Academic Freedom Has Lengthy Funeral

"Islands of repression in a sea of freedom".  This striking phrase was coined a few years ago by the American scholar Abigail Thernstrom to describe her country's universities.  She was reacting to bitter denunciations of her husband Stephan, an anti-racist Harvard history professor, and the reluctance of university authorities to defend him.

Stephan Thernstrom's crime?  Reading extracts from journals of white plantation owners to his students so they could learn how slave owners attempted to justify their actions.  His attackers charged that this was "racially insensitive".

While Abigail Thernstrom's words were obviously chosen for rhetorical effect, her remarks point to a serious malaise in many universities, and one that is not just confined to America.

A crucial distinction between universities and other kinds of training institutions is that universities are expected to provide an environment congenial to the free inquiry that enhances human knowledge.  Such inquiry needs to be rigorous in its adherence to the principles of rational argument, exacting in its use of factual evidence, and critical, in the sense that it should not accept claims to truth simply because people in authority have made them.

This creates a tension between universities and other sectors of society.  Free inquiry always has the potential to upset established interests, because it can puncture the myths and rationalisations which they use to support their positions.

Nevertheless, as intellectual openness is an essential part of our cultural heritage, governments in most Western countries, and particularly English-speaking countries, have accepted the need to safeguard academic freedom.  Legislation and well-established conventions limit external interference in the content, conclusions, and distribution of university teaching and research.

Today however, the greatest threats to intellectual freedom come not from outside, but from within the universities themselves.  Many academics in the humanities and social sciences have adopted a highly ideological view of their role, in which the purported political consequences of ideas are far more important than the arguments and evidence on which they are based.

And their politics are deeply at odds with those of mainstream Australians.  These privileged academics see themselves as presenting the views of the "oppressed" people on the wrong side of the fault lines of gender, race, ethnicity and class that supposedly divide our society -- although whether the "victims" themselves see things in the same light is another matter.

Two articles in the current issue of Quadrant magazine describe and condemn these developments.  Although Quadrant is identified with conservatism and the right, allowing many in the universities to dismiss its arguments on these grounds alone, both articles are by academics who are associated with the left side of the political spectrum.

Jean Curthoys was a left-wing feminist philosopher at Sydney University.  She starts by referring to the vitriolic attack on the author Helen Garner by the academic feminists who contributed essays to the book Bodyjamming.  Garner's own book, The First Stone, had cast a critical eye over the actions of radical feminists involved in a sexual harassment incident at Melbourne University in the early 1990s.

Curthoys observes that these essays, written by those who boast of their "intellectual training", show no interest in factual evidence or logical argument.  Garner was condemned because of the political implications of her book, and its implicit challenge to the authority of the radical feminists who have become ensconced in many universities.

According to Curthoys, Bodyjamming's approach is no aberration, but typical of much of the culture of academic feminism, with its claims that "feminist truth" is different from, and superior to, "patriarchal truth".  She quotes Australia's most prominent feminist philosopher as warning against attempts by women to "correct the bad arguments and inconsistencies of feminist theory", when this is "at the expense of major feminist commitments".

It was Curthoys' dismay at the treatment meted out to those who had tried to correct the "bad arguments", the students and academics "whose confidence, abilities and careers have been stamped on by academic feminists", that prompted her writing.  She wants to defend the value of reasoned feminist theory against the "intellectual and moral corruption" into which much academic feminism has fallen.

The other article recounts the bewilderment of Bob Catley, a political scientist who returned to an academic career after many years of working first for the Hawke government, and then as a Labor member of Federal Parliament.  Returning first to a new former-CAE university, and then to the University of Adelaide, Catley found that "the intellectual climates of these two institutions were remarkably and disappointingly similar", and that the situation at most other Australian universities was little different.

The academic radicals of the 1970s had lost none of their hostility to the liberal democracies and their social and intellectual achievements.  If anything, the collapse of socialism seemed to have intensified their hatred.  But the "children of the 70s" now control important parts of the university system, and they have created what Catley calls an "ideological near-consensus" through their ability to influence academic recruitment, promotions, and research funding.

All this doesn't bode well for the hopes of those who see the universities as playing a major part in the lifelong learning necessary for the knowledge-based economy of the twenty-first century.  But surprisingly, the kinds of problems identified by Curthoys and Catley -- as well as by many others before them -- do not rate a mention in Learning for Life, the report of the West Committee's review of higher education which was released last week.

