Webdiary - Founded and Inspired by Margo Kingston

When will Mr Andrews get it into his head that it's not ANY job that helps his fellow Australians improve their circumstances, but a DECENT job, with wages and conditions that make like bearable.

I'm fed up with the mantra of job, job, job. It's life, life, life I need, which I can only get with ENOUGH money for my family combined with REAL conditions that make life liveable.

Sorry Mr Andrews, your plan is a Claytons.

Of course having a job will improve the circumstances of Australians. Just look at the Chinese. They don't bother with trivial matters of conditions. They have nearly full employment & just look at how strong their economy is.

As for the skills shortage in this country, we can import Chinese workers (there's plenty of them) who would be happy to work for $5 per hour & a mat in the corner to sleep on. Throw in a few bowls of rice each day & they will be queing up

Surely people must be able to see the benefits of the IR legislation. Just make sure you have provisions written into your AWA for a comfy mat & your prefered flavour of rice. The more expensive flavours (Basmati etc) could be traded for your unproductive holidays & sick leave. The greatest benefit will be the ability to avoid paying income tax by keeping your annual salary under $5500 tax free threshold. It's a win, win, win situation. (Unless the Taxation dept fines you for tax evasion by signing an AWA.)

Now, where's my AWA and where do I sign?

I think Mr. Beazley is right that IR will become the Coalition's achilles heel. They have spent $50 million dollars trying to convince people that it will be great. The people I have been talking to are incensed by the legislation.
When Mr. Hendy is barracking for IR legislation you do not need to be Einstein to understand who will benefit.

Andrews can argue till the cows come home about how employees can readily negotiate with their employer saying it's an equal situation that an employee can argue from. In the real world, not fairy land, the employers have the upper hand as they can hire and fire. This is especially true if the employee has a hefty mortgage.

The Family Court reforms have had unfortunate and unforeseen consequences since being enacted by Mr. Whitlam; the reforms still need sorting out. Likewise, the IR legislation will have all sorts of effects when work hours change; schools, sporting clubs, social clubs and most importantly families. I think Mr. Beazley used a great analogy when he spoke about termites having a continuing impact in the future.

See State plans court challenge on IR by Jane Nelson, November 02, 2005:

QUEENSLAND is prepared to launch a High Court challenge against the Federal Government's new workplace relations laws. It says the legislation will neither simplify nor combine industrial relations into one system. Premier Peter Beattie said today the State Government was seeking legal advice but expected to launch a High Court challenge once the final legislation was available. Queensland last mounted a High Court challenge against the Federal Government in 1994 – in an unsuccessful education union case.

"This is a very heavy attack on the social fabric of Australian society," Mr Beattie said, referring to the 687-page Bill introduced into federal Parliament today.

BTW David Eastwood, I recommend reading The World is Flat by T.Friedman, which talks about how technological innovations and circumstances have allowed India and China to become part of the huge pie called globalisation.

David Eastwood, productivity isn't a bad thing. The government however has not made its case for how this legislation will increase productivity - where is the cost-benefit analysis? Talking about productivity, isn't that also dependent on skills and innovation - and hasn't this government made education more difficult to obtain and slashed R&D?

BTW, in future it will be cheaper to outsource IT jobs to China (a growing concern for India).

I heard most of Beazley's speech and about 5 minutes of Andrews' (that was all I could stomach) on the ABC today. Beazo was passionate and convincing; Andrews was slimy and mealy mouthed. I hope more of Australia was listening than just me.

I have a feeling that Beazley's last line is prescient. This will cost Howard Government (if he hangs around till the next election, that is).

Productivity, Productivity, is the goal according to the Government's rhetoric.

Definition: Output / Input. In commercial terms that's revenues divided by costs. So, increasing labour productivity is about getting more output per employee. That means we all have to work harder, or get less money for what we do now. It's important to get that straight.

Is that a bad thing? Of course, we'd all like to work less for more money if we had the chance. But, is it realistic for us to expect that our wages and conditions are sacrosanct? Of course the tacit assumption behind much of the anti-reform argument is that they are. What was won can't be given up.

We're the lucky country. Our wages and standards of living have always gone up, so why shouldn't they continue to? Same for house prices. Shame they're not going up any more.

I recently commissioned a market anlysis study from two organisations in a very complex area of new technology. The two quotes came back, the two approaches outlined were broadly similar. The two teams of people proposed to me to do the work were impressive, but one was better qualified (they all had PhDs!) and had more practically experienced people than the other, and, was prepared to put more of them on the case to do more detailed analysis and data collection. One of the quotes was more than twice the price of other.

The bigger, more qualified and experienced team was less than half the cost of the smaller, less qualified, less experienced team. Why? Simple: it was based in India. Already there are signs that Australia will struggle to compete - even in so-called knowledge based areas like these, let alone lower skilled domains.

Fact of the matter is that Globalisation is here and is likely to put many formerly comfortable, developed nations like us in difficult positions as they lose competitiveness.

Sooner or later we will need to bite the bullet and accept that the future isn't just an extension of the past. The sooner, the better.

Margo: Hi David. Have you read William Bridges' work? I read 'Managing Transitions' when thinking about the ALP after 2001, then 'Job Shift' and 'You and Co' when it started to dawn on me that Fairfax had withdrawn their support for Webdiary. I recommend them to everyone used to having a regular job and worried that they're gunna lose it. Then there's downshifting. I'm working my way through that one too and that's exciting, in a weird way (except for building myself up to giving up smoking). What 'products' do I really need. It's also empowering to consider every purchase on the basis of how it helps or hurts others, and the environment.

Margo Thanks - thought provoking - must read!

It's difficult to fathom responses to the Government's agendas in this case because of the complexity of the dynamics at play.

The argument I'm making about globalisation is very real, but so is the realpolitiking behind both Andrews and Beazley's speeches.

Beazley's rhetoric is empty - crap about "fair go" and "the Australian way". It's all about fear, and he's stoking it up. Good old tub-thumping F-U-D, and delivered surprisingly effectively given Beazley's style.

Andrews' rhetoric is all about making change palatable and spinning short term pain as long term gain, and fear: fear that we'll all be destitute if we don't hold productivity up. It's all too complex, all too new, and way scary. No-one likes to be scaremongered.

I find it depressing that important issues are being argued so badly, and with so much short term vested interest in play, but I guess I'm being naive.

Margo: Maybe that's why you're a Webdiarist! So, who in the Webdiary community will take on mounting a solid case for and a solid case against? I'd love Webdiary to host a thoughtful merits debate with shades of gray and the potential to develop the outline of a constructive alternative. Any takers?

Remember Patricks and the rotteweiler controversy on the Melbourne wharves? This employer is still in business and under the new laws he will have even more power. He was very good friends with Howard and Reith. He even got tax deductions for training the dogs and handlers in Dubai. Will we see more of this type of action. It's one way of getting all your staff onto AWAs.

Russell, years ago there was a clothing manufacturer in Sydney who, on being asked why he looked after the bottom end of the clothing market. His reply: "I have always looked after the battlers and boy have they looked after me". Stands to reason doesn't it, give the workers good money and they buy the products. No money, no workers to buy products, ergo, no business.

