Hockey's purse can perform industrial surgery

Joe Hockey has the chance to weed out Australia's bad practices and increase productivity without changing legislation. If requirements for assistance are clear, Toyota and others will adapt.

Joe Hockey has an opportunity rarely presented to an Australian federal treasurer. He has the chance to make significant changes to Australian industrial relations and, in the process, boost national productivity and employment.

Last week Hockey boldly (and correctly) declared that the government should not be subsidising “bad work practices”.

But exactly what does Hockey mean by “bad work practices” given the Coalition has excluded from the equation any widespread changes to the industrial relations act outside commercial building?

Joe, let me help you deliver clarity. With the help of one or two CEOs, who are sadly saddled with bad agreements, I have prepared three simple measures that you should require in any workplace agreement before the government will consider help.

First, while there should be lots of consultation between workers and managers in enterprise agreements there must be no “Consultative Committee” that has decision making teeth. Such committees are nearly always run by unions and are usually used to hinder productivity.

Second, there must be no restrictions whatsoever on the use of contractors and subcontractors, including small independent contractors. Management should be able to use any subcontractors it choses if it makes sense. Restrictions on managements' subcontracting should have nothing to do with enterprise agreements.

Third, managers must have sole authority over rosters, the staggering of holidays, rostered days off and shifts worked (incredibly some managers have agreed to have all rostered days off on the same day so the plant must shut).

Remember the legal shift allowance requirements etc. and pay rates are not challenged by this. The better productivity in some cases may allow higher pay.

What is staggering is that so many Australian chief executives have entered into enterprise agreements that have these provisions, which reduce productivity.

Accordingly, by eliminating three simple stipulations in significant areas of the workplace it would transform the productivity of Australian industry. Hockey cannot dictate to managers that they must agree to eliminate these arrangements but, in the case of Toyota and the automotive parts industry, the government has already guaranteed to provide substantial financial help although there is debate about the amount.

Toyota’s current work place agreements include at least some of these horror provisions. The courts have said that Toyota workers must be given the chance to vote as to whether they are prepared to change their agreement and then what changes should be made.

To stop all the union fist thumping Hockey needs to come out and clearly say what, as a bare minimum, must be banned from workplace agreements signed by those companies seeking government aid.

That makes it straight forward for Toyota to go to its worker and managers and say unless the three banned work practices are removed from their agreements then the plants will shut. Workers then are given a clear and unambiguous choice.

All of Toyota’s parts suppliers that require government assistance would of course also need to change their agreements and would be given the same choice. Hockey would therefore be using the government purse (which he is committed to do) to transform the productivity of large parts of the nation, without making changes to the industrial relations act.

Some union officials would prefer the workers lose their jobs rather than lose union power. Older workers may prefer the plants shut because they want their retrenchment packages. But there are a lot of people who want work. 

Many people say the motor industry has no hope because of lack of scale but Toyota has a very modern plant in Australia and now the Australian dollar is below 80 US cents and perhaps headed below 70 cents in the long term. The position of the Australian motor industry is not hopeless.

The parts makers have the opportunity to completely revamp and diversify their businesses.

But they need to shed bad agreements and being forced to make the “three Hockey changes” will be of an enormous assistance.

And suddenly shareholders in a wider range of industries have a simple way of determining whether their CEO is up to it – ‘does their enterprise agreement contain any of the Hockey 'silly clauses'? And because the three proposed bans are simple, easy to understand and present no conflict with the legislation there can be no excuses – CEOs that sign such agreements should not be on high pay rates. 

The increase in Australian productivity will be staggering because these clauses are widespread. Indeed one CEO told me he does not think there are many major companies in Australia that do not have at least one of the clauses in their agreement.

Joe, take the next step. I think if you do make it clear what must be taken out of agreements then Toyota will be able to make it just as clear to its workers. And once the ball starts rolling…

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles