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Speech

TAFE Directors Australia Convention 2007

Reframe – Refresh - Fresh Start

Melbourne Exhibition and Convention Centre

9.45am, Monday 24 September 2007

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Over the last 5 or 6 years, Australia – whether it be business, governments, the broader community or, for that matter, TAFE – has been presented with a whole set of major new challenges.

After 14 years of uninterrupted economic growth, with a rapidly ageing population and the profound emergence of China and India, we have got an economy which, for the first time in many decades, is operating in the zone of full capacity.

The combination of these factors, and the speed with which they have emerged, has created labour shortages – too many jobs chasing too few people.

And further pressures will come in terms of labour shortages in the years ahead.

For example, in South Australia today there are three quarters of a million people in jobs across the State. Recently a labour market research group estimated that over the next eight years nearly half of these three quarters of a million jobs in South Australia will need to be filled with new people because of retirements, combined with further job growth.

This is a remarkable projection, which is mirrored to a greater or lesser extent in other States. In the minds of lots of people the impact of what is coming down the line is only just starting to sink in.

This labour shortage, in combination with 20 to 30 years of talking down technical, vocational and creative careers, has produced skill shortages across many areas of the economy.

We need to take some confidence from the fact that there is a response taking place. In the last four years alone, 544,000 people completed apprenticeships. Now that compares with 30,900 who completed an apprenticeship in 1996.

But as many of your well know, effectively training new entrants to the workforce is only part of the solution. With insufficient young people reaching working age to plug the labour shortages, the issue of training or retraining people at all ages within the existing workforce is a critical part of dealing with the impact of labour shortages.

Business will respond. Business is responding.

Typically when labour shortages emerge, business seeks to replace labour with new technology. This is not a new phenomena.

What is new will be the pace of adoption of new technology over the next decade or more; it will be at a pace never before witnessed, and it has huge implications and opportunities for our training sector.

Let me give you an example some of you many have heard me recount previously.

Three or four months ago my wife and I visited friends on a cattle station north of Alice Springs. I hadn’t been there for 10 years.

The last time I visited there were 8,000 head of cattle; a traditional cattle station, lots of horses, mustering all the rest of it.

Today there are still 8,000 head of cattle, but not much else is the same.

We went to visit on a Saturday afternoon and drove into the property. The homestead’s 20 minutes off the road. That so-called front paddock, on 10,000 acres, was the horse paddock. A couple of hundred horses had traditionally been there for a hundred years; thoroughbreds for the mustering. I got to the homestead and I said to my friend, “I didn’t see any horses” and he said “there aren’t any, no horses anymore, it’s all helicopters, light aircraft and a couple of motor bikes”.

We had a drink and a little while later he said “I’ve got to show you the cattle yards”. We went down to the cattle yards and he proudly showed me the new $400,000 cattle crush.

The cattle crush is a metal cage which holds the cattle while they do what they have to do to the cattle and it’s got races leading up to it and all sorts of gates. Typically it is very labour intensive and quite dangerous. Here’s this cattle crush, he got it going, and there is a keypad on the side of it, it’s fully operational from a keypad. There’s no need for anyone much to be involved with the cattle, just dogs and one person handling the cattle crush. All the gates open automatically all the way back into the yards.

We went back to the homestead and I said “I haven’t seen any cattlemen, what they call ringers, where are your cattlemen?”.  He said, “I don’t have any cattlemen anymore."  Just his son who is 40, and my friend who is 68. And he said “we use backpackers, we run 8,000 head of cattle, a traditional cattle station with backpackers”.

My friend then spent the next 40 minutes telling me all about the international labour market and who he had booked to come from Germany and Switzerland, and about the training programme he puts them through when they arrive.

It got me thinking as I left, here we are in the middle of the Northern Territory on a traditional cattle station and in the space of 10 years, here’s a person in his 60s, who has sought to deal with an emerging labour shortage and other issues, and has fundamentally turned around the operations.

I thought what skills are now needed in Alice Springs and Katherine and such places. No longer the blacksmiths; they need someone to keep the helicopters in the air, someone who can maintain a $400,000, all singing, all dancing, computerised cattle crush. Someone who is linked into the international labour market.

It is extraordinary, not only the change but the pace of change, which I suppose is my point.

I thought it was symbolic. One, of the pace of change. Two, of the nature of the change that we are confronting and three, of the ingenuity of Australians in the face of challenges.

If a cattleman in his 60s, deep in the centre of Australia, can, in the space of 6 to 8 years so profoundly change the nature of running a traditional cattle station through the introduction of technology, imagine what is happening across so many other areas of our economy.

