Labour reform vital to the boom in WA

Is it controversial to claim that WA's economic boom would not have been so huge if cutting edge labour reforms had not happened over the last twenty years?  If it is, it may be even more controversial to say that the current Federal labour reforms are essential to maintaining and even expanding the boom.

WA is doing really well but not well enough to bring the 4 per cent plus unemployment rate down to historical lows of 2 per cent seen in the 1960s.

More economic growth is needed.  Getting labour issues right is essential to this objective.  The WA mining industry shows why.  If any economy is to fire at full capacity every operational aspects of business must be in total harmony.

This was the situation in WA mining in the 1980s.  Ore bodies were secured, finance was in place, markets were expanding, mines were built but labour relations were a disaster.  Mines were underperforming because collective labour agreements stopped mines operating at full design capacity.

The big change started in the Pilbara when the Robe River mine shifted to individual agreements.  Robe management simply wanted to run the mine properly.  They said the collective agreements stopped them having good working relationships with Robe staff.  This change in management attitude was revolutionary at the time, but it resulted in massive productivity, wage and profitability increases at Robe.

The new management approach was rapidly adopted through the mining sector, particularly in WA.

Quality individual staff agreements assist labour and management to pull together with planners, engineers, financiers, marketers and others to achieve high success.  Miners say they would not have captured the full benefit of the Chinese and Indian economic explosions without this.

The outcome is that the current WA mining boom and hence the general economic boom, would not have been on the scale it is if individual labour agreements had not spread through WA in the 1990s.

Take this simple example.  Many mines now have women driving their monster ore trucks.  It turns out women have proven safer and more skillful than men.  The greater female care has resulted in less equipment damage, breakdown and wear and tear.

But women have high child care needs.  In some mines women have formed child-care groups.  They alter their work rosters and share child care amongst themselves.

This could never have occurred under the old industrial relations processes.  To change things companies had to apply to government tribunals, employ lawyers and wait months, sometimes years for a decision.  If more change was needed the process was repeated.  The old system was just to slow to meet the evolving needs of the people on the ground.

Individual agreements enable the constant and small changes needed to focus everyone on properly servicing clients.

This is why the mining industry fled to the Federal industrial relations system a few years ago when WA laws destroyed individual worker contracts.

It's why the mining industry has been a loud supporter of the Federal Work Choices legislation.  They even say it doesn't go far enough to make individual contracts easier.

It's why WA needs to recognise the risk of not pushing for constant labour reform.

The terminal collapse now occurring of the traditional east coast manufacturing sector is a lesson for WA.  Over the last decade Australian manufacturers stuck to 1950s-style collective labour agreements.  They failed to do what miners did and focus the total business, including labour, on success.  Competitive international threats are now overwhelming Australian manufactures and opportunities are going unrealised.  It is management failure on a grand scale.

The same can happen in WA.  The WA commercial construction sector is the best example.

WA construction is plagued by violence, scandalous cost and schedule overruns.  It affects every aspect of life and business in WA.

These failures are held together by the WA industrial relations system which locks up labour and stops competition.  It's holding back the additional economic potential of WA.

If not fixed, it will continue to cause the boom to be under-realised.  Further, it can lead to economic rot in some sectors and job losses down the line as is happening in east coast manufacturing.

This is the importance of the new Federal regulator, the Australian Building and Construction Commission which is charged with weeding out corruption and returning competition to the construction sector.  It's a big task with a large focus in WA.

It's all part of the Federal Governments integrated approach to creating labour reform.  Along with Work Choices and the ABCC, we will soon see new legislation to look after independent contractors rights.

Is this revolutionary?  For some people, yes!  The total reform approach challenges some entrenched ways of doing business, and organising labour.  From these groups there will continue to be a lot of huff and noise.

For others, individual contracts merely secure what is already happening.  For them it's no big deal and they'll just continue with the job.

But for WA there's a lot at stake.  The development boom has a long way to go to secure the full benefits.  Labour reform is part of the package of activities that needs to occur to lock down this historic WA economic opportunity.

ADVERTISEMENT

State must keep the good times rolling

The past 10 years have been very good for Victorian businesses.

Thanks in large part to the past reforms the state has jettisoned its rust bucket tag.

The economy is purring.  People are moving in.  Businesses are investing and government's finances are in excellent shape.

The challenge is to sustain the good times.  And this is no minor task.

Unlike the other states -- NSW with its financial sector, WA with its mineral sector and Queensland with its expanding population -- Victoria does not have a sector that will inevitably grow and drive the economy.

Moreover at least two of the state's main competitive strengths -- its manufacturing base and as a base for corporate headquarters -- are waning.

