Lana Roelandts ECON 243, 2011 220032777 External

ECON 243 ASSIGNMENT 2011 LANA ROELANDTS WORD COUNT: 3174

Lana Roelandts ECON 243, 2011 220032777 External Compare the Howard Governments WorkChoices legislation for Australias industrial relations with the Fair Work Australia legislation of the Rudd/Gillard Government. In your answer show that you understand the significance of the differences. The Howard governments amendment to the Workplace Relations Act 1996, the Workplace Relations Amendment (WorkChoices) Act 2005 was a substantial change to Australian industrial relations structure and policy. The WorkChoices legislation made significant alterations to the previous Workplace Relations Act. The most notable alterations were the reduction in the number of awards, the introduction of Australian Workplace Agreements as a primary determinant of wages and conditions, the elimination of the Australian Industrial Relations Commissions role in setting wages and conditions for employees, abolishment of the no-disadvantage test, and the abolishment of unfair dismissal laws.

Under the Workplace Relations Act 1996 20 matters regarding wages and hours were included in awards for employees. However, under the WorkChoices 2005 legislation the number of matters that could be included in an award was reduced significantly, from 20 to just 5. This meant that employees were required to negotiate all other working conditions through enterprise bargaining negotiations in their Workplace Agreements. Enterprise bargaining has slowly become more prevalent in Australian Industrial Relations over the last twenty years. It was brought to the forefront in the Industrial Relations Reform Act 1993, however the WorkChoices legislation made enterprise bargaining the primary determinant of wages and conditions. This meant individuals would be required to negotiate their terms of employment. AWAs were seen as detrimental industrial relations legislation, as if an individual refused to sign their workplace agreement, then employers could simply terminate employment within the firm.

Lana Roelandts ECON 243, 2011 220032777 External The negotiation task was made even more difficult through the changes to one of the key industrial relations regulatory bodies, the Australian Industrial Relations Commission. WorkChoices effectively eliminated the AIRC-and state industrial tribunals-from wage-fixing process, and replaced the award system as a safety net with the Australian Pay and Conditions Standard. (Sappey et al, 2009, p.224) This was a significant legislative and structural change, as the key role of the AIRC set minimum wages and conditions, and conciliation and arbitration duties in settling industrial disputes. The Howard government introduced the Australian Fair Pay Commission to determine minimum wages and conditions for employees, instead of the AIRC, and the arbitration and conciliation functions of the AIRC were limited.

The abolishment of the no-disadvantage test became a crucial element of WorkChoices, as its abolishment created the possibility of loss of award conditions and standards under AWAs. It was the no-disadvantage test that retained the relevant award as a persons safety net. Before the commission could approve a collective agreement, or before the Employment Advocate could approve an AWA, they had to satisfy themselves the deal would leave the workers at no overall disadvantage compared with the provisions of their award... Now, however, the no-disadvantage test is to be replaced by an Australian fair pay and conditions standard. That is the collective agreement or AWA cant provide for pay rates lower than those set by the Fair Pay Commission or conditions of leave and standard hours worse than those specified in the new legislation. (Gittins, 2005) After the Howard government lost power in November 2007, the then Rudd Labour government set out to remove some of the injustices put in place by the WorkChoices legislation. The first important thing was to abolish the Workplace Agreements and revert to a system of awards as the safety net for workers. This was an attempt to make Australian industrial relations more equitable for more

Lana Roelandts ECON 243, 2011 220032777 External Australian workers.

Under the Fair Work Australia legislation, the number of allowable matters was increased to 20 allowable matters to be written into every employment control for minimum conditions. ...the National Employment Standards (NES) form part of the safety net, with ten minimum employee entitlements covering all employees engaged by a constitutional corporation, that cannot be bargained away with enterprise agreements (with a further ten minimum conditions for employees covered by new, modern awards). (Sappey et al, 2009, p.412)

Perhaps the most notable reform in industrial relations from WorkChoices to the Fair Work Australia (FWA) legislation was the introduction of Fair Work Australia, which is a tribunal which was put in place to replace the Australian Fair Pay Commission and the AIRC. In other words, it was put in place to be a federal tribunal that oversees the Australian workforce, and carries out functions such as setting wages and conditions, dispute resolution process, industrial action complaints and processes in dealing with industrial action, and enterprise bargaining functions. FWA has become the national regulator of industrial relations functions.

Another notable reform was the inclusion of small businesses in unfair dismissal claims under the FWA legislation, whereas small businesses were exempt from unfair dismissal claims under WorkChoices.

