Institute for Private Enterprise
Home page Newsletters






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





Due to the lateness of this “November” newsletter I have had to make it a combined November-December one, for which I apologise. I can only say that I was “diverted” by having to complete the BAS for my business (and my wife’s!). The compliance costs for this new,  “simplified”, tax system suggest that major procedural changes need to be made, at least for small businesses. There are signs that this may happen.


But at least the price effects of the GST seem likely to be less than some feared (?hoped). Although the “low” 3.7 per cent CPI increase in the September Quarter (compared with the Treasury estimate of 4.5 per cent) is not necessarily the final story on GST effects, competitive conditions seem likely to keep the price effects down. An “experimental” examination by the ABS concluded that it could not adequately make an estimate – and that the experimental research showing only a 1.7 percentage points GST contribution for the September quarter was (rightly) “unbelievable”!


The potential for maintaining low GST price effects has helped change the previously popular view on monetary policy. Pre-GST many were concerned that, particularly with the (alleged) “stimulatory” effects of tax reductions and increases in “compensatory” social security (which resulted in the government sector experiencing a reduction of about $2.3 billion in net income from these sources in the September quarter) further interest rate increases would be required. However, the September Quarter national accounts and other data since suggest that households have so far largely used the additional handouts to rebuild savings, which were run down prior to the GST - partly because so many apparently believed that prices would increase by 10 per cent!


Subscribers will know that I have been arguing for some time for the monetary authorities to be slow to tighten, to put less emphasis on pre-emptive action and to wait to see whether there are dangerous flow-throughs of one-off effects from sources other than the GST. It now appears that, even if some price increases from the exchange rate depreciation do creep through, they are likely to be one-offs – the exchange rate does seem to have bottomed and has already appreciated a bit (an analysis by Morgans of Brisbane suggests that, paradoxically, a slowing US economy has not previously prevented a rising $A). Similarly, the petrol etc price increases from oil price rises are now being reversed as, consistently with largely ignored Treasury forecasts, oil prices falls.


Now, the more popular view has switched, expecting slower growth and reductions in interest rates!  While the GST and the Olympics make it particularly difficult to read the national accounts figures, ABS trend estimates appear again to confirm the progressive slowing in GDP growth that has been occurring for some time and, even with the on-going boost to exports from the lower exchange rate, that may continue until the domestic sector adjusts to the post-GST environment. (It is somewhat ironic, however, that after experiencing trend growth rates of only just over 3 per cent per annum not so long ago, some commentators are talking of anything less than 4 per cent pa as if that would be a setback!).   Whether interest rate reductions become justified will largely depend on whether the combined effects of competitive conditions and productivity growth lead to lower inflation and, perhaps, higher unemployment. 




The branch stacking to ensure pre-selection of the “right” candidate revealed at the Queensland inquiry is only scratching the surface of the Australian story on vote manipulation. The fact that some journalists on the right of Labor have jumped in to try to make light of the skullduggery suggests a serious potential problem beyond that wing of the Party if all likely union-manipulated shenanigans were revealed. The astonishing attempt to downplay the problem by quoting former Commonwealth Chief Electoral Commissioner, Professor Colin Hughes, as an   “authority” who denies any serious problem may even backfire: Hughes was appointed by a Labor Minister whose nickname was reportedly the “Minister for Winning Elections”.


The story obviously extends beyond fixing the pre-selection of party candidates, or the “buying” of preferences, serious as those manipulations are for the political system. The HS Chapman Society’s video (and other HSC analyses) show that the Australian electoral system is wide open to fraudulent manipulation of votes in marginal electorates and, although proof is difficult, there is a high probability this has occurred at both the Federal and State levels.


Indeed, there is a high probability that it has determined election results. My February Newsletter, for example, pointed out that Labor won the 1993 Federal election by only 1550 votes across Australia, with very close margins in a number of seats. Suffice to say here that one Liberal Party candidate who lost by less than 200 votes subsequently discovered that 315 of those on the roll who do not vote as a matter of conscience did nonetheless have votes recorded against their names!


As the Electoral Commission has not had the capacity to check the residential genuiness of those who register in an electorate in the last week before an election, the 400,000 who did so before the 1993 election left the system wide open to fraudulent voting. This appears confirmed by the removal of many names in some electorates after the election! Even with the passage of new legislation last year, the checking at enrolment leaves much to be desired and the system also remains open to fraud at the polling booth itself.