Just last week it was reported that in a couple of years the rail system that moves Rio Tinto’s massive output from mine to port in the Pilbara will be fully automated. Rio’s train could soon be driverless – with trains doing up to 900km round trips with a driver sitting in front of a control panel in Perth.

The response to labour shortages will be multi-faceted, but in many areas of business the principal immediate focus has been to seek to retain mature aged workers (the 3 million people aged between 55 and 70), and to upskill the existing workforce, at all age levels, to handle the new technology that is being rapidly adopted.

The challenge for government is not to prescribe how individual businesses, or training organisations for that matter, should respond, but rather to provide an environment flexible enough to enable businesses to formulate rapid and profound change, and be free to implement it.

What bureaucrat or politician could have gone onto my friend’s cattle station 8 years ago and determined the solution I have described.

Rather, the imperative for Government is to create policies which give individuals and businesses the flexibility and incentive to work out strategies which best suit their circumstance.

It requires policy action on many fronts, and it is why the Government has introduced:

• Welfare-to-work legislation, to unlock huge pockets of untapped labour resources;
• Workplace Relations legislation to deliver much needed flexibility;
• Taxation reform;
• Tax breaks for seniors;
• Superannuation changes;
• Independent contractor legislation;
• A focus on skilled migration;
• Visa changes for backpackers;
• The sale of Telstra;
• Job re-locations subsidies;
• Major increases in child care spending, and
• A 24-fold increase in spending on VET over the last 10 years, including initiatives such as $3,000 work skill vouchers that put solutions in the hands of the individual.

These and other policies are creating a capacity and flexible environment for business to respond to the labour shortages.

Of course, training has a pivotal role.

Change in the nature of training delivery needs to keep pace with the unprecedented speed of adoption of new technology – in workplaces large and small.

Training solutions will differ from business to business, from month to month, from delivery method to delivery method.

And, when the future arrives it will not be as predicted, so planning for it needs to be flexible.

For training organisations, unprecedented innovation and flexibility of training delivery will be required.

It is enormously challenging, but exciting at the same time.

I suspect we might look back at some time in the future and see this period as one of revolution in the delivery of technical and vocational training in Australia.

How the various arms of VET respond will not only shape the future of the VET sector, but critically determine the capacity of industry to meet the challenge of labour shortages.

To date, in many cases, the publicly funded TAFE sector has been too slow to respond.

Many TAFE colleges have been shackled by State Government controls, guided by the iron glove of unions.

As a consequence, in recent years what we have been witnessing is an explosion in the growth of in-house training and private training organisations. Because there are no publicly available statistics this explosion has gone under the radar.

Chris Fraser, the head of training for the booming mining industry said recently that mining employers had given up on the public training system, and now used mainly private registered training organisations and some TAFEs that were operating on a commercial fee-for-service basis.

Mr Fraser said, “some of the TAFEs say, ‘we’ll do whatever you want as long as it’s between 9am and 5pm, Monday to Friday’ but that doesn’t work for us”.

Recently I had a meeting with eight of the top twelve IT companies in Australia. Collectively they train and upskill tens of thousands of Australians on their staff every year. They make a huge investment in training.

Every one of these companies reported that all their training was now in-house because it resulted in far more flexible training delivery, and enable them to upskill staff in quite specific skill sets.

A truly responsive TAFE sector would have been an attractive alternative to many of these companies; and tens of millions of dollars would be flowing into individual TAFEs.

I am hearing the same story across so many areas of business. Like my cattleman friend businesses are galloping to introduce new technologies to cope with labour shortages. In most cases they are turning to their existing workforce – to train or upskill them a notch, or two or three – to handle the new technologies.

Many require the training in the workplace, or on-line, at a time or frequency suitable to the employer and employee, with training in quite specific skills tailored to the new tasks each individual business confronts.

In this regard so many TAFEs are being left behind. At a time of increasing labour shortages we saw the census record a 13% reduction in TAFE enrolments between 2001 and 2006.

We need to breathe life into our TAFE sector around the country. Given the labour shortages there is a great urgency.

I see TAFEs as a wonderful national asset, with thousands of talented and dedicated staff, but the bureaucratic shackles need to be removed.

In my mind it is the area of greatest potential microeconomic reform in education in Australia.

To meet the needs of the workforce and industry of tomorrow, we must see added to TAFEs traditional training delivery methods a real capacity to deliver training in the workplace, in the home, on-line, tailored to the specific needs of a large or small business, and constitute a ‘building blocks’ approach to recognised training.