As we used to say in the Psychology Corps, David Eastwood, "Don't mate me, mate." Otherwise I am (and it doesn't happen often) completely at a loss. What was it your gran wanted to know?

What Australia needs is not labour productivity, but employer productivity. Both parties do agree that the purpose of the bill is to drive labour costs down. The difference is that the capitalists further argue that this driving down of wages is necessary – for Australia to be competitive, which will result in higher long term employment (it’s funny, Howard arguning that no-one will be worse off and that labour costs will come down at the same time).

In reality, some of the savings may go to improved profits to shareholders, but a significant amount will also go into the pockets of senior managers. What gets my goat is that these senior managers are not earning their salary. Instead of coming up with real innovation, they are living off driving wages down, and selling off Australia’s capital resources.

Employees are blamed when they under-perform. We should first start by checking on the boss. The boss’s job is to coach, mentor, motivate, train. Most bosses don’t even have a clue how to do this. So why are they being paid big bucks? We are promoting a culture where everything is about money – pay people more and we can get better people, they will work harder. In reality, people who work the best are the ones who enjoy their job – actually look forward to going to work in the mornings. They are loyal to their firm, and are less likely to commit fraud. Those who come for the money will get what they want from the firm, and vanish at the first opportunity. The new boss is paid big bucks to perform. He slashes jobs and wages. Hey presto, profits rise, he is a miracle worker. He moves on to a better offer. In the meantime, reality hits the organisation, and it slumps.

If it is not going to be an offence for bosses to demand a work place agreement as a condition of getting the job, then surely if an unemployed person is being offered a job with an unfair workplace agreement, then this should be a defence against losing Centrelink benefits for not taking the job.

As Mr Andrews is so convinced in the argument for AWA's, will he extend it to include members of Parliament? After all, there is no reason why all MPs should be paid the same or receive the same entitlements. Surely, the electorate a politician aspires to represent should be allowed to offer a workplace agreement, which the aspiring pollie can refuse and not stand as a candidate?

The ruling class once again ride roughshod over the minions. It will soon turn back to 18th century coal mines of England - work a day past your twenty-first birthday and the mine owners own you for life, try to flee and you will be whipped and chained up to stop you causing trouble again.

So much for Howard saying he will govern for all Australians.

Tha ACT Government is also pointing to the hypocrisy that lies behind these laws - the fact that in Howard Government land it is apparently fine for the powerful and the relatively wealthy - ie businessmen and women, doctors, and lawyers - to bargain collectively; just not the hapless individual worker.

In the Canberra Times this morning:

Berry seeks to freeze out Canberra Business Council

ACT Legislative Assembly Speaker Wayne Berry is seeking to freeze the Canberra Business Council out of all further negotiations with the ACT Government because of its support for the Federal Government's new industrial relations laws.

He cut short a meeting with council members on Wednesday, telling them they were not welcome to make representations to his office.

"And I will be commencing a discussion within the Labor Party about only negotiating with individual businesses about legislative changes they might want, instead of collective bargaining with business unions."

He accused the business council of trying to have it both ways, by supporting laws to weaken collective bargaining for workers while wanting to lobby government as a collective business group.

"It's about time that this union for businesses gained a fuller understanding of what it feels like to be isolated as an individual worker. You can't ... support the isolation of workers and then expect to collectively bargain for your business constituents."

Following the recent introduction of the new IR legislation the most common response I have encountered from numerous members of the workforce is that we have no control over this situation and should accept it as a fait accompli.

I beg to differ. Globalisation and the machinations of the marketplace work equally for both employer and employee.

If I were to purchase a product for $10,000 I would rightfully expect a high degree of quality and performance. However, if I only expended $1,000 on the same product I would equally expect a lesser degree of quality and performance.

This rule holds true if I possess $1million or $1.

Make no mistake, employers are purchasing a product that you are selling. YOUR LABOUR. If the price they are willing to pay (a fair and reasonable monetary remuneration, together with compensation for public holidays, penalty rates and annual leave loadings etc), they receive in return high quality and performance. Anything less and they do not DESERVE the workers full devotion.

It saddens and disappoints me that the general public do not realise the power that they possess. Always remember, governments do not tell us what to do, we tell them what to do. They are our representatives, put there by us to act in our best interests.

The reprehensible John Howard states that his word is his guarantee. This is an amazing statement coming from an unmitigated liar, con-man and scoundrel. This despicable individual is nothing more than a shill for big business and their massive profit margins.

The workers acting together can defeat this savage and unwarranted assault on our wages and conditions. Stand up for your hard earned rights. Always remember, if you don't stand for something, you will fall for anything.

I wish the various government people would stop claiming that this legislation has anything to do with the 21st century. And that goes for the Business Council advertisements as well. This legislation is classic early to middle 19th century probably from the coal fields of Belgium or sweatshop England.

As Michael Costello has said in an excellent article in The Australian, this is a declaration of class warfare, by the most ideology-driven PM in our history. In a sense this is Australia's Thatcherite revolution, which will have much the same results. Oddly it may mark Howard's closing stage of his regime, and the anger and rage that will swell when many ordinary workers realise that they have been robbed will put an end to that old lie about Howard's Battlers. Actually for nine years the hostile Senate shielded many really dumb Australians from knowing just how bad the Liberals could be in given real power! The hurt to come will be worthwhile if some dopey Australians see the need to drive this government from power. Hopefully Dumbo Bush and his crazy economic policies will push up interest rates, which will be another slap for the make-believe millionaries in their suburban McMansions. And just for good measure the collapse of the US position in Iraq will reveal how stupid Howard's foreign policies have been... roll on 2006!

Michael, precisely. An increasing number of countries are expressing unease about the globalisation because they have worked out that if you destroy the "bottom feeders" you destroy the rest of the food-chain above it.

Howard and Andrews and most of Aussie major businesses haven't worked that out yet. How long will it take do you think? One year or two?

Margo, when you say "mount a solid case" - where one stands depends on where one sits.

There are lots of solid cases either side. Each represents particular vested interests. Churches, employers, unions, business groups all have their own axe to grind, and most of these will be very cynical, unrepresentative and short termist.

Playing solomon would be impossible, but it would be great to encapsulate the big arguments from all points in language my grandmother would understand. I suggest Malcolm B Duncan! (Sorry mate...)

Michael, of course I can be replaced, that's the whole point of the example I gave.

As to "buying my products", the whole point of the study I commissioned is to find global opportunities for an innovative Australian technology. Any half smart business operator knows that the Australian market is irrelevant. As an exercise, have a look at this. The white bits are where the action is, that's not here.

The point you make about exporting jobs is a very good one - the example I quoted of "knowledge work" going offshore throws a spanner in the works of a lot of conventional globalist thinking. I don't have an immediate answer, but one point I will make, and it's a well proven one: Our wages will not fall to Indian rates, their wages will rise to ours. In doing so, their living standards will also rise towards ours. That's a good thing - most of them live in poverty now. This is what the "trade not aid" concept Geldof, Bono et al rave on about means. Past examples of this: Singapore, Japan, Korea. Coming examples: Mexico, Latam, South Africa.

When I was a kid in the 60s "Made in Japan" meant cheap and nasty. It doesn't now. A factory worker in Japan is more expensive than one here, and much of the manufacturing has moved to Korea and China. There's any amount of data around to support this point. Living standards in Japan have soared and poverty has all but disappeared. I call this a good thing.

