NSW Mid Term Report 2005

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					NSW Mid Term
Report 2005




               A
             March 2005
       Australian Business Limited
 140 Arthur St, North Sydney NSW 2060
Locked Bag 938, North Sydney NSW 2059
         Telephone: 13 26 96
    www.australianbusiness.com.au
 NSW Mid Term
Report Card 2005




Australian Business Limited
                           Executive Summary
                           The NSW Mid term Report Card assesses the performance of the
                           State Government and Opposition in relation to business issues
                           since the re-election of the Carr Government in March 2003.




The NSW Mid Term Report Card has been validated by            •    Government debt has been reduced and the
                                                                   Triple A credit rating is secure
  •    Eight business roundtables throughout New
       South Wales involving representatives of               •    Businesses and community organisations
       ninety businesses                                           have seen the benefits of tort law reforms
                                                                   introduced prior to the last election
  •    A NSW issues survey completed by 600
       businesses                                             •    Low unemployment, improved border
                                                                   protection, the heroin drought, ‘gaol not bail’
  •    The development of an interstate benchmark                  legislation and better policing have seen
       of State and Territory Government                           crime rates fall consistently over the past
       performance, covering 1,800 businesses                      two years.
       nationwide.
                                                            The business negatives for the Government include
The Mid Term Report Card finds that the performance
of both the Government and the Opposition has been            •    The size of Government continues to increase.
patchy. Insufficient attention has been paid to issues              NSW Government taxation revenue is up 8.1%
such as the diminishing competitiveness of NSW, the                or $1.1 billion above Government forecasts.
skills crisis and labour market shortages, increasing              Expenditure is up 10.5%, or $3.6 billion above
State taxation and expenditure and the growing                     Government forecasts
compliance burden. Business has serious concerns
in particular with the Government’s approach to               •    NSW businesses are burdened by the highest
Occupational Health and Safety (OH&S).                             payroll tax rates, Workers Compensation
                                                                   premiums and on-costs of any Australian
Neither the Government nor the Opposition should                   State
take NSW’s economic and jobs growth for granted.
Complacency about the capacity of business                    •    Infrastructure is not keeping pace with the
to compete with those in lower cost Australian                     economic needs of NSW
States and offshore will further disadvantage NSW
businesses.                                                   •    Government strategies to address critical
                                                                   labour and skills shortages are insufficient
Recent national economic performance statistics
demonstrate the need for new commitment and                   •    Significant compliance issues in OH&S are
renewed vigour to making NSW the most competitive                  resulting in low levels of business confidence
location for business.                                             in WorkCover. Many small businesses have
                                                                   ‘given up’ on OH&S compliance
The business positives for the Government over the
last two years include                                        •    Business and employment in NSW are being
                                                                   hampered by labour market and workplace
  •    Employment has grown strongly and                           relations inflexibility.
       unemployment has fallen from 6.1% to 5.1%




                                                        1
The Government needs new commitment to
economic reform and a focus on longer term
structural issues rather than the current focus on ‘day
to day’ issues. To this end, the recent appointment of
a NSW Minister for Economic Reform is welcome.

Like the Government, the Opposition has focused
on day to day political issues and has not
demonstrated a willingness to enter into detailed
and complex policy debates in areas such as
labour shortages, workplace relations, OH&S and
expenditure reductions.

Over the first two years of this term, the business
positives for the Opposition include

   •   The Opposition has advocated a lower tax
       position, but has yet to detail how it will pay
       for its lower tax approach

   •   A future Coalition Government is committed
       to benchmarking and a focus on outputs in
       the State Budget

   •   The Coalition has opposed the Government’s
       Draft Workplace Fatalities legislation.

There is concern regarding the Opposition’s

   •   Reconsideration of its past support for the
       Government’s tort law reforms

   •   Failure to address in any real detail issues
       relating to labour market and skills shortages,
       OH&S compliance issues and WorkCover
       premium setting.




                                                          2
                         Government Report Card

          Issue         Grade                           Comment
                                State economy is strong and has benefited from strong
Economy                   B     national economy. State’s underlying fundamentals are
                                sound.
                                Debt levels are low. Little attention paid to expenditure
Budget                   B-
                                efficiency. Tax burden is increasing.
                                Queensland outperforms NSW on every measure. High
                                payroll tax and Workers Compensation premiums are
State Competitiveness     D     hurting business. Tort law reforms have been positive for
                                business. Need to increase funding of key infrastructure.
                                Work on reducing business compliance burden needed.
Crime                     A     Crime rates have fallen consistently over the term.
                                Some improvement in performance of TAFE, however
Skills                    C     Government is moving too slowly. Real concerns amongst
                                NSW businesses about skill and labour shortages.
                                No change in recent years. NSW system remains relatively
                                inflexible. NSW Government must engage Federal
Workplace Relations       D
                                Government in debate over future direction of workplace
                                relations.
                                Some improvement in transparency. Costs to business are
Workers Compensation     C-     the highest in Australia. Benefits from improved scheme
                                performance not yet passed on to business.
                                Impossibility of compliance with current legislation makes
                                the application of OH&S a critical business issue. Some
OH&S                      D
                                recent attempts to improve communication with small
                                business.
                                Draft Workplace Fatalities legislation does not deliver on
Workplace Fatalities      F
                                Government’s stated objective.



                                                                          A       Excellent
                                                                          B       Good
                                                                          C       Satisfactory
                                                                          D       Unsatisfactory
                                                                          F       Fail




                                      3
                        Opposition Report Card

               Issue      Grade                         Comment
                                  Economic performance is not influenced by Opposition
Economy                    N/A
                                  policy.
                                  Lower tax philosophy is welcomed, but must be
Budget                      B-    matched by details of expenditure cuts. Budget
                                  benchmarking and focus on outputs is positive.
                                  Coalition appears to understand business concerns
                                  regarding competitiveness, but detailed policies
State Competitiveness       C
                                  needed. Business is concerned about Opposition
                                  backsliding on tort law reform.
                                  Opposition supported ‘gaol not bail’ legislation and
Crime                       B
                                  increased Police numbers.
                                  Major business issue receiving insufficient attention by
Skills                      D
                                  the Opposition.
                                  Opposition has expressed support for more flexible
Workplace Relations         B
                                  workplace relations system.
Workers Compensation        C-    Detailed policy from Opposition awaited.
                                  Opposition yet to engage in this extremely important
OH&S                        D
                                  but complex policy area.
                                  Coalition opposes current draft Bill. Opposition needs
Workplace Fatalities        A     to take constructive approach to ensure final legislation
                                  reflects employer and employee needs.



                                                                      A       Excellent
                                                                      B       Good
                                                                      C       Satisfactory
                                                                      D       Unsatisfactory
                                                                      F       Fail




                                  4
INTRODUCTION                                                   Priorities 2003 outcomes. The Opposition is assessed
                                                               against the policy determinations it has made to date
22 March 2005 marks the mid-point of the Carr                  and its response to business legislation presented to
Government’s third term in office.                              the Parliament.

