AUSCRIPT PTY LTD
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TRANSCRIPT OF PROCEEDINGS

O/N VT03410
AUSTRALIAN INDUSTRIAL

RELATIONS COMMISSION

JUSTICE GIUDICE, President
VICE PRESIDENT ROSS
VICE PRESIDENT McINTYRE
SENIOR DEPUTY PRESIDENT WATSON
SENIOR DEPUTY PRESIDENT HARRISON
COMMISSIONER LEWIN
COMMISSIONER HOFFMAN

C2001/4617, 5719, 5720, 5721, 5722,
5803, 5810, 5830, 5833, 5834, 5843,
5844, 5845, 5846, 5847, 5849, 5929,
5933, 5934, 5935 and 6130

TIMBER AND ALLIED INDUSTRIES AWARD 1999

THE HOSPITALITY INDUSTRY - ACCOMMODATION,
HOTELS, RESORTS AND GAMING AWARD 1998

BUILDING SERVICES (VICTORIA) AWARD 1994

LAUNDRY INDUSTRY (VICTORIA) AWARD 1998

CHILD CARE INDUSTRY (AUSTRALIAN CAPITAL
TERRITORY) AWARD 1989

THE VEHICLE INDUSTRY - REPAIR SERVICES
AND RETAIL - AWARD 1983

TRANSPORT WORKERS AWARD 1998

RETAIL AND WHOLESALE INDUSTRY - SHOP
EMPLOYEES (ACT) AWARD 2000

HORSE TRAINING INDUSTRY AWARD 1998

CLERICAL AND ADMINISTRATIVE EMPLOYEES
(VICTORIAN) AWARD 1995

VICTORIAN LOCAL AUTHORITIES AWARD 2001

STORAGE SERVICES (GENERAL) AWARD 1999

GROCERY PRODUCTS MANUFACTURE -
MANUFACTURING GROCERS AWARD 1996

COMMERCIAL SALES (VICTORIA) AWARD 1999

RUBBER, PLASTIC AND CABLE MAKING
INDUSTRY AWARD 1999

THE VEHICLE INDUSTRY AWARD 1992

CLOTHING TRADES AWARD 1999

GRAPHIC ARTS (GENERAL) AWARD 2000

METAL, ENGINEERING AND ASSOCIATED
INDUSTRIES AWARD 1998 - PART I

METAL, ENGINEERING AND ASSOCIATED
INDUSTRIES AWARD 1998 - PART III

Applications under section 113 of the Act
to vary the above awards re living wage
case matters (s.108 References)

MELBOURNE

10.02 AM, WEDNESDAY, 10 APRIL 2002

Continued from 9.4.02

PN3040

JUSTICE GIUDICE: Mr Watson.

PN3041

MR WATSON: If the Commission pleases, one matter I neglected to deal with in relation to our reply to the ACCIs submissions. In his submissions, Mr Kates raised the issue of working proprietors in relation to the employee earnings and hours survey. I should just have noted that in the employee earnings and hours survey the following categories of person are excluded. It excludes: directors not paid salary; proprietors and partners of unincorporated enterprises; and it includes - excludes, rather, self-employed persons including subcontractors. So directors not paid salaries, proprietors and partners of unincorporated enterprises, and self-employed persons including subcontractors are all excluded from the employee earnings and hours survey.

PN3042

I was dealing with the AIGs submissions regarding the tax transfer system, and we make the following propositions regarding those submissions. Firstly, they accept that there is no concrete proposal before this Commission for any enhancement. Secondly, they say the $10 stands alone, although we note that that seems to be somewhat contrary to their original submissions; that they would have preferred to see the full $10 going to the lower paid. And, thirdly, they produce AIG4 to which I do want to take the Commission now which provides some examples of what they say is the impact of the safety net adjustment and its interaction with the social security system.

PN3043

Can I take the Commission to AIG4. In the first instance, can we note that these are hand-picked examples of the most extreme variety in terms of the point they seek to make. And we referred in our submissions to the NATSEM report. Can we refer again to that matter. It was a report commissioned by the Commonwealth which showed that more than 85 per cent of persons in 1998/9 had an effective marginal tax rate of less than 40 per cent.

PN3044

Each of the examples which the AIG have picked in terms of salary are just below the relevant thresholds for cut-off. They have picked, particularly in the first example they have picked - - - 

PN3045

JUSTICE GIUDICE: The change in marginal tax rate, is it?