The state's future strength lies with doing things better, smarter and in proving a competitive, open, and supportive environment for businesses and entrepreneurs to invest, live and work.

While the reforms of the past moved the state in this direction, much more needs to be done.

Indeed there are large areas of government activity that have yet to be touched and others that are going backwards.

The regulatory burden imposed on Victorian business by the State Government continues to grow at a near exponential rate.

Over the past tens years, the volume of regulation imposed by the state (measured in term of pages) has more than doubled.

This growth took place despite a much publicised effort by the government to reduce the regulatory burden.

While there is no hope of stopping politicians from passing additional regulations -- that is after all what they do -- we can and need to further restrict and restrain their excessive regulatory propensities.  This can best be done by giving regulatory review bodies greater independence and powers.

There is also an urgent need to expand the pro-competition reform agenda into basic government services.  The first wave a microeconomic reform focused on injecting competition into electricity, ports, rail freight and urban transport.

The next wave needs to extend this process into areas such as health, aged care, environment, employment services, and welfare.

These are the areas that are driving government spending and taxation with cost rising rapidly.  They constitute a large section of the economy and have low levels of productivity and great scope for improvement.

While scope for injection competition in social services is more limited than was the case for state owned businesses, its potential is nonetheless large.

While the Howard Government has gone cautiously and successfully down this path in a number of areas, the states have done little aside from tax and spend.

Mr Bracks, to his credit, has recognised the need to push on with reform areas and will put the case to the Council of Australian Governments next month.

Lets hope he succeeds as our future could well be at stake.

ADVERTISEMENT

Let the buyers decide

Competition law will dominate the business news headlines in 2006.  The Australian Competition and Consumer Commission's prosecution of Visy Industries will continue to grab headlines, and the federal government will introduce jail terms for executives found guilty of operating cartels.

And there's even the prospect of something quite novel in Australia, a class action by the customers of Visy and Amcor, who claim they were disadvantaged by the alleged price-fixing of the two companies.

What is absent from this flurry of activity is any recognition of the principles of good law-making.  Put simply, the country's competition law regime fails the basic tests of common sense and consistency.

If executives from different businesses agree not to compete against each other, those executives could be deemed to have formed a cartel, they could be fined and in the future even imprisoned.

However, if those same executives were fortunate enough to be in an industry that for whatever reason the government of the day deemed to be politically important, they could meet the relevant portfolio minister and have their agreement protected by legislation.

Quite clearly, the way to run a cartel in Australia is to get the government to do it for you.

For example, at the behest of Qantas the government restricts who is allowed to fly between Australia and the United States.  If ever there was a restrictive trade practice that pushed up prices for consumers, this would be it.  But somehow the arrangement is defended as being in the national interest.  The ban on chemists operating in supermarkets likewise increases the costs of pharmaceuticals to consumers.  It is the fear of pharmacists dispensing prescriptions to aged pensioners while sporting a "Vote ALP" badge that has cowed successive coalition health ministers into a settlement with the Pharmacy Guild that is no less anti-competitive than the government's deal with Qantas.

The ACCC says cartels "harm consumers and they also harm the economy by distorting the ordinary processes of innovation and product development".  Whether this is true is debatable, as is the question of whether politicians should therefore try to regulate competition.  Many economists would argue that government efforts to encourage competition are usually counterproductive and the potential for abuse is enormous.

Assuming that cartels are the evil they are made out to be, why doesn't the ACCC focus its powers of persuasion and publicity on the biggest cartel operators in the country, the federal and state governments?  There are nearly 50 pieces of federal, state and territory legislation that authorise arrangements that would normally breach the Trade Practices Act, regulating everything from the single desk of the AWB to the monopoly of Australia Post.  For every ACCC press release condemning the collusive practices of Australian business, the ACCC should issue two press releases condemning the double standards of the country's politicians.

If class actions by those who paid inflated prices because of private cartels are allowed, there's no reason to object to litigation from individuals who have suffered loss because of government-enforced monopolies.  In principle, the tourist paying more for an airline ticket between Sydney and Los Angeles because of the absence of competition on the route has as much right to sue as the person who paid too much for a cardboard box.

In The Wealth of Nations, Adam Smith made a comment that for centuries has been used as justification for government interference in arrangements between businesses.  "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices".

Those opposed to the free market argue that if even the greatest exponent of laissez-faire economics believed that businesses colluded at the expense of the consumer, then it must be true that only government can control such behaviour.  What those same advocates of competition law neglect is Smith's very next sentence.  "It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice".  Smith goes on to say that the best discipline against such combinations is the power of the consumer, not government.  Indeed, the purpose of The Wealth of Nations is to demonstrate that government regulation of business reduces, not increases, the welfare of the community.

This is a point our parliamentarians would do well to remember during 2006.