I imagine, and it's too late at night to think deeply, that over time the productivity differential between developed and developing nations will disappear, and pressures to move jobs offshore will too. That's a long way off, and in the short term there will be no shortage of painful dislocation.

Howard's demise, but I suspect Australia's loss of the Ashes might have laid claim to that moment first.

One thing is clear, though: Howard has made the deep strategic error of giving Labor a clear reason for existing. A party unsure for many years about what it stands for has been let off the hook by a Prime Minister who stands very firmly for something - something most people strongly dislike.

Sean, thanks for the reference. Of course productivity's a good thing - I'm an economic rationalist!

It's dead simple. Labour productivity increases because labour costs go down in real terms over time. The Government's using the "P" word as a euphemism for slowing down real wage growth relative to output growth. The other factor that drives productivity - how capital resources are utilised, is untouched by these proposals, but I don't see that as surprising. It's called "IR reform", it's all about labour, not capital.

Arguments about more flexibility and efficiency in labour usage are really about real wage costs, that's a smoke screen. Arguments about skills ditto - it's another way of saying "more bang for the employment buck".

As to China and India - there's nothing particularly innovative about their technology, yet. It's totally about labour costs, and in China's case, sheer size and political power. Even as I type this I'm watching a National Geographic documentary on Indian call centre outsourcing - and it's totally about how in India highly skilled resources are fabulously cheap.

"Bite the bullet", David Eastwood? Then how, once we all have, and every job is outscourced to India for "half the price", are you going to get Aussies to buy your products, pay their mortgages and utility bills or pay for anything once we have all been reduced to Indian style wages under globalisation, and maintain your standard of living? Or do you hope to operate in a vacuum, sealed off from the effects? How will the government find the money to waste on boring adverts about this new 'future that isn't the past' once the tax base of workers has been decimated followed by a plunging corporate tax base?

We all lose under this phoney globalisation scam-which is not inevitable if we don't allow it .

I wouldn't be wishing for it "the sooner the better" if I were you. You may get your wish. What makes you so special that someone in the third world cannot replace you and order that new study for that new complex technology? Don't ever delude yourself that you can't be replaced. You ,I, Kevin Andrews and John Howard can all be replaced in the blink of an eye.

Margo: That Howard image of running faster and faster towards an ever-receding finshing line in relation to the economy and competitiveness haunts me. The more I think about it the more I believe that the current paradigm makes no sense.

"…the fact that in Howard Government land it is apparently fine for the powerful and the relatively wealthy - ie businessmen and women, doctors, and lawyers - to bargain collectively; just not the hapless individual worker."

Oh dear Sue Bushell, I believe you may have a nail on its head. Don't repeat that in coming weeks, you may be accused of inciting "hatred" or "contempt" of the government.

Jokes aside, that is perfectly correct. What is not understood here is that employers use a basic template with minor changes to the document to "create" an AWA. The government's own website has such an template for the "Food Processing Industry". Employers currently using AWAs simply create their document and present said document to prospective employees. The only change from one to the next are the personal details of the recipient. Nothing more.

You can expect to see the above illustration for the Food industry replicated not only by the government but more importantly, industry groups. For example, the Australian Industry Group is likely to produce templates for the various industry areas it represents (including mine: Labour Hire) and make same available to members. Does anyone really then think that individual employers are going to then sit and draft their own?

Whole sections of industry will then present these (those that take the AWA option up) to employees or prospective employees. The only changes? Those specific to the company and the recipient.

When this is done by a union (by way of an EBA) it is called "collective bargaining". When it is done by way of a union and across an industry (vehicle manufacturing, freight forwarding, plastic packaging manufacturing) it is called "pattern bargaining".

So, collective bargaining will not cease at all. Only one side of the "negotiation" though will be allowed to avail itself of it.

It's called hypocrisy.

David Eastwood: "Our wages will not fall to Indian standards, their wages will rise to ours".

So what we get David is a race to the top (not the bottom) - but as you suggest there will be dislocations. Such that individuals in less skilled roles will lose out unless new skills are acquired - increasingly difficult with increased barriers to education.

Brian McKinlay: "As Michael Costello has said in an excellent article in The Australian, this is a declaration of class warfare, by the most ideology-driven PM in our history."

Yes.

"In a sense this is Australia's Thatcherite revolution, which will have much the same results."

No. Having lived through both, Howard is far more extreme than Thatcher ever was. The UK as deformed by Thatcher was a bucolic paradise compared to what Howard is trying to create in Australia.

One of the greatest problems facing society is the desire for all to pay the cheapest price for goods and services. This applies to individuals, companies and governments. Two very apt quotes made by John Ruskin, a 19th Century English author and economist, are as follows:

"It is unwise to pay too much, but it is worse to pay too little. When you pay too much you lose a little money. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying too little and getting a lot. It cannot be done! So if you deal with the lowest bidder, it is wise to add something for the risk you run. And if you do that, you will have enough to pay for something better."

**************************

"There is hardly anything in this world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey"

It is only when people are prepared to pay a little extra for quality that we will actually save money. For example buying foreign goods may save $20 each week on our grocery bill, but we then pay $30 extra in taxes to support the unemployed due to the closure of their employer. The foreign car may be cheaper and comparable quality to an Australian built car, but the money saved is then spent on industry support or unemployment and retraining schemes for the workers when their factory closes (Holden and Mitsubishi are good examples of this).

In our pursuit of affluence and status, we are cutting our own throats and so called competition is actually destroying competition and choice.

Jay, you believe that productivity gains will chiefly go to senior management. That's an often cited view, but misguided. Look at the wage bill of any major corporation, and you'll see that the senior managers get a pretty small slice of the pie. I did the exercise on a big 4 bank a while ago, and despit earning salaries often described as "obscene" senior and upper middle management made up less that 5% of the overall wage bill.

In terms of increasing productivity, there are only two drivers" "Labour" (people) and "Capital" (Capital equipment and other fixed assets). Of course both need to be tackled - but there are constraints on the fixed asset side. Could a bank get more out of its branches by opening them 24 hours a day? No, there would be no-one to serve.

Could a manufacturing business get more out of its factories by running them 24 hours per day? Possibly - if it could sell all the stuff it made. How? Make it cheap enough to reach export markets. How? Reduce labour costs, the fixed asset costs are "sunk" - they have already been spent so they can't be reduced further.

Malcolm, she wants to understand the guts of the new IR proposals in 25 words or so with no political or other vested interest spin. She's 96 and struggles to wrap her mind around all this spin stuff.

Sean, thanks. Yes I do believe it's a race to somewhere other than the bottom, but maybe not the top. I'm a closet Malthusian and I'm sceptical the world can afford to live at the standards the west does now unless it can find a way to use a lot more renewable energy and grow and use food more efficiently.

What I've long believed is that governments that embrace globalisation and some of the so-called "rationalist" economics that go with it have a duty to address the "whole picture", and they rarely do.

What do I mean? There's virtually nothing in our current Social Welfare policy philosophy that explicitly addresses the inevitable dislocation globalisation will cause.