PN3046

MR WATSON: Yes, yes, the effective marginal tax rate given benefits.

PN3047

JUSTICE GIUDICE: Yes.

PN3048

MR WATSON: Yes, not marginal tax rates per se. 

PN3049

JUSTICE GIUDICE: Yes, I understand.

PN3050

MR WATSON: And just so that the Commission understands some of the selectiveness, if you like, of these examples, 61 per cent of award workers fall below the C7 figure which is used in the first of the examples and would not be affected in the way described. And the Commission might recall that in his submissions, for example, Mr Moir referred to Mr Whitnall. Well, that is an interesting reference because when you go to the witness statement, it is clear that that witness would not be affected in the way which these examples show. The witness is so far below the threshold that the relevant benefits which start to cut out, would not cut out. So that is the first point about the selectiveness of the example.

PN3051

The second point about the selectiveness of the example is that at least in the first instance we are talking about a single income family with one child under five. Can I just refer the Commission to some paragraphs in the '99/2000 written submissions of the ACTU, paragraphs 116 to 119 where the Commission was taken to material which demonstrated just how unrepresentative a family that family is. And the third point we make about the selectiveness of it is that the example relies on a maximum - the Commission will see at footnote 3 the maximum family tax benefit part A.

PN3052

Even if, even if every person in Australia who received maximum rate of family tax benefit part A without an income support payment was an award worker, it would still only - on the basis of material that we have checked, it would only constitute 6.7 per cent of award workers; even if everyone of them was an award worker and, of course, not everyone of them. Whilst award workers are a significant proportion of the people below $29,857, they are clearly not all of them.

PN3053

Can we make some more criticisms of the examples? Firstly, we say in relation to the specific calculations, we say that they are not done on an appropriate basis because what they do is they assume the increase based on these examples, but they do not index the various thresholds. Now, each of the thresholds will be indexed for CPI on 1 July.

PN3054

So once you do that exercise, even these examples the effects that are being talked about suddenly become much less dramatic. Now, of course, the AIG could rework its example by, again, finding somebody who just sat below the threshold and bumping them over it but that is the point. That is exactly what they would have to do. They would have to go just below the threshold and bump them over it.

[10.08am]

PN3055

The next thing we say about the actual examples is that they overstate, in our submission, the cost to the employer and they do that because this is meant to be an after tax analysis so far as the employee is concerned. It shows, after tax and after transfer payments, how much they receive, but the analysis so far as the employer is concerned is a before tax analysis. It is the gross cost. It doesn't take into account the expense, in inverted commas, of the additional increases and on-costs are tax deductible expenses and so the net cost in after tax terms to the employer is around about half of that which is indicated in each of the examples. So they look at an after tax and after benefit position for employees but they don't apply the same rigour to their analysis of the position for employers.

PN3056

Finally, we just note that there appears to be on the third page - we note that the AIG says that these have been checked by the relevant government department. We have had some experience of that ourselves in recent times. Can we just note - it may appear to be a small error but the Commission will see "dual income family with two children" on the third page. Under family assistance benefits - this is the $10 adjustment example - family tax benefit part B, 63 cents, new family assistance, it goes down to nil but reduction in assistance is described as nil. Now, that can't be right. It is a small point, perhaps, but again it indicates an error.

PN3057

Finally, what does each of these examples show? In every instance, it shows that whatever family type, no matter how selectively you pick, no matter how close you go to thresholds, are they better off under the ACTU proposal than under the AIG proposal? Yes, they are, and significantly so in every instance. So for all of the fuss made about this issue, the end result is that you hand pick the best examples you can find from their point of view and you still come up with people being better off under the ACTU claim than under the AIG proposal.

PN3058

JUSTICE GIUDICE: I thought that this exhibit, I must say, was directed to a more general issue, which was the interaction between the award safety net and the social security safety net, however one describes it.

PN3059

MR WATSON: Well, indeed, your Honour, and to that extent, our broader propositions about how it overstates the effect of that interaction are, we say, the apposite point.

PN3060

JUSTICE GIUDICE: Yes, but do you say that interaction is completely irrelevant to the Commission's deliberations?

PN3061

MR WATSON: Well, it is not completely irrelevant. The Commission needs to be cognisant of the social security system and the issues which arise in relation to it but in a circumstance such as in this case, where no one is suggesting any change and where, as we have demonstrated, the impacts which are being referred to adversely are much overstated, we think the Commission can, with confidence, accept the proposition which it has accepted in every one of these cases, that, whilst not perfectly targeted, safety net adjustments do provide a measure of assistance to the low paid.