I believe to achieve this, TAFE colleges need a measure of autonomy at least equal to that enjoyed by universities.

Talk to those involved with dual sector campuses and they will freely tell you that the university sector is much more dynamic and enterprising solely because of the freedom management enjoyed.

We need to give our TAFE sector around the country the autonomy and the capacity to grow their business – to be truly dynamic, enterprising and responsive.

States could deliver this reform tomorrow – with the stroke of a pen if they were so minded.

Progress is being made, but it is painstakingly slow – and we are seeing some backsliding.

Even in Victoria, where the benefits of much greater autonomy are on full display following the freeing up of TAFEs by Jeff Kennet 15 years ago, disturbingly we are seeing State government steps to re-regulate the sector.

Despite seeing their TAFE sector go from the back of the pack to the front of the line over the last 15 years – with the emergency of world leading TAFEs such as Holmesglen, Box Hill and others – the Victorian Government wants to turn back the clock, and remove the autonomy of TAFE Boards and management to set employment conditions.

In response to the explicit demands of the Australian Education Union the Victorian Government is imposing one centralised industrial agreement on all State owned VET institutions, including all dual sector University and TAFE institutions. As the AEU has stated in their TAFE Bulletin, “the 18 TAFE Directors in Victoria are now required by government to develop a single management position on which to negotiate”.

For all TAFE colleges in Victoria this represents serious re-regulation. For Victorian dual sector institutions running institution based employment agreements for all their staff, they will be forced to create a differentiation between their TAFE staff and University staff, with TAFE staff fettered by the AEU controlled Certified Agreement. This is a serious backward step.

Autonomy means:

• a capacity to truly respond to local industry and community needs, whenever, wherever and however the training is required;
• it means flexible employment arrangements which doesn’t necessitate casualisation to get around restrictive agreements;
• it means real decision making powers and independence for TAFE directors and management, including entering all sorts of partnerships, including international project work, fee-for-service training and third party access;
• it means the ability to generate and truly retain revenue; to be innovative and enterprising, and
• it means transparency and accountability.

I know some progress is being made. But it is far too slow given the extraordinary demands that have materialised from the combination of a rapidly ageing population, one and a half decades of uninterrupted economic growth and the profound emergence of China and India.

Despite the predictable cheap political shots from people doing Mr Rudd’s bidding, such as NSW Minister, John Della Bosca, this call for a very large measure of autonomy in no way suggests less money for TAFE.

The facts are that Australian Government expenditure under the Commonwealth-State Agreement for skilling Australia’s workforce has grown in real terms by 20 per cent since 1995-96, whereas the expenditure by the States and Territories has grown over that time by 5.4 per cent in real terms.

I’m proud of the fact that the Australian Government has spent over $24 billion on vocational and technical training over the last 10 years. In the year that took office our predecessor had budgeted $1 billion for vocational and technical training – and we have spent not ten times that over 10 years, we’ve spent 24 times that over 10 years.

In regards to the TAFE component, over 10 years we have committed 16 times what was being spent annually when we took office – from $770 million in 1995-96 to a total of around $12 billion.

Our political opponents are totally misrepresenting the funding facts. As well, they have not released any policies of any consequence and we are just weeks from an election.

Of course, in the future even more money will be needed. But my point is that the effectiveness of the current $4 billion spent on TAFE each year, and all future tax payer expenditure, will be turbo-charged if it is associated with cultural change within TAFE – if it is associated with a large measure of autonomy for individual TAFE institutions which encourages great innovation, flexibility and enterprise in the delivery of training and in the growth of research.

Just like my cattleman friend and the profound changes he identified for his business, those managing TAFEs know their business better than any politician or group of public servants. We need to give them the authority to make timely and independent decisions about their institution, in combination with proper transparency, and the accountability that comes with it.

Next year we have got the renegotiation of our TAFE funding arrangements – the Federal/State Funding Agreement.

It is an absolute imperative for me to see it deliver real autonomy for our TAFE institutions around Australia, and deliver it quickly.

As part of this process I want to put on the table a proposal to align our funding model in VET with the one we use for universities – namely negotiating with the States in relation to the provision of student places as opposed to funding teaching hours.

Furthermore, I would like explore the opportunity to increase the certainty of capital funding either by replacing the annual bidding process with some 3 year allocation, or considering the merit of a capital component in the money per place.

Our TAFE sector has the potential to lead and shape the national’s response to our labour and skill shortage, it has the potential to be an engine room for research and development, it has the potential to assume an equal status with universities in higher education.

The Howard/Costello Government will do what it can to unlock this potential – do what it can to remove the handcuffs.

Thank you.

END

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