The Government won the 2003 election with over                 To validate the Mid Term Report Card, Australian
56% of the two party preferred vote. Yet the political         Business Limited undertook eight business
landscape has changed since March 2003 and latest              roundtables throughout NSW involving
polling has seen the Government’s primary vote fall            representatives of over 90 businesses. A
to 35% and its two party preferred vote fall to 48%.           comprehensive survey of over 600 businesses
                                                               was also conducted. Sensis was commissioned
The Government’s budgetary position has also shifted           to interview 1,800 businesses across Australia
significantly with a $463 million surplus in 2002/03 to         to develop a benchmark of State and Territory
a deficit position. This is despite significant changes          Government performance. The results of the
to broaden the Government’s tax base (bracket creep            roundtables, benchmarking interviews and the survey
in payroll tax, abolition of land tax threshold, the new       form the basis of the findings of this report.
2.25% vendor duty and poker machine tax).
                                                               The Mid Term Report Card focuses only on issues
Since 2003, new issues affecting business                      which relate to and impact business.
competitiveness have also emerged. These include
the application of tort reforms, the Workplace
Fatalities debate, the application of the OH&S Act and
the continuing skills crisis.

In late 2002, Australian Business Limited developed
in collaboration with its members NSW Business
Priorities 2003. The ten priorities, presented to
Government and Opposition during the election
campaign prior to the March 2003 poll were

1.    Better access to an appropriately skilled
      workforce
2.    Reduce the burden of workplace compliance
      regimes
3.    Stem the rising cost of insurance premiums
4.    Review stamp duty on insurance premiums
5.    Maintain reliable utility infrastructure
6.    Improve transport infrastructure
7.    Reduce payroll tax
8.    Ensure environmental and economic
      sustainability
9.    Reduce crime
10.   Streamline regulations for environmental and
      urban planning.

This Mid Term Report Card assesses the performance
of the Government and the Opposition against the
priorities set out in NSW Business Priorities 2003.
The State Government is assessed on its legislative
initiatives and performance against NSW Business


                                                           5
ECONOMY

State Final Demand grew 5.7% in the year to March
2003, compared to the latest available data of 3.1%
in the year to December 2004. State Final Demand,
while trending down, has been strong in absolute
terms over the last two years.


                                               NSW State Final Demand Percentage Growth

             6




             5




             4




             3




             2




             1




             0
                 Mar-03




                           Jun-03




                                                   Sep-03




                                                                    Dec-03




                                                                                       Mar-04




                                                                                                          Jun-04




                                                                                                                              Sep-04




                                                                                                                                                  Dec-04
                                                                                                Source: Australian Bureau of Statistics, (at No: 5206.0)




                                      Treasury’s Assessment of the Performance and
                                            Outlook for NSW since July 2003*


                                                              Actual               Budget             Medium
                                                            2003/2004              Review              Term
                                                            Outcome               Forecast           Projection

                                     Gross State               2.0%                  3.25%               3.25%
                                      Product

                                     Final State               4.6%                   3%
                                      Demand


                                     Employment                1.4%                  1.25%               1.25%


                                    Unemployment               5.6%                  5.5%
                                        (rate)

                                     Sydney CPI                2.1%                  2.5%                2.25%


                               Wage Cost Index                 3.8%                  3.75%                3.5%


                                                             *Year average percent change, unless otherwise indicated

                                                             Source: NSW Treasury, 2004/05 Half Yearly Budget Review



                                                                             6
3220.0


3200.0


3180.0


3160.0


3140.0

Since March 2003, the unemployment rate for
3120.0
NSW has fallen from 6.1% in March 2003 to 5.1% in
January 2005. This is consistent with the fall in the
3100.0
national rate of unemployment from 6.2% in March
2003 to 5.1% in January 2005. The only times NSW
3080.0
unemployment rate has been below 5.1% were in
May and June 1981 when it fell to 5.0% and 4.5%
3060.0
respectively.
                                                         Jul-03




                                                                                                                                                                                                    Jul-04
            Mar-03

                       Apr-03

                                  May-03

                                             Jun-03



                                                                     Aug-03

                                                                                 Sep-03

                                                                                             Oct-03

                                                                                                          Nov-03

                                                                                                                       Dec-03

                                                                                                                                    Jan-04

                                                                                                                                              Feb-04

                                                                                                                                                           Mar-04

                                                                                                                                                                     Apr-04

                                                                                                                                                                              May-04

                                                                                                                                                                                       Jun-04



                                                                                                                                                                                                                Aug-04

                                                                                                                                                                                                                            Sep-04

                                                                                                                                                                                                                                        Oct-04

                                                                                                                                                                                                                                                   Nov-04

                                                                                                                                                                                                                                                              Dec-04

                                                                                                                                                                                                                                                                         Jan-05
Since March 2003, the NSW labour force has risen
by 64,400, including 33,900 full time positions. The
number of unemployed persons has fallen by 24,100
from 198,400 to 174,300.


                                                                                                                          Unemployment in NSW

   210000




   200000




   190000




   180000




   170000




   160000




   150000
              Mar-03

                         Apr-03

                                    May-03

                                                Jun-03

                                                            Jul-03

                                                                        Aug-03

                                                                                    Sep-03

                                                                                                 Oct-03

                                                                                                              Nov-03

                                                                                                                           Dec-03

                                                                                                                                         Jan-04

                                                                                                                                                      Feb-04

                                                                                                                                                                Mar-04

                                                                                                                                                                          Apr-04

                                                                                                                                                                                   May-04

                                                                                                                                                                                                Jun-04

                                                                                                                                                                                                             Jul-04

                                                                                                                                                                                                                         Aug-04

                                                                                                                                                                                                                                     Sep-04

                                                                                                                                                                                                                                                 Oct-04

                                                                                                                                                                                                                                                            Nov-04

                                                                                                                                                                                                                                                                       Dec-04

                                                                                                                                                                                                                                                                                  Jan-05




                                                                                                                                                                                            Source: Australian Bureau of Statistics, (at No: 6202.0)




Although many of the factors determining economic
growth and employment are outside the control of
the NSW Government, its provision of services and
leadership does influence the State’s performance.
Nevertheless, NSW is perceived to have a stable
and strong economy assisted by a stable political
environment.
Government                                                                                                                                   Opposition
GRADE: B                                                                                                                                     GRADE: N/A
                                                                                                                                             (Economic performance is not influenced by Opposition policy.)


                                                                                                                                                  7
  BUDGET                                                                                      Significant additional recurrent expenditure has
                                                                                              been required by Government to fund successful pay
  Since 2003 the Budgetary position of the NSW                                                claims by teachers and nurses.
  Government has tightened. At the 2002/03 Budget,
  the projected tax revenues for the year 2004/05 stood                                       This is reflected by the changes in expected employee
  at $14.1 billion and expected expenditure was $34.5                                         related expenditure. At the time of the 2002/03
  billion. At the 2004/05 Half Yearly Budget Review,                                          Budget, expected expenditure for employees in
  expected tax revenues had risen to $15.2 billion and                                        2004/05 was $16.9 billion and at the 2004/05 Mid Year
  expenditure had risen to $38.1 billion. In three years,                                     Review this had risen to $18.8 billion. In three years,
  expected tax revenue for 2004/05 has risen 8.1% and                                         expected employee expenditure for 2004/05 has risen
  expenditure by 10.5%.                                                                       by 11.5%.

                                                                                              The Government has supplemented its tax base by
          The NSW Budget 2004/05 Estimated vs Actual                                          introducing a number of new revenue measures,
                                                  2004/05                                     including
                            2004/05
                                                 Projected
                           Estimated                                  Increase                   •   A new poker machine tax on licensed clubs
                                                 December
                            June 02                                      %
                                                    2004
                            $ Billion                                                            •   A new 2.25% vendor duty on property sales
                                                  $ Billion

     Tax Revenues               14.10                 15.24               8.1                    •   Abolition of the land tax threshold.

