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• How the coalition could win the election
• Judicial intervention — "what society has come to demand"
• Lessons from the Kennett era
• UK public education becomes more market-oriented
• The stolen generationists take one step backward
• Greenhouse - and Chinese - blues
• Bush would have won anyway!
• Why is the dollar so low?

HOW THE COALITION COULD WIN THE ELECTION

Most people have written off the chances of a Coalition win in the next election despite Labor’s continuing strategy of having "no policies" — apart from the (unspecified) GST and IR roll-backs! True, the handling of the introduction of the GST has certainly put a lot of people off-side and was clearly a major factor in the swing against the Coalition earlier in the year. But, despite Shadow Treasurer Crean’s noble attempt to portray Labor as be a low-spending, low-taxing government, it is difficult to believe that rolling-back a pro-Labor tax (as the GST is) could be the major election issue.

However, Labor has given the Coalition a golden opportunity in the economic area most in need of reform, viz employer-employee relations. Labor’s substantive adoption of the ACTU’s re-regulation proposals, including giving the AIRC an even bigger interventionist role in determining employment conditions, provides the Coalition with the potential to make labour market reform an issue that could swing the polling balance back. Of course, this would be a rather risky and difficult venture, particularly as unemployment seems likely to be above 7 per cent at election time and as polling suggests a majority of the electorate thinks Labor is better equipped to deal with that problem. However, that situation itself provides the Coalition with a challenge (especially given the 11 per cent rate achieved under Labor) and, if the Coalition is to retain government, it needs to risk a major policy change. And, if it is to have any chance of having major reforms accepted in the Senate, it needs a mandate.

Moreover, strange as it might seem at first glance, an unemployment rate above 7 per cent could provide a basis for the Coalition to argue that such a development, in circumstances of the only modest slow-down in economic growth that seems likely, demonstrates how much more improvement is needed in the functioning of the labour market. There is also potential to point out here that, if one has regard to countries with similar political systems and less regulated labour markets, there is obvious scope to increase the proportion of Australia’s working age population in employment.

In short, the Coalition could make a good case that output, employment and living standards would be higher if employer-employee arrangements were more flexible and less determined by restrictive conditions laid down by third parties. Equally, that would also reduce the social problems that occur when people are not able to participate directly in the economic system even though they want to do so. Including the unemployed, there are currently about 1.8 million who say they would like to work but do not have a job. The Coalition could also argue that Labor’s re-regulation proposals will have adverse employment effects.

Labor may respond by proposing an "active" labour market policy that would include some form of income transfer for low wage earners. This might be similar to the "tax credit" in the US, where 80 per cent is simply a transfer as distinct from a tax rebate. It would doubtless argue that this would encourage people into employment, would at least partly pay for itself and would "improve" the distribution of incomes. However, whether or not Labor pursues such a course, the Coalition could itself propose such a transfer, either by adapting an existing welfare benefit or introducing its own (new) benefit for low wage earners in low income households (or some combination of the two).

Such a proposal could become part of a major reform program for the labour market that could include a further reduction in the AIRC’s wage setting role from the existing "safety net" covering 25 per cent of employees to a safety net covering those on the minimum wage only. The Coalition could structure the income transfer so that it would provide assurance to those who would no longer be covered by the safety net would have their (real) incomes from employment protected. The introduction of the tax credit would (naturally) be part of the legislation reducing the AIRC role.

A major objective would be to reduce further the apparent role/importance of the Commission (or any so-called impartial umpire) in determining what is a "fair" level of wages by giving specific emphasis to the adverse employment effects of the (existing) safety net and by highlighting the fact that social security benefits (with some possible modifications) protect those who have limited (or no) capacity to earn adequate incomes. For that purpose, the Commission could be required to take account of advice by a group of independent economists regarding the effects of any possible changes in the minimum wage on employment and household incomes (ie wages plus welfare benefits) of those earning that wage.

Such action would still leave the Commission with an extensive interventionist capacity in regard to its farcical role in settling (sic) industrial disputes. But, while that should also be reduced, the restriction of its wages role would be a major step forward in freeing both employers and employees to determine their relationship with minimal third party interference.

Politically, it would have considerable potential to expose Labor’s closeness to the union movement and the resultant protection of those with jobs (the insiders) from competition from those without one (the outsiders). As a Morgan Poll of 11 April indicates, there is no doubt that this closeness is an exploitable concern amongst both Coalition and Labor supporters. The Coalition could thus portray itself as the advocate/promoter of the low skilled, unemployed poor while at the same time offering income protection to those who might be adversely affected by increased competition in the labour market. Surely, Australia ought to be able to achieve an average unemployment rate that is much better than the US rate for its blacks and Hispanics?