The denial stance to date of the current Electoral Commission certainly implies a degree of attempted “cover-up”. In particular, the approach of putting the onus on complainants to pursue their case, rather than the Commission initiating inquiries, is wrong.


Although Labor is almost certainly the main culprit here, the worry is that none of the parties or the Electoral Commission may want to have a full-scale public inquiry into electoral reform that could reveal the system’s grave deficiencies. The call by Denis Shanahan (The Australian) for such an inquiry is appropriate, but unlikely to occur.




The “here to stay” slogan of the MUA during the waterfront dispute is looking increasingly tired and dated. The early resignation of John Coombs as union secretary; his admission that the MUA is now too small to be viable; and (most importantly) the confirmation that the average crane rate now appears to have settled around the target of 25 lifts per hour set by Peter Reith at the time of the dispute (but declared impossible by Coombs)  - all these surely confirm that the union lost the waterfront battle despite retaining its monopoly labour supplier position thanks to our biased courts. Once again, the majority media opinion has been proved totally wrong in criticizing Corrigan and praising the (original) outcome. Award winning journalist Pamela Williams (AFR) is a particular sinner.


Full credit should go to Chris Corrigan, Executive Director of Patrick Stevedores, one of few CEOs who have been brave enough to tackle directly the issue of managing workplace reform. Of course, even with the (modest) reduction in stevedoring charges, there is more reform to be done. But, as IPE pointed out at the time, this will come in part through increased mechanization, which Corrigan now appears to be undertaking. The union’s appalling restrictive practices ensured that it would cost jobs in the longer run – another union “victory” could leave it with no members!


Corrigan should be a candidate for Australian of the Year. And it should not be overlooked that Reith has demonstrated considerable personal and political courage in supporting the cause of waterfront reform. Despite his appalling treatment in the media, it now looks increasingly likely that he could stay as Minister of Workplace Relations.    




Attached is an article I wrote for the Herald Sun on the decision by the Victorian Government to toe the union line and re-establish a State Tribunal to regulate workplace relations. Upper House debate on the legislation has been deferred until March. That legislation has the potential to impose a highly restrictive regime on Victorian employers, particularly as the justices appointed to it would almost certainly have a similarly pro-union bias to those sitting on existing industrial tribunals/courts.


The Government, with assistance from The Age, is running a line that has superficial political appeal viz, that this is all about ensuring “fairness” for employees, including outworkers who are paid low wages and work in fairly rough conditions. However, “fairness” that provides additional protection to “insiders” will have adverse implications for those “outsiders” trying to obtain employment and can also mean that some existing employees would lose their jobs. That would almost certainly be the case if those hiring outworkers were forced to improve wages and other conditions.


The HR Nicholls Society (whose Board I have recently re-joined) is planning a conference for early 2001 that would focus on this legislation in particular. I will be giving a paper on outworkers.





Also attached is my article in The Age on the importance for Australia of the US alliance. This was written in response to one by Malcolm Fraser taking the opposite view.


Since the article the Government has indicated its intention to try to negotiate a bilateral trade agreement with the US. This is a move that I have been supporting for some time not because it would necessarily be of direct net economic benefit but rather because of the potential broader benefits of a closer alliance and the potential for getting access for agricultural exports. Of course, the US would have to agree that such an outcome was a possibility. But the election of Bush makes that more possible.


Incidentally, the Defence White Paper has since strongly endorsed the US alliance and announced some additional spending on defence. That addition, however, is relatively small and will still mean spending less than 2 per cent of GDP, which is at pre-1939 levels. More needs to be done by effecting savings elsewhere.




This is an area wide open to savings, as indicated in my attached commentary in the AFR on the so-called reforms of the welfare “system” by Minister Newman. In essence, the Government has sold the pass to the welfare lobby groups and has dodged the important issues in this area. The majority media line, in what has become a typical pattern of spouting the politically correct, has so far been to criticize the Minister for failing to indicate how much additional money the Government proposes to spend on social welfare! Virtually no understanding has been shown of the underlying issues.




