Steve Gibbons (Bendigo, Australian Labor Party) Share this | Hansard source

The new Labor government that came into office at the beginning of last December is committed to building a modern Australia for the 21st century. In doing so, there are many areas in which this government has had to make up for the neglect, complacency or mistakes of its predecessors. In the short time that Labor has been in office, we have made rapid progress in addressing many of those issues, including the measures announced in this week’s budget by the Treasurer. In the Governor-General’s speech at the opening of this parliament, he highlighted the importance of a new productivity agenda to the country’s long-term economic prospects, and it is productivity that I want to speak about today.

Increased productivity is the key to generating economic growth without the disastrous consequences of rising inflation. Yet for all of the rhetoric about responsible economic management from the former Howard government, productivity growth was woeful under its watch. The Prime Minister outlined this disastrous record in a speech some time ago to a business leaders’ forum at the Queensland University of Technology. Productivity growth had averaged 3.3 per cent a year in the five years up to 1998-99. In the following five years to 2003-04 it fell by one-third to 2.1 per cent a year, and now it is running at just 1.1 per cent a year. This is just one-third of the rate that the Howard government inherited from Labor in 1996. This collapse in productivity growth has been a major contributor to rising inflationary pressures in Australia, and among the main reasons for the decline have been the failures to invest in human capital, technology and infrastructure—failures to invest at a time when we had unprecedented budgetary opportunities from the proceeds of the current resources boom. Government spending certainly increased under the previous government, to unprecedented levels in fact, but very little was directed at addressing the constraints in our economy, including lifting productivity.

As the Business Council of Australia notes in its 2008-09 budget submission:

Of the $87 billion per annum that economic prosperity has delivered as windfall revenue to Canberra since 2002, all but $2 billion has been spent on income tax cuts and new spending.

At the same time, despite high commodity prices giving us the best terms of trade in more than 50 years, export growth over the past decade has fallen to half the rate of the decade before. Our current account deficit has reached record levels and foreign debt exploded threefold during the term of the Howard government. The need to redirect the proceeds of the resources boom into the future productive capacity of the Australian economy could not be clearer, and the Rudd Labor government is rising to that challenge.

Skills Australia has been established to lead an integrated response to the skills crisis, and the government is committed to creating an additional 450,000 training places over the next four years. Secondary schools are being invited to apply for funding for the construction of new trades training centres. I am pleased to report that I have initiated discussions with the seven secondary schools in my electorate about how their allocations of this fund can best be deployed to make Bendigo a shining example of modern trades education.

To provide national leadership on infrastructure development—including transport, energy, communications and water infrastructure—legislation establishing Infrastructure Australia has passed through the parliament and its inaugural chairperson has been announced. An expert panel has been appointed to assist the private sector proposals for building the national broadband network and construction is planned to start by the end of the year. For the first time in Australia’s history, the federal government, a Labor government, has taken a national leadership role in planning for our long-term infrastructure requirements.

At the end of the day this country’s future prosperity depends on our meeting the challenges of globalisation, and all of the government’s initiatives that I have outlined will contribute to that goal. But if we are going to respond to these challenges we need all of our businesses, large and small, to be world class. Unfortunately, the Australian Industry Group’s World class skills for world class industries study of 2006 shows that Australian industry is not yet world class, and not world class by a long way. This is not only the opinion of some academic or consultant but the view of the industry itself. Only 18 per cent, less than one in five, of more than 500 businesses surveyed by AiG say that they are currently world class. While this result is disappointing, it is encouraging that at least many do recognise the need to lift their game. Of those firms that are not already world class, 85 per cent thought it was important for them to become so in the next three years. So the imperative is clear.

There are, however, real questions about how Australian businesses become world class. How can we as a nation best invest to position ourselves for survival and prosperity after the current resources boom? It is essentially Australian management who must step up to the plate. While it is appropriate for us to celebrate the achievements of the few Australian businesses that are succeeding on the world stage, we must be ruthlessly realistic about the performance of Australia’s managers. We have to question, for example, why this country has almost no global leader in any market except for the resources industry and some niche sectors in the financial services industry. Where are our world-class manufacturing companies? Where are our world-class information technology companies? The Sydney Morning Herald reported in March that at the CeBIT conference in Hanover, which is the largest information technology fair in the world, just five exhibits out of 5,800 were from Australian companies. This was less even than from New Zealand and hardly the representation one would expect from what is supposed to be the clever country.