PN3062

That is the fundamental proposition which the Commission has reached in each of these cases since 1997 and there is really no warrant on any of the evidence to move from that proposition. Nothing in what any of the others say - - - 

PN3063

VICE PRESIDENT ROSS: Mr Watson, I note what you say, that there is no concrete proposal for any enhancement in these proceedings but do you disagree with the general proposition that adjustments in the social safety net may be relevant to the determination of the level of award wages?

PN3064

MR WATSON: I have just said it is not completely irrelevant.

PN3065

VICE PRESIDENT ROSS: Yes.

PN3066

MR WATSON: But it very much depends on the nature of what is proposed and - - - 

PN3067

VICE PRESIDENT ROSS: Certainly, yes; that is certainly - - - 

PN3068

MR WATSON: The nature of what is proposed, and we have actually been remarkably consistent on this, as distinct, we would say, from those at the other end of the table. In the 2000 and 2001 cases, we talked about the adverse impacts of the GST and we said - I mean, of course it was asserted from the other side that they were not adverse impacts but we talked about those things. We have accepted that there is an interaction and that people can be left worse off because of policy changes or, in some instances, better off. We don't walk away from saying that there are occasions on which it might be relevant to take into account those matters but in this case, where there is, essentially, a no change proposition put, then we say the Commission should disregard entirely the matters which are raised.

[10.15am]

PN3069

Can I turn then to the Commonwealth. I have tended to just go through their submissions as they put them, so it is not structured perhaps in the way I would have liked to have put it. But in any event, at paragraph 2670 and 2671 the Commonwealth reiterated, if you like, its criticism of the ACTU for a comparison of movements in award rates with earnings measures, and said, in effect, that that is not a like with like comparison. But the thing that is to be observed about the submissions at those paragraphs is that firstly they accept that earnings measures assist in a consideration of where living standards are moving.

PN3070

Secondly, we would note that in the course of their written submissions and oral submissions they have looked at real AWOTE as a measure of living standards, and indeed, in COMMONWEALTH7, which they tended, they looked at in effect movements in AHOTE. So once they have got to that point it really becomes an issue of then, well, is the Commission is to have regard to generally prevailing living standards or not, and they simply cannot contend that the Commission should not have regard to that issue. It is there fair square in the Act.

PN3071

So for all the criticism on that issue, we think in the end they have conceded the critical point, which is that earnings measures can assist in the understanding of living standards. At 2672 the assertion was made that last year's safety net maintained or increased wages relative to inflation for persons below C10. That is wrong. For persons between $433 and $490 last year's decision delivered less than 3 per cent. And the Commonwealth's preferred deflator, the June deflator, extracting for GST is 3 per cent.

PN3072

There is a mischaracterisation of our arguments regarding the comparison with other wage movements have been about market rates. It is not about market rates. It is about living standards and what constitutes a fair minimum. At 2683 the Commonwealth concedes that the fundamentals of the economy are sound. At 2681 though they went to the Treasurer's most recent speech regarding the state of the economy. Can we say these things about the Treasurer's most recent speech. Firstly, we think there is an interesting contrast between the tone of the most recent speech and the tone of earlier pronouncements of both the Treasurer and the Prime Minister about how the economy was going.

PN3073

Phrases like "gang busters" and so on do not seem evidence in the more recent speech. And we think that the Commission ought to accept that the tone of the recent speech is as much because its audience was the Reserve Bank as because that is the view that is generally held by the Government regarding Australia's economic circumstances. There was clearly an attempt, we think, from the Government to talk the Reserve Bank out of an increase in rates. And that is what that speech should be seen as.

PN3074

At 2688 the Commonwealth says we fail to distinguish between aggregate and central performance. That is, in our submission, not right. In our reply submissions we referred to some of the growth figures for some of the sectors that have come along to the Commission and made, if you like, special pleading. The Accommodation, Cafes and Restaurants, the December national quarter accounts show that the year to growth figure for that industry in trend terms, 5.2 per cent, in seasonal adjusted terms, 4.5 per cent.

PN3075

Retail, in trend terms, 4.5 per cent, in seasonally adjusted terms, 4.8 per cent. Personal Services, in trend terms, 6.4 per cent, in seasonally adjusted terms, 6.1 per cent. Those figures all compare with a trend figure for GDP growth of 3.7 per cent and a seasonally adjusted figure of 4.1.