JUDICIAL INTERVENTION — "WHAT SOCIETY HAS COME TO DEMAND"

At the recent HR Nicholls Society Conference I presented a paper on Judicial Intervention — What Society Has Come To Demand that has already been circulated to subscribers and is on the Society’s web site (www.hrnicholls.com.au ). Attached is an article based on the paper published in the Canberra Times and a letter published in the AFR pointing out that there are many reasons why businessmen might be "baffled" by existing arrangements for regulating employer-employee relations. (However, the letter is somewhat exaggerated: there are "only" 700 not 7,000 pages in the Workplace Relations Act).

One of the most important points made in the paper is that arbitrators/judges who make prescriptive decisions on employment conditions do not have the basic capacity to make such decisions. Indeed, leaving aside contractual/criminal infringements, no third party has that capacity and uninvited judicial intervention in employer-employee relations is a farce. More generally, employers face an almost total lack of certainty about the outcome of tribunal decisions on "disputes" trumped up by unions. This situation derives from the general attitude of the judiciary that it should "interpret", as Chief Justice Gleeson has put it, "what society has come to demand"; and the specific attitude of most of those who decide industrial issues that there is an imbalance of bargaining power that requires correction in the interests of fairness.

A notable feature of the conference was the presentation by the Chief Executive of the New Zealand Employers Federation, Ann Knowles, who outlined the consistent and continuing attacks (including aggressive advertisements in the media) by the Federation on the re-regulation proposals by the NZ Labour Party. These occurred both before and after Labour’s election, to the point where the Prime Minister even described the Federation as "an enemy of the State"!

Although the Federation’s efforts did not stop re-regulation legislation, the Labour Government was forced to modify significantly its original proposals (apparently drawn up by the trade union movement) and the legislation did not take effect until October last year. Ms Knowles observed that the limited extent of actual changes in employer-employee relations since the legislation may reflect the relative contentment by most employers and employees with their experiences under the less regulated conditions applying from 1991. Ms Knowles’ paper is also available on the Society’s web site.

The contrast between the New Zealand Employers Federation and our Business Council of Australia is quite striking. The BCA appears to have made only limited effort to highlight the problems with re-regulation. Its low-key approach exists even though the September 2000 edition of BCA Papers included the results of "extensive interviews" with the CEOs of 57 members showing that " 91 per cent see a need for further reforms of the industrial relations system; and that such reform could deliver 20 per cent of the potential improvement in their businesses". Moreover, many CEOs saw further reform as facilitating the internal improvement in their businesses that would be the major source of improved efficiency.

Another interesting feature of the Conference was the revelation of the extensive efforts by the Victorian Liberal Party to make the business community aware of the potential problems with the Bracks Government’s Fair Employment Bill. While less aggressive than those of the NZ Employers, these efforts produced encouraging feedback to the Victorian Liberals, and with their decision to reject the legislation in the Upper House, this suggests one possible course of action in regard to Labor’s proposed changes at the Federal level.

LESSONS FROM THE KENNETT ERA

In March I presented a paper on Victoria: Lessons From the Kennett Era to a function at the Victorian Parliament House organized by Kim Wells, Shadow Minister for Police. That paper has also been circulated to subscribers. The attached article based on the paper was published in the Herald Sun.

The analysis of the period in which Kennett was Premier clearly shows that, whatever reservations some people may have had about the Kennett "style", Victorians benefited greatly. The State had the fastest growth in GSP per head (the best measure of living standards) and the fastest rate of reduction in unemployment. As I argued at the time, the idea that Victoria was condemned to be a "rust belt" State was always overdone because it did not take adequate account of the flexibility provided to the private sector from having a State Government that was (more) encouraging to private investment.

Moreover, contrary to the rubbish put out by The Age (which is still doing it), levels of key government services (such as government schools and hospitals) were not "savagely depleted" but were operated at around the average level in all States. After six years on office, the Carr Government in NSW is experiencing similar quality problems in delivering education and hospital services (not to mention police) as those said to have been caused by the alleged savage depletion by the Kennett Government. It is particularly ironic that, in the last two years of the Kennett Government, its relative spending levels were higher than those of the Carr Government. There appears to be little understanding in media organisations such as The Age that quality is more dependent on having a competitive environment than on actual levels of spending.

Unfortunately, the Victorian Liberal Party now seems to have become so concerned to distance itself from the perceived Kennett image that it is unable to claim credit for the many good things that happened during the 1992-93 to 1999-00 period. Just to take one example, the fact that interest payments absorbed 22.5 per cent of public sector revenue in 1992-93 but only 2.5 per cent in 1999-00 surely warrants high praise for the Kennett Government: it effectively added over $5.5 billion to spending on services from the savings on debt servicing.

It should be possible to distinguish between the Kennett style and what the Kennett Government did. The latest Morgan Poll (18 April) suggests a further increase in support for the Bracks Government and an urgent need for the Liberal Party to start differentiating itself "philosophically" instead of waiting for the Government to make a mistake.

