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The Institute for Private Enterprise promotes the cause of private enterprise and a reduction in the role of government. Subscribers ($275 pa) receive copies of all IPE publications including a monthly newsletter.







The Federal Court decision to dismiss the claims of maltreatment against the Commonwealth by two part-Aboriginals from the Northern Territory (NT) was a triumph for those who have consistently opposed the stolen generation myth. Astonishingly, however, none of those who have propagated that myth have publicly retracted their view notwithstanding the damning evidence and judgment. One can only speculate that the term risks becoming a “falsey” that is entrenched in community-speak simply because it was widely accepted for a time. Those who got themselves committed have certainly engaged in a series of responses designed to promote other courses such as treaties, agreements - and even bills of rights – as well as apologies (for those interested I have critical analyses of some of these). One leading daily has even stepped up its coverage of matters claimed to be adversely affecting Aborigines. Such strategies are clearly diversionary and defensive, of course.


The evidence and judgment confirm what the IPE has been saying now for some time, viz that the Commonwealth did not have a policy of forcible removal of part-Aboriginal children from their mothers in the NT; that separations were either the deliberate decision of mothers or reflected their agreement obtained over a period of up to 18 months; and that the Commonwealth action was the opposite of “racist” both because its policy was principally designed to protect part-Aboriginal children who were often not accepted by traditional communities and because many part-Aboriginal children were not separated anyway.


Peter Howson was fortunate in being able to have these truths enunciated in the attached article in The Age and in an interview published in the Sydney Morning Herald. He also had a letter published in The Wall St Journal responding to a highly misleading front page article published by it. However, he has so far been unsuccessful in attempts to have published further articles trying to focus attention on the real need - to stop looking at the past and concentrate instead on what should be done to improve the current position of Aborigines, particularly the minority living in traditional communities. This failure is despite a plethora of articles published in the media promulgating the stolen generation thesis.


A “victory” of sorts did occur when The Australian editorialized after the Quadrant conference on 8-9 September in Sydney that the “other” view should at least be discussed. However, the paper did not retract its demand for an apology even in the face of the excellent dinner address by the Commonwealth’s Counsel, Douglas Meagher QC.  Apart from confirming the main features of the judgment, Meagher exposed many egregious errors and fallacies in the Bringing Them Home report by Sir Ronald Wilson (I have a copy of his very balanced paper). He also pointed out that Sir Ronald’s claim to have had insufficient funding from the Commonwealth was not made until after he presented his report!


Incidentally, although Sir Ronald’s “justification” to the Senate Inquiry was little short of a disgrace, it received no media criticism/analysis even though his report has been such an important factor in propounding the stolen generation myth.  Among other things, when questioned on O’Loughlin’s decision that there was no general policy of forced removal he could do little more than refer to the existence of the power to remove without parental consent. He made no acknowledgement of the fact that this did not happen in the NT! Astonishingly, he implied that the evidence given by Aboriginal witnesses to his Commission could not be relied upon; and he cast doubt on Judge Abadee’s decision against Williams in NSW, an outcome that was subsequently fully endorsed by the Full Court.


Most of the Quadrant conference papers will be published in Quadrant itself. However, there are some important points that should be mentioned here:


# The summary of the judgment issued by Judge O’Loughlin was misleading in implying at one point that the Commonwealth may have had a policy of forcible removal. O’Loughlin’s full judgment made it clear that he accepted that there was, in fact, no such policy.

#The media has been palpably blameworthy in reporting the summary’s implication without qualification. It had plenty of opportunity to recognize the real possibility that the case would come out as it has. The trouble was that, once it looked as though the apology view would not be confirmed, the media chose to almost entirely ignore an important case - or to report it only perfunctorily. Moreover, why in the month or so since the judgment, has the media still chosen to avoid the truth?