So what is world class when it comes to business? A 2001 study by Dr Darryl Hull and Vivienne Read at the University of New South Wales found that excellent Australian workplaces are characterised by world-class performance, competitiveness and innovation. But being world class means more than maximising short-term profits, more than high returns to shareholders. A fundamental tenet of Western capitalism is the free market, a market where competition and the threat of oblivion produce economic growth and increasing prosperity for all. But unfortunately, despite their rhetoric, many of those who are responsible for making capitalism work—business owners, board directors and executive management—do not much like the idea of a competitive marketplace. In fact, they spend much of their time working to dominate or eliminate any competitors. Why? Because they can make more profit if they operate in a market that is a duopoly or oligopoly than they can if there is real competition. More profit means higher dividends, a booming share price for investors and bigger bonuses for fat cat executives and directors. One of the many problems of oligopolies is that they allow managements to get lazy. They forget how to innovate, they forget how to get the best out of their people and they forget how to compete. They are anything but world class. Unfortunately, many Australian industries are just duopolies or oligopolies, and we have to ask ourselves if this contributes to our lack of world-class companies and our woeful export performance, particularly in manufactured goods.

Australia’s businesses have to make some fundamental changes to the way they operate and manage their people, not least because of the changing nature of work in advanced economies. For example, Professor Frank Levy of the Massachusetts Institute of Technology and Professor Richard Murnane from Harvard University predict that future employment growth will be dominated by jobs that they refer to as ‘expert thinking’and ‘complex communication’. These are jobs requiring creativity, design, problem solving and innovation and involving more face-to-face communication. They predict that there will be little or no growth in repetitive manual jobs in developed countries. Professor Richard Florida, a United States economist, estimates that what he describes as the ‘creative sector’, which includes these expert thinking and complex communication jobs, grew from 20 per cent to 30 per cent of the US workforce in the period 1980 to 2002.

These trends mean that Australia can no longer rely on being able to perform simple unskilled jobs as competitively as developing countries. These include routine manual jobs, such as in call centres or in routine software coding, as well as those that follow well-defined rules, such as assembly-line manufacturing. These jobs have declined considerably in advanced economies and they are always highly vulnerable to automation, outsourcing and offshoring. Indeed, a 2005 report by the Organisation for Economic Cooperation and Development found that up to 19 per cent, almost one in five, Australians were employed in jobs vulnerable to offshoring. In this global environment the organisations that will be successful are those that look after their people and ensure that their working environments foster and reward creativity, new ideas and risk taking.

The research by Dr Hull and Ms Read I referred to earlier, which incidentally was funded by the Business Council of Australia, tried to identify the very factors that distinguished ‘excellent’ workplaces from ‘very good’ workplaces. They concluded that quality working relationships are the central pivot on which excellent workplaces are founded. They found that in all excellent workplaces there was an atmosphere of mutual trust and respect. They said:

We became convinced ...  that to produce quality work in Australia, one must have quality working relationships ... which requires constant renewal and reaffirmation by all parties.

They said that these relationships are underpinned by ‘trust, respect, self-worth and recognition’ and that the fundamental importance of trust ‘couldn’t be over-estimated’. Importantly, and fortunately, there is no magic in this. They say that the characteristics of excellent workplaces are ‘identifiable, quantifiable and manageable’. They found that management practices that promote respect, recognition and self-worth directly impact on business performance. They found that workplace leaders in excellent organisations, whether supervisors, team leaders or more senior managers, were aware of the impact that their behaviour has on the way people feel about the workplace and their job.

Of course, all this people management stuff is a bit too touchy-feely for some of our more macho managers who are driven solely by the bottom line. Current accounting standards must share some of the blame for this situation. How many times do we read in annual reports that a company’s greatest assets are its people? Yet, when we turn to read its balance sheet, there are plenty of assets listed but no human ones. In fact, every dollar that a company spends on hiring, training and improving the capabilities of its employees is reported as a cost, not as an investment in its most important asset. It is no wonder that managers spend so much time trying to reduce the cost of their people and it is no wonder that training and a whole range of people management spending are among the first things to go when a company is trying to cut costs. This accounting treatment also leads to poor public policy.