Reforms put in place by the Rudd/Gillard Labor government under the FWA legislation, although not completely abolishing all aspects of the WorkChoices legislation, it did however, correct some great injustices and restore a degree of equity between employers and employees in the workplace.

Lana Roelandts ECON 243, 2011 220032777 External Discuss the importance of national competition policy since 1995 and the role of the Australian Competition and Consumer Commission. Prior to 1995, competition laws and policy in Australia were administered differently than they are now. Before 1995, competition policy was regulated by the Trade Practices Commission and the Prices Surveillance Authority. The two pieces of legislation enforcing the rights of these regulatory bodies were the Trade Practices Act 1974 and the Prices Surveillance Act 1983. It is the merger of these two regulatory bodies, which occurred in 1995, that has given shape to the current national competition policy regulation in Australia.

In 1992 the Commonwealth Government set up a committee to inquire into a national competition policy... The recommendations of the committee, contained in the Hilmer Report, were accepted by COAG (Council of Australian Governments) in February 1994. (Lewis et al, 2010, p.74) The Hilmer Report stated the need for a broad approach to regulation. (Lewis et al, 2010, p.74) It also recognised that Australia is a single integrated market with state and territory boundaries diminishing in importance and that many trade restrictions had been removed or diminished making the traded goods sector more competitive. (Lewis et al, 2010, p.74) Based on the Hilmer Report, the federal parliament passed the Competition Policy Reform Act 1995. The CPRA is an amendment to the TPA and includes within it the Prices Surveillance Act. (Lewis et al, 2010, p.74) This legislative amendment was crucial because the Trade Practices Act (TPA) has been one of the key pieces of legislation regarding Australian competition policy. The TPA is concerned with the behaviour of firms rather than prohibiting certain industry structures. Thus, a monopoly is not actually prohibited; rather, it is the uses of monopoly power to, say, fix high prices, that is prohibited. (Lewis et al, 2010, p.71) The TPA legislations functions were to deal with elements such as the misuse of market power, mergers and acquisitions, unconscionable conduct, anti-competitive

Lana Roelandts ECON 243, 2011 220032777 External agreements, as well as many other areas. The amalgamation of the TPA with the Prices Surveillance Act (PSA) under the CPRA, included the ability to investigate price rises, to monitor the prices, profits and costs of firms, and to hold inquiries regarding the supply of goods and services to the functions the Act was to oversee. It was agreed, that with the amalgamation of the TPA and PSA, that the regulatory bodies entrusted in distributing the legislation should also be amalgamated, in order to create a nationwide competition policy regulator. This is how the Australian Competition and Consumer Commission (ACCC) came into existence in 1995.

The role of the ACCC is defined on its website as The ACCC promotes competition and fair trade in the market place to benefit consumers, business and the community. It also regulates national infrastructure industries. Its primary responsibility is to ensure that individuals and businesses comply with the Commonwealth's competition, fair trading and consumer protection laws. The ACCC website also states The Australian Competition and Consumer Commission is an independent statutory authority. It was formed in 1995 to administer the Trade Practices Act 1974 (renamed the Competition and Consumer Act 2010 on 1 January 2011) and other acts. The ACCC was formed as part of the implementation of the National Competition Policy program. (Lewis et al, 2010, p.71) A somewhat important legislative change occurred on 1st January 2011 with regards to competition policy. The Trade Practices Act 1974 was renamed as the Competition and Consumer Act 2010 (CCA). Although the content of the Trade Practices Act did not undergo severe legislative change, the change in the TPAs name must be noted when dealing with aspects of national competition policy. This move can be seen to reflect the regulatory functions of the ACCC, by specifically highlighting the nature of the legislations governance of competition and consumer welfare and policy.

Lana Roelandts ECON 243, 2011 220032777 External Exclusively, the CCA gives the ACCC the authoritative power to deal with unfair market practices, industry codes, mergers and acquisitions of companies, product safety, product labelling, price monitoring, and the regulation of industries... This is especially important, when failing to do so could disadvantage consumers and impede upon consumer welfare, and the welfare of other firms in the market. For example, collusive behaviour between market leading firms, such as price-fixing and other similar behaviours not only impact upon consumers, but they also have negative impacts on the competing firms in the market, as this behaviour has the ability to negatively impact upon efficiency. It is the ACCCs role and function to limit this kind of behaviour and make competition policy in Australia as equitable as possible, with a few exception.