There are lessons in the Kennett era for Oppositions in other States too (including in NSW where Morgan polling shows the Liberal Party at its lowest level of support on record). One such lesson suggests value in a reduction in the role of government, preferably in regard to ownership of enterprises but at least in the operation of services. Another suggests the need to put the role of government in perspective. For example, the fact that the Victorian private sector now contributes around 85 per cent of total State capital spending (the highest for any State) highlights the relative importance of policies that are "investor friendly" and shows that the much-vaunted public infrastructure projects are much less important and make a much smaller contribution to growth than commonly supposed.

UK PUBLIC EDUCATION BECOMES MORE MARKET-ORIENTED

The Kennett Government made a start towards improving the quality of government schools by providing for them to have a somewhat greater degree of self-management. However, by the time of the election loss only 50 had opted to move in that direction and the Bracks Government has stopped any further moves. It has also set in train a removal of the special status for the 50.

Meantime, the Blair Government in the UK has announced important innovations in public education policy that move in the same direction as the Kennett Government was going. Indeed, the whisper is that the UK Minister for Education, David Blunkett, had actually researched the Kennett Government reforms. The new Blair policy provides an opportunity for all State governments to at least "third way" government schooling and (possibly) stop the continuing move out of such schools.

Blair’s new policy includes, importantly, the pursuit of greater diversity through the conversion over five years of about half the UK comprehensive secondary schools into specialist schools; more government support for "faith" schools (ie church schools) "where there is clear local demand from parents and communities"; the introduction of a new category of advanced specialist schools for "high-performing" schools; and a "new model which would enable a private or voluntary sector to take responsibility for a weak or failing school against a fixed term contract, with renewal subject to performance".

Blair has particularly emphasised the increase in school autonomy. Thus, "all schools are receiving payments made direct to the head teacher"… "all heads (are) having more control over their budgets than ever before", and successful schools will have "greater freedom over the National Curriculum and teachers’ pay and conditions". There is also emphasis on building pupils’ individual talents, including through the establishment of a National Centre for Gifted and Talented Youth and the setting of targets for children to attain. The School league tables are retained and the performance of children will also be published.

While Blair was at pains to emphasize that "there is no question of a two tier system", this new policy produced howls of outrage from the education unions that "there will be different tiers of education" and that the gap between the most advantaged and least advantaged may widen. This "gap" obsession was, of course, also a major criticism of the Kennett Government’ self-governing schools policy and it continues to be an obstacle to further reform of the government education system in Victoria and other States. Put in simple terms, the belief is that there will be a lower standard of education provided to children who have lower educable capacities because they will be left behind in lower quality schools.

But there is no substance to the two-tier argument. Where schools have children with lower educable capacities that can be handled by providing more resources (including higher skilled - and paid - teachers). Indeed, the Blair policy makes specific provision for special "pupil learning credits" for schools in the most disadvantaged areas. In any event, the existence of a large group of government subsidized private schools means that Australia already has a two-tier system: indeed, the diversity amongst private schools demonstrates that there are already many tiers of school education.

Unsurprisingly, the Conservative Party Shadow Minister, Theresa May, welcomed "the language and rhetoric of many of the proposals — at least those that have been cut and pasted from the Conservative party web site". Here in Australia there is potential for Oppositions to pinch the Blair policy too. The establishment of "independent" or "autonomous" government schools would create a competitive market in the operation of such schools and improve the quality of education. There is a need to extend self-government well beyond what the Kennett Government did by giving the maximum freedom to individual schools to make their own decisions, particularly over staffing and curricula. The imposition of state-mandated curricula restricts choice and risks the inclusion of an ideology that is determined by the kind of education bureaucrats that operated in Victoria in the 1980s.

THE STOLEN GENERATIONISTS TAKE ONE STEP BACKWARD

With my assistance, Peter Howson has made more significant contributions to getting the truth told about the treatment of Aborigines. The three major articles he has had published are attached.

Possibly the most important was his response to the acknowledgement by Robert Manne that there were serious errors in the Wilson report Bringing Them Home. Subscribers will recall that I called in 1999 for an apology by Wilson for the egregious errors and misrepresentations for which he was responsible. Needless to say, however, Manne continues to claim that many thousands of Aboriginal children were stolen even though, as Peter points out, he produces no substantive supporting evidence. He also "overlooks" the facts that removals of part-Aboriginal children were made because of abuse or neglect, and because of voluntary decisions by parents wanting to improve the children’s education in particular. As yet, no living Aborigine has established having been "stolen".

After many attempts, Peter has also succeeded in bringing into the open that many Aboriginal children continue to be forcibly removed from parents, as do many non-indigenous children. In short, abuse or neglect continues as it did in the past.

The Australian also seems to have expanded its preparedness to publish articles that reveal the truth about the horrific conditions in the more traditional and remoter communities and that even question the primitive cultures that have been promoted. Peter’s attempts to bring out the violence against women in particular in traditional communities are now being vindicated. However, it is clearly just too "difficult" for the media to recognize its past faults and abandon its call for an apology for the absurd stealing claim.

Moreover, the obsessive focus on the past, particularly in academia, has meant a disgraceful neglect of what should be done to reduce the problems that have arisen as a result of the disastrous policies of separation that successive governments have pursued. It is hoped that the establishment next month of the Bennelong Society will help to redress this deficiency.