      Employee
                               16.87                  18.81               11.5                In each case the Government has linked these
      Expenses
                                                                                              changes in taxation to other measures. The poker
    Total Expenses             34.45                  38.09
                                                                                              machine tax on clubs has been allocated to providing
                                                                          10.5
                                                                                              additional health funding, the vendor duty to pay for
                                                                                              the first home owners stamp duty exemption and the
              Source: NSW Treasury, 2002/03 Budget, 2004-05 Half Yearly Budget Review
                                                                                              abolition of the land tax threshold to pay for a cut in
                                                                                              the land tax rate.

                    Government Expenditure

2002/03            (Actual) 34,277

2003/04            (Actual) 36,443

2004/05            (Projected) 38,088

2005/06            (Projected) 39,014

2006/07            (Projected) 40,569

2007/08            (Projected) 42,233

          0      10,000       20,000        30,000       40,000        50,000

              Source: NSW Treasury, Budget Papers and 2004/05 Half Yearly Budget Review




                NSW              Queensland                Victoria




     2003



     2002                                                                                 8
                                                     Payroll Tax in $ Millions

     7000



     6000



     5000



     4000



     3000



     2000



     1000



        0
                   2002/03         2003/04            2004/05                 2005/06                    2006/07                    2007/08
                                                    (projected)             (projected)                (projected)                (projected)

                                                                         Source: NSW Treasury, Budget Papers and 2004/05 Half Yearly Budget Review



Of concern are the projections in the Half Yearly                     It should be noted that NSW residents pay the highest
Budget Review regarding NSW payroll tax collections.                  taxes of any State or Territory in Australia. According
The Review detailed an additional $3.7 billion in                     to the Australian Bureau of Statistics, every NSW
payroll tax collections over the four years to 2007/08,               resident in 2002/03 paid $2,477 in State and Local
equating to a 32% increase. This represents a                         taxes, compared with $2,267 in Victoria, $2,136 in
significant competitive impost on NSW businesses.                      West Australia, $2,010 in South Australia, $1,867
NSW has the highest rate of payroll tax of mainland                   in Queensland and $1,557 in Tasmania. NSW has
Australian States at 6.00% and compares with                          historically collected more taxes per capita than any
Queensland at 4.75% and Victoria at 5.25%.                            other Australian State and Territory.


                                               State Taxes Per Capita


         NSW


       Victoria


  West Australia


         ACT


 South Australia


   Queensland


      Tasmania


            NT


                   0         500             1000                 1500                 2000                    2500                    3000

                                                                                   Source: Australian Bureau of Statistics, (at No: 5506.0)




                                                                  9
The NSW Government has, without success,                       •   Abolishing the 2.25% vendor duty by 2011/12
continued to seek greater fairness from the
Commonwealth Grants Commission. Business                       •   Keeping the stamp duty concession for first
supports the NSW Government in its attempt to                      home buyers.
end the significant unnecessary cross-subsidisation
of other States with taxation collected from NSW           The Opposition has pursued tax reductions in areas
businesses and residents.                                  of high electoral worth, but has yet to detail any
                                                           policies aimed at reducing taxes on business.
Significantly, the Government in its 2004/05 Half
Yearly Budget Review announced that the Net                The Opposition is yet to detail any significant changes
Operating Surplus would be used as the new                 to expenditure. The Opposition prior to the last State
measure of the final budget outcome. This change            Election unveiled its expenditure cuts and costing
recognised that the Government had fulfilled the key        documents less than 48 hours before the poll, which
objectives of the 1995 Debt Elimination Act and brings     coincided with the commencement of the war on Iraq.
NSW in line with standard practice in other Australian     Business will not have confidence in the strength
States.                                                    of Coalition commitments if there is a similar late
                                                           release of expenditure cuts and costing documents.
According to the 2004/05 Half Yearly Budget Review
“the fiscal strategy will now place more emphasis           The Leader of the Opposition, in his 2004 Budget
on the broader concept of net financial liabilities.        Reply Speech, committed the Opposition to
This measure takes into account the full range of          undertaking benchmarking in Government and
the general government sector’s future financial            assessing the performance of Government against
obligations, including debt, and so represents a more      outcomes as distinct from inputs. This is a welcome
complete picture of the sector’s financial health”.         development and demonstrates a commitment to
                                                           using the Budgetary process as a means of lifting
The Government has set itself a new long term fiscal        Government performance.
goal of reducing general government net financial
liabilities to 5% of Gross State Product in 2020.
                                                           Summary
The consistent work at reducing the financial
                                                           Government
exposure of NSW means its Triple A rating is secure.
As importantly, it now allows the Government to            The Government has faced strong budgetary
invest in major infrastructure projects to strengthen      pressures particularly in relation to wages. However
the productive capacity of NSW.                            additional staff costs equate to less than half of the
                                                           increase in expenditure since 2003.

The Opposition                                             The Government has significantly increased the tax
Following the 2003 State Election, the Opposition          burden since 2003 and there is little evidence of the
signalled a new approach by handing the role of            Government seeking to rein in or cut expenditure.
Shadow Treasurer to the Leader of the Opposition.          High levels of taxation, particularly in relation to
                                                           business taxes like payroll tax, are making NSW
Predominantly, the Opposition has focused on               increasingly uncompetitive relative to Queensland.
matters of taxation, rather than issues of expenditure.
To date, the Opposition has made a number of               However, the Government has kept a tight control on
taxation commitments for the 2007 Election, including      debt levels, ensuring the State’s Triple A credit rating
                                                           is secure. By the Government’s own admission, debt
   •   Modifying the new poker machine tax on              levels have fallen to a point where the Government
       clubs                                               can now lift infrastructure spending without
                                                           endangering the Triple A rating.
   •   Re-introducing a tax free threshold for land        GRADE: B-
       tax (though not the same threshold as that
       abolished in 2004)


                                                          10
Opposition                                                    The Mid Term Report Card survey found
The Opposition has committed itself to a lower                overwhelming support for the Premier’s
tax burden on NSW taxpayers, but has focused to               campaign to reform the Commonwealth
date on tax cuts to individual taxpayers rather than          Grants Commission system for allocating
businesses.                                                   Commonwealth revenue to the States and
                                                              Territories. Over 77% of respondents support
Whilst the Opposition recognises the need to                  the Premier’s campaign to overhaul the
improve the performance of Government through                 Commission.
benchmarking and assessing performance against
outputs, it has yet to detail how these taxation and          Business also had a clear view in relation to
spending promises will be paid for.                           where any tax relief should be targeted in the
                                                              2005/06 State Budget, with 55% nominating
There is a case for NSW to take on more debt to pay           payroll tax, followed by 42% nominating the
for additional infrastructure and the Opposition has          new 2.25% vendor duty on investment property
already indicated it will pursue this option. However,        sales and 3% nominating cutting the new poker
this is only acceptable when the complete financial            machine tax.
details of any infrastructure proposals are on the
table.                                                        Indications that the Government intends to
                                                              increase its infrastructure program are widely
The Opposition should release its costing of election         supported by business. 75% indicated support
commitments on an ongoing basis. Costing of                   for increased infrastructure spending and that it
promises and details of departmental expenditure              was appropriate to use debt responsibly to fund
cuts should be detailed when policy commitments are           this increase.
made public. The Opposition should not repeat the
way the 2003 costing document release was handled.
GRADE: B-                                                          Source: Australian Business Limited survey February/March 2005, 600 responses




                                                         11
STATE COMPETITIVENESS                                        An example of the differences in costs between NSW
                                                             and other Australian States is shown below, based on
According to the Australian Bureau of Statistics, NSW        a 15 employee business spending $5,000 per month
residents pay more per capita in taxation than any           on rent and requiring three employee parking spaces.
other Australian State or Territory. Taxation at a State     The company owns two cars each worth $20,000 and
level is investment based, either on property (stamp         a van valued at $50,000 which are all registered.
duties, land tax, parking space levy) or on labour
(payroll tax). In such an environment, State taxes           This comparison demonstrates the difficulties many
can and do have an effect on the levels of economic          businesses in NSW face in competing with those in
activity within and between States.                          States that have a significantly lower tax base, and
                                                             this is before NSW’s higher Workers Compensation
On this basis, NSW has a significant competitive              premiums are paid.
disadvantage to its nearest neighbours, Queensland
and Victoria.