  # While the white occupation of Australia inflicted violence and killings on Aborigines that appear unjustified in today’s terms, many of the publicized killings by whites need to be seen against the background that they occurred in circumstances of response to killings of whites by Aboriginal warriors. Moreover, a re-assessment of the past presented by retired academic Keith Windschuttle suggests that many past claims of maltreatment/killings of Aborigines may be exaggerated, partly because they have been based on secondary sources that were not adequately checked and/or

partly because they reflected bias. Both the Wilson report and the historical analyses by Henry Reynolds must come under suspicion for these reasons.

# Claims by historian Henry Reynolds that around 20,000 Aboriginals may have been killed (or “massacred”) by whites in the occupation of Australia may be highly exaggerated and lacking in reliable first hand evidence. Since the Quadrant conference Reynolds himself has publicly defended the estimate – but also acknowledged it as nothing “more than a guess”!

# One Quadrant presenter with lengthy first hand contact with part-Aboriginal children who lived at one of the hostels (sometimes characterized as a “prison”) indicated that, contrary to popular belief, the children had considerable freedom of movement and, importantly, none wanted to return to Aboriginal culture. Indeed, his and other accounts made it evident that there was considerable hostility between half-castes and full-bloods.

# It turned out that one of the claimants - Peter Gunner - was fathered by a Mr Gunner who also fathered another nine Peter Gunners!


Overall, some progress has at last been made in changing the Coombsian culture. But there is still a good way to go.







Until recently, the media has been reporting the depreciation of the $A almost as poorly as it has the Aboriginal “stolen generation” question:


# the focus has been far too much on the $US-$A rate rather than the best measure of competitiveness - the trade weighted average exchange rate (TWI), which has depreciated much less. While the $A TWI has dropped quite markedly over the past two years or so, it has been considerably less than the drop in the $US-$A rate. The market seems only recently to have realized the extent of the substantial appreciation   of the $US trade weighted rate in recent years and the downward pressure that has exerted on the $A TWI (see chart). Given the generally strong world economic growth that should have helped both currencies, the question is why the $US has risen so sharply while the $A has declined;


# some media commentators have been touting the prospect of an Australian “debt crisis” as in the 1980s. But both our current account deficit and our (relative) servicing costs have declined, and our existing economic policies are much superior to what they were then. Moreover, given the increase in the US’ current account deficit from 1.7 per cent of GDP in 1997 to around 4.5 per cent today, the question is why the $US hasn’t depreciated;

# far too little attention was being paid to the effects of variations in capital flows  on exchange rates.  There seems little doubt that the $US has been rising because US productivity growth (up 5.7 per cent in the June quarter) has been attracting large and increased capital inflows, reflected in its widening current account deficit. These inflows have undoubtedly been major contributors to the surge in the US’ business capital stock, importantly associated with the “new economy”.

Of course, Australia is also maintaining high levels of investment: indeed significantly higher under the present Government than the previous one. We are also attracting foreign capital that is currently contributing the equivalent of over 20 per cent of that investment. But we have become relatively less attractive to such capital and thus have to “offer” a lower exchange rate.


Gross Fixed Capital Formation & Current Account Deficit (% of GDP)


   CAPITAL*            CAD

1991  –92                       19.9                  3.3

1992  –93                       20.5                  3.6

1993  –94                       20.9                  3.6

1994  –95                       22.3                  6.0

1995  –96                       21.8                  4.3

1996  –97                       22.8                  3.4

1997  –98                       23.8                  4.0

1998  –99                       23.9                  5.7

1999  -00                       24.3                  5.4

* Includes both public and private investment.


This is discussed further in my attached article, which may have contributed to the recent improvement in media analysis, particularly in focusing on capital flows. However, there continues to be over-reporting of the views of financial commentators who often have a vested interest in either promoting themselves or the “books” of their institutions. Moreover, while the competition for foreign capital is now better recognized, the (relative) reduction in Australia’s investment attractiveness is being attributed almost entirely to an alleged failure by the Government to “pick winners”/ provide more money for R & D.


