Manufacturing News

Industry has no money tree

AT the start of 2009, Australian manufacturers are confronting very different risks from those they faced at the beginning of last year.

A year ago, industry was concerned about high inflation and the strong Australian dollar. Now, the greatest risks we face stem from slowing economic conditions.

The global financial crisis and economic slowdown are yet to be fully felt by Australian companies, and employers are bracing themselves. Businesses need to remain highly flexible and adaptable in order to survive the tough times ahead.

The upcoming bargaining round poses further risks for manufacturers, particularly when new industrial laws are set to be introduced from July 1 this year.

A key test for the laws will be whether they are suitable for bad times as well as good times. Another key test is whether the new laws will preserve the harmonious workplace relations environment that Australia has enjoyed over the past few years.

There is no doubt that economic conditions have changed markedly since the last manufacturing bargaining round took place in 2006. There is also no doubt that the unions need to curb their ambitions to reflect the immensely tough and challenging conditions that industry faces in 2009.

This bargaining round, which is understood to involve the expiry of about 1,300 enterprise agreements between March and June, will not occur in an environment overshadowed by skills shortages, full capacity, and rising inflation. It will instead need to reflect the fact that inflation is falling, demand is slack, and unemployment is rising.

The increasingly tight and competitive business conditions dictate that wage increases through agreement making should be moderate and sustainable. The pressure that manufacturers are feeling is already reflected in lower apprentice numbers.

It is hoped that unions and employees will recognise business survival as the major imperative in the bargaining round, resulting in orderly and productive negotiations. Otherwise, the bargaining round could end up as a trade-off between pay rises and retaining jobs.

Given the uncertainty of the current economic environment, the Australian Industrial Relations Commission’s award modernisation process remains an ambitious task that also has huge implications for employers, involving both cost and risk for business.

Ai Group was pleased the Commission’s December decision on the modern manufacturing industry award, which will operate from January 1, 2010, addressed many of industry’s concerns.

These included ensuring that small businesses will not be required to pay redundancy pay in the future and that the manufacturing award will not operate as a general occupational award for supervisors in all industries.

In addition, the modern manufacturing industry award will have a secure scope rather than the Commission’s earlier draft approach that would have resulted in the award being overridden by any other award with overlapping coverage. A secure scope is necessary to protect manufacturers from claims for more generous construction and mining industry conditions.

Ai Group has commended the Commission for the consultative approach it is taking to the award modernisation process. It will be important for the Commission to consider further changes to the modern awards announced in December if problems are identified before they come into operation in January 2010.

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