The State Chamber of Commerce (NSW) has
undertaken a comparison of costs on business
between Australian States. NSW is clearly the least
competitive of any Australian State when business
taxes are compared.




                         NSW             QLD                VIC            WA                SA                   TAS
                          $               $                  $              $                 $                    $

     Total Wages         773,916        693,030            741,078        746,070          684,918               663,000

      Estimated
                         843,568        755,403            807,775        813,216          746,561               722,670
       Payroll

    Total Expenses       14,614            0               13,533          3,477            13,753                  0


      Payroll Tax        14,614            0               13,533          3,477            13,753                  0

     Stamp Duty
                          210             210                   0          210               600                    0
       (lease)


  Parking Space Levy      2,580            0                    0          540                 0                    0


 Stamp Duty on Vehicle
                          4,200          1,800              2,250          3,500            2,610                 2,646
     Registration


   Total State Taxes
                         21,604          2,010             15,783          7,727            16,963                2,646
     and Charges



                                                                                    Source: State Chamber of Commerce (NSW) 2004




                                                           12
                                             Workers Compensation                        Workers Compensation Costs as
                                              Costs per employee                          a proportion of total earnings
                                                       $                                                %

                  NSW                                    1,161                                                   2.7

                 Victoria                                969                                                     2.4

               Queensland                                602                                                     1.6

             South Australia                             916                                                     2.5

            Western Australia                            760                                                     2.0

                Tasmania                                 902                                                     2.7

            Northern Territory                           845                                                     2.2

                   ACT                                   937                                                     2.1


            Australian Average                           939                                                     2.3
                                                     2002/03

                                                     2003/04                        Source: Australian Bureau of Statistics, (at No: 6348.0.55.001)


Workers compensation costs represent a particular        The
                                                     2004/05   NSW Government in January recognised the
burden for NSW businesses with workers                   issue of economic competitiveness through the
                                                     2005/06
compensation costs per worker in NSW the highest         appointment of NSW’s first Minister for Economic
in the nation at $1,161 per employee compared            Reform. This new Office of Economic Development
                                                     2006/07
with $602 per employee in Queensland. Workers            will have responsibility for future privatisations,
compensation costs per employee in NSW are           2007/08
                                                         improving performance of Government departments,
93% higher than in Queensland, despite the fact                      role of 20,000     service 40,000
                                                         lifting the 10,000 business in 30,000 delivery and
                                                             0                                              50,000
average salaries in NSW are only 18% higher than         improving the competitiveness of NSW. This is a
Queensland. The difference in cost can also be           welcome development as is the appointment by the
attributed to factors such as premium calculation,       Opposition of a Shadow Minister for Reform
benefits payable and scheme performance. These            of Government.
factors when combined create an additional burden
for business.
                                                                          NSW             Queensland                      Victoria
The relative attractiveness of Queensland to business
is reflected by the escalating movement of NSW
residents to other States. In 2003, a net 31,800 NSW             2003
residents moved interstate. During the same year
an additional 39,200 residents moved interstate to
Queensland and 28 people moved to Victoria.                      2002


The number of NSW residents moving interstate is
increasing each year and it appears to reflect among              2001

other issues dissatisfaction with taxation, compliance
and infrastructure in NSW.                                          -30,000 -20,000 -10,000       0       10,000       20,000 30,000 40,000
                                                                                          Source: Australian Bureau of Statistics, (at No: 3412.0)




                                                         13
                                                  State Final Demand
     Tort Law Reform                                                      The Government has stood by these reforms, which
     NSW Business Priorities 2003 identified great concern                 are effective and strongly supported by business.
     over the escalating costs of public liability and
     professional indemnity insurance premiums.                           Business is concerned that the Opposition may
                                                                          unwind these reforms by supporting a Legislative
     Since that time, the insurance market has stabilised                 Council inquiry into them. Requests for a public
     and this is due, in significant measure, to quickly                   assurance from the Opposition that they continue to
     implemented tort law reforms by the NSW                              support these reforms have gone unanswered.
     Government.
                                                                          Sensis and Australian Business Limited
     The latest analysis of public liability and professional             Benchmark of State and Territory
     indemnity premiums by the Australian Competition                     Government Costs and Regulation
     and Consumer Commission has detailed a 15%                           During February 2005 Sensis in conjunction with
     decrease in average premiums for public liability                    Australian Business Limited undertook a survey of
     insurance and a 17% decrease in real average                         1,800 Australian businesses regarding the ease of
     personal indemnity insurance premiums in the first                    doing business in each State and Territory.
     six months of 2004.
                                                                          1,800 small and medium sized businesses were asked
0%            1.0%                   2.0%
     The reforms have stabilised insurance premiums and 3.0%                             4.0%                 5.0%              6.0%
                                                                          “Taking into account your State/Territory Government
     provided greater stability to the re-insurance market.               costs and regulatory system, how easy do you find
                                                                          it to do business in your State/Territory, on a scale
                                                                          of 1 to 10, 1 being extremely difficult and 10 being
                                                                          extremely easy?”




        Rating of State or Territory Government Costs and Regulatory System


                 New South Wales                                 5.6

                             Victoria                                                         6.3

                        Queensland                                                      6.2
                                                                                                               The higher the
                    South Australia                                                           6.3            score the easier it
                                                                                                             is to do business
                 Western Australia                                                      6.2

                           Tasmania                                             6.0

                 Northern Territory                                                     6.2

        Australian Capital Territory                                                                   6.6

                            Average                                             6.0



                                                                              regulatory system, Sweeney
        Q. Taking into account your state/territory government costs andSource: Sensis Business Indexhow Research February 2005
        easy do you find it is to do business in your state/territory, on a scale of 1 to 10,
        1 being extremely difficult and 10 being extremely easy?

                                                                                        SOURCE: Sensis ® Business Index
                                                                                        Sweeney Research February 2005


                                                                       14
The benchmark finds that NSW significantly                      The introduction of tort law reform by the State
underperforms every other Australian State or                 Government over two years ago continues to
Territory Government. The findings of this benchmark           have widespread support amongst business,
demonstrate that NSW small and medium sized                   with 83% indicating support. The high level
businesses find it more difficult to do business due            of support is a warning to the Opposition that
to State issues than their counterparts in all other          business will strongly oppose any attempt to
Australian States and Territories.                            roll back these reforms.