ADVERTISEMENT

Save the Planet, Cut Down a Tree

The latest round of restrictions on broad-scale tree clearing in NSW and Queensland were driven in part by the Federal Government's global warming concerns and our Kyoto greenhouse gas emissions target.

But research recently published in a science journal Nature, suggests trees may in fact be a source of greenhouse gases.

In Japan, in 1997, the Federal government agreed to a target of limiting greenhouse gas emissions to 108 per cent of 1990 emissions by 2012 as part of the Kyoto Protocol.

The Government never formalised this agreement, but Environment Minister, Ian Campbell, has boasted we will nevertheless meet the target in part by stopping tree clearing.

In fact, it had been calculated that the vegetation management legislation introduced into Queensland and NSW over the last few years would contribute to a net reduction in carbon dioxide emissions of about 25 million tones.

By comparison the transport sector (where over half of emissions are from cars) is projected to grow by about 33 million tones by 2012.

Central to the Kyoto accounting systems is the idea that forests are a net sink for greenhouse gases because trees store carbon dioxide, while factories and cars, for example, are a source of greenhouse gases because they generate carbon dioxide.

But the new research shows that while trees store carbon dioxide, they emit methane and methane is about 20 times more potent as a greenhouse gas than carbon dioxide.

So forests may in fact be a source of greenhouse gases.

This is an extraordinary finding likely to result in a rewrite of the Kyoto rule book and further complicate greenhouse gas accounting.

CSIRO has played down the finding, suggesting that methane from a radiate pine plantation would off-set only about 5 percent of the amount of carbon dioxide stored by trees in terms of global warming.

But tropical forests are thought to contribute much more methane than, for example, pine plantations in southern Australia.

Interestingly, while it was once suggested that Australia could meet its total emission reduction targets by eliminating cattle because these ruminants release methane as flatulence, this new research suggests a forest may produce more methane than an equivalent area of grazed pasture.

Given climate change is the top environmental issue, the more zealous among the farming community may use the finding as an opportunity to promote the slogan, "save the environment, cut down a tree"!

While it is a bit more complex than this, now is certainly a good time for the agriculture lobby to demand the Government rethink its vegetation management legislation.

It might also be a good time to ask our scientists and science managers:  "How could such a potentially large source of greenhouse gases have been overlooked?"

ADVERTISEMENT

NSW work safety law undermining industry

New South Wales work safety laws are the worst in Australia and possibly the worst in the world.  The laws create unsafe work cultures involving complacency and responsibility avoidance.  They are dramatically impacting on the NSW mining industry.

The NSW Occupational Health and Safety Act 2000 presumes managers to be guilty even before an accident investigation occurs.  They are denied trial in a proper court or trial before a jury and cannot appeal.  They are personally fined large amounts in the NSW Industrial Court even if something happens over which they had no control.  They are denied basic rights to legal justice that the worst of violent bank robbers receive.

If these laws were in place but hadn't been used, perhaps there wouldn't be much community anger.  But the NSW mining industry saw these laws being used against some of its managers in the Gretley coal mine disaster prosecutions and now the industry is in silent but near panic.

The Gretley disaster occurred in 1996.  The government initiated the manager prosecutions in 2000.  Four miners drowned in the Gretley underground mine in Newcastle when drilling accidentally broke into a 100 year old, disused and water-filled mine shaft, flooding the new mine.

The subsequent formal investigation found that flooding occurred because the company was using mine maps that were wrong.  The company was required by law to use maps supplied to them by the NSW Government's Mines Department.  The maps showed the old flooded mine to be in a different location to where it was.  The NSW Mines Department admitted in evidence it was at fault.

But the NSW OHS laws impose "absolute" obligations on companies and managers.  This meant that the managers at Gretley were supposed to have god-like powers that enabled them to discover that the government maps were wrong.  Three mine managers have been prosecuted and personally fined in excess of $100,000.

But the government refused to prosecute its own Mines Department and has never explained why.  Is something being hidden?  Why were the mine managers picked-on and the department left alone?  Since Gretley there have been other NSW mine incident prosecutions that raise questions.

The company that now owns the Gretley mine has tried to support the managers by challenging the validity of the government's laws that block appeals.  But the government strengthened the appeals blocking laws just before Christmas last year.  This is as close to a stacked kangaroo court, legal process as can be found in Australia.

In addition, the NSW OHS laws do not apply similar responsibilities to employees.  So if a mine employee does something that leads to a mine incident they won't face OHS prosecution in the way a manager would.  This sends signals to employees that they don't have to be as diligent on safety as in other States because in NSW someone else will be blamed.  No other state applies these double standards.

What's the outcome?