Many Victorians have been led by the media to believe that they will again face electricity shortages this summer and this possibility is being attributed to there being inadequate electricity capacity to cope with possible surges in demand in hot weather. However, in a AFR letter of 11 December the managing director of NEMMCO (the National Electricity Management Company) has stated that “there is adequate capacity to meet customer needs, even at the peak of summer”. Although this statement has been challenged in the AFR, it does not (surprisingly) appear to have been reported in the Melbourne media.


More importantly, the author was brave enough to state that the “supply problems that occurred in Victoria in February and November were related to the removal of generating capacity due to an industrial dispute. Taking the November supply incident as an example, I doubt if any power system anywhere in the world would be able to sustain the sudden withdrawal of more than a third of its generating capacity without having to cut some supply to customers”.


The reality is that, for about 18 months now, a union group within the CFMEU has not only disobeyed CFMEU instructions but has been allowed by the Federal Court to resist attempts at reform by Yallourn Energy and other electricity companies.  At one stage Justice Marshall even stopped an AIRC Commissioner from a move that would have required the parties to engage in bargaining! The partiality of the Court is a serious on-going concern and there seems little doubt that it has played a part in the decision of Yallourn’s UK parent to sell out (and at a significant loss).


This partiality has also probably influenced the decision of the ACCI to adopt a proposal by the Australian Mines and Metals Association (AMMA) that companies be allowed to opt out of regulation under the Workplace Relations Act and move to regulation under the common law. Such a move would require the approval of two-thirds of employees.

This proposal is moving in the direction I have been advocating. However, to escape the clutches of the judiciary would require more than simply to allow companies to opt out. Legislation would be needed to reduce the scope for judicial intervention by codifying the common law in a way that gave maximum decision-making powers to the parties to an employment bargain.


Meantime, there can be no guarantee that unionists from what has long been one of the centers of Australia’s industrial troubles – the Latrobe Valley under the grossly over-staffed SECV – will not again cause some blackouts this summer. Should that occur, some will doubtless attribute it to the consequences of electricity privatization.




One of the highlights of the past month was the 11 November meeting of the Samuel Griffith Society at which a number of excellent papers were delivered, and will be published in due course by the Society. The highlight, however, was one by the Chief Minister of the Northern Territory, Denis Burke, on mandatory sentencing. His paper was preceded by a presentation by the President of the NSW bar and NSW Law Society, Ruth McColl, who strongly opposed mandatory sentencing, arguing that there were many examples of disproportionate sentencing by the NT Administration that were inconsistent with the need to make “the punishment fit the crime”.


Unfortunately for McColl, Burke effectively knocked her case for six. He pointed out that the allegedly disproportionate sentencing examples quoted by McColl and reported in the media constituted extraordinary misreporting of the cases. This included one oft-quoted alleged mal-sentencing for the stealing of food which involved important events not reported, such as the breaking and entering of the home of an 85 year old pensioner, the imposition by the magistrate of double the minimum sentence, and the failure of the defence to appeal the sentence!


Burke stated that “in every case of mandatory sentencing highlighted by the media, the basic facts are so wrong that you would have difficulty reconciling the media reports with the court transcripts.” He also pointed out that an article by McColl claiming very large increases in imprisonment rates of juveniles and indigenous women was completely wrong: there have been decreases in imprisonment in each case and only one juvenile was currently in NT prison as a result of mandatory sentencing, compared with 30-40 in the late 1980s.


Burke also made a number of important and relevant points about the considerations and processes involved in introducing mandatory sentencing, including:


  • It was developed not in Cabinet but in the CLP Party room, originally supported by the Labor Opposition and widely advertised in the 1994 election at which CLP members won 17 out of 25 seats including (for the first time) the seat of Victoria River, which has a majority of Aboriginal voters;


  • In the 1997 election the CLP increased its majority by winning another seat with majority Aboriginal voters despite the (new) opposition of Labor to mandatory sentencing;


  • The offences of Aboriginals mostly occur against Aboriginal families who want their property rights defended and often do not understand attempts by white lawyers to persuade offenders to lie. (Incidentally, it appears that quite a few law-abiding Aboriginals in the NT are keen to join the police force and some are in fact working as police aides);


  • Compared with mandatory sentencing regimes in the US and the UK, “the Territory and Western Australia look positively wimpy”;


  • In 1981 the High Court specifically recognized that Parliament may provide mandatory sentencing;


·        Each of the Commonwealth and States maintains its own mandatory sentencing laws for a range of crimes.