Lana Roelandts ECON 243, 2011 220032777 External What was the regime of labourist-protectionism? Discuss why it was replaced by a neo-liberal globalisation policy in the 1980s. Labourist-protectionism has been in existence before the federation of Australia in 1901. However, at the start of the 20th Century, the State and Federal governments began to play a larger role and have a greater influence on the Australian economy. With regards to economic protection of emerging Australian industries, tariffs were introduced as a mechanism to encourage the purchasing of domestic products by placing a tax on imported goods. This effectively was a means of protecting domestic producers and firms, especially in emerging industries in the primary sector, such as agriculture, mining of resources etc.

An early example of a tariff legislation imposed to protect domestic firms was the Excise Tariff Act 1906. Under this legislation the Excise Tariff Act introduced tariffs for the newly emerging manufacturing industry in Australia. Under the Excise Tariff Act employers were granted tariff protection, provided that a fair and reasonable wage was paid to their workers. This stipulated that firms were eligible for protection from imports only if they met the minimum fair wage requirements set out in the Excise Tariff Act legislation.

The basic premise of labourist-protectionism was to secure the interests of the white Australian male worker. This involved securing employment/job security, wages, and ultimately quality of life for the white male worker. The way in which labourist-protectionism operated was to restrict/regulate industries in Australia in the primary sector and reduce the threat of foreign trade and investment. It was economically viable for the Australian government to engage in labouristprotectionism as Australian workers were earning high incomes due to the primary sector exports, such as wool, wheat, gold, minerals, coal, beef and iron ore.

Lana Roelandts ECON 243, 2011 220032777 External

Although protectionism was a way of providing protection to domestic producers in domestic markets from the threat of international competition, over the course of the century, the Australian government shifted away from protecting industries. As a result of tariff protection, many other sections of the economy suffered. Those industries that used Australian-made inputs had to pay higher prices due to cost inefficiencies in the production of those inputs. Industries relying on imported inputs were disadvantaged, as the tariffs placed on the imported inputs raised domestic production costs. (Lewis et al, 2010, p.26) Another economic burden of tariff protectionism is tariffs on imports raise the value of the Australian dollar, reducing incomes for exporters and making imports more expensive. (Lewis et al, 2010, p.26)

It is due to these factors that the protectionism policy in Australia was drastically reformed throughout the 1970s. It was in 1973 until there was any decisive change in public policy on tariffs. (Lewis et al, 2010, p.26) Under the Whitlam Labor Government, the government reduced all tariffs unilaterally by 25 percent. It was around this time that Australia was experiencing what is referred to as stagflation, effectively a wage/price spiral with inflation followed by high levels of unemployment due to increases in wages and the subsequent increases in living costs. There was also an increasing demand to make Australian markets more open to international competition.

Ultimately, deregulation of Australian markets was sought in an effort to make Australia more globally competitive. In other words, a neo-liberal stance was taken in a quest for global competitiveness by Australian markets. Neo-liberalism is the belief that the State should only play a minimal role, that supply and demand should determine prices of things and the State should not be regulating markets. This belief was strongly held by the Hawke Labor market, and ultimately led to the floating of the Australian Dollar on the stock exchange, which meant that fluctuations in its price

Lana Roelandts ECON 243, 2011 220032777 External were determined by the demand and supply of Australian dollars in international currency markets. (Lewis et al, 2010, p.36) This occurred in December 1983. As Australian industries became more competitive, there was also an increase in the requirement of legislation to provide protection for consumers and firms in operation, eg the Trade Practices Act 1974 (Cth).

Through the lowering of tariffs and the opening of Australias economy, Australia has, over the course of a century, slowly shifted from the labourist-protectionism past, to a more economically efficient neo-liberalist outcome, and has embraced global competition through market deregulation and a shift towards free trade, and positioned Australia in an advantageous competitive position within the global marketplace.

Lana Roelandts ECON 243, 2011 220032777 External Discuss the usefulness of the concept of path dependency demonstrating its use in explaining Australias history of institutional continuity and change. In your answer discuss three examples of how the concept can be applied.

Path dependency operates on the notion that, in order to understand current systems it is important to understand previous systems and their functions and how these systems have changed over time.