Mine managers and NSW mine companies are worried.  The government passed new OHS laws in 2005 that enable the jailing of managers in the event of a work death.  Presumption of guilt applies to managers stripping them of criminal justice rights.

NSW mine companies won't publicly say so but they are having difficulty finding new managers.  Existing managers down to supervisors are actively looking for jobs in the mining boom states of Western Australia and Queensland.  NSW mine managers are looking to become "consultants" where they can give advice but not be the decision makers.

And no one will disclose how these laws are impacting on mine upgrades and future mine investment considerations.  It's easier and safer for companies to quietly make investments outside of NSW.

None of this should be occurring.  Victoria for example, strengthened its work safety laws in 2004 by applying responsibility to everyone at work for what they control.  Proper principles of legal justice apply under OHS laws in the other states.

NSW is currently undergoing a review of OHS laws.  But there are concerns the review may prove to be a piece of political management rather than a serious re-consideration of the dangerous OHS laws.

What is needed are strong laws that apply full responsibility to everyone who is involved in work and who has control.  Legal justice must apply.  Only then can work cultures and behaviours be fully focused on safety.

ADVERTISEMENT

Farmers' solutions are in their own paddock

With the focus on the Howard Government's WorkChoices legislation, it could be easy to forget that labour issues are far broader than just industrial relations.

For a long time the National Farmers Federation has been a strong and vocal supporter of industrial relations reform.  It supports the current changes.  But it's refreshing to see the federation come out recently with a report on labour in the farming sector that takes a broader perspective.

The NFF Labour Shortage Action Plan details how labour supply problems are so severe as to be constraining production.  Crops are not grown and markets are not being tapped.  But rather than complaining that government should supply the fix, the NFF says the answers sit mostly with farmers.  This is unusual.  Industry associations usually lobby for government handouts.

It's important to appreciate that farming has changed massively in the past 15 years or so.  The number of farms has dropped from about 150,000 to around 130,000 under the mantra of get big or get out.

If farms haven't become big they are often in trouble.  The potato farmers in Tasmania who lost their McDonald's contracts this year needed to create economies of scale and embrace new technology or competitors would win.  They stayed small and on average have only been grossing incomes of around $30,000 a year.  This is unsustainable, almost subsistence poverty farming where they can't service customers properly.

Technology has exploded.  For example, ploughing of fields is now frequently automated and satellite directed, resulting in millimetre precision.  This is dovetailed with high-tech knowledge of soil compositions and water retention capacities.  Variances are plotted down to minute degrees.  It's high science producing big yield increases.

Unfortunately, however, according to the NFF, a big factor causing the labour shortages is a misperception of farming jobs.  Many people think that career opportunities don't exist and work is low paid, manual drudgery.  But the reality is different.  The need, particularly with the big and expanding farm conglomerates, is for highly trained technicians to handle and develop computer and engineering-driven technology.  Creative application of advanced science is in demand.

This has resulted in career opportunities that are being missed by young professionals.  And the world of self-employment, always strong in farming, is expanding quickly into these new areas.  It's boom time for practical entrepreneurs.

On the negative side, the NFF recognises that perceptions of unsafe work practices are supported by the facts.  Farmers are killing and injuring themselves and their staff at much higher rates than in any other industry.  The NFF says this must stop, and is gearing for a farmer-led turnaround in work safety as top priority.  But potential workers will remain sceptical until there are results.

The NFF also says there is no such thing as an unskilled job.  This particularly applies to the unfilled demand for fruit and other crop picking.

The NFF says picking jobs need to be filled by backpackers and special visa-entry workers, but only alongside those who make good permanent living travelling from seasonal crop to crop.  But to succeed, farmers must approach human-resource management professionally.

One example is a large family-run fruit farm that was struggling for seasonal pickers.  The family invested in upgrading accommodation.  They developed a website giving virtual tours of accommodation and the farm.  They bought a minibus to shuttle pickers to and from the nearest large town for shopping and recreation.  They conducted pre-work training on safety and how to pick to maximise income.

In short, they realised that they were the problem.  They became professional in their approach to human resources.  Their labour shortage is over.  In fact they are sought after as a preferred work location.  And with free accommodation and no transport costs, net financial returns for pickers better many city jobs.

The NFF has done itself and the farming sector a favour.  Sure, it has pointed out areas where government needs to play a role, for instance in assistance with the farm work-safety campaign.  But the NFF's central thrust is to say that most solutions to farmers' labour problems are in their own paddocks.  It's up to farmers to take the same professional approach to human resources as they take to farming technology.

It's a self-analysis that needs to apply across all industries in Australia.

ADVERTISEMENT

Cool down on warming

In Sydney this week a meeting was held on climate change.