This claim, however, needs to be put in perspective and account taken of the fact that, by avoiding trying to pick winners in the technology sector when that was advocated several years ago, Australia has “saved” national resources and may now be reaping some of the benefits of the large R & D invested by others. Of course, there are sometimes advantages in being at the forefront of technology: but, as one Nobel Prize winner has pointed out, “the world’s technical knowledge is generally accessible at little or no cost to all countries”.  Australia faces a much more fundamental problem than not being a leading investor in technology, viz, our institutional structure is less conducive to risk taking/ entrepreneurial behaviour and, hence, to foreign (and other) investment generally. A major inhibition here is almost certainly our workplace relations system, which seems to be deteriorating almost daily (see below).   




Most commentators (including the market) predict a further rise in interest rates driven partly by the inflationary effects of the lower $A. However, particularly as that lower $A is not being caused by increasing domestic inflation, any “first round” inflationary effects from the depreciations, should they emerge, ought not to result in monetary tightening. So far, there has been little sign of such effects. 


It is also significant that inflationary pressures remain very modest on the cost side, as shown in the following chart (which includes the June quarter outcome). It seems little appreciated here that the faster growth in productivity, and the continued low increase in Australian unit labour costs, are important in keeping inflationary pressures down.  Indeed, no media attention has been given to the fact that all the 1.7 per cent increase in compensation to employees in the June Quarter’s national accounts was due to increased employment ie on this national accounts measure (which is more comprehensive than others) there was no increase in average wages in the quarter. This eases pressures on that potentially important influence on costs and, hence, on inflation.




On the expenditure side, the June accounts do show that the faster rate of increase in prices evident in March was sustained, with household consumption expenditure prices increasing by 0.6 per cent for the second quarter in a row. However, those increases are still within the 2-3 per cent pa inflation target and include some (such as petrol and food) that do not reflect “core” inflation. Housing prices were also temporarily boosted by the pre-GST  “boom”.  




While individual members of the Victorian police force generally appear to have performed well in handling the protesters at the World Economic Forum, the police command again performed atrociously. Police Commissioner Comrie claimed that the softly, softly approach adopted by police on the first day reflected an understanding with one group that the protests would be non-violent. One cannot help wondering whether, with such naivety, police have any similar agreements with Victorian criminals!


Attached is an article I was asked to write on this subject by the Sydney Daily Telegraph, which was followed by a similar piece in the Herald-Sun. It is encouraging that a number of political leaders criticized the violence (but why was it described as “fascist” rather than “socialist”?) – and that Premier Bracks actually “intervened” after the debacle of the first day to “authorize” the police to take firmer action. But police need to be instructed to stop violence and stop interference with the rights of others – that is not “political interference” but maintaining civil society. 




Many commentators responded to the WEF protesters by suggesting that, with more non-government organizations (NGOs) critical of allowing “free” market reforms, those NGO’s should be given the opportunity to put their views or at least attend relevant organizations, such as the World Trade Organisation (in fact, some 780 NGOs attended the WTO Seattle meeting!). One editorial even suggested dialogue “until agreement is reached”! This is a profoundly mistaken view: most of these NGOs have relatively small memberships and are formed because they are ideologically opposed to freer market reforms. They are not representative of wider community views, and would only further obstruct the progress of such reforms. Attempts at “dialogue” would be fruitless.


The real need is for political and business leaders to explain the benefits of such reforms not to the NGOs but the rest of the community. Many of the uncommitted are unsure of the arguments and need to be assisted. Last month’s newsletter (see referred to some rebuttals of the nonsense about widening gaps between “rich” and “poor” countries (and within countries too), and this has been picked up by some commentators. But political and business leaders need to do much more to explain that globalisation has not produced greater inequality.   




The apparent continued deterioration in the capacity of businesses to manage their own workplace relations has at last stirred the Business Council of Australia into action on this major issue. The September edition of BCA Papers includes the results of “extensive interviews” with CEOs of 57 members showing that  “91 per cent see a need for further reform of the industrial relations system; and that such reform could deliver 20 per cent of the potential improvement in their businesses”. Moreover, many CEOs see further reform as facilitating the internal improvement in their businesses that would be the major source of improved efficiency.