CHINESE — AND GREENHOUSE - BLUES

What a difference George Bush is starting to make. His calm handling of the Chinese plane "mishap" was exemplary. Although one Australian media commentator stationed in China claims it was an accident reflecting the limited training given Chinese pilots for fear they will scoot to Taiwan, it is difficult to escape the feeling that it was part of a deliberate Chinese strategy designed to try to stop the US providing new naval anti-missile equipment/destroyers to that country by painting Bush as an extremist. It will be interesting to see whether the Chinese stupidity is "punished" by, for example, withholding US support for the Olympic Games China wants to hold in 2008.

The Bush Government’s decision not to proceed with ratification of the Kyoto protocol to limit greenhouse gas emissions also deserves high commendation. It is worth quoting some extracts from an interview with Dr Fred Singer made in February before the decision was known. Singer served as Chief Scientist in the US Department of Transportation, was the first Director of the US Weather Satellite Service and now runs the US think-tank, the Science & Environmental Policy Project (SEPP).

He is, thus, a real expert on climate issues, to the point where he has been attacked by Ozone Action (now being named US Greenpeace) in a special brochure. Singer was present at the most recent UN Global Warming Conference at The Hague last November and his view that "global warming is a phantom problem" apparently received extensive coverage in European media. The following extract summarises his position:

"Of course, we all believe in the reality of the greenhouse effect. The question is really: is it significant or insignificant. The current data seem to show that it is not significant in relation natural variations in the climate. We do not see a signal that can be associated with or attributed to human activities. The climate models used for predicting future temperatures have not been validated against observations and therefore should not be relied on. The consequences of the warming are generally beneficial: less severe storms, more rain, better growth of agricultural crops. Economists now believe that global warming is good for the economy and the people. All this is fully discussed in my recent book Hot Talk, Cold Science: Global Warming’s Unfinished Debate, published by the Independent Institute (Oakland, CA)."

Other particular points of interest from the Singer interview are:

• Sea-level rise is unrelated global warming but is a continuation of the rise since the last Ice Age 18,000 years ago — "and there is nothing we can do to stop it".
• The ozone depletion is small in relation to natural fluctuations and "is not serious at all".
• Contrary to greenies’ hopes that there would be no renewals of nuclear power licenses, the recent approval of 20 year renewals for two nuclear plants has effectively extended the nuclear power sector of the US electric utility industry well into the century. Another 30 or so are expected to have their licenses renewed by 2003.

The latest Quadrant has also published an excellent article on climate change by Professor Garth Paltridge, Director of the Institute of Antarctic and Southern Ocean Studies at the University of Tasmania. Paltridge points out that "the fundamental question still to be answered is whether, in view of the uncertainties, it would be cheaper and more sensible to spend money on adaptation to climate change, if and when it occurred".

Naturally, the views of such "scientifically incorrect" experts are as difficult to get reported in the Australian media as have been, at least until recently, the views of the "politically incorrect" on the stolen generation issue. Is it any wonder that a majority of the community accepts the greenhouse scare campaign? Do we need a new term — "media incorrect"?

BUSH WOULD HAVE WON ANYWAY — BUT FIDEL IS STILL WELL "AHEAD"!

According to an Associated Press report, a newspaper review of Florida’s "undervote" ballots concluded that President Bush "would almost certainly have still won the State had the US Supreme Court allowed a hand count to be completed". But nobody can beat Fidel. He recently celebrated (sic) 40 years of socialism in Cuba at a rally attended by 100,000 (sic) supporters who publicly swore to defend the revolution to their last drop of blood! Was the waving of rifles by many in the crowd (and by Fidel himself) sending a signal that this is the only way socialism can survive?

 

 

WHY IS THE $A SO LOW?

Although the $A appears to have steadied recently, its unexpected depreciation over the past year of about 10 per cent (in trade weighted terms) from an apparently already under-valued level has continued to attract inordinate attention, attempted explanations and puzzlement from just about every economist, including the Reserve Bank Governor. Given the declining (in relative terms) current account deficit and burden of servicing overseas liabilities, and the continued relatively low consumer price movements, the $A weakness cannot be attributed to the concerns about controlling inflation and domestic "over-spending", and the poor budgetary and monetary policies associated with those phenomena in the 1980s.There should not, therefore, be any worry that Australia faces a potential external "crisis".

Indeed, the irony is that, by getting inflation under control, Australian interest rates have fallen to levels much closer to US rates than they were. This absence of "high" interest rates may have resulted in some reduction in the (superficial) attractiveness of Australia to foreigners wanting to park surplus funds and put more pressure on the exchange rate as the adjustment mechanism for attracting funds to finance the current account deficit.

With their large current account surpluses (and important influence on international capital flows), there is no doubt the Japanese found in the 1980s that high Australian interest rates offered a (relatively) attractive place for investment of surplus funds despite many warnings by myself and others in Treasury of the risk of exchange rate losses. One could speculate that, having subsequently experienced such losses on a considerable scale, and being attracted by the booming US markets (and $US), the Japanese have more recently wanted less exchange rate risk before investing in our "low" interest rates.