Participants were from the six Asia-Pacific nations which together will account for 70 per cent of the world's carbon dioxide emissions.

Four of the six nations represented at the meeting -- Australia, the United States, China and India -- have rejected proposals to massively reduce their emissions of carbon dioxide, the satanic gas that it is said will bring global warming.

The US and Australia have however put taxes on coal-based electricity plant to encourage a move away from this, the lowest-cost source of energy.

In Victoria, Environment Minister John Thwaites, whose public utterances increasingly appear to be written by a Greenpeace fanatic, is urging an intensification of these measures.

The problem is that if increased emissions of carbon dioxide are causing significant levels of warming we can do nothing about it.

An early apostle for aggressive emissions reduction action, British Prime Minister Tony Blair, has now agreed that this is unachievable.

Mr Blair has acknowledged that no nation will take the economically crippling decisions necessary to bring about the massive reductions in carbon dioxide emissions that some are calling for.

Only two of the 20 nations that signed up to emission restraints at the 1997 Kyoto Convention will meet their targets.

Those targets would in any case have only a trivial effect -- theoretically they would reduce average warming by just 0.15°C by 2100.

Increased carbon dioxide emissions do not mean ecological disaster.

Mankind has lived through far greater oscillations in global temperatures than might occur from releases of carbon dioxide through the burning of fossil fuels.

And let us not forget, the carbon dioxide thus released is simply some of that which has been "unnaturally" soaked up by living matter over billions of years.

Notwithstanding the collapse of the Kyoto agreement, there remains a great deal of posturing on the matter.  Victoria, with its endless supply of very cheap brown coal, has more to lose than any other region in the world from taxing carbon dioxide.

Extracting carbon dioxide from brown coal, even in the embryonic pilot schemes now on the drawing board, would double the cost of electricity generation.  Not only would this have a direct on the consumer but it would, at a stroke, undermine the State's commercial competitiveness.

If we were serious about reducing carbon emissions we would be embracing nuclear power.

At least we know this is only double the cost of coal power.

But even such a modicum of commonsense wilts in the hands of ministers who are prisoners of the green left.

Mr Thwaites released a paper shortly before Christmas calling for a doubling of the electricity derived from wind power.

We know wind power is expensive and unreliable but in making the proposal, he did not even try to estimate its cost to the ordinary consumer or to the State.

Victoria needs better leadership than this.

ADVERTISEMENT

Hot, But Not All Bad

Last year was the hottest on record in Australia, with temperatures about one degree Celsius warmer than the 1961-1990 average, which is the reference period for the Australian Bureau of Meteorology.

According to the Bureau, a full degree increase in temperatures in southern Australia is equivalent to moving towns about 100 kilometers north.

But the temperature increase was not uniform across Australia, with parts of Western Australia recording a cooler than average year in 2005, while central western Queensland was on average more than two degrees warmer.

Information on temperatures from around the world is compiled at The National Aeuronautics and Space Administration (NASA) in the US.

NASA reports that, globally, temperatures have increase on average by 0.6 degrees in the past three decades and 0.8 degrees when measured over the last 100 years.

Interestingly, globally, 2005 was not the hottest year on record.  According to NASA 2005 was a "dead heat" with 1998, the warmest previous year.

Again the temperature increase has not been uniform across the globe.

While parts of Antarctica have been cooler than usual, it was more than two degrees hotter across much of the Arctic than it was during the 1951-1980 period, which is the reference period for NASA.

As a consequence of the warming in the Arctic it has been reported that Greenland's ice sheets are melting and glaciers retreating.

Interestingly, while Greenland has been thinning at the margins, measurements show the island has also been getting taller -- that's right taller.

Satellite measurements showed that more snow has been falling on Greenland and as a consequence the island's icecaps are growing at a rate of approximately five centimeters a year.

According to the Norwegian Centre for Global Ocean Studies and Operational Oceanography, this thickening is consistent with theories of global warming because warmer air, even if it is still below freezing, can carry more moisture.

While the often quoted CSIRO scenario modelling suggests that it could get drier in Australia with global warming, in contrast some Australian climatologists have predicted that as it gets warmer there will be more cloud cover and more rain.

The hypothesis that it will get wetter as it gets warmer is consistent with the observation that Greenland is getting taller because more snow is falling.

So global warming might not be all bad news.  Indeed, last year, the warmest year on record in Australia, was also the year the drought broke for many farmers.

I hope that 2006 is warm, but not too warm, and wet, but not too wet!  Happy New Year!

ADVERTISEMENT

Con-fusion over going green

Australia and India are the only nations in the Asia-Pacific partnership without a significant nuclear energy capability

Last year was the hottest on record in Australia with the annual mean temperature 1.09°C above the average.