And look now, we have a major new IR package that will certainly create incremental short & medium term dislocation, for longer term benefit. Fine, but where's the accompanying Social Security package designed to ease the incremental "dislocation burden" it will cause?

Margo: The Welfare to Work package is stalled, I'm told, and the Govt now claims there's no necessary connection between the two. Webdiary is following the W to W debate, and we've now combined its archive with the IR one. I remember reading a while ago that Fred Hilmer, architect of the competition policy revolution, said there was always supposed to be a second big report on handling dislocation and putting in place transition arrangements for communities tossed on the scrap heap post the big bang. Keating never got around to that one, and therein lies part of the momentum for what would become the Hanson phenomenon as many country towns and maufacturing towns (think Ipswich and Maryborough in Queensland, for example) were left to die all by themselves.

To me, the notion of a "fair go" being gratuitously bandied around by various commentators, politicians and punters could much better manifest itself in calls for beefing up welfare to deal with the implications of the new IR policy framework.

Apart from the issues of rights and equity that lie at the heart of this obnoxous piece of legislation, there is a basic contradiction in all the spin and hype coming from Howard and his big business backers-and it's this.

To the extent that lowering wages encourages employers to hire an additional employee, then absent increased demand, these measures will actually lower productivity. Productivity is not increased by increasing the number of people in employment simply by making it cheaper to employ them. Productivity is increased by increasing the amount and quality of goods and services produced using the same or less numbers of employees for each unit produced. Or by producing much more than they currently do with the increased number of employees they may employ.

If there are additional employees employed whose marginal productivity is the same or lower than those already in employemnt, there will be a net decrease in productivity.

If there are not additional employees employed as a result of these changes, but rather a substitute of new and cheaper employees for those already in work there will BE NO INCREASE IN PRODUCTIVITY, but there will be an increase in the surplus produced which goes to the employer for either investment or transfer to investors (capital) by way of increased dividends. If the increased surplus goes to investment in capital goods, (new technology and the like) then the demand for additional employment will be actually decreased, as new technology is able to produce the same or more using fewer people!

To the extent that competition for jobs at the lower end of the skill scale increases, then all that will happen is that those whose whose productivity is higher, (because they have more expreience and therefore more skills than those who are new hires) will lose their jobs in favour of those who are cheaper, but whose marginal productivity is less. This decrease may be imperceptible to each individual employer, especially if they are able to increase the length of the working day, but across the whole of the economy the effects will be marked.

In the absence of any mandated updating of the skills and capacities of the employees coming onto the labour market as a result of the welfare to work changes, we can confidently expect productivity to actually fall.

Since Australian employers refuse to accept that they have any responsbility to train and develop their existing workforces (let alone a newer and cheaper one) they will 'waste' the flood of cheaper and more tractable labour in an orgy of cost cutting, as each employer is forced to follow the lowest payer in each industry to remain competitive.

Trade unions actually improve productivity by forcing employers in industries to 'spread' productivty gains across the industry. In the absence of this discipline, employers will simpply substitute labour for investment in new technology, upgrading of skills and development of new techniques. To the extent that they still do those things, there is no mechanism to ensure that the virtuous cycle of investment on people and technology will be spread acrooss the industry.

This scheme is a recipe for a low wage, low skill, economy, where deference and fear are the driving forces at each enterprise. You only have to compare New Zealand's productivity in the 1990s with Australia's in the same period to understand the point.

Before people start to natter about skill shortages, and a 'workers market' understand that employers are already poised to import new skilled labour (trained snd developed by third world countries who can scarcly afford to lose their own skilled workers) as a substitute for their inaction over the last decade on the issue of skilled apprenticeships.

Understand that the bulk of the 'new apprenticeships' introduced by this tawdry government have gone to their mates in retail and fast food, not in areas of high cost training. That task is now being outsourced to the school system, so that the states and parents, can undertake the task that once used to be performed by business in this country.

Is there anything at all that business in this country feels that they should actually pay for? Their political representatives are actually saying that the working poor should be supported not with the wages they earn, but by the welfare system. That means every body who is a PAYE taxpayer, will be requird to subsidise the wages bill of every business in the country.

I don't know about you, but I believe in mutual obligation. When will Australian employers acknowledge that they have an obligation to the general community to actually pay people a wage they can live on, and also an obligation to train their own employees?

The biggest welfare bludgers in this country are the BCA, ACCI and AiG.

Margo: Hi Jane. I heard from someone on the inside a while ago that the Government's National Training Authority, or whatever the body is called that subsidises trainee wages for business, is a giant crock. Anyone care to investigate for Webdiary? I don't know if Fairfax gets the subsidy, but I do know that the company now favours taking on not genuine trainees but qualified journos from regional or country areas. That way they don't actually train them but use them from day one to do the work of qualified trained journos at lower pay.

I was shocked to hear in Question Time yesterday that the Government will now IMPORT apprentices from overseas. Even in these boom times there are many young Australians in the underclass. How about insisting that employers spend the money they want to spend to do this (or is it our money again) to financially help unemployed youth in the cities move to the country where there are shortages or give them subsidies to train at TAFE in exchange for a three year stint for the employer concerned?

Mr BURKE (3.04 p.m.)—My question is to the Minister for Citizenship and Multicultural Affairs, representing the Minister for Immigration and Multicultural and Indigenous Affairs. I refer to the minister’s answer of Tuesday where the minister referred to the new visa for imported apprentices. Does the minister understand, despite his answer, that new apprentices from overseas are not skilled migrants but are coming here to take up these places to acquire skills? Minister, isn’t it true that if an imported apprentice refuses an AWA they will miss out on the job, the apprenticeship and the visa? Given the abolition of the no disadvantage test, how will our young Australians compete for apprenticeships, given imported apprentices will accept any wages to get the visa? You are driving wages down—and you know it.

The SPEAKER—Order! In calling the minister, he will ignore the last part of that question.

Mr JOHN COBB—Despite the government’s best efforts at encouraging higher participation by apprentices—and that includes lifting the living away from home allowance, giving an allowance for tool kits and other inducements—country Australia is where the highest shortage of skill levels and apprenticeships exist. There are many instances of employers and contractors who have had to put contracts on hold and put on hold their expansion ideas. The government has put together this visa with a great deal of consideration.

This visa will not—I repeat: will not—disadvantage any young Australian wishing to become an apprentice. This visa will not disadvantage any young Australian wishing to become an apprentice in country Australia. Employers are bound and have to make every attempt—in fact, they have to prove that they are unable to get an apprentice locally. That means also that local bodies, like councils, have to agree that they are unable to access an apprentice locally before they are able to get an apprentice from overseas to fill the position.

Mr Burke—That’s wrong, you’re misleading the parliament.

The SPEAKER—Order! The member for Watson has asked his question.

Mr JOHN COBB—It would be a wonderful thing if apprenticeship vacancies in country Australia were side by side with people wanting to fill those positions. But the reality is that, with Australia’s record low unemployment, it is simply not the position. I must repeat that no employer will be able to disadvantage any young Australian or Australian permanent resident who wishes to have an apprenticeship in country Australia. This government sees no reason why the prosperity of country Australia should be disadvantaged because the union movement runs the Labor Party.