Burke also commented critically on some of the extraordinary obiter dicta statements on the subject by various judges. He suggested that the Australian judiciary should agree a similar resolution to that adopted by the Judicial Council of Canada that “the judiciary should avoid taking part in controversial discussions except only in respect of matters that directly affect the operation of the Courts”.


More generally, Burke showed considerable political savvy and could clearly go further if he chose to leave the Territory. Incidentally, The Australian was the only major paper to report Burke’s address and some of the other papers. But the reporting of Burke’s address did not bring out just how devastating it was for McColl.




The bottom line in the mandatory sentencing issue is, of course, is the (growing) community dissatisfaction with the apparent increase in interventionism by many un-elected judges on what appear largely to be political/social grounds, such as recognizing Aboriginal problems by imposing light or no sentences on offenders. This judicial tendency is widespread in other areas of the law too, most notably in industrial relations. The most notorious recent example is a Federal Court decision that the expulsion from a club of a misbehaving drug addict constituted discrimination! NSW Premier Carr has apparently written to the Prime Minister seeking legislation to deal with this situation.


The Herald Sun deserves congratulations for its attacks on bad sentencing by some Victorian judges and for its compliments when sound sentences are imposed by others, including the jailing for 13 years of a man who had bashed and robbed 13 elderly women. It has also given some publicity to the Crime Victims Support Association, which proposes to hold a rally next March 2 to protest at “the lenient attitude of some of our judiciary”.  That paper has also been drawing attention to problems, particularly but not only for businesses, from the apparently lax treatment of supposed loiterers and beggars, some of whom are drug traders and/or fraudulent. This appears to have stimulated police into a more active approach. What is needed is a return to the legislation that used to apply to vagrancy and made it easier for police to control such people.


A major point that is frequently overlooked in this debate is not that proper sentencing of criminals will result in reform of the individuals but that it will keep the individuals away from causing harm to others.  Dr Richard Stone, who has undertaken a study of the dramatic drop in US crime rates (especially violent crime) over the last 8-10 years, points out that, while there have been many causes, two have probably been the most significant, viz a radical change in the philosophy of policing and sentencing, accompanied by a supportive change in public attitudes and community expectations; and a large increase in the number of prisons and prisoners.


The most important change in policing policy has been not to ignore low-level crime (like fare-evasion, graffiti, vandalism, petty theft and gang activity) in order to focus on major violent crime. Police have accepted that such low-level crime can often provide the path by which individuals take their first steps toward becoming violent offenders. Hence community policing and a much more visible street-level police presence have returned, youthful gangs forming on street-corners and generating an atmosphere of intimidation have been dispersed, vandals and pick-pockets have been arrested and read the riot act rather than being ignored, and repeat offenders have faced serious penalties.


This change in police policy has received considerable public support. The previous permissiveness towards crime – preoccupation with root causes, emphasis on rehabilitation rather than public safety, and pressure to limit police powers and reduce sentences – has been replaced by a greater acceptance of zero tolerance, of stiffer sentencing, of public safety over criminal rights, and of impatience with waiting for root-causes to be overcome.


The expansion in the number of US prisons in the 1980s and 1990s, which allowed a restoration of more severe sentencing, is reflected in the following:


  • Between 1960 and 1970, when crime first exploded, the US prison population fell from 213,000 to 196,000 and average time served for violent offences fell too.


  • By 1990 the US prison population reached 690,000, then 1.1 million in 1997 and now over 1.3 million. Over half of the increase between 1990 and 1997 consisted of violent offenders. As a consequence the average time served by violent offenders increased from 43 months (only 47% of sentence) in 1993 to 88 months (or 80% of sentence) today.


Some will see the increase in prisoners as a “bad thing”. However, as released felons commit a large number of crimes, this has been a major factor in cutting violent crime. In a 1991 Justice Department survey, felons back in prison for parole violations in 1991 had committed 6,800 murders, 5,500 rapes, 8,800 assaults and 22,500 robberies while on parole. Based on these figures, one estimate suggested that, if the prison population had not risen as it did after 1975, there would have been an additional 390,000 crimes in these four categories in 1989 alone! Another estimate suggests that each extra imprisonment averts between two and three violent crimes per year.          


Although our crime problem is much less than the US’, we can learn from that country’s experience. It is better to do so than to experience the trauma that the US went through.