Whether or not such speculation is correct, there seems little doubt that the recent exchange rate weakness reflects a weakness in net foreign investment in Australia. However, published data up to the December quarter does not suggest a weakening in inward direct or portfolio investment. Rather, it seems to indicate an increased rate of outward investment and that may reflect increased portfolio investment overseas by Australian super funds in particular. While this has doubtless partly reflected the (past) surge in US markets, it may be part of an on-going structural diversification of equity investment by such funds.

However, the "bottom line" in all this may be that Australia faces a new external policy challenge, viz, until major improvements are effected in several micro policies, notably industrial relations, competition, environmental and Aboriginal policies, there may be insufficient net foreign direct/portfolio investment to finance the current account deficit (as distinct from overseas borrowings by banks and others, which have increased strongly over the past year). This may, in turn, require an exchange rate that is somewhat "under-valued" by more traditional purchasing power parity measures: in a sense, we may have to pay a price for policies that are insufficiently attractive to foreign (and Australian) investors. The ultimate result could even be the elimination of the current account deficit and of our long standing position as a net importer of foreign capital.

ALL STATES SHOULD BE JEFFED
(Herald Sun 7 March 2001)

Some people talk of Victoria having been jeffed, meaning ravaged, says Des Moore. The Reality is the state did well under the Kennett government, he argues.

Just recently James Lambert announced the addition of the verb to jeff to the Macquarie Dictionary of Slang he edits. He was apparently attempting to put Jeff Kennett in his place by defining to jeff as to ruin or destroy in a heartless and unfair manner. But was the period most directly influenced by Kennett Government policies (1992-93 to 1999-00) really one of destruction?

A common perception is that the State’s financial position was greatly strengthened but by slashing government spending without regard for social consequences. Yet while there was an initial reduction in spending from Labor’s unsustainably high, debt-financed levels, over the seven years both current and capital spending increased by 17 per cent in real terms.

Although Victoria was assessed by the Grants Commission as spending $674 million less in 1999-00 than needed to deliver services at the average level for the States, that was a mere 3.6 per cent lower. More importantly, the key sectors of government schools education, hospitals, and welfare were all providing services well above the States’ average and the below average areas involved lower spending mainly on regulatory and industry services, assistance to non-government schools and (reflecting improved financial management) debt charges.

The enormous public transport subsidies inherited by the Kennett Government were reduced to average levels, partly reflecting the privatization that will also provide further significant savings for taxpayers.

Minister Mary Delahunty recently asserted that last year’s increase in the proportion finishing government secondary schools showed the Bracks Government’s serious and targeted reinvestment is starting to show dividends, while under the Kennett Government educational involvement dropped to the lowest in the country. Retention rates were consistently well above the Australian average under that Government.

It also had average class sizes in government schools around the States average of 14.8 in its past three years. And for its past five years spending a head on government schools was higher than needed to provide average service levels. Unsurprisingly, the Bracks Government has not foreshadowed a return to Labor’s average classes of 13 in 1992-93. The quality of education then was clearly lower than during the Kennett period, reflecting the greater importance of other influences on standards.

In reality, the vital financial strengthening by the Kennett Government did no more than move major public services to around the average level for the States (and mostly above levels under Labor’s Carr Government in NSW).

Victorian living standards grew at a faster rate than in other States. Under the previous Labor Government they had grown slower than the Australian average.

With Victoria’s privatizations the private sector now contributes the highest proportion of total capital spending amongst the States — about 85 per cent — and the idea that public infrastructure provides the key to development is a myth.

Private investment was, and remains, the driving determinant of employment, with our unemployment rate falling by more than in other States during the Kennett era.

The Kennett reforms meant a more appropriate role for government while maintaining good quality public services. All this argues for further privatizations and the minimization of the regulation of business activity.

Des Moore, a former Deputy Secretary, Commonwealth Treasury, is Director, Institute for Private Enterprise.

 

A SCOURGE TO WORKPLACE RELATIONS
(Canberra Times 3 April 2001)

Judicial intervention in industrial relations is deterring employment and wasting resources, argues DES MOORE  

The Commonwealth’s constitutional power to regulate employer-employee relations is limited to the prevention and settlement of interstate industrial disputes. But the union movement has "created" interstate disputes to provide cases galore to a sympathetic industrial relations judiciary that has then attempted settlement by imposing employment conditions on both sides, including wage levels.  

Although the Australian Industrial Relations Commission has a poor record in preventing and settling disputes, with its sisters at the Federal Court it continues to apply conditions that deter employment. These industrial tribunals intervene on a fallacious basis because they mistakenly perceive a major imbalance of bargaining power unfavourable to employees. The judiciary has thus come to award itself a function: the administration of "fairness". 

