Stewart McArthur (Corangamite, Liberal Party) Share this | Hansard source

I have listened very carefully to the member for Hunter. He is the shadow spokesman for small business, and he understands contracting. In fact I have been to his electorate, where I have seen him in action, and he has talked to those contractors in the coal industry. I am having a bit of difficulty understanding what he has been saying. I think he supports the legislation intrinsically. He talks about competition between contractors being unfair; that is a strange comment. He supports some contractors and not others. So I think the member for Hunter, surprisingly enough, after all the rhetoric, supports the government’s bill and I am very pleased that the member for Hunter showed such erudition.

I am delighted to support the Independent Contractors Bill 2006 and the workplace relations legislation on this occasion. The government is proud to encourage an entrepreneurial culture across Australia where people are encouraged and able to go about their work and to get a job done productively and efficiently. The entrepreneurial culture will put emphasis on people getting the job done, with the key focus being on payment on outcomes, as opposed to time spent on the job.

There has been a dramatic shift across society towards contracting out jobs and tasks to those who are in a better position to deliver, thereby generating increased efficiency and reducing cost. We see this in our industries, where large manufacturers have moved away from start-to-finish construction. In Geelong, in the electorate of Corangamite, the Ford Motor Company do not build a car and all its components; instead, Ford pay a number of small component firms on contract terms to produce parts and deliver them on a just-in-time basis to the factory, where they put them together to produce a fully assembled motor vehicle.

We see a shift in our own households, as the member for Hunter would understand. We call in Jim’s Mowing to mow our lawns quickly and cost-effectively. This saves hundreds of families in Grovedale, Belmont and Highton, in the electorate of Corangamite, from the need to service and start their own motor mowers, which often do not start when you want to mow the lawn. And we see this shift in the workforce, where increasingly workers are opting out of structured employment and choosing to work for themselves as contractors, to be their own boss and do a job for a client: walk in, get the job done and leave to do the next job.

This legislation recognises the massive change in the workforce towards what is called ‘latent entrepreneurship’ by University of Zurich economists who have studied self-employment. This bill will provide important protection for up to 1.9 million Australians who are independent contractors. There are many self-employed contractors working in my electorate of Corangamite and in the rural industries across country Australia. Farmers hire contractors to do fencing; cut, bale and cart hay; sow and harvest crops; and transport grain to the silos or livestock to the market. Agricultural contracting has developed at the same time as farming has evolved. Former farmers who have been forced out of farming have been able to use their skills to provide private contracting services to other farmers, in a win-win arrangement.

In my own experience, I have contracted a typical rugged rural Australian called ‘Nabby’ McNabb for fencing on my family property. As a contractor, Nabby was his own boss. He would turn up at 7 am, rain, hail or sunshine, put in a full day’s work—digging holes, putting up fence posts, stringing wires—and then Nabby would be at the head office, the local hotel, by 3.30 pm, having a few cold beers. It was here that he conducted and arranged the business with the local farmers. Nabby would not have wanted to be an employee and work for hours at the direction of a boss. He was fiercely independent; he wanted to get the job done. It is for hardworking, enterprising, free-willed Australians such as my old friend Nabby that the government is introducing this legislation.

The labour movement and the Labor Party want to drag self-employed workers into the regulated employment system to allow unions to exert more influence over people’s lives. The government is introducing this legislation to protect Australians from another example of union overreach. The Australian self-employed contractor workforce can take much credit for their contribution to the nation’s economic growth over recent years. The contractor workforce have helped to deliver increased productivity and efficiency that has not been delivered by the more heavily regulated awards based and union dominated sectors of the workforce.

By way of example, I can compare the highly unionised construction industry with the home-building industry, which operates with contractors and subcontractors. The construction industry has serious problems, as was demonstrated by the Cole Royal Commission into the Building and Construction Industry. In this industry, the union movement, represented by the Construction, Forestry, Mining and Energy Union, the CFMEU, is notorious for its strikes, bullying tactics and enforcing a ‘no ticket, no start’ regime. The construction workers have no incentive to get the job done quickly or even on time because they get paid for the time they are on the site. There are countless examples of construction sites in Victoria that have suffered delays and cost blow-outs so that workers can get more money.

The house-building industry is a completely different case. I have the opportunity to observe house construction across Corangamite, with rapid residential development in the Geelong suburbs and in Colac. A number of private contractors and subcontractors are employed in housing construction. These tradesmen are employed on fixed contracts to construct houses and they have a strong incentive to complete the job quickly, efficiently and for the least cost possible in accordance with all the laws. Our self-employed tradesmen and subcontractors are always aware of the need to move on to the next job and to maintain their personal reputation for quality and cost-effective service so that they will receive future jobs. Subcontractors cannot afford to make mistakes on the job, because errors and faulty work cost them extra time and higher costs for no extra pay.

