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This is the first newsletter since the November-December 2001 one. The only "excuse" I can offer (apart from holidays) is the considerable extra work undertaken as a result of September 11, my involvement in preparing a major paper on the Minimum Wage issue and in continuing to help Peter Howson on Aboriginal issues.


This has obviously become the most important and serious issue facing governments (and societies) today. In February the Australian Strategic Policy Institute (ASPI) was fortunate in having John Chipman, Director of the International Institute for Strategic Studies in London conduct a seminar in which (as a Board member) I was invited to participate. The breadth and depth of his knowledge of the problem is revealed in the attached extracts from notes I took.

Since the seminar, the increase in the Israel-Palestine conflict has changed the immediate focus of US strategic policy, but Chipman’s perspective remains relevant. Although no evidence has emerged of Al Qaeda influence behind the greatly increased Palestinian terrorism, that increase undoubtedly originates from the Islamic fundamentalist movement. The overt increase in support from Iraq and Iran for Palestinian suicide bombing is probably an attempt, post-Afghanistan, to divert US attention away from them. Whatever reservations one might have about some Israeli policies, it is vitally important to both them and us that as much force as is needed be used to minimize Palestinian terrorism. Success of that terrorism in Israel would likely see a repeat in other countries.

It was encouraging to hear Chipman’s strong support for US anti-terrorism policy, which I also expressed in the attached articles published in The Age, Herald Sun and Financial Review. But it remains astonishing how many commentators remain "concerned" about the "aggressiveness" of the US response to September 11. There continues to be a significant group, particularly amongst some old stagers, who worry that the Texas President will start shooting from the hip and/or will "upset" other countries that are seen as our friends.

One is reminded of the days when, in Treasury, one frequently had to confront the prevailing Department of Foreign Affairs’ attitude that Australia must not criticize the economic policies of "neighbours" even though the adoption of such policies in international agencies would be against Australia’s national interests (not to mention their own). Some of that has gone since I left Treasury in 1987: but there remains in Canberra and elsewhere (particularly in academe) an important group that takes the line that all countries/leaders should be treated as having "legitimate" interests and that negotiation is the proper course to pursue. They adopt this attitude even when it is very clear that some of the countries/leaders cannot be trusted and will use every possible tactic (including the negotiation ploy) to maintain or add to their own power. And, of course, we should never tell others that democratic institutions and market-oriented policies are "right": such "preaching" only "creates a backlash". Yet it is essential, in the longer run, that such institutions and policies be adopted by the countries where Islamic fundamentalism is rampant.

Of course, Australia cannot necessarily "go all the way with LBJ" and we must stand ready to criticise the US if it goes too far. But we must also recognize and support the US in confronting terrorism.

It should be noted that my attached article in The Age incorrectly criticized the Office of National Assessments on the basis of an Age report that contained quotes from what it claimed to be an ONA document. ONA subsequently assured me that there was no such document and The Age published a letter from that organization saying that its "analysis of the missile defence issue differs markedly from the views alleged in the article".


On 22-23 March the HR Nicholls Society held a most successful conference at which an excellent set of papers was presented on a range of workplace issues. They are available on the Society’s web site (www.hrnicholls.com.au ).

John Stone presented the Copeman medal to former Workplace Relations Minister Peter Reith for distinguished service in the cause of Australian workplace relations and, in particular, his "display of judgment, fortitude and coolness under fire" in the 1998 waterfront dispute. Peter Reith’s response is well-worth reading both for his general comments on workplace relations and for bringing out important aspects of the enormously successful outcome to the waterfront dispute that have not been revealed or properly dealt with in the media (including some that should make sections of the media ashamed). These include the fact that "various accusations leveled against the Government and me were brought to the courts and came to nought"; that "the government lost not one case. In fact it won two later cases"; that "there were no findings or decisions against the Commonwealth"; and that (comment by a judge) "it is nowhere suggested that the Minister took part in plans for the Dubai representations". Reith acknowledges that, while substantive reform has been achieved since the dispute, there is still a duopoly and "the government should not take its eye off the waterfront". Reith also praised the 1998 paper I wrote on labour market deregulation - and even suggested it be updated!

Tony Abbott also gave an important paper in which he congratulated the Society for the consistent leadership shown since the 1980s; acknowledged that "serious problems" still exist in the labour market and remain to be dealt with; indicated that, while the Government would continue to push for legislative reform, there is a limit to what it can do without more active support from a business community that has so far been dragging the chain (Peter Reith put it rather more strongly!); and said that the government is now taking a more active approach to enforcing existing law (including the enforcement of fines on unionists) and will continue to pursue that course. He sent out a strong message that the Government would be much more active in supporting employers when they face union intimidation and indicated several cases in which the Commonwealth has already intervened.

Abbott’s paper received surprisingly limited media coverage. Although it was one of the "home-town" papers, The Age made no mention of it or of the other papers presented at the conference. It even failed to mention the (very unsuccessful) protests outside the conference by THC Secretary Leigh Hubbard and CFMEU’s Martin Kingham, who failed to attract the threatened 500 or so thugs they said would come with them.