Judicial interventionism is not confined to industrial matters. Writing in 1995, Chief Justice Gleeson accepted the "abiding need for predictability and certainty" from judicial decisions, but acknowledged that they are increasingly based on subjective assessments because they want to reflect "the consequences of what society has come to demand". He did not say, though, how a non-elected judge should determine which of society’s many demands should be accepted or how account should be taken of any adverse implications.  

For example, how can a judge with no expertise in economics determine that employers have superior bargaining power? True, employers appear to have a stronger position deriving from their greater wealth and their power to hire and fire. But economists know that labour demand and supply are determined by over 1,000,000 businesses competing with each other for the labour services of over 9,000,000 workers with a range of skills. This situation does not generally allow employers to dictate conditions. 

Economists also know that in the more competitive labour market operating in the 1990s the share of national income going to labour remained stable and average real wages increased strongly. By contrast, the much greater legislative and judicial intervention in the 1970s and 1980s resulted in an initial short, sharp increase in labour’s share, followed by a long, steady decline. A more competitive labour market may actually help workers. 

Recent analysis by some labour economists of employment contracts is also relevant. This suggests that the industrial judiciary cannot make meaningful judgements of the terms of such contracts and cannot therefore effectively enforce them. This situation arises partly because whether or not an employment relationship works in practice depends on many factors that cannot be specified in a contract. For example, the contribution by an employee will depend partly on the worker’s capacity and the prospect of advancement while an employer will take account of the risk of employee loss and the training and hiring costs of replacements.  

These are necessarily matters only for the parties concerned to judge, not the judiciary. For their part, employees are freely able to make such judgements and do so readily. Indeed, voluntary quits exceed employer firings by three to one.  

Of course, employers’ firing decisions take account of employment protection legislation. But such legislation also makes employers much less likely to employ marginal workers because firing could be costly even if the job-match proves unsatisfactory. The judiciary cannot take account of such potential employment losses.  

Unfortunately, the inability of courts to effectively enforce employment contracts does not deter its attempts at adjudication and that tends systematically to undermine the self-enforcing properties of employment contracts, thereby eroding incentives to contribute productive effort to jobs. For example, the focus on procedural fairness in unfair dismissal cases reduce the penalties employees would normally expect to experience for "shirking" and this tends to raise the general level of shirking. The intrinsically complex nature of the employment contract, and its wider implications, are powerful arguments against judicial intervention. 

Although successive governments have failed to address the excessive third party intervention issue, the fact that the legislation badly requires reform need not have stopped the tribunals from interpreting it in ways that recognizes the interests of the community in general as distinct from unions in particular. It has effectively imposed upon Australia a highly interventionist set of arrangements and it has done so without adequate understanding of the economic and social implications.  

The recent slight moderation in judicial intervention does suggest that expressions of concern have exerted a modicum of influence. But, even allowing for the apparent readiness of the law to provide from its perspective "what society has come to demand", there are few signs of any real conversion of thinking.

Tribunals are continuing to allow unions to play a game of testing every possible provision and business is bearing considerable direct costs, as is the community both from the wasteful use of resources and the adverse effects on employment. It is also remarkable that the plethora of industrial decisions reveals no precedent that would enable an employer to confidently pursue this or that course of reformatory action.  

This is an extract from a paper on Judicial Intervention "What Society Has Come To Demand" presented to the HR Nicholls Conference on 24 March. Des Moore is Director of the Institute for Private Enterprise.

 

SORRY PLIGHT MASKS REAL PROBLEMS
(The Australian, 27 February 2001)

Aboriginal children are still being removed, and for good reasons

By Peter Howson

The admission by former ATSIC chairperson, Lowitja O’Donoghue, that she was not after all "stolen" from her parents adds considerable support for those who have been arguing that there is no case for an apology to such children. Given that she was actually put in a home by her father, there is no substance to her reaction that whether she was stolen or removed is only playing with words. The stealing thesis has been used to accuse governments of action involving the wrongful forcible separation of Aboriginal children from parents.

The O’Donoghue admission also opens up the question of why, today, so many more indigenous than non-indigenous children are legally required to be separated from their parents.

Last year’s test case dismissing compensation claims for maltreatment by two part-Aborigines (Messrs Cubillo and Gunner) established that the Commonwealth did not have any policy of forcible separation in the Northern Territory. It is true, by contrast, that State Governments have long been operating such policies. Unsurprisingly, Sir Ronald Wilson has been quoting their submissions to his 1995-97 inquiry as support for the extraordinary conclusion in his Bringing Them Home report that around one third of Aboriginal children were removed from parents in a manner that constituted racial discrimination and genocide.

However, developments since the Wilson report confirm that his conclusion cannot be substantiated. For one thing, research has revealed that earlier removals from their parents of Aboriginal children in the States were subject to legal procedures to ensure that the children needed protection. In New South Wales, for example, removals required an inquiry to establish it was in "the interest of the moral or physical welfare" of the child - and was appealable to a court by parents. Surely Wilson should have taken into account that these legal procedures established that the removals were due to neglect, even abuse?