Summary                                                       The appointment of the first Minister for
                                                              Economic Reform has been welcomed by
                                                              business. 68% supported the appointment of
Government
                                                              a Minister for Economic Reform, 15% opposed
The appointment of a Minister for Economic Reform             it and 17% were not sure. This result indicates
indicates that the Government is beginning to                 strong business goodwill towards the creation
address issues of competitiveness. However, with the          of this new role.
appointment only made weeks ago, it is too early to
tell if it will address competitiveness issues.

Whilst the Government demonstrated political
courage in tackling tort law reform, other areas of
reform and competitiveness are yet to be addressed.

The finding of the Sensis and Australian Business
Limited benchmark of Australian businesses
demonstrates an unsatisfactory level of difficulty in
doing business in NSW. The combination of high
taxation and difficult compliance regimes have
resulted in NSW being the poorest performer against
this State and Territory benchmark.

The Government has made little progress in
improving efficiencies, nor in making NSW more
competitive with neighbouring States and Territories.
GRADE: D

Opposition
The Opposition has consistently demonstrated an
understanding that NSW is uncompetitive relative to
Queensland.

It is concerning that the Opposition has entertained
debate to roll back the tort law reforms introduced by
the Carr Government. A roll back of tort law reform
will result in higher insurance premiums and a
significant disincentive to invest.
GRADE: C




                                                         15
CRIME                                                        The fall in crime across NSW has not occurred
                                                             in every local Government area. In the Hunter
NSW Business Priorities 2003 raised the concerns             for example, rates of crime have remained static,
of business regarding escalating levels of crime and         however, the statewide trend is downward.
concerns regarding adequate sentences. Businesses,
in many areas of the State, believed that crime and          Since 2003 the Government has
fear of crime, was having an impact on business.
                                                                    •   Increased the size of the NSW Police Service
By almost all measures, the strengthening economy,                      with 15,009 Police Officers as at 30 June 2004
more stringent checking at ports and airports, the
heroin drought and the introduction of ‘gaol not bail’              •   Passed legislation providing for up to 14 years
legislation has resulted in a substantive decrease in                   gaol for drive-by shootings
reported crime over the past three years.
                                                                    •   Implemented legislative changes for bail
In almost all categories of crime, there have been                      conditions (changes to presumption against
significant falls in the rate of crime.                                  bail in relation to crimes of violence and
                                                                        repeat offenders).
The release of the 2003 Recorded Crime Figures,
detailed that crime rates fell for eight of the 16           Summary
major crime categories. In the 2003 Recorded Crime
Statistics, the recorded rate of
                                                             Government
   •      Robbery without a weapon fell 4.6%                 Crime has fallen and this is welcomed by business
   •      Robbery with a weapon other than a firearm          as crime levels affect both costs and revenues of
          fell 19.3%                                         business.
   •      Break and enter (dwelling) fell 11.4%              GRADE: A
   •      Break and enter (non-dwelling) fell 12.8%
   •      Motor vehicle theft fell 17.3%                     Opposition
   •      Steal from a motor vehicle fell 14.7%              It should be noted the Opposition prior to the 2003
   •      Steal from a person fell 6.8%                      State Election initiated policies supporting ‘gaol not
   •      Fraud fell 15.2%.                                  bail’ legislation and also supported an increase in
                                                             Police Service numbers.
The remaining eight major categories of crime
                                                             GRADE: B
(murder, assault, robbery with a firearm, sexual
assault, indecent assault, stealing from a retail store,
stealing from a dwelling and malicious damage to
property) showed no significant upward or
downward trend.


                                                     Rate per 100,000                                    Rate per 100,000
                       Offence
                                                     Population 2001                                     Population 2003
 Murder                                                      1.6                                                    1.4

 Robbery – without a weapon                                122.3                                                   96.6

 Robbery with firearm                                        13.5                                                   10.6

 Robbery with a weapon not a firearm                         65.7                                                   33.6

 Break and Enter non dwelling                              796.9                                                   545.4

 Motor Vehicle Theft                                       822.5                                                    524

 Steal from retail store                                   316.1                                                   335.5

 Fraud                                                      491.4                                                  448.6


                                                                        Source: Bureau of Crime Statistics and Research: Recorded Crime Statistics


                                                           16
SKILLS                                                                implication and potential of this are yet to be
                                                                      seen. Early indications are that it will help
76% of businesses interviewed in NSW Business                         the Government respond more effectively
Priorities 2003 indicated that a skilled workforce was                to industry training needs, to integrate
either very important or extremely important to their                 vocational education delivery and improve
business.                                                             utilisation of existing infrastructure.

Business recognised in 2003 that skills shortages              These positive initiatives have been offset by
were emerging across most sectors. The situation has
worsened since that time. The March 2005 Australian               •   Continued resistance to fully implementing
Business Limited/Sensis Manufacturing and Allied                      the nationally agreed User Choice Policy
Services Index found that the ‘skills crisis’ is now
the primary concern of manufacturers with 20% of                  •   Insignificant growth in State Government
companies in the manufacturing sector expressing                      funding for vocational training. This is in part
“finding quality staff” as the primary business                        due to the roll-over of the Australian National
concern of their organisation.                                        Training Authority Agreement with the
                                                                      Commonwealth Government
The lowest unemployment rates in thirty years have
worsened the skill shortage crisis, yet there has been            •   Failure to address the negative impact of
little attempt to increase the availability of flexible,               annual contracting of training under the
workplace-specific vocational education & training                     Apprenticeship and Traineeship Training
(VET) to respond to user end need.                                    Program (ATTP). This, coupled with increased
                                                                      administration and reporting requirements
This is particularly so in regional NSW, where labour                 without CPI linked funding, is creating a
and skill-specific shortages are impacting on business                 significant barrier to sustainability
costs and output.
                                                                  •   Removal of Workers Compensation coverage
Despite this, there appears to be little sense of                     for trainees in the 2003/04 Budget
urgency within the NSW Government to tackle this
growing issue. The State Opposition has been silent               •   Introduction of a vocational education
and is yet to demonstrate an interest in vocational                   fee. While this fee reflects action taken in
education & training needs.                                           other States, tender requirements to deliver
                                                                      public funded training mean that it applies
Business has welcomed the following initiatives of                    to both TAFE and private training providers.
the State Government                                                  Combined, Australian Business Limited
                                                                      considers that these two issues have had
   •   Increased Department of Education & Training                   a negative impact on industry uptake of
       focus on professional development for school                   vocational training in 2004
       based careers advisers but has yet to develop
       any clear, long term strategies to better                  •   Inaction by the NSW Department of Education
       connect with industry                                          & Training to broaden flexibility in funding
                                                                      for either new entrant or existing workers.
   •   Creation of the NSW Industry Skills Forum                      Existing worker traineeships in NSW do
       enabling high-level industry input into training               not attract NSW Government incentives for
       priorities and advice on industry needs for the                registered training providers, despite being
       allocation of public funds for training                        registered and regulated by the Department.