Sorry Grant, I don't buy that. What you're overlooking (excellent quote by the way) is that our preferences are individual. What is a worthwhile "little extra" for quality for me might be an intolerable burden for someone scraping to make ends meet. You're overlooking market segmentation and, in a sense the individual's right to choose.

As a great exercise, go to a supermarket of the same brand as yours in a very different part of town and do your weekly shippong there. Chances are you'll find that lots of what you usually buy isn't there. I've often been frustrated trying to shop in a "foreign" store.

Retailers are adept at altering their product mix to suit what sells in each store's catchment area. Broadly, looking at staples like toilet roll, baked beans etc the cheaply positioned own label brands sell more in the poorer areas, the more expensive brands in the more affluent areas, even though we all buy the same stuff at the top level.

Back in cold war East Germany everyone had a choice of one brand of toilet paper, and it was shocking stuff. The state had determined, in a Germanically efficient manner, that the citizens only needed on ebrand of toilet paper and that it would be more economically efficient to produce on that basis. The resulting monopoly made the senior managers of the Toilet Paper producer very rich, as they were able to frig the accounts so that the state only saw a small proportion of their overall revenues,while the rest went into their pockets.

Needless to say, East German toilet paper was more expensive, dead scratchy and less effective that the western version. It's not lamented, say my sources.

Margo, good point! Fred does get credit for something...

I've probably clumsily understated what I'm alluding to. It's more than welfare. Way more, and your Hanson reference is spot on. It's about:

1) Understanding and acceptance. Governments have a duty to help us understand the implications of globalisation, accept that they are positive in the long term.

2) Expectations. Those threatened need to accept that the short term disclocations are understood buy the community at large, and that they will be supported by the community. They need to know they will get a fair go.

3) Adopting an holistic approach. It's not just welfare dollars, it's about communities, self respect, education, training, resettlement, immigration (yes!), population policy, reginal and town planning etc etc etc. I never saw Hilmer's report, but I'd be surprised if it didn't push this line.

Margo: David, I don't think there ever was a Hilmer report part 2 - there was meant to be, but it never happened. Thanks, Paul K.

Margo, I work in a related part of the sector and can confirm that the process for attracting apprentices from overseas is underway. Curiously, I don't see any lack of local kids wanting apprenticeships, so much as a shortage of employers to take them on.

Maybe this is just being seen to be doing something about skills shortages?

Margo: Hi Karen. Care to write a piece on what's going on in this area and how it can be reformed for the benefit of our kids?

Ian McIntyre: "Remember Patricks and the rotteweiler controversy on the Melbourne wharves."

This was only a controversy to the unions. The rest of Australia agreed with it.

Margo: That's not correct, Alan. The opinion polls were very evenly split at first - see here, then swung the union's way, from memory. Here's the ACTU's perspective at the time.

It was not just Patricks involved in the Waterfront debacle.

In 1995, WA Transport Minister, Eric Charlton gave control of part of the North Wharf at Fremantle to Len Buckeridge of the Buckeridge Group of Companies (BGC).

After he lost to the MUA, he had the cheek to demand and receive compensation.

"their wages will rise to ours."

It's a nice idea David but do you seriously think that will happen in our lifetime? And if that's ever acheived I suggest Australia would be about as relevant to Asia as Fiji is to the World.

The Patricks' debacle was another giant con foisted upon us with the covert support of Howard. That the much maligned wharfies got even 50% support from the public was a miracle, given the long history of real corruption on the wharves. Even my fiercly socialist grandfather both admired the strength of the wharf unions and railed against the endless hassles he encountered getting imported goods past them. Given their unpopularity this was a reason that the dreadful Reith and Howard judged could be the first real attempt to destroy unionism. Many of the same arguments were used then, as are being used now. It's just always ideology with the Howard government that is utterly vacuous when it comes to new ideas for a new century. Big business is never wrong. Except with Patricks - the same hopeless management with borrowings equal to 110% of it's capital.

Michael, yes I believe it will very easily happen in our lifetime. It took about 25 years in Japan, Hong Kong and Singapore. Won't happen overnight, but...

David - you have supported my statement in a roundabout way. I live in Ayr Nth Qld. One each Coles & Woolies. Next nearest like stores (any stores)are 100km's away (Townsville). Everybody rushed to do their shopping in these stores when they first opened because of oh so cheap prices & lots of variety compared to the local & independent grocers/butchers/etc.

Since most of these have now closed their doors, Colesworths have much limited range of products. Mostly own brands & a few overpriced name brand products. eg $2.30 500g savings brand frozen peas, $4.10 birdseye peas. In many rural(poorer) areas the own brand products are the major sellers (I refuse to buy them, will always stick to known brands).

It is well known most of the Colesworth's own brands are made from mostly cheap imported products usually not even packaged in Australia. Just like Wal-mart in the USA where the majority of products are foreign made & imported therefore cheaper, many local businesses are forced to close.

Once that is achieved by people saving a few dollars each week on groceries, now fresh produce etc prices go up. Now you have to buy the cheaper own brand products to be able to afford the necessary items needed, which in turn leads to the known brands starting to import or move operations offshore (Heinz to NZ). Jobs are lost in manufacturing & we are now paying even more in taxes to support the unemployed as well as ridiculous prices for any fresh or local products.

Sorry if this seems to be straying off the topic of this thread (I don't quite have the language skills of many others in Webdiary)but my point is, because of people's desire to get everything for the cheapest price possible, we now have the business community & gov't saying we need to drive down wages & conditions for business to be able cut costs to compete.

Because people were scared about their interest rates increasing we now have one of the most draconian Gov'ts in Aust history, the effects of which will be suffered for a great deal many more years after they are voted from office. We are headed for the recession we DIDN'T need to have!!! (Wow my brain hurts from trying to put this into coherant words)

Margo Paying more for products you think are more worthy is fair enough. You are placing a dollar value to your principles. Fair enough.

Grant, your words sound perfectly coherent to me. I guess my point is that we all want things as cheap as possible all the time, regardless. Why woudn't we?

We all want different things, but if I can buy the next Madonna CD for $15, why would I pay $30 for it? That's $15 lost that I could have spent on whatever I want, or need. Could be food, luxury items, petrol or indeed a donation to charity or a meal for a homeless person - whatever I want. Any rational consumer will always want the option to have a few more bucks in their pocket to spend on whatever they want.

Margo: I don't agree with that, David. A rational consumer could well pay more for organic food, to protect their health and help the environment. Same for buying food from companies which source their food and other products from local co-operatives in the third world. It depends on what one sees as ones self interest and the emphasis one places on one's duties as a citizen of the planet. Another case - a rational consumer could patronise the independent petrol retailer or grocer or community newspaper to foster community-based businesses and/or stop big business cornering the market then increasing their prices after forcing their smaller competitors out of business. Or paying out for a rain water tank or solar panel to do their bit to conserve water and reduce the nation's reliance on coal-fired power. Are ethical investors and ethical consumers irrational?

Margo You're quite right - I overlooked the cases you mention which indeed are excellent examples of how a consumer might go for something other than the lowest price.

I guess implicit in my reasoning is that we select what we buy based on our values and then look for the best price. If that means selecting an independent petrol retailer, for the reasons you articulated, then shopping around for the cheapest independent retailer is what may well come next.