The Howard government’s Work Choices legislation, which was so strongly pushed by our peak business bodies, was clearly designed to reduce the cost of labour to Australian business in a short-sighted attempt to compete with labour costs in developing countries—an unnecessary attempt, according to a recent study by KPMG. Despite all the bleating from the big end of town about the cost of operating in Australia, KPMG found that we are one of the least costly locations in the industrialised world in which to do business. Their 2008 competitive alternatives survey found that Australia is already ranked fourth in terms of competitiveness after Mexico, Canada and the US. And, what is more, there is less than one per cent separating Australia from being the second cheapest place in the world to do business.

So further driving down wages is not what this country should be looking to in order to increase business profitability. There is ample evidence that increases in both productivity and profitability are best achieved by better management of the workforce. In fact, research from the UK has found that there is a greater payback from improved human resource management than from giving more attention to business strategy or to product quality or to new technology or even to research and development—and Australian employees know when they are not being well managed by their bosses.

Research released in March this year by recruitment consultants Hudson shows significant gaps between what workers want and what employers offer. More than one in two employees are currently thinking about changing jobs or are ready to walk out the door. In my own state of Victoria, two-thirds of employees are dissatisfied in their current role and are thinking about taking or are ready to take a new job. This is why I believe that, if Australian business is going to be world class, it has to be world class in the management of its human resources.

I have already given notice of my intention to move a motion in private members’ business to this effect. I will be proposing:

... the establishment of a National Commission for Workplace Innovation and Excellence that will, in conjunction with the business community, trade union movement, professional associations and education providers:

(a)

identify workplace factors that positively impact on workplace innovation, excellence and productivity including human resource management practices and organisational culture;

(b)

develop policies that promote workplace innovation, excellence and productivity including best practice models, codes of practice, awareness programs, business exchanges and awards; and

(c)

support research, management education and training in conjunction with higher education providers and professional associations.

I would like to take a few minutes at this point to acknowledge the research on this subject conducted by my late chief of staff and good friend, Richard Clarke. Richard tragically and unexpectedly passed away last month at the young age of 50. He was an inspiration to all who knew him. That is a cliche perhaps, but in Richard’s case it is definitely a true one. He spent most of his working life striving to make things better for others. Selflessly, and seeking no accolades for himself, he succeeded in that objective and improved the lives of thousands of people. Whether it was those with mental illness, whose plight he was strongly committed to, or designing and implementing a pioneering workplace agreement, his paramount concern was for the wellbeing of his fellow human beings. Richard drew on a wealth of experience from his work as a ministerial adviser to former Victorian health ministers Tom Roper, David White and Maureen Lyster and later as a senior health administrator both here in the ACT and in Victoria. He served on the board of management of the Bendigo Base Hospital in the late 1980s and later again as a director of Bendigo Health.

He believed strongly that substantial increases in productivity followed from enriching the working environment for employees, and his groundbreaking work at the Casey Hospital is just one example of this. He wanted to understand how differences in relations between employers and employees distinguished the world’s outstanding corporations and government agencies from those that are merely successful. He was convinced that Australia’s national productivity and profitability can be significantly improved by identifying these differences. Richard was acknowledged as a successful change management practitioner and was highly regarded by both employer organisations and trade unions. He understood more than most the need for continual change in workplace practices, as our national economy responded to increasing globalisation. Not for Richard the pointless industrial disputes that left only one side still standing. He was far more interested in the practices that resulted in everyone being better off than they were before and constantly striving for the win-win scenario. Richard Clarke was not just a visionary manager but a good friend for almost 30 years, and I will miss him greatly.

In conclusion, the election of the Labor government provides the opportunity for new thinking about Australia’s economic performance, for new thinking about what our businesses—both large and small—need to do if we are to be competitive in the global market and maintain a high standard of living for all Australians and for new thinking about how we should manage our most vulnerable resources, our people.

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