Globally, temperatures have increased by 0.6°C over the past three decades and 0.8°C when measured over the past 100 years.

The Kyoto Protocol, an attempt to limit global greenhouse gas emissions, has been promoted as the solution to global warming.

The Protocol became legally binding on most of the developed world in February last year obliging participants to reduce their emissions by an average of 5.2 per cent above 1990 levels by 2012.

The Australian and US governments have refused to ratify the Protocol.

But even if Kyoto was fully implemented, with Australia and the US joining up, it would at most deliver a temperature reduction of 0.15°C by 2100.

Kyoto is limited because about 70 per cent of carbon dioxide emissions are from countries not subject to Kyoto restrictions.

These countries are exempt because they are considered part of the developing world.

Indeed, Kyoto divides the world into two groups -- the developed nations and the developing.

This is a discriminatory approach based on the idea that rich countries historically have emitted more greenhouse gases per person.

Last year, the "Kyoto dissidents", Australia and the US, formed a partnership with the governments of the two most populous nations on Earth, China and India, as well as South Korea and Japan, to form the Asia-Pacific Partnership on Clean Development and Climate.

Together these countries account for about half of the world's population, GDP, energy use and greenhouse gas emissions.

The partnership was announced in Laos in July as a solution to global warming with a key aim the development, sharing and promotion of new and improved technologies to reduce greenhouse gas emissions.

The coming together of these six nations is a fascinating development.

Japan and South Korea are already members of an international alliance committed to building a $16 billion nuclear fusion reactor in the south of France.

Fusion is what powers the sun.

While the partnership was announced last July, and various policy documents are available on the Internet, ministers from the six countries formally meet for the first time in Sydney today.

Some environmental groups have questioned their commitment to curbing emissions as the partnership documents state that arbitrary targets for reducing greenhouse gas emissions will not be on the agenda and economic growth will not be compromised.

Emission reduction targets are central to Kyoto, but many countries are not going to meet their Kyoto targets.

Canada has increased its emissions by 24.2 per cent from the base 1990 level, far from its 2012 target of a 6 per cent reduction.

Because there are corrective payments for countries that fail to meet their targets Ireland is facing a potential bill of £400 million ($A815 million).

Britain is one of the few countries on-track to meet its Kyoto emissions target.

Britain has 14 nuclear power stations and Prime Minister Tony Blair is considering the possibility of a new generation of nuclear power stations because nuclear is greenhouse neutral.

China and Japan already have committed to new generation nuclear power plants as part of existing strategies to reduce emissions.

Australia and India are the only nations in the new Asia-Pacific partnership without a significant current nuclear energy capability.

Australia has been left behind in what some describe as a global renaissance in nuclear energy use, perhaps reflecting the power of environmental groups -- which have an aversion to nuclear energy -- in this country.

However, an increasing number of prominent environmentalists, including James Lovelock -- who developed the Gaia theory -- and Greenpeace co-founder Patrick Moore, are speaking out in favour of the technology.

The new partnership also is likely to support and promote research into solar, clean coal, hydrogen and fusion as future sources of energy.

There is a clear belief in science and technology, though some have remarked that it is not a lack of technology but rather effective mechanisms for technology transfer that will prove the greater challenge.

The partnership has the potential to achieve much more than Kyoto.

Then again, with just Kyoto, global emissions will be some 40 per cent higher in 2010 than in 1990.

When the Australian Bureau of Meteorology recently reported that last year was the hottest on record, it cautioned against assuming next year would be hotter again.

The bureau emphasised that annual temperatures are influenced by many factors.

Who knows what the temperature will be next year and who knows which of the new technologies will prove winners?

Some say fusion is just a pipedream.

But we can perhaps agree that there is need for a new approach and, given the mix of nations at the meeting today in Sydney, reason for optimism.

As Sheikh Yamani, a founding architect of OPEC, pointed out some years ago, "the stone age came to an end not for a lack of stones, and the oil age will end, but not for a lack of oil".

There will be a day when we stop using oil and coal, and it will be when new energy technologies provide superior benefits.

ADVERTISEMENT

Regulation proves Hydra-headed

Following the launch of the annual report of the National Competition Council in December, Treasurer Peter Costello announced competition payments to the states of $834 million.  This is the final such payment from a $16 billion bag of money available on a pro rata basis to the states and territories.

The council's focus has been on eradicating impediments to competition in such forms as restrictive occupational and supply licensing.  It has also looked at exclusion of potential suppliers from monopoly facilities, especially gas, electricity and rail.  This latter task married its other role of determining whether such facilities were monopolies and whether they should be opened to users who had been previously excluded.