[10.22am]

PN3076

And these are sectors which come along to this case and say: we need special treatment. Or in respect of which the Commonwealth say: oh, well, you haven't paid any regard to those matters. Well, there is the different sectoral effect. They have had year two growth which has in every instance exceeded the average.

PN3077

At a number of points in its submission, the Commonwealth perhaps more starkly than in previous years advanced the proposition that any wage increase cost jobs including, they accept, their own proposal. The first of these references is found at 2703 but there are references scattered throughout the submission, and there is a reference at 2729. We would make the following comments regarding that proposition.

PN3078

Firstly, we would observe that it is not consistent with the view of the Commission that moderate wage increases have a negligible employment impact and, in particular, we would refer the Commission to its 2001 decision, paragraphs 98 and 142. Secondly, we would point out that it, in fact, relies on a counter-factual proposition, that is they do not say that there won't be employment growth if there are wage increases. They simply say: oh, well, employment growth will not be as great as it might otherwise have been if there was no wage increase. It is the counter-factual that can be never tested.

PN3079

And, thirdly, given the emphasis placed in the Commonwealth's submissions on the unemployment issue, it is curious - perhaps even bizarre - that they come along to this Commission and advocate a position which they say - which they concede will cost jobs. In our submission, that inevitably leads to the conclusion that notwithstanding the economic orthodoxy which underlies that submission regarding the relationship between wage increases and jobs, the Commonwealth do not genuinely believe that a moderate increase costs jobs. It simply beggars belief that they would come to this Commission and advocate for a wage increase which they honestly believed cost jobs.

PN3080

Because of that economic orthodoxy though, the Commonwealth's position, in a sense, becomes this. They accept that the safety net and the tax transfer system are complementary; that is at 2699. Because they say any safety net increase will cost jobs, they, in effect, advocate a real decline in wages in these proceedings for award workers. They do not advocate any increase in tax transfers payments because they say the system is currently all right; and that is at 2708 of transcript. And so, therefore, the net effect, the total effect of their position in this case is that they argue for a decline in the living standards of the low paid. You won't get a wage increase that meets inflation and you won't get an improvement in your tax transfer system because we think it is doing fine: that is the net effect of their position. So for people like Elizabeth Neville and Michael Howells, what they are saying is: it doesn't matter how bad things are now, we advocate a position which will leave you worse, leave you worse.

PN3081

Now, in relation to the decline in non-cash transfer income, the Commonwealth attempted to deal with our criticisms around about 2733 and following in transcript. The essence of their proposition in that regard seems to be that the Commonwealth's reference to a trend in the data in paragraph 6.34 referred not to that part of the submission in which it was found, but to some earlier and separate paragraphs at 6.24 and 6.31.

PN3082

Well, with respect, we think that is a wholly unconvincing argument. If you wanted to refer to paragraphs 6.24 and 6.31, well, then you would have stuck the sentence in there. You wouldn't stick it in a couple of paragraphs later at 6.34 where you are actually dealing with the two tables, one of which has the material about non-cash transfers.

PN3083

The second thing we would say about that is that COMMONWEALTH8, which the email tendered, is hardly evidence of anything. In particular, it is not clear that the author of that email has even spoken to Ms Harding about where she based her data. He assumes where her data came from.

PN3084

At 2709 and 2710 we note that the Commonwealth accepts our propositions in relation to earnings and equality, and we simply say that they failed, in our submission, to address at all the issue of whether or not a decision in these proceedings ought ameliorate or exacerbate that trend. AT 2774 they repeat the assertion often made in these proceedings and outside as a sort of a glib aside that the ACTU is seeking an increase for persons on $50,000 per annum because we seek an adjustment to all rates. Well, we have advanced our arguments as to why an adjustment for all rates is appropriate but the Commission should just note that more than 95 per cent of award workers earn less than the $50,000 mark quoted; more than 95 per cent.

PN3085

The Commonwealth continues its submission from previous cases regarding the impact of our claim on bargaining. In this respect we are content mostly to adopt the submissions of the joint labour states on this submission. When I say mostly, I am happy to adopt those submissions in full but I do want to just go on and make one other point. At paragraph 2801 the Commonwealth specifically referred to the situation regarding hospitality and retail sectors. We just remind the Commission that in Commonwealth appendix A, paragraph A(15), the Commonwealth itself notes that the average gap in accommodation, cafés and restaurants, which we presume is the reference to hospitality, the gap between award rates and agreement rates for full time adults is $90.61 and the gap for retail for full time adults is $60.95. Now, on that basis a $25 increase will simply not have any impact on the incentive to bargain.