Certainly, the report talks about the need to encourage "diversity" in higher education, although by this it mainly seems to mean diversity of administrative and course structures.  And at least some of its recommendations are sensible, and might indirectly help to end the rot in some of the worst-affected sections of academia.  But if the committee members really want Australia to become "the clever country" (although they do not use this worn-out term themselves), they should have been far more candid about what needs to be changed -- like restoring genuine academic freedom to our universities.

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Jeff's $2b is Taxing Issue

The Kennett Government faces it biggest challenge yet, which is to pursue and sell the benefits of a low-tax environment.

Over the last seven years the Government has brought the Victorian public sector from the brink of a financial abyss to a sound sustainable financial position.

The question is:  now that it has reached its fiscal goals, what next?

The no-change position -- which is what was essentially adopted in the 1999 Budget released this week -- is not sustainable for much longer.  Eliminating all state debt -- which is what will happen under current policies -- is hard even for us scrooges to sustain.  Stuffing cash into hollow logs is also only a short-term measure -- as the termites will eventually get to them and leave nothing but dust.

The fact is that the Government has the wherewithal over the next few years, with the proceeds from privatisation already in train, to provide a substantial tax-cut, or boost in spending, in the order of $2 billion.  It can achieve this "reform bonus" whilst maintaining a balanced budget, reducing debt, and providing enough slack to cope with fall-out from Asia.

The fundamental question is:  how should this "reform bonus" be provided -- through lower taxes or higher spending?

The priority should be tax cuts and sooner rather than later.  Victoria remains -- even after the minor tax cuts doled out over the last few years -- a high-tax state.  Its tax-take will still be $220 million above the average of all states at the end of next year.  Moreover, unless the Queensland Government goes on a taxing spree in this year's Budget, which is unlikely in an election year, the Victoria Government will still be extracting $2 billion more in tax than its Queensland counterpart.

True, taxes in Victoria are now below the level incurred in NSW -- which has assumed the dubious honour of being the nation's big-taxing state.  However, Victoria does not have the euphoria of the Olympics or the natural draw of Sydney to desensitise business to taxes.  Nor does it have the resource base and fast population growth of WA and Qld.

The Victorian economy will confront a difficult period over the next few years as it struggles to re-engineer or replace its erstwhile protected industry base.  To do so Victoria needs to create a competitive advantage and the best one would be to have a low-taxing, efficient public sector.

Although higher spending may be appropriate in some areas such as public hospitals, contrary to received wisdom, public spending has not been slashed over the last seven years.  As Ed Shann has discussed in previous columns, public sector spending, in overall terms and in most essential areas in Victoria, remains above the level of other states.  Moreover, the Kennett Government has greatly improved the efficiency of service delivery so that consumers are getting greater bang for the still large amount of bucks being pumped into the system.

The problem for the Government is that the political calculus is skewed in favour more spending -- even if wasteful -- and against tax cuts.  To most people state spending is virtually a free good.  Most services are provided free of charge and the nexus between taxing and spending has been all but broken.  Most state taxes are levied on business and are, therefore, invisible to people and over half of state funds are laundered through the Commonwealth.

The task is a tough one -- politically much more difficult than balancing the books -- but the pay-off will be great, and the alternative, worrying.

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Security Lies in ANZAC Tradition

In 1917, in a shell hole in France, a dying lieutenant employed his last minutes to instruct my father on the immediate safety of the platoon.  Such heroic attention to duty should be glorified.  It is the fortitude that bears such discomforts as dysentery, starvation, lice, trench feet and terror while defying the Fates unto death, rather than war that we commemorate each April 25th.  Nevertheless, as time has passed the need for ANZAC Day to do more than honour willing sacrifice has increased.

My earliest memory is that of my parents discussing the outbreak of World War II and, like others of my age, I have not had my fortitude tested in battle.  Therefore, I risk being likened to the spectator who tells the batsmen how to play Shane Warn.  Nevertheless, we have reached a time when, if the mere spectators do not speculate on the meaning of "ANZAC", it risks losing meaning.  World War I veterans are dead;  World War II veterans are dying off;  veterans of the Korean conflict are few in number;  Australians are still divided over Vietnam;  there has been a huge influx of migrants who inevitably bring traditions of different flags and different battles;  and the black armband view of Australian history has been employed to weaken pride in Australian nationhood.  For all of these reasons ANZAC has lost emotional appeal.  It is, therefore, more important that its celebration should be given more of the colder appeal of reason that explains why Ausralian practices and institutions are worth defending.  Even if it could be sustained, it would no longer be sufficient to rely upon Australian tribalism to generate the will to defend the nation.