Naturally, non-indigenous children also then had similar provisions protecting them (and parents) against indiscriminate forcible removal under Child Welfare legislation. While that system has been modified, it basically continues today.

Thus, at the end of 1998-99 almost 18,000 Australian children were under care and protection orders issued by courts (with most removed from parents and subject to the guardianship/ custody of government departments). The majority of such children (over 14,000) were non-indigenous. However, a significantly higher proportion of orders applied to indigenous children, with NSW having the highest rate involving eight times as many of its indigenous children.

Sadly, both today and yesterday these removals derive from situations of serious child abuse or neglect, including actual or potential harm. The basic need for removals reflects the incapacity of a small group of parents, from whatever racial origin, to manage their children — and quite often their own relationship too. Given that forcible separations type policies have applied to both indigenous and non-indigenous children, and have included protective provisions, one can only wonder how Wilson concluded that State policies have involved discrimination against Aboriginal children.

Moreover, as the NT case clearly demonstrates, any such thesis would need rigorous checking, preferably in a court environment. In that case claims of forcible separation were not established notwithstanding extensive assistance to claimants from counsel subsidized by the Commonwealth. One NSW claim of having been stolen, made by a part-Aborigine, has also been decisively dismissed by the State’s Full Court, again demonstrating serious problems with unsubstantiated claims.

Yet, with the failure of any proper case to establish that unwarranted forcible separations have occurred, Wilson now proposes a tribunal where evidence would be subject to less searching tests. But would the discovery of the first "stolen" child by such a tribunal really be convincing? In reality it would risk being a repeat exercise of Wilson’s own failure to make adequate checks of the veracity of stories told to his inquiry by Aborigines.

The underlying causes of higher rates of forcible removals of indigenous children are complex but have nothing to do with discrimination against indigenes. Cultural differences are important, with Aboriginal mothers often finding that mixed-race progeny have not been accepted by traditional Aboriginal communities.

But a major cause is also the endemic violence that has emerged within such communities, with severe adverse effects on women and children. In traditional communities elders have lost much of their former authority and alcoholism and violence are often rampant. The life-styles are simply not conducive to parental care for many children.

Official reports now available indicate that previous governments’ policies involving the granting of communal land rights have turned many traditional communities into cultural prisons, where gainful employment opportunities are limited and attempts to pursue the old lifestyle of hunter-gatherer largely futile.

The important thing now is to provide conditions conducive to improving the present life-styles of such Aborigines. The challenge for governments and Aboriginal leaders is not the futile playing with words about apologies, let alone treaties and such like, but decisive action to deal with real problems that inflict serious harm on many Aboriginal children.

Peter Howson was Aboriginal Affairs minister in 1971-72

ACADEMIA’S SORRY OBSESSION
(The Age 3 April 2001)

Manne et al would help Aborigines more by looking at the present, not the past

By Peter Howson

One believer in the "stolen generations" claim, Robert Manne, has now conceded serious errors in the report by Sir Ronald Wilson, Bringing Them Home. But Manne and others continue to promulgate the myth without producing substantive evidence.

Contrary to the claim in Manne’s new book "In Denial: The Stolen Generations and the Right"(an extract of which appeared in Saturday Extra), no significance at all can be attached to the 1994 ABS Household survey reporting that one in ten Aborigines (compared with Sir Ronald’s one in three) believed they had been "stolen".

The ABS survey made no checks on the authenticity of these beliefs, a process that was demonstrated as essential in the subsequent Williams case in NSW and Cubillo-Gunner cases in the Northern Territory. As Justice O’Loughlin pointed in his judgment on the latter, mixed-race children who were removed at an early age could not themselves have personal knowledge of what actually occurred, and would have to rely on stories they had been told.

When properly tested in court, such stories were revealed as close to fantasies.

The failure of the self-appointed true believers to find any living Aborigine who was stolen, and the realization that there are some questions about the Wilson report, has now forced Manne to retreat to claiming:

• That 25,000 children were "stolen" between 1900 and 1970 - but without acknowledging that reliance on childhood memories, and on subsequent stories relayed by a parent who would naturally tend to blame others, provides no substantive evidence of the reason for removals;

• That these removals are for Aboriginal Australians what the term Holocaust was for Jews;

• That there has been a campaign against the stolen generations thesis by alleged right wingers whose motive is to deny that Aborigines suffered as a result of the occupation of Australia. There is no evidence to support this and it is fanciful to imagine such a large number of individuals with diverse views and backgrounds could mount a campaign. Manne seems unable to distinguish between a campaign and the obvious concern of these individuals to establish the truth.

To support their views, generation myth-makers such as Manne are selectively quoting statements by one or two officials who were administering Aboriginal policy as implying such policies were founded on racist objectives, rather than providing protection and succor for children.

However, whatever the views of those administrators, no evidence has been produced that such objectives formed part of government policies themselves. Indeed, the 1937 Government policy statement by the then responsible Commonwealth Minister, John McEwen, clearly indicated there were no such objectives in the Northern Territory .