I'm all for this style of consumer activism, but I am also deeply sceptical of it as the degree of transparency that exists in many of these "ethical" situations is low, and one can never be sure whether one's intent is actually being met, or whether you're just lining the pockets of some entrepreneur or multinational in disguise.

Classical rationalist economics would say the most effective way to achieve social goals is not to buy products at a premium that support these goals, it's better to buy on pure economics and then give the money save to the cause in question - cuts out a whole raft of middlemen.

What often happens in the "support the third world" example is that an enterprising middleman buys the produce extremely cheap, sells it to us extremely expensively - and we feel good about that as we're "supporting the third world", and then they pocket a large margin along the way and get very rich. The right answer here is to remove trade barriers and subsidies and let the big players source the mainstream stuff they sell from the third world. A lot more people would get pulled out of poverty much faster that way. Sure, the multinationals will pocket a big margin too - but competition usually pushes that back to today's levels before too long. We could argue too that the benefit to the third world is worth it in any case.

I don't believe ethical investors and consumers are irrational at all, but I fear that much of their goodwill is currently being turned into profits for opportunists, and relatively little of it is hitting its intended target.

Margo: Well that won't happen with Webdiary, David, you can count on that. All revenue and outgoings will be completely transparent to all Webdiarists through the regular publication of our bank statements. People can comment on or query them through the comments box, and if a Webdiarist accountant - John Carson? - would like to volunteer, he or she can check them out any time.

Just to add my two cents' worth about the cheaper products - it's much more complicated than the supposed holy grail of being the cheapest, it's more about what you value. For example I still refuse to buy the cheap milk from interstate becuse of what happened to the milk farmers and local milkos. I have consciously thought - that could have been me having the rug pulled out from under me by supposedly sound economic principles. Well, I have principles.

Margo: Hi Mardi. And was the economic reasoning for all that sound? See Pull the udder one.

The cat is (almost) out of the bag. The government's own Treasury report apparently details that all is not well within Howard's workplace Utopia. If the report is saying what it's reported as saying, then the government's claims that unemployment will fall and wages will rise is nothing but lies. Stands to reason - Howard and lies are common bedfellows.

David, in a previous post in this thread you mentioned the two drivers affecting productivity, namely capital and labour. Given that capital costs are less flexible I'm interested to know which strategies you consider to be the most effective for reducing labour costs.

In the same post you dismissed arguments about the disproportional distribution of wages, citing a breakdown of the wage bill of a bank, as being inconsequential to the issue of productivity. In financial terms your argument is attractive, the mathematical logic is undeniable, however I think you underestimate the impact that absolute increases in the wages of senior management, however relatively insignificant, can have on the culture of an organisation.

In the same way that huge increases applied to the few yield small changes in proportion, small increases (like worker demotivation factor because the boss is getting way too much while I'm here doing all the work) applied to the many yield huge changes.

You are right, David Eastwood, in a well run pyramid scheme the shavings from the bottom reaps much more than enough for those at the top. Nor am I advocating a culture of envy. Senior managers work long hours, and they are generally hired on merit. They genuinely do not enjoy inflicting pain, unless they have their executioner mask on, and do so believing they are making the hard decisions, while in fact it is the easy ones.

Some people think that being a good manager is easy. It is not. It requires skills that are not being taught. Some think that senior managers have a lot of power, the manager simply signs off a policy or law, and it automatically becomes good, right, and starts working the way he envisions it (and it usually is a he, women are usually more attuned to their environment). They believe in the simple models economists create. Unfortunately a lot of these people are managers and politicians, and they do have a lot of power over people’s lives.

Elsewhere in this discussion are claims that we need to import apprentices because we have a shortage of applicants. Does that mean that Australia has no unemployment? Or is the real issues more complex and the hiring of overseas applicants is an easy solution which give the added benefit of lowering employment conditions.

I lived through the industrial reforms in New Zealand (started by Labour), and saw those who preached that the country had to go through the pain being the ones who felt it the least. And reforms are necessary. Consolidating state legislation makes sense. Firms sometimes need down-sizing, and restructuring. However, good firms simply stop hiring staff, and with turnover typically at 20%, it can be achieved reasonably quickly. However, often the real purposes of restructuring are partly to look busy and partly to get rid of non-performing staff. Non-performers can be fired under existing rules. It takes about as long as a re-structuring, but it requires the managers to be able to prove that they are genuinely managing their staff.

We claim we live in a democracy. If so, why do we establish cultures and laws where money rules?

I had been promising to put up a piece on the extent of the Corporations power under the Commonwealth Constitution for some time now - and now I finally see my way clear to do it.

Firstly, section 51 of the Commonwealth of Australia Constitution Act provides:

The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to:

(xxxvii) matters referred to the Parliament of the Commonwealth by the Parliament or the Parliaments of any State or States, but so that the law shall extend only to the States by whose Parliaments the matter is referred, or which afterwards adopt the law;..."

I have referred to the "referrals" power incidentally at this point (as a consequence of an idea I had after reading one of Malcolm's posts) and shall return to it at a later point. Now to the issue of the extent of the corporations power (and the legislative power of the States, by extension)

When interpreting the Constitution, a theory originally developed that the Commonwealth had legislative competence for each of the heads of power - but the Commonwealth was to be strictly kept to the specifics of the head of power - and the States held "reserve powers" with respect to the particular s 51 head of power. The theory being that in a federal system of government, this is how the legislative power should be shared between the Commonwealth and the States.

This was known as the "reserve powers doctrine" of Constitutional interpretation which gained favour, but was quickly abolished by the High Court in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers' case") (1920) 28 CLR 129.

Prior to the Engineers' case, a test of the validity of legislation which relied on the corporations power was whether in fact the legislation was a law with respect to either financial, trading or foreign corporations - and if it was, the law was considered valid. The lead decision on the corporations power was Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330, where the High Court by a 4-1 majority, applied the "reserved powers" theory and said that the Commonwealth could legislate only with regard to the legal capacity of foreign, trading or financial corporations but couldn't regulate the activities of those companies. Sir Isaac Isaacs was the only judge to take the contrary position and said that the Commonwealth could regulate the conduct of corporations and the conditions upon which they conducted business. He had some reservations to this approach and said that the Commonwealth, acting under s 51(xx) could not regulate the formation, the internal affairs, the liquidation of the company, or set the wages paid by corporations to their employees, or the qualifications required by company directors.

It wasn't until the Federal Parliament, passed predecessor legislation to the current Trade Practices Act - that Sir Isaac Isaacs position was eventually vindicated. The Parliament was attempting to broadly legislate with respect to the trading activities of trading corporations by making use of the corporations power. The prevailing constitutional theory was that in Huddart Parker and so the issue of the validity of the legislation proceeded to the High Court.

The High Court decided in Strickland v Rocla Concrete Pipes (1971) 124 CLR 468, by a 5-2 majority that the Parliament could legislate to control the anti-competitive conduct of the corporations listed in s 51(xx), but that portions of the legislation then enacted by the Federal Parliament went beyond the legislative head of power and was invalid. The other important ruling, by 7-0 majority was that the decision of the Court in Huddart Parker was wrongly decided and should be overruled (giving Isaacs J's dissenting opinion some credence).