First, however, a statistic that demonstrates that armed defence can be well worth its cost:  In the first 80 years of this century, absolutist governments killed over 95 million people or 477 in every 10,000 of their own subjects whereas 35.6 million or 22 per 10,000 of the relevant populations died in battle.  Communism was 20 times more deadly than war.  There have been times when it clearly paid to fight the sort of regimes that resort to gas chambers and gulags and there may be others.  However, the task of ensuring that Australia can defend itself and that it is worth the sacrifice of its young men is not a periodic one.

We were not spared the horrors of National Socialism and Communism in Australia because we are an inherently superior people.  On the contrary, in spite of recent immigration, Australians are genetically and culturally similar to the Germans who tolerated the "final solution".  We heard and rejected the Siren calls of those flawed philosophies because the civilising institutions and practices that deliver our social order were robust enough for us not too desperately to crave Utopia or class or racial scapegoats.

The truth is that our liberal society offering approximate equality of citizenship, personal security, justice and personal opportunity, far from being the natural order, is achieved in only a small portion of the world.  Our freedoms and prosperity are the legacy of quite recent Australians.  We will continue to enjoy that legacy only if we deserve it and our duty, like that of my father's lieutenant, is to those who will live beyond us.

I understand the argument that ANZAC should not be complicated by current arguments.  Nevertheless, it is a duty that cannot be satisfied by retreat before controversy.  Surely we do the ANZAC tradition no disservice by encouraging people to think about what makes Australia a place worth defending (and migrating to) and what is needed now to insure that future enemies do not enjoy easy victories.  It is perhaps the things we think we agree about that most need defending.  For instance, we claim to be committed democrats, but we stretch the rules of the political game, particularly within the parties, almost to breaking point;  when we agree with them we applaud governments and unelected judges who usurp the authority of parliaments;  and compared with the years just after World War II few of us feel obliged to contribute in a voluntary capacity to democratic politics.

Again although we know full well that security lies in a strong economy with only manageable foreign debt, we allow our votes to be bought by unprincipled politicians with policies that will weaken the Australian economy.  I have especially in mind continuing budget deficits and lax monetary policy, and immunities from competition granted to professions, unions and protected industries.  We seem to believe in self reliance only for the other fellow.

We are anything but clear about what we mean by equality, equity and justice, even though we rightly believe that they are ideals that go to the heart of the mutual understandings that enable us to live peaceably and prosperously.  Only when understood as all embracing principles can they unite.  Without that understanding, they serve the culture of complaint of one Australian against another.

Future external threats may be avoided in a better world dominated by strong and honourable alliances.  History is, however, a catalogue of disasters following wishful thinking.  Most Australians claim that they are prepared to pay for a defence force that makes us too prickly for most aggressors to attack but not, it seems, if that means taking funds from middle class welfare or the Olympic games.

It is asking a lot of the ANZAC tradition that it should be employed to reinforce duties about which peace-time citizens may disagree, but it is in the defeat of hypocrisy that our security currently lies.  It beggars belief that the men who bore arms for their country in war should not wish to risk something to defend it in peace.  It would be the saddest of betrayals if another generation were to plunder its economy and to neglect its civil institutions making Australia both less defendable and less worth defending.

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Churches Risk Squandering Their Moral Authority

In Britain, people used to say that the Church of England was the Conservative Party at prayer.  In Australia the major Christian denominations are increasingly beginning to look as though they are the left faction of the Labor Party at prayer.

Last week alone, a number of church leaders attacked the morality of the Federal government's involvement in the waterfront dispute, only a day after another group of prominent church people claimed that its approach to native title had undermined reconciliation and endangered Australia's international reputation.  And when Premier Rob Borbidge said that the churches were guilty of hypocrisy because they were expecting pastoralists to make sacrifices that they seemed unwilling to make themselves, yet another group of clerics accused him of being divisive and irresponsible.

The business of governing often involves compromises which sacrifice probity to expediency.  Churches have the right, and even the duty, to challenge governments whose actions fall short of appropriate moral standards, and to articulate the principles which should guide public conduct in a decent society.  Politicians who tell church leaders to stick to their worship have a very limited understanding both of religion, and of the history of Western cultures.