This significant development (barely even reported in the media) includes a major change in CEO attitudes: by contrast with the early 1990s, there is now no acceptance of the view that unions and tribunals must be partners in improvement. Moreover, while CEOs acknowledge improvements in the system, “concerns remain about the opportunity costs of the system, especially its capacity to consume management resources, its limiting impact on the art of the possible and its capacity to obstruct, deter and delay change, innovation and improvement through its effect on managerial, employee and union behaviour.”


Bravo - the foregoing quote sounds rather like an IPE conclusion! However, the real question is whether the BCA will push for labour market deregulation. Its immediate agenda appears to focus on the machinery rather than the substantive side by holding a forum on the possible establishment of a single, national system of regulation, which has been floated as a possible option by Peter Reith.


The BCA survey comes in the aftermath of the disastrous decisions taken at the ALP Conference in July, when Beazley caved in to the unions.  These decisions included the abolition of individual bargaining, an increase in powers of the AIRC (including some powers not previously held, such as the power to arbitrate collective agreements - which could be used to regulate market rates of pay), the abolition of secondary boycott laws in the Trade Practices Act, the declaration of small contractors to be employees, increased funding of the ILO and trade union training, greater rights of entry by unions, and unionists to become the agent of all employees.


Similar backwards steps are being taken or threatened by State Labor Governments in NSW, Victoria, Queensland and Tasmania. Of particular concern is the attempt by Queensland to bring independent contractors (who are free to negotiate their own terms and conditions outside the tribunals) within the regulatory framework. Labor is also pursuing this policy in most other States and Federally.


The Labor States’ policies are being heavily influenced by Sydney University’s Professor McCallum, who claims to have a “new vision of collective labour law”. He has just authored a report advocating the re-establishment in Victoria of laws to provide for remuneration and terms and conditions of employment for those not covered by federal awards, and a Fair Employment Tribunal. Both Victorian industry representatives on the Taskforce opposed the re-establishment of a State system, as well as other proposals. The Taskforce commissioned that well-known advocate of more regulation, the Australian Centre for Industrial Relations Research and Training, to undertake the statistical research. 


These moves are being undertaken against the background of the continued maneuvers by Federal Court judges to find ways of interpreting the existing federal legislation so that employers are constrained in managing their work forces, unions are favored and tribunals have more to do. This has been analysed in previous newsletters (see Jan-Feb-March in particular). A classic recent example of heavy interventionism has been the Federal Court decisions to the effect that outsourcing to obtain lower costs may be in breach of legislation requiring freedom of association. One such appalling decision – against St George Bank - has been appealed to the High Court, where the Commonwealth joined the action in support of the employer’s case.


We are also awaiting the outcome of the Federal Court’s decision on BHP’s (partly frustrated) attempt to offer iron ore workers individual contracts. It is scandalous that this has dragged on for so long, let alone that there should be any doubt about the decision. One encouraging development on this front, however, has been the decision by the Commonwealth Bank to abandon further negotiations with the Finance Sector Union after it rejected the Bank’s offer of a package providing an average “wage” increase of 4 per cent pa for two years and demanded a 6.5 per cent pa increase, plus staffing assurances. The Bank is now offering its 28,000 staff individual agreements (Australian Workplace Agreements) in what would be the largest such offer under the Workplace Relations Act. This is a major initiative that has significant potential to spread if it is accepted, with obvious implications for Labor’s decision to “outlaw” such agreements. The ACTU obviously sees this as a major threat to unionization and has reportedly joined in the battle with the CBA.


The case for major reform is considerable. The OECD’s report for the June Ministerial Council Meeting noted that “diverging labour market performances were a major factor setting apart countries where growth increased over the 1990s from those where it fell”. Unfortunately, it now appears that the only prospect of worthwhile deregulatory reform here would be for the Coalition to make such reform a major issue at the next election. But to appeal seriously to the electorate would require there to be more exposure of the problems with the existing arrangements, including the judicial tribunals.