The National Executive Director of the Housing Industry Association, Dr Ron Silberberg, reflected on these matters during a speech to the HR Nicholls Society conference in September 1991. Dr Silberberg is somebody who knows a thing or two about house construction and the views of the people who work in the industry. He said:

Subcontractors are highly self-motivated, which is reflected in their high productivity levels … It is not unusual to see subbies working on housing sites at weekends. They don’t receive penalty rates for working at weekends … Their future earnings depend on establishing a reputation for quality and reliability.

Dr Silberberg compared the housing and construction industries:

The housing industry is characterised by harmonious industrial relations. Subbies don’t get paid for delays so there is a strong incentive to get on with the job. According to the CSIRO, the level of unproductive time on housing sites is about 4 percent; for the unionised commercial building industry, the amount of unproductive time is 23 percent.

Those two figures reflect the thesis and background of this legislation. Every new homeowner, every young family of first home buyers and everyone else with an appreciation of the nation’s buoyant property market will understand that there are new houses going up across Australia’s suburbs. The houses seem to be constructed almost overnight, and this remarkable development has only occurred because of the use of self-employed building contractors and subcontractors who have an incentive to get on with the job.

In the free economy, people should have a choice to go into business for themselves if they want to. People should be able to have a choice to be their own boss and to contribute their skills, abilities, assets and hard work towards the growth of the nation—and to take the risk of bankruptcy if they are not successful. That is the key issue for a contractor: not only do they apply their skills but they run the risk of going broke—and the bank is very tough on these independent contractors if they do not pay the bills. The Labor Party and the trade union movement, on the other hand, want to crush the spirit of individual endeavour and free enterprise by clawing Australia’s independent contractors into the regulated employment system and deeming independent contractors as employees. The member for Hunter ably demonstrated that in his previous remarks.

The decision as to whether a person can go out on their own and establish their own business should be up to the individual. It should not be a decision for the government or for the trade union movement. It would be better if the government did not have to legislate for independent contractors; it would be better if these decisions could be left to individuals. But, because of the Labor Party’s position across the states, there is a need to protect—at both federal and state level—the rights of independent contractors. The Australian economy and workforce are changing, and that is why it is important for the government to take this action to protect the legal rights of independent contractors—and I emphasise ‘legal rights of independent contractors.’

Australia is no longer a highly unionised, nine to five, Monday to Friday economy. Australians are leaving the trade unions in droves because the unions no longer seem to be relevant to the majority of our nation’s workers. Rigid and inflexible award conditions do not suit the needs of individual employees and businesses. Union membership has been declining for the past 30 years. In 1976, 51 per cent of the workforce were union members—and we well remember those days. Union membership had fallen to 40.5 per cent by 1990 and, by August 2004, 22.7 per cent of workers were in a union. Despite a massive union campaign against the government’s proposed industrial relations reforms last year, the proportion of the workforce who choose to be members of a union fell again to 22.4 per cent in August 2005.

In the private sector, the rate at which Australian workers have abandoned the union movement has been even more severe, with only 16.8 per cent of private sector employees in unions by August 2005. In contrast to the steady decline in union membership, there has been an increase in the number of Australians who choose to work for themselves as independent contractors. It is estimated that there are up to 1.9 million independent contractors in Australia—equivalent to the number of union members.

This legislation delivers on an important commitment given to independent contractors at the 2004 federal election, when the Howard government said that it would legislate to not only protect but support the endeavours of independent contractors in the Australian economy. This commitment came as a direct result of the calls from independent contractors to be protected from the deeming laws of state Labor governments, which have sought to classify independent contractors as employees. The Labor Party’s national policy at the time of the last election included expanding the definition of ‘employee’ to include ‘those in employment type relationships’. The rights of individual contractors were under serious threat from the Labor Party’s proposals. So we can see that the Labor Party were very keen to make their own definition of ‘contractors’. The government, with this legislation, will make it quite clear.

On this basis, members of the Labor Party at both state and federal levels have demonstrated that they are out of touch with the aspirations of those Australians who genuinely want to operate as independent contractors and to enter into service contracts with companies, clients and private individuals. The important factor for the Labor Party and the unions to understand is that contractors are different from employees, and they do not want to be treated as employees. Bob Day, the former President of the Housing Industry Association, outlined the union mindset on contractors and employees in a speech to the HR Nicholls Society in 2000. He said:

Contractors are paid for performance—not for time. Any non-standard arrangement like this is a threat to the union mindset … Unions have always wanted to conscript subbies into their dwindling ranks and along with tax officialdom and the IR Club have, at every opportunity, tried to turn independent contractors into employees. Unions already have secured footholds in just about every area of the commercial construction industry and have significant influence in areas such as superannuation, health funds, training, occupational health and safety rehabilitation, insurance and even labour hire firms. Their campaign to control the supply of labour never ends.