So the issue is not whether churches should rebuke governments, corporations and other sectors of society for their moral failings, but whether these criticisms reflect a position that seems to be based more on partisan politics than on theology.

Clearly, it is possible to take a morally defensible position that happens to coincide with a particular political interest on industrial relations or on many other matters of public contention without having any overall partisan intent, however unwilling a government under attack might be to accept this.  But it is very difficult to base any judgements about the possible political motivations of the churches on their interventions in a single issue alone.

Rather, we have to look at their track record, and ask whether the moral principles the churches claim to uphold are invoked without fear or favour no matter who the wrong-doer might be.  This involves considering the matters on which they take a public stand as well as those where they choose to remain silent.

It is on this point that some of the more vocal clerics are on shaky ground.  As Glenn Milne reported in yesterday's Australian, Mr Howard's office has carried out a thorough search to see whether there was any church condemnation of the Hawke government's destruction of the airline pilot's union in the late 1980s, or any concern about the effects this had on the pilots' wives and children.  Nothing has been found, even though the issues at stake are similar.

And despite the churches special mission to protect the innocent, they do not appear to have joined with the government and the media in condemning the MUA for allowing children to be part of the wharfies' pickets.

Nor did the mainstream churches speak out against the fraud of "secret women's business" on Hindmarsh Island in South Australia.  On the contrary, many prominent clerics gave their support to the fraud.  This was despite requests from the "dissident" Ngarrindjeri women that the church listen to their side of the story and the overwhelming evidence showing that the "women's business" had been fabricated to support the interests of wealthy landowners and environmentalists.

Either the churches were gullible, thus casting doubts on their claims to be well-informed on Aboriginal issues and other matters which they speak out about.  Or they were willing to go along with bogus claims because they were supported by a particular side of politics, thus casting doubts on their moral integrity.

Of course, there are many in the churches who are very troubled by these one-sided interventions.  The Melbourne-based Galatians Group, made up of laity and clergy from both Protestant and Catholic churches, was formed a few years ago to take a more questioning stance about the theological basis for the churches' public statements about social justice and similar matters.  Groups such as the Galatians recognise that the churches' moral authority is not eternally guaranteed, and that it can be rapidly squandered if seems to be too closely entwined with a particular political ideology.  Others in the churches should be as wise.

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Matters of Fact or Fiction?

If you produce a booklet that is supposed to counter public ignorance and prejudice, your own information must be accurate, and you have to be candid about difficult and potentially embarrassing issues.  Unfortunately, the Aboriginal and Torres Strait Islander Commission seems to think otherwise.

ATSIC has just published As a Matter of Fact:  Answering the Myths and Misconceptions About Indigenous Australians.  Even though it was almost certainly designed to influence the political outcome of the Wik/native title debate, in principle such a booklet is a worthwhile project.  A lot of misinformation about Aborigines and Torres Strait Islanders is widely circulated, not just in private conversations, but in the media, text books, and official reports.

As a Matter of Fact presents twenty-five "misconceptions or resentments" grouped into six categories:  history, government funding, ATSIC itself, specific programs directed at indigenous Australians, land and native title issues, and social attitudes.  Some of these "misconceptions" really are myths, and the booklet does a reasonable job of rebutting them.

For instance, non-Aborigines often wrongly claim that "most Aboriginal people have problems with alcohol".  Using figures from the 1993 and 1994 National Drug Strategy surveys, As a Matter of Fact points out that the proportion of Aborigines and Torres Strait Islanders who are regular drinkers is considerably lower than the proportion for the general population -- 33 per cent as against 45 per cent.

The booklet also attempts to deal with the kinds of observations that have given rise to the stereotypes about Aborigines and alcohol.  It acknowledges that the often public nature of Aboriginal drinking makes it much more visible, and that Aborigines who do drink, "are more likely to do so in excess" -- although it omits the important qualification that many Aborigines also enjoy alcohol in moderation.

While there might be grounds for quarrelling with specific details, As a Matter of Fact offers a legitimate response to a number of other prejudices and misconceptions, such as "Aboriginal history is not Australian history", and "There is no point in buying land for Aboriginal people".  But in other sections, these constructive efforts are undermined by a much less acceptable approach, which pretends that some justifiable complaints are also myths.