PN3086

Can we deal now with the Commonwealth's submissions on economic effects. The first thing to note about the Commonwealth's submission, and it stands out like a beacon, is that they don't dispute our claim that the aggregate impact of the ACTUs claim in this case is the same as the aggregate impact on their own costings of the 1998 decision. Now, in 1998 the Commission said it was awarding a moderate increase. It accepted that it was awarding an increase which would have an economic impact which was manageable. Our claim in these proceedings is the same aggregate impact and they say nothing to contradict that.

[10.30am]

PN3087

In relation to the net impact, where their submissions were focused, can we make the following observations. Firstly, a consideration of the net impact, as we have noted, is consistent with the approach of the Commission in previous cases. It is an approach which makes sense because the decision of this Commission takes place not in a vacuum but in a situation where last year's decision actually occurred. As the ACCI is so keen to note, last year's decision has already made a contribution to various macroeconomic indicators and so it is logically, we say, absurd to look at our claim this year without having regard to what happened last year. It makes sense to look at the net impact.

PN3088

Now, the Commonwealth's assertion that we have been selective in our submissions about the evidence led from Commonwealth witnesses is just false and I invite the Commission to test it this way. We went to the transcript. We read from the transcript and we read extensively from a couple of key passages. The Commonwealth comes back and says selective quote. Where did they go to the transcript and show that our quote was in some way or another contradicted or qualified in subsequent evidence? They did not. They make a bald assertion because the evidence of the Commonwealth witnesses assists them not at all.

PN3089

COMMONWEALTH2 is the smoking gun in this case. It is the piece of evidence that the Commonwealth have never wanted the Commission to see. Mr Murdoch, in his submissions, made criticisms about the ACTUs approach in relation to seeking witnesses. We have tried and tried and tried in previous cases and, indeed, in the lead-up to this, to get straight answers from the Commonwealth about this modelling and at every turn we have been met with obfuscation and sliding. We put witnesses in the box and we got straight answers.

PN3090

What did Mr Taylor say? Mr Taylor said when you look at the aggregate figure that is in MYEFO for wages growth, he can't tell you that it doesn't already include .6 for award wages. He can't tell you whether it is .1, .3 or .6. They model our claim against a baseline of the MYEFO forecast but they cannot tell you that our claim, the economic effect of our claim, is not already there.

PN3091

VICE PRESIDENT ROSS: Isn't there an issue about just the timing? I can recall something being said to the effect that your claim wasn't made known until after the MYEFO forecast was done.

PN3092

MR WATSON: That is right. That is right, exactly, and that is, in a sense, exactly the point we make about the Commonwealth's position. See, the Commonwealth in these cases have always said, well, they model our claim against their position, and they have always said that their position is incorporated in some way in the MYEFO forecast. Now, in this year's case they have been quite careful. They say the economic effect of their position is incorporated in the MYEFO forecast.

PN3093

Well, they say our claim is .6 per cent. They cannot say that award wages growth of .6 per cent is not already in their forecast. So the economic effect of our claim might already be there. They can't have it both ways. They can't say, as they did in their original submissions, the economic of the Commonwealth's position is in the MYEFO forecast. That is what they said. They said that in their original thing. They can't say that and then say but hang on a sec, the ACTU claim came after, because, as is evident from the correspondence, they didn't determine their position in relation to our claim until January of this year.

PN3094

So if you are talking about what is incorporated in MYEFO, it is clear that our claim and their position cannot have been. They were both determined after. If you are talking about the economic effect, then what does the evidence of Mr Taylor say? The evidence of Mr Taylor says he can't tell you whether it is .1, .3 or .6. So at every instance, they have come along and modelled our claim against a baseline. Now, when we get the straight answers, it is clear that that baseline might include our claim. They can't tell you it doesn't. They can't tell you it does.

PN3095

JUSTICE GIUDICE: But whether it does or whether it doesn't, I suppose, potentially it could be wrong in any event. It is only a forecast.