The paper on the minimum wage I presented (to which Geoff Hogbin made an extensive contribution) argues that:

Further aspects of this analysis are in the conclusions set out in the attachment and the full paper is on my web site as well as the HRN one. An editor of an economic journal has agreed to have refereed for possible publication a shortened version of the paper.


The attached articles cover, first, some of the main authors in Gary John’s excellently edited book on Waking Up to Dreamtime: The Illusion of Aboriginal Self-Determination and, second, the movie Rabbit-Proof Fence. The first highlights the various serious adverse consequences for Aborigines of the separatist policies that have been pursued and the counter-productiveness for Aborigines of having their leaders continuing to advocate a treaty.

The second reflects the continuing (but diminishing) pursuit of the stolen generation myth. The producers of the film went to enormous lengths to try to convince viewers and others that it is not simply a dramatization but is a true story representing the past forcible removal of Aboriginal children that was part of an alleged assimilationist policy. That this is clearly not the case did not stop them persistently insisting on it being "true".

In reality, the film is an (other) example of the readiness of the artistic community to distort the past by taking any available opportunity to exploit the "Ned Kelly" underdog type image. Producer Noyce gave away the real game when, on (the very biased) Margaret Throsby ABC Classic FM radio program, he said on 2 April:

I didn’t want to make a film that was overtly political, but rather covertly. I wanted to make a film that would speak to all Australians and all white people, as well as black people in the world. I didn’t want to make the film preachy. I wanted people to take whatever message they wanted from watching a wonderful drama and a story of courage and determination and love.

Almost all film reviewers gave the movie the maximum five star rating – a "must see". Unfortunately for them, the movie has all of a sudden virtually ceased to be shown after only a short run – perhaps the true believers have finished viewing?

The Benelong Society’s next conference will be pursuing how best to improve the position of Aborigines. It will be in Brisbane on 30-31 August and will include an address by Minister Ruddock as well as by some Aborigines.


Attached is an article based on my address in January to the Young Liberals convention on the virtues of economic rationalism (a slightly more extensive version was published in Economic Papers, December 2001 and is available on my web site).

I have been trying to get across the idea that the strong growth in GDP per head in the 1990s basically reflects the response to the economic reforms that have been implemented under both the Coalition and Labor ie that the dreaded economic rationalism has actually worked. Given the predominantly left-orientation of the media, it is not surprising perhaps that so little credit has been given to such reforms and that economic rationalism continues to be decried. Commentators often evade the issue by referring to specific economic developments as if they have little or no connection with policy action.

The December quarter increase in GDP of 1.4 per cent (about double what the "experts" forecast) has led to some acknowledgement that policies may have helped. The Economist recently concluded an article entitled "Down Wonder" with:

Over the past ten years, Australia has enjoyed the fastest growth of any highly developed economy. A series of reforms over the past two decades – from financial deregulation and reduced import barriers to the overhaul of taxes and labour relations – has made the economy much more competitive. Good policy has counted for more than good luck.

The latest OECD calculations of GDP per head on a purchasing power parity basis lend further weight to my ER thesis. These calculations provide the cornerstone indicator of economic performance of individual countries. One table shows that, out of 23 OECD countries comparable to Australia in terms of living standards, only three (Norway, Ireland and Luxembourg) grew faster between 1990 and 1999. As much of the Luxembourg workforce is not counted in its per capita GDP calculations, its performance doesn’t count and Norway benefited considerably from oil revenues. That leaves the (two) Irish as winners in the performance stakes!

One is left wondering when economic rationalism will be "recognized"!


Surprise, surprise the cessation of the arrival of boats with asylum–seekers has not led to any acknowledgement by the third estate that the Government’s "Pacific Solution" may not turn out such a bad policy after all. Instead, the media switched attention to specific issues that it thought it might be able to embarrass the Government with. But even the pursuit of the Government’s mistake over the "child overboard" issue (a mistake arising initially from what seems to be a poor system of communications between Defence arms) appears to be backfiring. Evidence to the Senate inquiry is now revealing many more incidents than had been publicly revealed where asylum seekers tried to persuade the intercepting navy ships to bring them to Australia by adopting a form of harm "strategy", such as sabotaging their own boats so that they had to be rescued and/or threatening to throw children overboard. In short, the Prime Minister was correct in his election comment that many of these asylum seekers are not the kind of people we want in Australia.

There can be no doubt that the media has lost enormous credibility over this issue and has badly misjudged the reactions of the community to aggressive queue jumpers trying to force their way into the country. Indeed, the media (again) did not do its homework on the use of the navy. That did not start in the election or the lead up to it. As far back as 1999 the Government established a Coastal Surveillance Task Force and implemented a program to detect and deter illegal arrivals. That program sought to address all points in the irregular migration chain. It would be a reasonable assessment that the program has had substantial desirable effects in giving genuine refugees a better chance.