In its response to the statement that "ATSIC is not representative of indigenous people" -- a well-founded criticism I have heard from many Aborigines themselves -- the booklet clearly attempts to mislead people.  As a Matter of Fact claims that participation in ATSIC elections has increased in each of the three elections since an initial 29 per cent turnout in 1990:  "In 1993, the figure increased to 31 percent.  The most recent election, in October 1996, saw that figure increase once again by 8.7 per cent".  These sentences have only one interpretation -- that voter participation in the last ATSIC election was almost 40 per cent.

In actual fact -- as opposed to ATSIC "fact" -- figures from the 1996 census indicate that the turnout was around 25 to 26 percent, a decrease of at least 6 per cent.  This was despite urgings from a number of prominent Aboriginal supporters of the organisation that a high turnout would send the clear message that indigenous people were angry with government reforms and financial cutbacks to ATSIC.  Perhaps "despite" in the last sentence should really be "because of".

What did increase by 8.7 per cent was the number of people who voted.  But the number of people identifying as indigenous increased at a far higher rate -- 33 per cent between the 1991 and 1996 censuses.

As a Matter of Fact takes a less than candid approach to another supposed "myth";  that "sacred sites are made up to stop development".  Of course, many sites are genuine.  Yet it is equally true that others are not, a matter which the booklet simply ignores, to the detriment of its credibility.

In a few cases -- Hindmarsh Island is the best-known example -- sites have been deliberately fabricated to frustrate a particular project.  But there are also cases where the invention has been relatively innocent, arising out of a belief held by some Aborigines that the discovery of precious minerals is itself proof that the place where they were found must be associated with Dreamtime beings.

Even more interesting are cases where a reverse process of invention has taken place.  The anthropologist Christopher Anderson has recounted how Aborigines in the Bloomfield area of north Queensland opposed their land council and denied the existence of the very sites they had shown him five years previously.  This occurred because the Aborigines were strong supporters of the Daintree-Bloomfield road, and did not want anything to stop its construction, much to the anger of conservationists, who questioned the authenticity of the Bloomfield Aborigines, claiming they had "lost their culture".

Indeed, such querying of the Aboriginality of particular individuals or communities because of their lifestyle or skin colour is common amongst non-Aboriginal Australians.  In the section headed "Many of them are no darker than me -- the real Aborigines live in the outback", As a Matter of Fact provides a good response to these kinds of misconceptions, pointing out that Aboriginality is a product of history, upbringing and experiences, as well as descent.

Nevertheless, the booklet's justified criticisms of people who would confine authentic Aboriginality to those who fit certain stereotypes is undermined by its own attempts to do exactly the same.

Statements such as "all Aboriginal people have retained the core elements of our spiritual association to land and this association is an assertion of our Aboriginality" appeal to the religious hunger of many white Australians, and help to gain their support for the ATSIC position on native title.  However, they also serve to deny the Aboriginality of the very substantial number of Aborigines who do not feel this way.

ATSIC and its supporters may pay lip service to the great diversity of contemporary Aboriginal life.  But in its political campaigns, ATSIC tries to pretend that it represents a common indigenous point of view.  It doesn't, and there isn't one anyway.

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Tax Reforms Have Drawbacks

Two major proposals for tax reform are soon to be put on the table:  the Government's and the BCA lead business/welfare consortium's.

Enough has been said to get good idea about basic structure of these options though, the BCA group appears now to be having second thoughts.

Both options included a GST with a rate of around 10%.  They differ mainly in their use of GST revenue and approach to reform of income tax.

Under the Government option revenue from the GST will be used to replace wholesale sales taxes and reduce marginal tax rates for middle income earners.  State taxes will be left untouched.

The political logic of this approach is clear.  It proposes a tried and tested model -- the one that worked in Canada and New Zealand.  It keeps things as simple and tangible as possible.  It ensures that the median voter comes-out ahead and in a unambiguous manner.  And it ensures that Commonwealth gets full credit for all the goodies -- the tax cut.

The problem with the Costello option are two fold.

First it will likely result in higher expenditure and ultimately higher taxes.  The proposal entails a shift in the tax system from income tax to a GST.  This will result in a less progressive overall tax system with the lowest income groups being worse off.  The government, therefore, will come under immense pressure to provide a compensation package which, if made, will necessitate a higher expenditure and overall tax take.

Second, it would leave in place state taxes which together collect more and impose far more damage than the wholesales sales tax.  In other words it would leave the job half done.

The option being put together by BCA lead group appears to overcomes the problems of the Government's option, but it has a major problem of its own.