The only criticism that can be made of the decision in Strickland is that the Court declined to define the scope of the corporations power - and this, to an extent was left to later decisions.

Decisions subsequent to Strickland sought to identify whether the behaviour of a corporation brought it within the definitions of trading, financial or foreign corporation within s 51(xx).

It wasn't two decisions of the High Court in Actors & Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 and Commonwealth v Tasmania ("the Tasmanian Dams case") (1983) 158 CLR 1 that the Court started to look at what the outer reaches of the corporations power actually was.

Fontana Films was a decision of the Court, examining the validity of section 45D of the Trade Practices Act 1974, which prevents employees from engaging in strikes in support of people presently engaged in industrial action. Gibbs CJ took the view that the laws were valid under the incidental power (s 51(xxxix)) and made the following observations (with emphasis added):

"The words of par. (xx) suggest that the nature of the corporation to which the laws relate must be significant as an element in the nature or character of the laws, if they are to be valid: cf. per Walsh J. in Strickland v. Rocla Concrete Pipes Ltd. (1971) 124 CLR, at p 519 . In other words, in the case of trading and financial corporations, laws which relate to their trading and financial activities will be within the power. This does not mean that a law under s. 51 (xx) may apply only to the foreign activities of a foreign corporation, for ex hypothesi the law will be one for the peace, order and good government of the Commonwealth. It means that the fact that the corporation is a foreign corporation should be significant in the way in which the law relates to it. For present purposes, however, it is enough that it is established by Strickland v. Rocla Concrete Pipes Ltd. that a law which governs the trading activities of trading corporations formed within the limits of the Commonwealth is within the scope of s. 51 (xx): see especially at pp. 490, 508, 525. Of course, the law in the present case does not regulate or govern the activities of trading corporations; it regulates the conduct of others. But the conduct to which the law is directed is conduct designed to cause, and likely to cause, substantial loss or damage to the business of a trading corporation formed within the limits of the Commonwealth. I can see no reason in principle why such a law should necessarily fall outside the scope of s. 51 (xx). A law may be one with respect to a trading corporation, although it casts obligations upon a person other than a trading corporation. An example is provided by s. 5 of the Crimes Act 1914 (Cth), as amended, considered in Reg. v. Australian Industrial Court; Ex parte C.L.M. Holdings Pty. Ltd. (1977) 136 CLR 235, at pp 246-247 . A law will fall within the power if the conduct to which it is directed is so relevant to the subject of the power that a law rendering such conduct unlawful can be described as a law with respect to that subject.

Stephen J discussed the process of characterising a law to determine whether it is within the corporations power, or any other source of legislative power and made the following extracted comments:

What I have said touches upon one of the major difficulties involved in the process of characterization. An accurate description of any at all complex law will necessarily be relatively detailed if it is to encompass the several elements which together go to make up the impugned law. However, constitutional grants of power such as those in s. 51 are customarily expressed quite differently - succinctly and in terms of wide generality. Thus, when an accurate, and hence relatively detailed, description of a law is sought to be matched against one or other of the tersely expressed grants of legislative power contained in s. 51 of the Constitution, it will not infrequently be found that different parts of the description of the law fall within different paragraphs of s. 51; still other parts may be found to fall within none of those enumerated grants of power, because they concern elements of the law which are the subject only of State legislative power.
...

The centrality of that connexion is emphasized, rather than diminished, by the fact that the prohibition which the law imposes is not addressed to corporations but rather to those who act with a purpose of harming them. That the law takes this form is dictated by its aim of protecting corporations from a particular harm; in such a prohibitory law the focus will necessarily be upon the acts of those who intend harm. A law forbidding certain acts of third parties for the reason that they were both intended, and also likely, to harm aliens would surely be as central to the grant of power with respect to aliens as a law which required aliens to do or refrain from particular conduct: the intended object of another's conduct is no less central, no less significant, in bestowing a character upon a law than is the actor to whom that law directly speaks.

Mason J commented (emphasis added):

I should not wish it to be thought from what I have said that the corporations power is confined in its application to trading corporations to laws that deal with their trading activities. The subject of the power is corporations - of the kind described; the power is not expressed as one with respect to the activities of corporations, let alone activities of a particular kind or kinds. A constitutional grant of legislative power should be construed liberally and not in any narrow or pedantic fashion...

Nowhere in the Constitution is there to be found a secure footing for an implication that the power is to be read down so that it relates to "the trading activities of trading corporations" and, I would suppose, correspondingly to the financial activities of financial corporations and perhaps to the foreign aspects of foreign corporations. Even if it be thought that it was concern as to the trading activities of trading corporations and financial activities of financial corporations that led to the singling out in s. 51(xx) of these domestic corporations from other domestic corporations it would be mere speculation to say that it was intended to confine the legislative power so given to these activities. The competing hypothesis, which conforms to the accepted approach to the construction of a legislative power in the Constitution is that it was intended to confer comprehensive power with respect to the subject matter so as to ensure that all conceivable matters of national concern would be comprehended. The power should, therefore, in accordance with that approach, be construed as a plenary power with respect to the subjects mentioned free from the unexpressed qualifications which have been suggested.

Brennan J applied the Court's previous decision in Strickland concluding that a law protecting the business of a trading corporation was within the corporations power, but commented:

A law which, discriminating between one or more of the corporations in para (xx) and the public at large, protects both the trading and non-trading business of trading corporations, wears the appearance of a law with respect to those corporations. It is of the nature of the power that it is a power to make law with respect to corporate persons, not with respect to functions, activities or relationships. The subject matter of activities, or relationships which the law affects may be relevant to the question whether the law is truly to be described as a law with respect to corporations mentioned in para (xx), but the validity of the law cannot be determined as though the power were expressed as a power to make laws with respect to the trading or some other activity of or relationship with corporations mentioned in para (xx).

The remaining members of the Court agreed with the separate judgments of Gibbs CJ and Mason J.

The Tasmanian Dams case, involved the validity of the World Heritage Property Conservation Act 1983 (Cth) - particularly in so far as it purported to legislate using s 51(xx) to prohibit corporations from undertaking certain activities within heritage listed areas. In this case, the area in issue was the proposed Gordon below Franklin Dam in south west Tasmania.

Predictably, Gibbs CJ adhered to his previous view in Fontana Films and determined that the Hydro Electricity Commission was not a trading corporation, because its activities, together with the purpose of its formation was in discharging a public function of importance to Tasmania. The trading function of the Commission, although important did not reflect the character of the corporation and by extension, the Commonwealth legislation did not apply to it. In any event, the relevant provisions could not be truly characterised as a law with respect to corporations.

Mason J cast the issue of legislative validity firstly, in terms of the scope of the corporations power and secondly, whether the law is in truth a law with respect to the corporations power, so defined. His Honour held that the Hydro Electric Commission was a trading corporation and the law was within the terms of the corporations power. In doing so, he commented (with emphasis added):

The true principle is that the character of the law is to be ascertained from its legal operation, that is by reference to the rights, duties, obligations, powers and privileges which it creates. This is not to deny the validity of a law which exhibits in its practical operation a "substantial connection" with a relevant head of power... The requirement that there should be a substantial connection between the exercise of the power and its subject matter does not mean that the connection must be "close". It means only that the connection must not be "so insubstantial, tenuous or distant" that it cannot be regarded as a law with respect to the head of power...