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But contractors are not employees—they are running businesses with all the associated risks and expenses.

Until the Labor Party unshackle themselves from the trade union movement and, instead, support the desires of Australia’s independent contractor workforce to be their own boss, the Labor Party will not be a credible choice to win government.

I can report that there has been a lot of interest in this legislation from small business men and women across my electorate. Many self-employed people are looking for the certainty that this new legislation will provide. Indicative of the feedback I have received from local business, Fred Runia, from a successful Geelong region transport company, Josie’s Transport Group, has written to my office regarding the government’s Independent Contractors Bill 2006. Fred is well known to me. He is a classic independent contractor who employs a lot of people. He is a very genuine small businessperson and runs a wonderful transport company. He wrote to say this:

We are aware of the Independent Contractor Act and fully support the introduction of this Act. Our company has always had responsible commercial dealings with our contractors without interference ... that have been beneficial to both parties. We are therefore looking forward to the clarity that the IC Act will give to owner drivers and principal contractors to negotiate and operate without third party interference.

This is a statement from Josie’s Transport, which has been a very successful business in Geelong for the past 32 years. The firm has a relationship with approximately 35 owner-driver contractors who are operating to enhance their fleet and their service. Like many others, this company is successful because it has managed an ongoing relationship with self-employed owner-drivers who have formed a contractual service agreement with Josie’s on a commercial basis. I can confirm that because I have talked to Fred Runia at some length about these arrangements, and I know from my personal observation that they are successful. As with many other private transactions, Josie’s Transport and the drivers who provide transport services to them under private contract do not want third party interference, whether it be from government or from the trade union movement. These owner-drivers are confident that they can negotiate their own arrangements without government intervention.

In drafting this legislation, there have been some concerns amongst owner-drivers regarding the provisions that will allow for the continued recognition of New South Wales and Victorian legislative protections for owner-drivers. The government is looking closely at this issue and the protections for owner-drivers that have been supported on a bipartisan basis in these states. The minister has advised that the government does not intend to disturb these arrangements at this stage. However, the government will establish a review of the state based owner-driver protections in 2007 with a view to achieving national consistency for these types of laws.

There are particular arrangements in place for owner-drivers under the existing New South Wales state laws, including goodwill on delivery contracts, and the government’s proposed review of these state provisions will ensure that there are no unintended consequences for these owner-drivers. I have taken a close interest in this debate and have met with representatives of the Independent Contractors of Australia and Owner Drivers Australia. I have discussed these issues with owner-drivers, represented by Mr Ken Phillips, who is a forceful advocate for independent contractors and more flexible labour arrangements. It is clear to me that this bill implements our election commitment to deliver certainty to independent contractors and that there is a clear commitment to review the specific protections provided to owner-drivers in New South Wales and Victoria.

This is very important legislation, both in philosophical terms and in terms of the government’s commitment to that section of the Australian workforce. Ken Phillips suggests that the Independent Contractors Bill is:

... arguably more significant and far reaching in its implications than the labour regulation reforms under WorkChoices. Whereas WorkChoices is a re jigging of the employer-employee relationship, the Independent Contractors Act cuts entirely away from that paradigm. It walks away from the idea contained within employment law that economic activity involving labour is one of systematic and inevitable conflict. The Independent Contractors Act will prove important because it contains the idea that every Australian has the right to be their own boss to set their own economic direction and to control their own destiny.

It would be a struggle to more clearly explain the importance and meaning of this bill. I am delighted with Mr Ken Phillips and his very strong support for the contractors bill and the background information that he has provided to the government, which has assisted in the drafting of this particular legislation.

I support the bill wholeheartedly. I support the philosophical thrust of it. When this bill is passed—with the opposition voting against it—it will become a key part of the government’s reforms of the industrial relations system. It will give, as I have said, a sense of independence. It will give legal protection to independent contractors. Contrary to the propositions put up by those opposite, this legislation is in the interests of those hardworking contractors who work day and night for their own good, their family’s good and the good of the client.

I note that the amendment put forward by the opposition put up the usual arguments that people will be exploited and that employees will not be looked after. Australia is an independent country. Those contractors have shown their spirit since the Eureka Stockade. They want to work hard; they want to get the job done. We totally reject the amendment put up by the opposition. That reflects a bygone era. This government is moving into 2006 and beyond. This will be a most important part of the legislative program that looks after hardworking Australians.

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