Under the BCA option, the proceeds from a GST would be used solely to reform the indirect tax system including the elimination of wholesales sales, payroll tax, financial taxes and stamp duties.  This should require no compensation package, as the GST would be no more regressive than the indirect taxes it replaces.  Moreover it will thoroughly reform the indirect tax system.

The weakness of the consortium's option -- and the thing that is making its members waver -- is its approach to reform of income tax.

It proposes that cuts in income tax rates be financed solely from within the income tax system via the elimination of deductions and loopholes.

The trouble is that there are very few large loopholes in the Australian income tax system.  The system has been continuously scrutinised by revenue hunger tax collectors over the last ten years leaving.  Most deduction and tax structures has a strong rationale.

Moreover most so-called loopholes benefit small-to-medium business -- which make up the bulk of the consortium's membership.  In effect therefore this option is based on its proponents agreeing to higher effective income tax rates.  This is causing the concern in the consortium's ranks.

The sticking point in tax debate to date then is no GST but income tax.  The real task is for the BCA lead group to come up with a saleable income tax reform package, that will work not increase the complexity of the system and require some self inflicted pain.

Otherwise simpler, more modest and inferior Costello option will rule the day.

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Taxing Tome Signal's Labor's Renewal

Civilising Global Capital:  New Thinking for Australian Labor
by Mark Latham
Allen & Unwin, 1998

"Formidable" is the adjective that comes to mind when confronted with Latham's tome.  It is neither textbook nor essay, but a working politician's compilation of what he believes is happening to the world and how Labor needs to respond.

Its greatest strength is that it has been published, its greatest weakness is that much of it will remain unread.  The electorate is the better for knowing that there are real thinkers in Parliament, but Latham's thoughts will need to be distilled if they are to generate the renewal he seeks on the left of the political divide.

The strength outweighs the weakness, because the fact is that the book does signal the intellectual renewal of Labor, much like the one that swept through the party in the late 1960's, led by Whitlam, Dunstan, and Hawke.

What is Latham's message?  Essentially, that social democrat political parties interested in a fairer society have fewer tools to work with than previously.  The Labor party cannot even aspire to control the means of production, distribution, and exchange, and the great ameliorator the welfare state, has whiskers on it.

What is to be done?  Accept the reality of the global market, and prepare the citizen's to cope with it!  This is essentially Jack Stanton's -- read Bill Clinton's -- appeal to the unemployed shipyard workers in the film Primary Colors.  An appeal to help people develop the muscles "between their ears".

Latham wants to help prepare the people for this life's work not through the coddling of the left's nanny state, or the brutality of the individualism of the right.  He seeks a "radical" centre where public provision of assistance must be reciprocated by personal responsibility, including a heightened sense of responsibility towards each other and not just through the intermediary of the state.

This is a desire for collective action using non-state solutions, and could be a big swerve away from the social justice or welfare rights brigade who assert the right of one class of person to the resources of another in the name of fairness or equality, or even choice.  The problem with welfare rights is that they are resource rights and require the consent of the payer.  They are anti-democratic.  This is the Eva Cox view of the world, give us what we want so we can make everyone happy.  Trouble is it makes some people profoundly unhappy if you tax them and deny them the ability to even question what the money is being used for.

The assertion that people need a "social capability" to make their own way leads Latham to suggest that the welfare state "one size fits all" assumption should be abandoned.  He argues that "the role of the state ... is to ensure that people have a platform of citizenship on which to stand".  The question is does this mean a designer label welfare state, where everyone's tastes can be catered for?  I can see more categories of provision, and more public servants to service them.  What about black, Muslim, disabled, lesbian, vegetarian, young women's legal centres?

Fortunately, in the battle of the new communitarian socialists I think Latham comes down on the side of the democratic left, he certainly ditches the Cox view of the endless demands on the taxpayer, as of right, and in that lies his potential for broad appeal.

On the tax side of the equation Latham again seeks the democratic solution, to restore public confidence in the integrity of the tax regime.  If you can raise peoples' confidence in the purposes to which taxes are applied and in the manner in which you raise them, you are a long way towards obtaining office.  Latham's pet scheme is just that, a progressive expenditure tax.  It aims to shift the incidence of tax from earning to spending, and apply a highly progressive tax to consumption.  This overcomes a principal Labor objection to the consumption tax, its flat rate.  Under PET those taxpayers with the highest level of consumption would pay the highest proportion of tax.  A slug to the idle rich.