PN3096

MR WATSON: Absolutely, absolutely and, in a sense, that is entirely consistent with our submissions. This is a process whereby they present as a mathematical certainty a series of figures which are, in themselves, so statistically small when one models the net impact and even when one models it their way, in light of the inadequacies of their forecasting, to be anything but certainties. They present a table which is precise but inaccurate. It measures effects of .1s and .3s but in light of their forecasting history, it is inaccurate. To the extent that they say, well, we get a consistent direction of effect; whatever number you put in, we do get job losses, that is an outcome of the specification of the model. It is an outcome of the assumptions that underpin the model.

PN3097

COMMONWEALTH2, if I can take the Commission to it, in table 2, says precisely what we said it would say. It says, as the witness herself conceded, that there is a negligible impact. Each of the figures there - - - 

PN3098

JUSTICE GIUDICE: I am sorry, what exhibit is this?

PN3099

MR WATSON: Exhibit COMMONWEALTH2 - sorry, and I am going to table 2. It says there is a negligible macroeconomic impact of our claim. You feed in the net impact relative to last year's decision, a decision which the Commission has held, itself, had a negligible impact. You feed in the net impact and what do you get? You get a series of figures .1 or below. Now, the one matter to which Mr Murdoch turned in his submissions was the minus 5000 figure for employment and he said, well, that is hardly negligible.

PN3100

But the point about that figure is that it is a figure generated by the model and when one goes to the employment growth impact, that is really what the Commission should be looking at: statistically zero employment growth impact. We are talking about big numbers here and so a very small statistical impact, you generate absolute numbers that look larger. But in terms of this model, the impact on employment growth is zero. That 5000 person figure needs to be understood in a context where, as the witness accepted, the error figure on the employment level in the most recent ABS data is plus or minus 37,400.

PN3101

When you bear those things in mind, you get a sense of the genuinely negligible impact which their own modelling shows from our claim. Now, they again advanced this notion that we only get that result because we say the Reserve Bank and financial market should be turned off. In this regard, we think the Commonwealth's submissions are completely without foundation. The Reserve Bank of Australia response in the model is alleged to mimic historical movements.

PN3102

Now, I note that it was asserted in submissions that I invited the Commission to rely on my own knowledge of the Reserve Bank of Australia movements. I don't do that. The Commission should rely on its own knowledge. Will the Reserve Bank of Australia respond to a .1 per cent impact on inflation by immediately raising interest rates by a 1/4 of a per cent? It is a nonsense, in the light of recent history.

PN3103

JUSTICE GIUDICE: The response referred to is a 1/4 of a per cent, is it?

PN3104

MR WATSON: Yes. You will see in table 1 the Reserve Bank response is a 30 basis point response. I presume that is rounding up from .25. I have given them that much. It was submitted that we did not dispute the .48 per cent figure inputted into the model as being an accurate description of the difference between our claim and the Commonwealth proposal. That is not so. We specifically said in our reply submission at paragraph R5.10 that it was an overestimate. The .48 was an overestimate.

PN3105

In any event, the fundamental proposition is that we simply don't accept that there is any sense in inputting a .48 as the difference between our claim and the Commonwealth proposal if the Commission is trying to get a sense of what the impact of our claim will be.

PN3106

In relation to flow-on, the submissions of the Commonwealth regarding the likelihood of flow-on to agreements, we note that they don't appear to dispute our calculation of the percentage of employees covered by agreements which have automatic flow-on, where we submitted that was about .4 per cent. We note also that in relation to the other two categories which we specifically addressed, where safety net increases were flowed on conditionally or where they were consistent with the safety net, we calculated about .5 per cent. We note that the Commonwealth did not dispute an impact of that order.

PN3107

At paragraph 2815 the Commonwealth said that the situation of automatic flow-on was, in effect, the tip of the iceberg. Well, based on those figures, .4 per cent and .5 per cent, in fact, the situation of automatic flow-on, in our submission, is actually about half of the ice cube. It is a very small effect and automatic flow-on constitutes about half of it.

[10.45am]

PN3108

The end result of all of this is that the Commonwealth is left without a feather to fly with on macro-economic costing. And so it is for that reason that at 2839 to 2842 there was a slide into, if you like, micro-economic impacts. In relation to micro-economic impacts we repeat all of our earlier submissions and we note that in its oral submissions the Commonwealth has simply failed to deal with our proposition regarding their own chart 5.3, the ones which shows employment growth in award dependent industries compared to the all industries figure. Where on that chart do you see the noticeable impact of safety net increases on employment growth. You simply don't.