   •   Re-structure of the NSW Department
       of Education & Training to integrate
       administration and align the TAFE and
       School regions across the State. The full


                                                          17
Summary                                                    The Opposition has not taken an active interest in
                                                           addressing the mismatch between business needs
Government                                                 and public and private capacity to deliver training.
                                                           As a consequence, the Opposition’s demonstrated
The Government is yet to fully demonstrate that
                                                           understanding of the needs of business in relation
it understands the needs of business in relation
                                                           to vocational education, is inadequate.
to skills shortages. Feedback from business
                                                           RATING: D
roundtables on the performance of TAFE was mixed,
with performance directly related to the capacity of
local TAFE management to connect with business.
                                                           Business considers that the State Government
However, even when local roundtables expressed
                                                           has not responded quickly to the skills crisis.
positive sentiments regarding the performance of
                                                           79% of businesses believe the Government
TAFE, this support was always tempered by the TAFE
                                                           is not doing enough in relation to address
system’s relative inflexibility.
                                                           current skills crisis. This reflects the results
                                                           of the Matching Workplace Skills to Business
Incremental initiatives to make TAFE more flexible
                                                           Needs study undertaken by Australian Business
and responsive are not enough given the skills
                                                           Limited in late 2003.
shortages faced by business. Changes to TAFE
course fees and the decision to remove the Workers
                                                           The study found that 46% of businesses
Compensation coverage for trainees indicate that the
                                                           wanted greater customisation of training under
Government does not comprehend the seriousness
                                                           public funding and 42% of businesses wanted
of the current skills crisis.
                                                           to cut red tape in the administration of New
                                                           Apprenticeships.
Integral to addressing skills shortages is changing the
perspective of high school students towards trades
based careers. Not enough work is being undertaken
with either teachers or careers advisers in high
schools to address this perception.

Major cultural change is needed within both the
Department of Education & Training and the broader
school communities to achieve this end.
GRADE: C

Opposition
Prior to the last State Election, the Leader of the
Opposition spoke often about the need to change
perceptions in high schools regarding trade based
careers. This welcome approach has not been taken
further and integrated into a substantial policy
response.

The Opposition has, since the election, indicated
its support for Workers Compensation coverage for
trainees and also opposition to additional course
charges for TAFE students. However, the extent of the
Opposition’s involvement in the vocational training
debate does not extend past these issues. The
Opposition has been silent about matching business
needs with a flexible and responsive vocational
training system.


                                                          18
WORKPLACE RELATIONS                                           under the Federal system. After taking population
                                                              into account, it is estimated that some 3,000 Federal
The efficiency of the NSW workplace relations                  Agreements were entered into in NSW. Businesses
system has a major effect on the productivity of the          are therefore making agreements under the Federal
Australian economy, as NSW makes up one third of              system at ten times the rate of the NSW system.
the Australian labour market.
                                                              This trend has accelerated over the last eighteen
The NSW Department of Commerce estimates that                 months with a continuing decline in the number of
38% of the NSW labour force is employed under State           enterprise agreements being entered into under the
awards, 31% under Federal awards and 31% work                 NSW system.
award free.
                                                              The application of unfair dismissal laws in NSW
The 38% of the labour force employed under State              places considerable pressure on employers. In 2003,
awards work within an inflexible, rigid workplace              over 4,000 applications for unfair dismissal were filed
relations system.                                             in the State Commission in NSW. This compares
                                                              with 1,378 applications from NSW under the Federal
The way that the State’s workplaces are regulated             system, despite a comparable number of employees
was a central concern of business in NSW Business             being covered under each system.
Priorities 2003. Concerns related to the unfair
dismissal system, workplace regulation and anti-              A survey of Australian Business Limited members
discrimination legislation.                                   in 2004 found that 75% of businesses rated the
                                                              application of unfair dismissal laws as a “moderate
Business saw workplace regulation as over-                                       .
                                                              or major concern” The Federal Government has
complicated, detailed and difficult to understand              indicated that it will exempt small businesses from
with certainty. This complexity was immeasurably              the Federal unfair dismissal regime. This exemption
compounded by the requirement for business to                 is expected when the Coalition gains control of the
deal with both State and Federal legislation in their         Senate on 1 July 2005.
workplaces.
                                                              The re-election of the Federal Government
The existence of dual systems and regulation was              with majority control of the Senate provides an
perceived as adding to the weight of regulation,              opportunity to develop a simplified and unified
time costs of compliance and difficulties making               workplace relations system. A unified system will
productive, effective workplaces.                             remove duplication, simplify workplace relations and
                                                              improve national competitiveness.
There is a perceived lack of balance in workplace
relations regulation. Employees’ rights dominate over         The State Government has recently indicated its
employers’, tribunal processes are time consuming             opposition to a unified system. Given that no
and unpredictable, union and employee rights                  proposal from the Federal Government is on the
dominate business needs. Workplace regulations                table, it is difficult to assess if this is only a holding
rarely work to assist businesses to operate better.           position or if the State Government will enter
                                                              constructive negotiations.
In addition, business continues to raise concerns
about inadequate support and disincentives to                 Workplace relations reform is critical to lifting national
enterprise bargaining.                                        competitiveness. It can be expected the response by
                                                              the State Government and Opposition to the Federal
Federal legislation is strongly preferred by employees        Government’s proposed changes to workplace
for making enterprise agreements.                             relations will form a significant part of businesses’
                                                              judgement about their respective performances in the
In 2003, only 347 enterprise agreements were made             lead up to the March 2007 State Election.
under the NSW system. In the same period there
were 8,679 certified agreements signed nationally


                                                         19
In the Mid Term Report Card survey, 92%                  Opposition
expressed support for the State Government               The Leader of the Opposition has stated he is
to work with the Federal Government in                   receptive to Federal plans for reform of workplace
developing a simplified, unified workplace                 relations in Australia. He has also indicated
relations system.                                        this should be part of any debate between the
                                                         Commonwealth and the States about issues of
Business support on this question was the                Federalism and overlapping jurisdiction.
highest of any question in the Mid Term
Report Card survey. Businesses are seeking               Given that the Opposition’s final position is
a co-operative approach from Governments                 dependent on seeing a definitive Federal Government
to removing duplication, improving                       position, the State Opposition is not expected to
competitiveness and making the workplace                 outline detailed proposals for workplace relations
relations system more responsive to business             reform in NSW until the Commonwealth’s final
needs.                                                   position is known.

Australian Business Limited encourages the               Statements by the Leader of the Opposition indicate
State Government to sit down with the Federal            support for workplace relations reform.
Government to develop a plan that will remove
                                                         GRADE: B
duplication, simplify workplace relations and
improve national competitiveness.




Summary
Government
The Government has shown little or no interest
in reforming workplace relations to facilitate
more productive workplaces and simplify existing
workplace regulation in NSW. The proposed
introduction of further regulation in areas such as
workplace surveillance and the current system for
enterprise agreements is discouraging. In addition,
the NSW unfair dismissal system fails to reject
unwarranted claims early enough and has uncertain
exemptions.

The Federal system is expected to become even more
flexible with the Federal Government indicating that
workplace relations reform is its highest priority in
2005.