In advising on the competition payments, the NCC oversaw a program of regulatory reviews across all jurisdictions (including, in theory, the commonwealth) and vetted the conduct of those reviews.  There were deductions for bad behaviour and the states actually forfeited some $40 million of the final available pool for not fully meeting their obligations.

In its early days, especially under the present chairman of the Australian Competition and Consumer Commission, Graeme Samuel, the NCC was at pains to stress that it was not bent on pursuing "so-called economic rationalism".  Even so, it has applied the blowtorch of logical analysis to examine government interventions that impeded competition.  The deductions it recommended represented highly visible lost revenue.  Not only was income forgone, but the state governments that had to forgo funds also had the badge of reform recalcitrants pinned to their chests.

The NCC tested the water concerning such deductions in 1998 when it withheld $10 million from NSW, which had refused to dismantle its restrictive marketing arrangements for rice.  NSW finally did so in November 2005.  More recently it has even recommended deducting funds from Western Australia for not opening up shopping hours in spite of a WA referendum tying the government's hands.

Disengaging government from the economic decisions that should be left to buyers and sellers has been a major backbone to economic reform.  The NCC has punched above its weight in generating an environment where the best economic outcomes are achieved by the market rather than politicians and bureaucrats.

Its formal tasks are coming to an end.  Not only is the competition payments pool now drained but also diminishing is the council's other role of assessing whether monopoly facilities should be required to be opened up.  It recently recommended that the Moomba-to-Adelaide gas pipeline be removed from access controls, recognising a new supply vehicle, the SEAgas pipeline linking Adelaide with offshore Victorian gas, provides adequate competitive disciplines.  New rival supply systems like this as well as technology developments are gradually paring the incidence of genuine monopolies to localised heartlands like electricity and gas reticulation.

As demonstrated by the Business Council of Australia and other contributors to the Gary Banks-chaired Red Tape Taskforce, much remains to be done in regulatory review.  Many submissions have supported the common knowledge that, despite lofty deregulatory statements, governments have barely drawn breath in their regulatory marches.

The Banks report, due out this month, is bound to offer much evidence of continued regulatory excesses that will provide material for further efforts to stem the tide of regulatory costs.  An important milestone for achieving these is the meeting next month of the Council of Australian Governments.  A promising grounding for this meeting is rival deregulation challenges being posted by the Victorian and commonwealth governments.

Victoria is undoubtedly the most advanced Australian jurisdiction in its regulatory control procedures.  Even so, its own Competition and Efficiency Commission's report on regulation in regional Victoria has demonstrated that the pace of new regulation has not slackened and is adversely affecting the regional economy.

The commonwealth, for its own part, has comprehensive regulatory review machinery.  But too often this provides reviews of new regulation that simply offer spurious rationales for the regulation and no time for public comment.

While the NCC and others have been successful in highlighting the benefits of competition reform, much of the more recent regulation is social regulation aimed at safety, the environment and health.  It is more difficult to address such regulation since, unlike pure economic regulation designed to hinder competition, it does not have the automatic presumption in favour of government disengagement.

The NCC has won its spurs in helping to root out much of the economic regulation of competition that characterised Australian markets until recent years.  Stemming the tide of social regulation will be a more formidable task and will require considerable resourcing.

ADVERTISEMENT

Corporate responsibility is to make profits

Sometimes it takes a while for things to sink in.  After a decade of talking about corporate social responsibility, it is only in the past few years that companies have come to appreciate the consequences of signing up to what seemed like a good idea at the time.

Relations between business and society are now viewed by governments, regulators and the community almost exclusively through the prism of whether corporations are being socially responsible.  The proponents of corporate social responsibility ensure that its elements are never precisely described, with the result that business is susceptible to an ever-growing list of ill-defined responsibilities.

If the notion of corporate social responsibility had been around in the 1950s -- when the respective roles of government, business and unions were clearly demarcated -- companies could easily have satisfied what would have been expected of them.

Half a century later, as belief in the unlimited capacity of government has diminished, and as other social institutions decline in significance, it has been left to business to carry out the tasks that once would have been left to others.  For example, the Prime Minister's Community Business Partnership lists "strengthening community ties" as an obligation now carried by the business sector.

The problem is not only that companies are diverted from their most important social responsibility, the creation of wealth.  There is also the larger issue of shifting accountability for matters that are properly in the domain of public politics into the private sphere.

The attitude of most of the country's large public companies to the imposition of the requirements of corporate social responsibility demonstrates the perils of allowing marketing tactics to prevail over business strategy.  Chief executives embraced the concept fearing the judgement of their peers, their critics and government.