PN3109

Can I deal now with the issue of our submissions on mid-range figures. We note that despite putting it squarely up-front, in our submission, the ACCI simply failed to address it. The AIG referred a couple of times to the range 18 to 25 as being unacceptable but at no stage dealt with the substantive basis of our argument in this respect. The Commonwealth in its submissions yesterday sought to disparage our submissions and suggest that it indicated an ambit position. But fundamentally the Commonwealth did not contradict our submissions, our substantive submissions, that $18 was the first number you get to which does not have a lesser economic impact than last year's decision, and has an average increase consistent with the most conservative of the community wage movements' wage cost index.

PN3110

Neither of those propositions have been in any way cast in doubt by any of those at the other end of the table. And we note in that regard that none of the other parties have seriously addressed the economic effects or the impact on incentive to bargain of an increase in that order. Elizabeth Neville needs every cent of a $25 increase to make her life a bit easier. Through all of the analysis of data and evidence, not one party has dared to say that Elizabeth Neville does not need and deserve a $25 per week increase. Michael Howells needs and deserve a $25 increase. So do the other witnesses. So do the low paid.

PN3111

SENIOR DEPUTY PRESIDENT McINTYRE: Mr Watson, when you come back to these witnesses, the question that exercises my mind is why aren't at least some of them under enterprise agreements. The last one is, according to - it goes to the question of incentive to bargain. My question about the bus driver in Tasmania is still unanswered. I just find it hard to believe that what I presume is a unionised area, where the employer is the state Labor Government, there is not an enterprise agreement. And the more enterprise agreements there are the better.

PN3112

MR WATSON: Well, your Honour, in relation to the specific example, as I understand it from the instructions I have received from unions in Tasmania, it is intended to commence, you know, enterprise bargaining but - but, I mean, the more broad proposition is this. It takes two to tango, and employers who pay award rates are getting a very good deal. They are getting a fantastic deal compared to their same colleagues down the road who paid enterprise agreement rates.

PN3113

SENIOR DEPUTY PRESIDENT McINTYRE: There is protected action. And why isn't something happening?

PN3114

MR WATSON: Well, your Honour also assumes that we are taking union movement - union dominated areas of employment, and that is, with respect, not an assumption that can properly be made.

PN3115

SENIOR DEPUTY PRESIDENT McINTYRE: Well, I did assume in that case, I do not know about the other one, the cases of the other people who have given evidence.

PN3116

MR WATSON: The witnesses we provide are union members but they are not necessarily in areas of employment where union densities are high in an industry, or even necessarily in a workplace sense.

PN3117

SENIOR DEPUTY PRESIDENT McINTYRE: I mean, I see what is going on with the bus drivers in New South Wales because I live there at the moment, where industrial protected action has been taken and there have been stoppages. I just wonder why enterprise bargaining has not spread to some of the areas where these witnesses are employed. Also the large hotels.

PN3118

MR WATSON: Well, the large hotels is a good example because I can assure the Commission that the LHMU had in Sydney in particular, but around the country, Sydney and Melbourne in particular but around the country run very active campaigns seeking bargains but have been singularly unsuccessful in persuading employers. I mean, our submission in this respect is quite stark. There is simply too big an advantage in terms of wage differential for an employer in these sort of sectors to keep people on the award.

PN3119

SENIOR DEPUTY PRESIDENT McINTYRE: The last of the witnesses, that is Mr Evans, tab 11 of the ACTU4.

PN3120

MR WATSON: Yes.

PN3121

SENIOR DEPUTY PRESIDENT McINTYRE: Says that he is employed under an enterprise agreement, earns $452.60 week.

PN3122

MR WATSON: Yes.

PN3123

SENIOR DEPUTY PRESIDENT McINTYRE: Wouldn't the impact of the ACTU's claim in this case possibly have some effect on the desire to bargain in the wage under the agreements of that amount.

PN3124

MR WATSON: Well, your Honour, I would only say this, that if I were Mr Evans and I have got an enterprise agreement that contains that amount, whether or not the Commission awards our claim I would be trying to get better next time. I mean, whether you award what the Commonwealth and the ACCI contend for or whether you award what we contend for, if I were Mr Evans next time round I would be trying to do better.

PN3125

SENIOR DEPUTY PRESIDENT McINTYRE: Understandable.

PN3126

MR WATSON: I think it is that blunt, with respect. I do not think there is much money in Mr Evans' situation, and when you look at the witnesses, there is not much money in many of them.

PN3127

SENIOR DEPUTY PRESIDENT McINTYRE: I think he is the only one under an agreement.