The initial response by the State Government to the
Federal Government’s reform proposals has not been
encouraging.
GRADE: D




                                                        20
WORKERS COMPENSATION                                           Inherent in such a system is a framework that
                                                               provides reasonable certainty for businesses as to the
In NSW Business Priorities 2003 workers                        cost of premiums.
compensation premiums were rated as the highest
concern for businesses employing twenty people                 The release of a discussion paper in March 2005
or more. Seven in ten businesses said workers                  regarding the setting of premiums is welcome. The
compensation was impacting significantly on                     discussion paper seeks to provide business with
business operations, with 42% of respondents rating            greater certainty for premium setting, retrospectively
the impact as highly important.                                adjusting premiums for employers who have been
                                                               the victim of fraudulent claims, rewarding small
The primary concerns of business relate to the cost            to medium sized businesses who promptly report
of premiums, lack of transparency in the premium               claims and rewriting premium documents so they are
setting process, slow responses by WorkCover when              understandable.
premiums are in dispute and concerns about bias
and fairness. There also appears to be inaction by             This need by business for greater certainty and
insurers regarding fraudulent or exaggerated claims            transparency was demonstrated in the 2004 Premium
and a perception that return to work initiatives were          Order, which in a number of instances produced
not encouraged.                                                anomalous results. In some circumstances premiums
                                                               rose despite unchanged tariff rates, and stable or
The State Government recognised these concerns                 reducing wages bills and claims costs.
and commissioned McKinsey and Company to
undertake a review of Workers Compensation in                  Harmonisation with other State schemes has not
NSW. The Government has actively pursued the                   been significantly advanced. Recommendations by
recommendations in the review.                                 the Productivity Commission that would have made
                                                               it possible for a wider group of national employers
Areas that have received attention from the State              to move to self-insurance were only partially adopted
Government since the 2003 Election include                     by the Commonwealth. Harmonisation remains a
                                                               difficult political challenge but must remain a key
   •   Obtaining greater harmonisation with other              longer term objective.
       States’ schemes
                                                               Workers compensation costs continue to be
   •   Establishing an independent insurance entity            significantly higher in NSW ($1,161 per employee in
       with statutory supervision                              2002/03) than in any other jurisdiction. At the same
                                                               time the Scheme has in recent years consistently
   •   Maintaining a publicly underwritten                     paid for itself on an annual basis. Despite the
       scheme and expanding the range of claims                improvement in position, the NSW Government is
       management suppliers                                    yet to pass on any premium reductions. There is
                                                               no compelling argument that total elimination of
   •   Improving premium setting to better reflect              the Scheme deficit be the pre-requisite for premium
       business risk                                           reductions. The substantial savings expected from
                                                               Partnerships for Recovery and the Review of Premium
   •   Creating proxy market signals to inform                 Setting are yet to be seen.
       employer choice of provider.
                                                               As yet, the Opposition has not developed any policy
The results of the current Review of Premium                   options for WorkCover, nor has it sought to use its
Setting are not yet known. However, WorkCover has              position to constructively develop options to assist
sought to engage employers in the current review.              business.
Employers are seeking in the Review of Premium
Setting a system that better reflects the risks inherent
in a business and the costs to the scheme of claims
from that business.


                                                          21
Summary
Government
The Minister for Industrial Relations has implemented
significant reform in relation to the operation of
the Workers Compensation Scheme and setting of
premiums.

Whilst there has been an improvement in the
Scheme’s performance and greater transparency,
feedback from roundtables reflects continued
concern. Further work is needed to establish greater
transparency and fairness before business confidence
in WorkCover can be expected to increase. Despite
the improvements in the Scheme’s performance in
recent years, the Government has yet to pass on any
of these benefits to business in reduced premiums.
GRADE: C-

Opposition
The Opposition is yet to release any policies in
relation to the administration and calculation of
WorkCover Premiums. This is a significant area
of business interest and the Opposition has yet to
identify any improvements to the operation of the
Scheme.
GRADE: C-




                                                        22
OCCUPATIONAL HEALTH AND SAFETY                                  •    The lack of any public provision of data in
                                                                     relation to the application of OH&S continues
NSW Business Priorities 2003 identified Occupational                  to impair confidence in the OH&S system.
Health & Safety (OH&S) compliance as a significant                    Business still believes the OH&S system
and negative issue for NSW businesses. According                     is unreasonably biased against them and
to the survey of members, 41% of respondents                         there is an imbalance in the enforcement of
answered that OH&S compliance issues were                            OH&S between employers and employees.
significant and impacting negatively on their                         Until there is public scrutiny of OH&S data,
operations.                                                          there will continue to be a perception that
                                                                     the system is unreasonably biased against
In September 2003, the 24 month transition period                    business
for the Occupational Health & Safety Regulation 2001
(OHSR 2001) concluded and all small businesses had              •    The NSW Government has demonstrated
to comply with the Occupational Health & Safety Act                  little interest in developing national
2000 (OSHA 2000). To this end, WorkCover indicated                   consistency in OH&S. The Productivity
it would focus on advice and assistance to ensure                    Commission in its report, National Workers
businesses were aware of their OH&S obligations                      Compensation and Occupational Health and
through the Small Business Assistance Strategy.                      Safety Frameworks, recommended greater
                                                                     national OH&S consistency and the Federal
Since 2003 the following has occurred                                Government has proposed a new Australian
                                                                     Safety and Compensation Council to increase
  •    There has been a discernable increase in the                  national workers compensation and OH&S
       effort expended by WorkCover in the provision                 consistency. It also recommended uniform
       of support to business with respect to                        OH&S legislation
       compliance issues. This has been welcomed
       by business and it is recognised that it is an           •    Concern has emerged at the application of
       activity which requires persistence on the part               the absolute duty of care required by OHSA
       of WorkCover                                                  2000. The Industrial Relations Commission
                                                                     has applied the duty in an arbitrary rather
  •    The Government has chosen not to bring                        than an equitable way. The application of the
       forward a review of the OH&S Regulation.                      absolute duty has tightened with subsequent
       There is consistent evidence to show that                     narrowing of statutory defences. The result
       many businesses have found it difficult                        is that over the last two years business
       to comply with the requirements of the                        perceptions of a fundamental lack of balance
       Regulation and that compliance costs to                       between the obligations of employers and
       business are significant                                       employees have sharpened. Many employers
                                                                     regard it now to be impossible to comply with
  •    WorkCover has directed considerable                           the legislation. This was highlighted by the
       resources to education and assistance to                      Committee of Experts.
       employers as a result of the magnitude of the
       changes introduced via OHSR 2001. While                Compliance concerns are growing, particularly for
       welcome, this assistance does not deal with            the small business sector. The 2004 Red Tape Register
       the core issues of complexity and compliance           compiled by the State Chamber of Commerce
       costs                                                  found that compliance time for small business
                                                              was increasing. In 2003, 13% of small businesses
  •    WorkCover Assist was funded for a further              surveyed in the register spent 5 to 15 hours per week
       two years (until Mid 2005). This is a welcome          on OH&S related issues and in 2004 this had risen
       development and continues the positive                 to 25%.
       engagement of employers and employees and
       ensures WorkCover’s message continues to be
       delivered to the widest possible audience


                                                         23
Summary
Government
The operation of OHSR 2001 and OHSA 2000 has
created considerable concern amongst business. In
particular, the tight interpretation of the duty of care
has created considerable angst particularly amongst
small business. The arbitrary and absolute way the
Commission has applied the duty of care has resulted
in many employers simply giving up.

Greater attempts are needed by WorkCover to
co-operatively communicate with small to medium
sized businesses. Confidence in the fairness of OH&S
is low and WorkCover has made no substantive effort
to address this lack of confidence.

The five year review of OHSA 2000 is expected in
late 2005. Changing WorkCover’s culture and the
current application of OH&S will be a critical issue for
employers.
GRADE: D

Opposition
The Opposition has not entered into any debate
regarding the application of OH&S legislation since
the election. It is a significant compliance issue for
business and the Opposition has yet to engage in
meaningful and positive dialogue.
GRADE: D


It became apparent through the business
roundtables and the Mid Term Report Card
Survey there is considerable anger directed
towards the State Government over the
administration of the workers compensation
system. Only 12% of respondents said
WorkCover’s performance has improved over
the past two years. 39% said its performance
had stayed the same, 15% said it had
deteriorated and a further 34% were ‘not sure’.

