Industrial Relations: Lies and Intimidation
In this chapter I will present a brief overview of the economic changes and decisions that took place in Australia between the 1980s and the early 2000s and consequently helped create the landscape we found ourselves in 2006. Moreover, it will illustrate the lengths governments will go to in order to protect themselves in financially crippling situations.
The process began in the late 1970s, when the Oil Crisis rocked Australia’s economy to its core. By the mid-1980s, the dollar had collapsed, and the financial system was under extreme strain. Interest rates had shot up, exports were in decline, and the rising prices of imports had begun to affect the cost of living. In order to keep both itself and the business sector viable, the federal government needed access to cheap money in Australia.
The federal government, the state governments, major financial institutions, several corporations, and the unions sat down to find a solution that would suit all those involved.
In the end, the only solution satisfactory to everyone involved, turned out to be the expansion of the superannuation scheme. Up to this point, public sector workers, major corporations, and large companies, had all had their own, separate superannuation schemes. From now on, all private sector workers in Australia would come under a federal superannuation scheme. The publicly presented rationale for the policy change, was improving workers’ retirement outcomes – a percentage of their income would be invested , in order to ensure their future financial security in retirement.
In practice, this meant that the Federal Government would gain access to funds it could control for its own short and long term needs. The State Governments would continue to control their own public service workers’ Super Funds, while the federal Scheme would only apply to the private sector workers’ contributions.
Large corporations, in their turn, would be getting the new Super funds investing the private sector Workers’ funds into the share market, and so could support those major corporations and businesses by giving them an improved capital base to assist their operations.
As it was a decision related to industrial relations, it was necessary for the scheme to have the support of the unions. For them, the deal offered an opportunity to improve their support base – and via association, that of the labor government – by presenting the scheme as their own initiative and success. The unions having long suffered from falling membership numbers, believed the deal would boost their relevance and halt the decline in union membership.
As stated before, the Superannuation Scheme was presented to the public as a way to ensure that all working Australians have a better retirement. Yet the way in which the superannuation money would be invested, and on what grounds, was never explained, and most importantly, unlike public workers’ schemes, the private sector workers’ super funds would not be protected, which was –and has – never been publicly stated.
At no point was it explained either, that inflation was to be kept at 2-3%, and that this would erode the dollar value of the funds over the years. Nor was it ever explained that superannuation funds would be run by major finance corporations, with ex-politicians and union heavyweights – all of whom would be compensated well for their time – being appointed to the super funds boards. The money for all their salaries would of course come from fees and out of the profits made by the funds each year. If a loss was made , then deductions would be made from each individual super account to cover the losses.
The deal presented to the public in 1988 stated that an agreement had been reached between the unions and the Federal Government, with big business and their lobby groups supporting the initiative. A pay rise of 3% would be awarded to the workers, and this would be kept as a super contribution in a designated fund. This agreement was made under the Industrial relations portfolio and was presented to the Australian public as the ‘ Wages Accord’ .
However, there was one major problem with implementing the scheme: the Australian Corporations Act, which governs federal laws on industrial relations. At the time, the act only applied to large corporations, while the states controlled their own industrial relations independently. The private non-incorporated sector did not come under the A.C.A. at all, as the people within them were designated as working individuals, not company entities. At the time there were questions raised about whether it would be lawful to impose this accord on state controlled private companies and their employees.
Thus, in order for the plan to work, the states would have to come on board and hand over the control of their private sector industrial relations. Giving up their independence in this area was not what they wanted, but the growing pressure from all around in the federal area, forced their hand. This regardless of the fact that such legislation would be unlawful if passed in parliament, given that under the Corporations Act there was no lawful jurisdiction to do so.
During this period, however, Australia had slipped into a full-blown recession, and those in power were forced to make decisions that were not in the best interests of the country. The states decided to keep control of their private sectors but agreed to allowing the Super Wages Accord to go ahead.
The law was passed. The small business sector, however, was slow to implement the plan, and in 1992, in order to enforce the collection of superannuation payments, the scheme came under the supervision of the Australian Tax Office. This was clearly intimidation aimed at the private sector and was allowed to go ahead with little protesting from the states.
Legally, the A.T.O. has federal control over any tax that is implemented by parliament on the Australian public. What the A.T.O. has no jurisdiction over whatsoever is imposing industrial relations laws having to do with wages or working conditions on either a federal or state level. In other words, bringing the Super system for the private sector into the Australian Tax office was unlawful.
The fact that this unlawful piece of legislation was allowed to go through parliament when most of the members and senators had a law background shows just how bad the financial system was in the early 1990s during that recession. The fact that it was not corrected when things gradually improved in the early 2000s, tells us that all the groups involved, were getting out of the Super system everything they had expected all along.
Although the matters above were generally known throughout the Federal & State Governments the Private sector Superannuation System was allowed to continue. Indeed, when a cash injection was required the Federal Govt. along with the unions, agreed to increase the wages deduction from the 3% to 9.5% and continued to call it the Employers contribution.
The original plan was to use a wage increase as the base for the Super Guarantee and it continued to do so as more wage increases were directed to employers to pay. When the super rate was not increased then the Federal & State Commisions increased wages through yearly cost of living increases.
The 18 years that this questionable process continued without any serious problems, received a setback in 2006, that setback will become clearer as this story progresses.