Path dependency is a useful notion for explaining Australias history of institutional continuity and change, as it specifies how the tradition of concepts and ideas that have been long withstanding can, in some cases be difficult to break away from. Economic behaviour and policy are heavily influenced by this historically-derived and existing structure of institutions and the choices they allow. (Kellett, 2011, p.4) A practical example of this is the industrial relations system in Australia. The Conciliation and Arbitration Act 1904, was the first major development of industrial relations institution in Australia, and it put in place and industrial relations structure that would remain relatively unchanged for over 50 years. This structure is that of government regulation regarding the determining of employee wages and conditions through an award system and the setting of a minimum wage standard. This function remained comparatively unchanged until the Howard governments WorkChoices legislation in 2005. Using path dependency, it can be said that the WorkChoices legislation was an inefficient and ineffective reform to the industrial relations system as, the highly centralised wage setting system that had been in place in Australia, was a long standing and effective institution at ensuring workers received a fair minimum wage, and the WorkChoices legislation shifted this institution and replaced it with a decentralised wage determination system. The Howard government failed to realise that the path dependency with regards to the previous industrial relations system was strong and much of the Australian population, particularly the working population did not want to reform this institution. This is

Lana Roelandts ECON 243, 2011 220032777 External because if institutions are successful in delivery desirable social outcomes, then there is no need to change them. WorkChoices did not deliver desirable social outcomes, therefore reverting to the previous system was necessary.

Another example of this path dependency can be seen with regards to large economic institutions. Historically, for example, the Commonwealth Bank of Australia was owned by the Commonwealth government. Historically, the Commonwealth Bank was Australias central bank, and was responsible for setting interest rates, etc, until 1960. As the Australian economy continued to flourish after the Second World War, it was seen that, in order to be more competitive within the industry it would be a suitable solution for the Commonwealth Bank to be privatised. Although the history of the Commonwealth Bank was that it was government-owned, the developments of rapid global expansion of markets was an indicator that privatisation was the suitable alternative to encourage competition, and therefore create better social outcomes for individuals through the increase in choices and the lowering of banking rates and fees.

Vertical fiscal imbalance and horizontal fiscal imbalance are examples of explaining Australias institutional history, highlighting the Australian Constitution. Vertical fiscal imbalance occurs when the Federal Government generates more tax revenue than the state governments. Historically this was not the case, as state governments traditionally had significant power over taxation and development of public infrastructure. The imbalance between States spending needs and revenue powers (known as vertical fiscal imbalance) has largely arisen from the Commonwealths takeover of income taxes in World War II and the High Courts striking down of many State taxes on the basis that they are excises (which are reserved to the Commonwealth under the Constitution). (Scherini, 2006, p.1) This shift in power enforced by the institution of the Constitution, has had a mixed reaction, however, provision of revenue to states by the federal government was undertaken

Lana Roelandts ECON 243, 2011 220032777 External as a means to better social outcomes for all Australians. The provision of state grants to state governments is an effective means of correcting vertical fiscal imbalance. These grants are generally used for the building and upkeep of public infrastructure, required to improve social outcomes for Australian citizens. Horizontal fiscal imbalance arise because there are differences between states in the costs per head of providing public services. (Lewis et al, 2010, p.48) This can be remedied by the federal government provision of required grants, based on requirement and urgency for funds.

The decision by the High Court of Australia to remove many state taxes, on the grounds of them being excises, which, under the Constitution, are reserved for the right of the Commonwealth government was very crucial as it displaced state funding, and significantly increased federal government funding. This caused a significant change to the Australian financial institutions that had previously been in place, and the concept of path dependency has allowed for this decision to be compared to the previous method of revenue raising that had been put in place.

Lana Roelandts ECON 243, 2011 220032777 External References

Sappey, R., Burgess, J., Lyons, M., Buultjens, J, 2009, Industrial Relatrions in Australia: Work and Workplaces, Pearson Australia, 2nd Ed.

Gittins, R, 2005, The end of the wage-setting world as we know it, The Sydney Morning Herald, 28 May, < http://www.smh.com.au/news/National/The-end-of-thewagesetting-world-as-we-knowit/2005/05/27/1117129901079.html?oneclick=true#>, accessed 09/09/2011

Lewis, P., Garnett, A., Treadgold, M., Hawtrey, K., 2010, The Australian Economy: Your Guide, Pearson Australia, 5th Ed.

http://www.abs.gov.au/ausstats/abs@.nsf/2f762f95845417aeca25706c00834efa/b384b643 7deeb1ceca256f4e00783f85!OpenDocument Labour Price Index: Concepts, Sources and Methods, 2004, accessed 09/09/2011 Lloyd,C., Ramsay, T. , 2009, The Transformations of Australias Labor Market Since 1983: From Social Democracy to Regulatory Capitalism?, University of New England http://www.accc.gov.au/content/index.phtml/itemId/54137 accessed, 09/09/2011 Scherini, A., 2006, Reforming Specific Purpose Payments to achieve the best outcomes for the community: A practitioners perspective, http://www.business.curtin.edu.au/files/scherini.pdf , last accessed, 09/09/2011 Kellett, J. 2011, Topic Notes, ECON243,