBITS AND MFIs |
EXHIBIT #RMI2 COPY FINAL NATIONAL WAGE CASE SURVEY QUESTIONNAIRE PN2615
EXHIBIT #RCA1 WRITTEN SUBMISSION OF MR LAW PN2655
EXHIBIT #COMMONWEALTH3 SUBMISSION OF 01/03/2002 PN2659
EXHIBIT #COMMONWEALTH4 APPENDIXES OF 01/03/2002 PN2659
EXHIBIT #COMMONWEALTH5 REPLY SUBMISSION OF 28/03/2002 PN2659
EXHIBIT #COMMONWEALTH6 APPENDIXES OF 28/03/2002 PN2659
EXHIBIT #COMMONWEALTH7 UPDATE OF TABLE USING ABS DATA PN2676
EXHIBIT #COMMONWEALTH8 E-MAIL DATED 8 APRIL PN2739
EXHIBIT #ACTU13 PRESS RELEASE AND SURVEY OF INVESTOR CONFIDENCE PN2939
EXHIBIT #ACTU14 MEDIA RELEASES PN3020
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