Brennan J decided that the relevant legislation was a law with respect to trading corporations but declined a view on the extent of the corporations power. Deane J preferred the broad view that the corporations power was not restricted to the trading activities of trading corporations - but that it was a general power to make laws with respect to trading corporations. Murphy J substantially agreed with the reasons of Mason J. Both Wilson and Dawson JJ took a view similar to that of Gibbs CJ.

So what does it all mean? And does it really matter?

In Fontana Films, the Court divides itself into three camps on the extent of the corporations power and its legislative use. Gibbs CJ and Wilson J preferred a narrow approach to regulating the specific activities of the types of corporation listed in s 51(xx). Mason, Murphy and Aickin JJ suggest that s 51(xx) is a broad grant of legislative power with respect to the types of named corporations which should be construed liberally and without implication. Stephen and Brennan JJ took a limited view that s 51(xx) authorised legislation governing the trading activities of trading corporations - but declined to address the issue further.

In the Tasmanian Dams Case, the Court split into two main groups. Gibbs CJ, Wilson and Dawson JJ took the limited view (largely postulated by Gibbs CJ in Fontana Films). Mason, Murphy and Deane JJ took the broader view put up by Mason J in Fontana Films. Brennan J's decision managed to resolve the dispute before the Court (in terms of the corporations power), without pushing the matter beyond the narrow view of the corporations power outlined by Gibbs CJ in Fontana Films.

Is it really relevant today, particularly regarding the debate over the industrial relations legislation?

The short answer to that question is "Yes, but"...

It all depends on one caveat - and that related to the constitutionality of the entire Commonwealth legislative scheme relating to company law in Australia. The problem commenced with a decision of the High Court in Re Wakim; Ex parte McNally.

The issue, to put it in simple terms, was this - the Commonwealth Parliament can validly confer federal jurisdiction upon State courts under the Constitution, however, it is impossible for the State Parliaments to legislate and confer State jurisdiction upon Federal Courts.

This was the presumption upon which the Corporations Act in the form it had taken to date had rested and to that point, had functioned effectively. This was the potential doomsday nightmare scenario for corporate law in Australia.

Remedial legislation was passed by all Parliaments to attempt to fix things, however, there were still potential problems envisioned. The conclusion arrived at to remedy the situation was for the States to refer their legislative powers to the Commonwealth to enable the Corporations Act to not suffer the fate of constitutional challenges regarding its validity. The States all passed referring legislation in the form of a uniform Corporations (Commonwealth Powers) Act 2001 (the Territories don't need to by virtue of s 122 of the Commonwealth Constitution).

So what does it all mean?

The Commonwealth have not made a wholesale reference of legislative power with respect to corporations to the Commonwealth - on a fair reading of the uniform legislation, its only a limited reference to support the validity of the Corporations Act in its present form.

The corporations power s 51(xx) in the constitution is to be applied to the Workplace Relations (Work Choices) Bill 2005 - with its attendant problems, and the position in Fontana Films and Tasmanian Dams (ie. can the Commonwealth legislate only for trading activities, or can it legislate for all purposes for trading, financial and foreign corporations?) is the issue which will squarely arise for the decision of the High Court in yet another bun fight to come.

Flow on consequences for the IR reforms might be:

1. The States should never make a wholesale reference of legislative power regarding corporations to the Commonwealth - and in the event that they do, then the wholesale referral of power may be able to be revoked.
2. In the event that businesses are structured in such a way that assets are held by one company, employees are employed by another and the business of the company is conducted by a third, it may be possible that the IR reforms do not apply to the "employee company" if that company cannot be described as a trading, financial or foreign company.

Just a few more thoughts and a bit more grist for the mill in this debate.

Margo: Many thanks, Andrew. Good on you for taking the time to set this hard legal stuff out for Webdiarists.

Brock Turner, thanks. I'm not sure if you're trying to set me up to say something hideous about workers, but if you are, here it comes: There are only two ways to reduce labour costs. 1) Use less people and 2) Pay the people you use less for the work they do. Both options hurt workers in the short term (and benefit them in the longer term IMHO).

In our economy, and most Western economies option 1 has always been the main thrust of managerial effort, usually through automation, and sometimes via nasty IR battles about working conditions. Option 2 is now becoming more realistic through outsourcing offshore, and perhaps also via the evolvcing IR climate at home that is replacing rigid award based wage structures wth new, more adaptive agreements. I say perhaps, because our unemployment is at historic lows, which givers workers overall a fair bit of bargaining power at present. Given that it really is unclear that the proposed reforms will drive down wages in the short term - though next time we have a recession that may change.

The motivation effect you describe is certainly there in middle management levels in large corporates I've worked in, despite them often being in on the joke. But, in my experience (I've had may operational management jobs over the years) the shop floor doesn't give a rats arse. All they want is a pay packet in return for doing a job they don't have to think too much about, and that's their right. We're not all careerists. Why should anything else be expected of anyone, and why should they care about how much their bosses make?

My brother graduated from University with a double major in English and Politics. After Uni He got a menial job in the pay office of a public service organisation, because that's all he was qiualified to do and he wasn't ambitious. After a few years he got fed up with doing work that exercised neither mind nor body. He's been a postman for the last 15 years, and he's very happy about that.

In answer to Jay Somasundaram's question, why do we create a society where economics and money rules? I think the answer to that can be found in a famous case in America (and as I am not a legal type I cannot give chapter and verse on it) whereupon the Supreme Court decided that corporations were to be classed as individuals and to have all the rights and benefits accorded to them that are given to every individual in society. So the transmogrification began and, of course, the political parties which represented capital in society thus pushed this ideological barrow very hard and continue to do so to this day; culminating in the sort of IR laws we are about to have foisted on us courtesy of our own capitalist party. Suffice to say, they also like pushing the line that each and every worker ought to become a micro capitalist corporation, notwithstanding that it will surely create a dog eat dog world ultimately. However, that's the sort of social Darwinism that they ascribe to wholeheartedly, and that's their right I suppose in a democracy, and whilst I still can, I don't have to like it because I happen to think that not everyone is capable at all times of being grist for the mill and so should not be cast onto a social scrapheap for being so, or made to become part of a working underclass rather than being afforded the time to achieve at their own pace with the gentle encouragement of carrots, rather than being beaten with sticks, and made to suffer deprivation. Of course, malingerers should not be tolerated, but experience has taught me that some people are too fragile and break too easily.

Finally, for the edification of all, and especially because The Australian probably won't print my rebuttal to their onerous weekend editorial, I'll leave you with my latest Letter to the Editor:

'In contrast to what you claimed in your editorial on the weekend, it is you who have put the O into oxymoron.

You say that the itinerant society that the new IR laws will create will be better for one and all, skilled and unskilled labour. That if you leave your job on a Friday, because the boss won't give you what your inflated opinion of yourself thinks that you are worth, then on Monday you will be able to walk around the corner and find a factory, with a shingle out the front, advertising a vacancy, for a job paying what you think you are worth.

What a dream, what a fallacy you are attempting to push onto the Australian people. So, who is it that you work for again, Kublai Khan? And is this Xanadu? Or, as I believe it will become, in reality, neo-Dickensian Australia.