It is unclear exactly what the benefits are for business and society from adopting corporate social responsibility.  Companies are no more or less engaged with their communities than they were previously;  anti-corporate campaigns rage unabated;  and business regulation continues apace.  Further, corporate social responsibility appears to have done nothing for the reputation of the directors of public companies.  In a survey released in November by Roy Morgan Research, they were ranked as having a level of ethics and honesty below talkback radio announcers and union officials.

The question of how companies approach corporate social responsibility reveals the tension between acceding to external demands or confronting and defeating such demands.  For as long as companies have been in existence, they have had to manage this dilemma.

The US railway tycoon of the 1860s and director of the Erie Railroad company, Jay Gould, was once asked whether he was a Republican or a Democrat.  He replied:  "In a Republican state, I am a Republican;  in a Democrat state, I am a Democrat;  in an independent state, I am independent -- but I am always for Erie".

For many in business such an attitude is commonsense.  If the price of running a railway or selling a product is co-operating with a Republican or Democrat (or Liberal or Labor) administration then so be it -- it is not the business of business to play politics.  But in the long run, there is a price to pay for not doing so.

Globalisation has further weakened the ability of companies to enunciate a position that is different from prevailing public opinion.  An attitude that dictates that a company can and should be all things to all people might be good brand management but it has its dangers.  In order to maintain their licence to operate in particular locations, businesses must adapt to local conditions and they are afraid to put at risk their political standing.

Such an approach was expressed a few years ago by Ford:  "As a multinational ... Ford in its largest sense is an Australian company in Australia, a British company in the UK, a German company in Germany".

How to manage the monster it has helped create is the question now confronting corporate Australia.  That job isn't made any easier by the recent success of the Australian Council of Trade Unions' advertising campaign.  The image conjured up by the union movement is of all bosses as bastards, and of small-business owners around the country counting the days until the implementation of the Work Choices legislation so that they can sack their long-serving employees for being five minutes late for work.

Most business leaders would argue that those corporations that are successful in the long run are inevitably good corporate citizens anyway, and that adding the burden of social responsibility won't turn a badly behaved company into a well-behaved one.

The first task for Australian business in 2006 is to confront head-on the underlying assumption of corporate social responsibility, which is that unless governments force them, companies will ignore the social, environmental and ethical consequences of their actions.

The second task is to re-establish the principle that the single best contribution any company can make to the community is to be profitable.

ADVERTISEMENT

Get set for another year of growth and prosperity

The past year was another great one for business and the Victorian economy and the outlook is for a repeat performance in 2006.

The international outlook is just about as good as it gets.

China continues to suck-up our resources like the long starved, giant it is.

The Japanese economy, after fifteen years of rolling recessions, is back on track with the Nikkei growing by 40 per cent during the 2005.

The United States economy continues to purr along driving the world economy with it.  Our neighbours in Asia while no longer tigerish, are still growing vigorously.

Of course there are weak spots, like most of old, continental Europe, but the final tally they matter little.

The local outlook is, if anything, even better than the world outlook.

The housing market is dong fine, achieving slower but still respectable and more sustainable rates of growth.

The doomsayers are still preaching collapse, but wisely few people are listening.  Household consumption is still growing albeit at a slower rate.

Importantly exports and business investment are picking-up and nicely filling the gap created by slowing household and housing sectors.

Export growth while respectable, has in recent years been dwarfed by the flood of imports sucked in to feed the consumption boom.

The consumption boom is over and the commodity boom is on.  Prices of most commodities are at near record levels as are export volumes.

Accordingly the current account deficit which did reach disconcerting heights in 2005 is starting to decline.

High demand and profits are driving near record levels of investment in mineral and energy capacity and associated infrastructure.

And much more is on the drawing boards not the least being the $28 billion Gorgon LNG project located in WA's northwest.

There is also an investment boom under way in general business and social infrastructure.

State governments, notably Queensland, Western Australia and Victoria, are spending at near record levels on infrastructure in the budget sector, in public-private partnerships and via government business enterprises.

Even the utilities industry, which for the past decade has focused on getting the most out of existing assets, is investing in new capacity.

The private sector is also investing heavily.

Indeed business investment measured as a share of the GDP in 2006 is expected to reach levels not experienced since 1950s.

Of course, there are more than a few challenges in the New Year.  2006 could well prove to be an annus horribilis for some sections of the State's manufacturing sector.

The potential bankruptcy of General Motors and perhaps Ford Motor Company, as well as the growing competition from China, augers poorly for local auto industry.

The food manufacturing sector, which has long failed to live up to its potential, is also facing a do or die year.

The good news is that the Howard Government's new IR reforms at long last provide the necessary legislative environment for the food and auto industry to restructure, survive and perhaps grow.

The question is:  is the management and work force in these industries up to the task?

For most of us, though 2006 looks to be another year of growth and prosperity.

ADVERTISEMENT