Manne dismisses sworn evidence on the stolen generation question, subjected to cross examination, by patrol and other officers in the Cubillo-Gunner cases, while effectively claiming that statements by one or two other officers reflected government policy.

It is important to recognize that:

• The removals of children from parents involved part-Aborigines, not full bloods;

• These children were often not accepted as members of traditional communities and in such cases were subjected to discrimination within such communities. Indeed, some of such children were subjected to infanticide. Baldwin Spencer’s report of the late 1920s, which revealed that numerous part-Aboriginal children born during the construction of the Ghan railroad had been abandoned and become wandering waifs, inspired responses from those who saw a clear need to provide care for such children.

• Many removals were made by administrations because of neglect or abuse of the children, as continues to the present day (in 1998-99, for example, over 3,000 Aboriginal children were forcibly removed from a parent for this reason across all States and in the Northern Territory). As the Wilson report itself reveals, legislation going back to the early nineteenth century provided that such removals had to be authorized by boards and/or courts.

• The Christian churches took the lead in establishing institutions to help protect such children and provide education that would not otherwise have been available.

• Not a few removals were made voluntarily by a parent or parents in order to provide better opportunities, particularly educational, for the child. The evidence in the Cubillo-Gunner case showed such children were generally well cared for in the NT.

 

While one could not rule out that some improper removals occurred pre-World War II, no substantive evidence has yet been adduced to establish that this occurred on any scale. And it has become clear that it did not occur post-World War II.

It is a sad indictment of academia that so much of it continues to focus on trying to indict white Australians for past bad behaviour. They should instead be trying to find solutions to the serious current problems being experienced by the small minority of Aborigines who have not moved to urban centers and inter-married with non-indigenes.

Peter Howson was Minister for Aboriginal Affairs in 1971 and 1972.

 

‘RACISTS’ TAG IS FUTILE
(Herald Sun 20 February 2001)

Separate development won’t help outback Aborigines — and cries of racism won’t help reconciliation, argues Peter Howson.

Aboriginal spokesman Geoff Clark claims racism is one of the terrible defects weakening Australia, denying Aborigines their rights and suppressing their cultures.

Mr Clark, chairman of ATSIC, the Aboriginal and Torres Strait Islander Commission, has argued for a treaty that includes recognition of customary law and the right to self-determination. He has now organised an international conference on indigenous people and racism, which begins today at Sydney University.

But use of taxpayers’ funds by ATSIC and sponsor RMIT University to run the conference must be questioned.

Making outrageous racist accusations that antagonize one side, and display intolerance, is not the way to achieve reconciliation. Particularly as the Federal Government already has a Racial Discrimination Act that penalises racist acts. Mr Clark should start from the position that all citizens act responsibly unless otherwise established in court.

His out-burst raises the question of whether those portrayed as Aboriginal leaders can legitimately claim to represent the diverse interests and views amongst people claiming Aboriginal lineage. The majority of Aborigines do not even vote in ATSIC elections and significant differences between full-blood and part Aborigines, not to mention within those groups, are ignored by leaders.

Those leaders certainly overlook that the Aboriginal community now essentially comprises two nations, one largely separate (and mostly including traditional Aborigines) and the other part of the broader community. It is largely irrelevant to appeal to the over 70 per cent of Aborigines living in urban communities and professing Christianity with policies advocating additional land rights and the recognition of customary law.

Importantly, policies that encourage separate cultural development are against the interests of most Aborigines in traditional communities. While those Aborigines have retained some links with their traditional cultures, they are no longer hunter-gathers but, as Noel Pearson has identified, largely dependent on welfare.

This encouragement of separate Aboriginal communities on their own land, dating from the 1970s, has been a failed experiment. Without an effective labour market in most areas, the dispiritedness that comes with reliance on handouts is hardly surprising.

The deteriorating living conditions for most Aborigines staying in such communities have recently been highlighted by former missionary, Richard Trudgen. His book on the land-rich Yolngu tribe suggests that if nothing changes, these great warriors of Arnhem Land will just lie down and die.

Separatist policies must be changed by providing residents with enhanced incentives and opportunities to adapt to 21^st Century Australian life. That would be consistent with Federal Parliament’s August 1999 reconciliation motion reaffirming the central importance of practical measures to overcome disadvantage and expressing deep and sincere regret for injustices suffered under past policies.

Now $5 million will be spent on establishing in Canberra an integrated national symbol recognizing indigenous people and Australia’s desire to share a harmonious future. These various actions surely constitute an appropriate culmination of the reconciliation process that commenced in 1991.

The important thing is not to debate treaties but to focus on how to change the outdated policies of the 1970s to 1990s that are antipathetic to long run Aboriginal interests. And to recognize that accusations of racism do not constitute a basis for changing the reconciliation that has effectively been achieved. Rather, it appears as attempted political self-promotion.

Peter Howson was Minister for Aboriginal Affairs in 1971-72.