It's now or never for manufacturing

Why push through workplace reform?  The Australian manufacturing sector provides a good reason.

In about the past 18 months, Australian manufacturing has moved into a state of near foreboding.  The rapid rise in the dollar, the surge in the competitiveness of China, and the shift to global manufacturing has been obvious since 2000.  This has stymied Australia's manufacturing export growth of the 1990s.

What is now inducing almost a fatalistic mood among Australian manufacturers is the recent rapid rise in the quality of Chinese manufactured components, particularly in automotive and related industries.  Australia until recently had maintained a quality edge.  This has gone.  Chinese manufacturers have studied the quality required and now achieve the equivalent of domestic production standards, or higher, and at better prices.

While Australia is achieving sustained economic growth, its manufacturing sector has all the ingredients for heading in the reverse direction.  This could happen at great speed.  Most Australian manufacturers have plans to shift production overseas.

It's for this reason that the workplace reforms proposed by the Federal Government are urgently needed and long overdue.  Critical sectors need reform fast.  Jobs are on the line.

The mining sector was able to grasp the current export boom in part because of workplace reforms pushed through in the 1990s.  Mines now deliver on time where once they were unreliable due to restrictive work practices.  But manufacturing, construction, rail, road and ports infrastructure, for example, have only tinkered with reform, and often have gone backwards.

For any business to succeed, the modern benchmark is constant improvement.  Yet the capacity of managers to manage businesses in key industries has been reduced under the formal terms of enterprise agreements.  Denial of the managerial right to control rosters, training and how workers should be engaged is standard in many agreements.  Poor work practices in part explain, for example, why it costs about $800 more to ship a newly made caravan from Melbourne to Brisbane than from China to Brisbane.

The union picket at the small Dandenong plastics manufacturer Kemalex demonstrates the problem of achieving constant improvement in Australia.  Kemalex operates a plant in Adelaide, where it has used independent contractors for almost a decade.  Kemalex says this is critical to its success.  It has been doing the same at its plant in Dandenong for two years.  The unions have ordered the company to eliminate contractors, and have waged a fierce campaign against both Kemalex and independent contractors.

Unions are fearful of workplace reform.  In essence, they demand one form of managerial model, built on a full-time workforce involving collective agreements with unions.

The Federal Government wants a mix of options allowing union agreements, collective non-union agreements, individual Australian Workplace Agreements and independent contracting, using commercial rather than employment contracts.

Australia is at one of those forks in the road.  Constant business improvement can be targeted by giving businesses a range of managerial options.  Or one prescriptive managerial structure can be imposed.

The Federal Government has announced it will legislate to allow a choice of options.  But unions indicate they will vilify and damage any business, such as Kemalex, that rejects the union management model.

Once the new legislation has passed, the pressure will be on managers.  They can target every facet of domestic business for constant improvement, or they can shift production overseas.  International competitive pressure will not allow a middle ground.  Reform of workplace arrangements is imperative.

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