In the roundtables, the primary causes of
dissatisfaction were identified as a lack of
transparency from WorkCover and the current
unworkable application of the duty of care.




                                                           24
WORKPLACE FATALITIES LEGISLATION                              Summary
The most significant workplace issue to emerge since           Government
the 2003 election is the issue of Workplace Fatalities
                                                              The Government correctly rejected the call for
legislation.
                                                              industrial manslaughter legislation but the Draft
                                                              Workplace Fatalities Bill is fundamentally flawed.
Business groups, the Government and the Opposition
support the need for ‘rogue’ and reckless employers
                                                              As yet the Government has not answered the
to be brought to account. There is however
                                                              concerns of business in relation to its draft Workplace
significant differences between business and the
                                                              Fatalities legislation. The Australian Business Limited
Government about how this is meant to be achieved.
                                                              plan on Workplace Fatalities legislation creates
                                                              a framework which meets community need for
The Government has, as requested by business,
                                                              legislation to punish reckless and rogue employers.
rejected the option of industrial manslaughter
                                                              The Government as yet has not accepted the
legislation within the Crimes Act. However, the
                                                              reasonable suggestions of business.
draft bill presented by the Government in 2004 has
                                                              GRADE: F
raised concerns primarily because it acts within
the framework of OHSA 2000 and the impossibility
of compliance by employers with the Act. The                  Opposition
combination of an absolute duty of care with a new            The Opposition has indicated its commitment to
offence that carries up to five years gaol is a concern        oppose the draft legislation. It is, however, unclear
to every employer.                                            if this commitment to oppose the draft legislation
                                                              means that it will not vote for any amendments to
The draft legislation, in its current form, is not            improve the legislation.
supported by either business or the Opposition.
At the time of writing, the Government is yet                 If the Government proceeds with legislation, the
to respond to the five point plan developed by                 Opposition will need to ensure that it works to
Australian Business Limited on Workplace Fatalities           remove those elements of the draft bill that are
which                                                         repugnant to business.

   1.   Requires that prosecutions under Workplace            The grading of the Opposition is based on its
        Fatality provisions are only launched when            commitment to oppose the draft legislation
        employers act ‘recklessly’ and endanger the           and assumes that it will not oppose reasonable
        life of another                                       amendments if legislation becomes inevitable.
                                                              GRADE: A
   2.   Provides only WorkCover and the Crown with
        the right of prosecution (thereby removing
        unions’ right to prosecute)

   3.   Removes ‘bounty hunter’ incentives for trade
        unions to prosecute

   4.   Ensures a right of appeal when custodial
        sentences are applied

   5.   Introduces a practical application of an
        employer’s duty of care.

   The issue is a major concern to business and the
   discernable differences on the Government and
   Opposition positions are clear.


                                                         25
There is overwhelming concern in the
business community about the current draft
Workplace Fatality legislation. All roundtables
expressed extreme dissatisfaction with the
draft legislation. Concern stems from the
fact the new offence will form part of the
Occupational Health and Safety Act 2000 which
has an extremely broad and difficult obligation
in relation to the duty of care. This broad
definition ensures that compliance is legally
near impossible and as such employers have
every right to be fearful of gaol if a workplace
fatality occurs at their workplace.

Two aspects of the Workplace Fatalities
legislation were surveyed as part of the
Mid Term Report Card, they being the right
of unions to initiate workplace fatality
prosecutions against employers and rights of
appeal under the draft legislation.

Only 10% supported the right of trade unions to
prosecute employers with 84% of businesses
opposed to this power. The view of the
respondents reflects the combined business
submission put to the NSW Industrial Relations
Minister that trade unions should not have
‘police style’ powers against employers. This
power should rest with WorkCover and the
Crown alone.

An overwhelming 89% of respondents believe
that any employer who receives a gaol sentence
for a workplace fatality should have the right of
appeal to a higher court.




                                                    26
MOVING FORWARD

NSW must preserve the economic and jobs growth
that have occurred in recent years. The current levels
of economic growth cannot be taken for granted.

The gains of the past decade will be put at risk if
there is complacency about the growth in the size
of Government and the ensuing growth in taxation.
As importantly, issues of compliance, particularly
in OH&S and workplace relations, are inhibiting the
capacity of business to compete with other States and
internationally.

The Mid Term Report Card details an action plan for
both the State Government and Opposition. It is
against this action plan that both the Government and
the Opposition will be assessed by business in one
year’s time.




                                                         27
Government                                                Opposition

 1.   Establish an expenditure taskforce under the            1.   Commit to cutting payroll tax. Currently
      chairmanship of the Minister for Economic                    Opposition tax cuts are not targeted towards
      Reform to cut the growth in Government                       business. Cutting payroll tax must be central
      expenditure. This growth in expenditure is                   to any plan to cut taxation.
      putting additional taxation pressure on NSW
      businesses and making them uncompetitive                2.   Detail nature and extent of proposed
      against Queensland and Victoria.                             expenditure cuts. Opposition plans to cut
                                                                   taxation and lift infrastructure spending will
 2.   Commence a four year program to cut                          not have credibility if it does not detail how it
      payroll tax from 6.0% to 5.5% and increase                   will fund these initiatives.
      the tax free threshold to $700,000. At this
      level, the rate will still be above the 4.75%           3.   Commit to an ongoing release of costed
      in Queensland and 5.25% rate in Victoria.                    policies. Any last minute release of costing
      The NSW Government would need to forgo                       documents in the 2007 election campaign will
      approximately $600 million of the projected                  not inspire confidence or credibility.
      $3.7 billion increase in payroll tax revenues.
                                                              4.   Focus Opposition policy attention on
 3.   Further invest in infrastructure. NSW’s Triple A             Vocational Education. To date the Opposition
      credit rating is secure and there are extensive              has focussed more on schools than training.
      pressures on the water, electricity, road and
      rail networks.                                          5.   Publicly re-commit the Opposition to tort
                                                                   law reform. Ongoing support for the
 4.   Negotiate with the Federal Government                        Government’s tort law reforms is essential.
      to develop a simplified, unified workplace
      relations system.                                       6.   Provide bi-partisan support to the NSW
                                                                   Government in its attempts to reform the
 5.   Return the benefits of Workers Compensation                   Commonwealth Grants Commission.
      Scheme surpluses to businesses in the form
      of lower premiums. The performance of the               7.   Publicly release the Opposition’s Occupational
      Scheme has improved in recent years and the                  Health and Safety policy by March 2006.
      benefits should be passed on.
                                                              8.   Publicly release the Opposition’s policy
 6.   Engage constructively with business                          on Workers Compensation premiums by
      on labour force and skills issues. The                       March 2006.
      Government should establish and implement
      a coherent strategy to address the current
      skills crisis and future skills needs.

 7.   As a matter of urgency, review the OH&S
      2000 Act with particular focus on reforming
      the duty of care. The current application of the
      duty of care is having significant unforeseen
      consequences, including many smaller
      businesses giving up on OH&S because
      compliance is too difficult.

 8.   Amend the draft Workplace Fatalities
      legislation by adopting the Australian
      Business Limited five point plan.


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