PN3128

MR WATSON: Yes, yes. The submissions of the Commonwealth and the employers invite the Commission to, in effect, cross to the other side of the road and pretend that the needs of the low paid are not there. The Commonwealth and AIG say, in effect, oh, don't worry about the needs of the low paid because the good Samaritan tax transfer system will be along in a just a minute. But Elizabeth Neville and Michael Howells are where they are after the effects of the tax transfer system.

PN3129

There is no good Samaritan coming along the road in just a while. The Commission cannot and ought no to cross the road. It needs to deal with the needs of the low paid. Demonstrated need has been demonstrated in spades. Buoyant economic conditions; the economy is buoyant. The ACCI say it. The Commonwealth say it. The AIG say it. They do not say it here so much. But they say it outside and they mean it outside.

PN3130

The submissions of the Commonwealth and employers regarding the level of uncertainty associated with Australia's future prospects are simply, we say, disingenuous. The Commission ought have regard to what they say outside the proceedings and the precise terminology they use, buoyant, sustained. The words that they come in here and disavow. Economic effect. We say there is a negligible economic effect. We say there is a gross impact of our claim of .5 per cent. The Commonwealth say .59. But on whatever analysis one takes it is about the same as the gross impact of the 1998 decision, and that is something they do not dispute.

PN3131

We say a net impact of .2 per cent and despite the obvious extent to which that has been an issue in the proceedings, the Commonwealth cannot provide you with any alternative figure. We say there is a negligible economic impact of 8.2 per cent net addition to wages growth and that is demonstrated by their material. Demonstrated need, buoyant economic conditions, negligible economic effect.

PN3132

The evidence in this case, as distinct from repetitive assertion, is clear. $25 is justified and it is safe. $25 is significant and it is cautious. $25 is needed and it is responsible. $25 is not much to ask for for Australia's low paid, it is time to bring home the bacon. If the Commission pleases.

PN3133

JUSTICE GIUDICE: Dr Kates.

PN3134

DR KATES: If the Commission pleases. I would just simply address this last ACTU exhibit, ACTU13.

PN3135

JUSTICE GIUDICE: The media release, is it?

PN3136

DR KATES: Pardon?

PN3137

JUSTICE GIUDICE: The media release.

PN3138

DR KATES: That is the one, yes.

PN3139

JUSTICE GIUDICE: Yes. What exhibit number was that?

PN3140

DR KATES: ACTU13.

PN3141

JUSTICE GIUDICE: 13, yes.

PN3142

DR KATES: In our submission the data in the survey and the words of the press release exactly reflect what we have said in this Commission, as well as reflecting exactly what the survey as a whole states. It is, in our view, a remarkably accurate survey, and it is a basis for a barometer and it is the basis for the survey on the safety net. But the important issue I want to note in regard to the survey is that it is divided into two halves. And there is the first half which is a discussion of the national economy by individual respondents, and this is data in respect of things that are beyond their own immediate knowledge. So it is, how do you think the economy out there is going looking at it from the basis of a panelbeater shop in Queanbeyan.

PN3143

But the second part of it, and this is the important part on which we based the barometer on and do most of our analytical work from, the second part is based on how are things within each individual own firm. And as it states in the survey, while the perceptions of the national economy have moved up sharply, conditions with their own firms, in terms of conditions within their own firms, the results are far more measured. So that if you are looking at how this survey investor confidence is measuring conditions, the one that really matters is in terms of how things are in individual businesses. And as we say it is only the beginning of a journey towards a more robust future.

PN3144

The ACTU quotes the fact that we use the word "buoyant" and perhaps listening to them over the last few days buoyant was in my head because of that, but it is not that conditions are buoyant, it is that expectations are buoyant. We have not yet gone to the end of that journey we are talking about, the path to recovery. We are only just starting down that path. And as that last paragraph states, and I will just quote what I think is really the essence of this case, and I quote from this press release:

PN3145

It will be essential for both interest rate determination by the Reserve Bank and the safety net decision by the Industrial Relations Commission to recognise how important it is to firmly implant the stirrings of recovery through decisions that ensure that further growth and stronger growth does occur.

PN3146

And I end the quote there. If the Commission pleases.

PN3147

JUSTICE GIUDICE: Thank you, Dr Kates. Yes, thank you all for your submissions. They have been very helpful. There will be no surprise that we intend to reserve our decision. So I will adjourn without fixing a date.

ADJOURNED INDEFINITELY [11.00am]