I don't know enough about tax to argue the point, and as it has never been implemented anywhere in the world it is certain not to appear in Labor's policy speech later this year.  Nevertheless, Labor better get its thinking cap on if it is to be in the tax debate, you cannot win by being idle.  And that is Latham's other major message, Labor has to know what it wants to do in office if it wins.

The real test and the real measure of the book occurs at its middle, the chapters on income inequality, economic exclusion and employment creation.  The solutions -- a dual wages system and spatially defined job creation through public sector spending, the creation of economic cooperatives and the imposition of corporate responsibility need careful scrutiny.  In my student days I had the pleasure of discussing the role of trade unions and wages policy with Colin Clark (the only Australian economist quoted in Keynes General Theory ...).  Basically his view was that the wages of Australian workers would have risen at about the same rate in the absence of unions as with them.  In other words, at least in the long run, economic not political factors determine wages.

This is the question for Labor, just how much can political intervention achieve in the absence of economic reform?  Apart from the need to be seen to be doing something, maybe not much.  This is not to say that the market place is about to deliver a fair share of national income for all participants, it almost certainly will not.  The trick is to ensure a gain-sharing model that does not lower the total amount of earnings available for distribution.  The various schemes applying to declining regions for instance smack of resisting regional adjustment to the economy.  It is more sensible to have workers move to where the jobs are than to subsidise jobs in the areas where the workers live.  Part of that logic also is that wage rates will have to vary between regions.

Latham has set out on the journey of a lifetime.  In the words of Robert Michel's, "democracy is a treasure which no one will ever know by deliberate search.  But in continuing our search ... we shall perform a work which will have fertile results".

I wish Mark Latham a rich harvest.

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Unfinished Business

There is a rather pleasing irony in last Wednesday's High Court ruling that the Hindmarsh Island Bridge Act is valid.  Those who had been trying to have the Act overturned had argued that the Constitution prevents the Commonwealth from passing laws detrimental to Aborigines.  Although the High Court has side-stepped this thorny question, in the long run the court's decision about the Act itself will undoubtedly benefit Aborigines.  The 5-1 ruling -- with only Justice Michael Kirby dissenting -- will also help to maintain public respect for the High Court.

Had the court struck down the Act, it would have conveyed a dreadful message, both to Aborigines and to other Australians.  Whatever the legal arguments, the court would have been seen as stating that Aborigines can make fraudulent claims in order to block any development they don't like, and that neither governments nor the law can stop them.

This message would have harmed race relations and demoralised the many Aborigines who are angry at the ways their culture and history are being manipulated and distorted for short-term political and economic ends.  It also would have encouraged public scepticism about any future Aboriginal heritage claims in other parts of Australia.

The Hindmarsh Island mess started in 1993, after a coalition of conservationists, ferry drivers and wealthy home owners who were trying to prevent the construction of a bridge linking the island to the South Australian mainland came to realise they were unlikely to be successful.  They shrewdly decided that Aboriginal support would greatly strengthen their case.  Until that time, the local Ngarrindjeri people had not opposed the bridge, even though they had been aware of it since 1989, when the bridge developers had consulted with Ngarrindjeri leaders.

In December 1993, the South Australian Aboriginal Legal Rights Movement asked both the state and federal ministers for Aboriginal affairs to prohibit the bridge, claiming it would damage archaeological sites.  When it became clear such sites would not provide sufficient grounds, the Ngarrindjeri who had joined the anti-bridge fight searched around for something more potent.

"Secret women's business" emerged soon after a female anthropologist who had been studying Aboriginal women elsewhere in South Australia suggested the possibility, perhaps only innocently, to a couple of prominent anti-bridge Ngarrindjeri.  The heady combination of spirituality and women proved irresistible to the then Federal Minister for Aboriginal Affairs, Robert Tickner, and to Professor Cheryl Saunders, the legal academic engaged to investigate these new claims.

Professor Saunders reported that Ngarrindjeri women believed the bridge would make "the cosmos, and human beings within it, sterile and unable to reproduce".  This was more than enough for Tickner, who immediately declared that the bridge could not go ahead for twenty-five years.

And so things would have stood had it not been for a group of fourteen courageous Ngarrindjeri women.  They knew the claims about "women's business" had been conjured out of nowhere, and they were prepared to speak out, despite the physical threats, ridicule and ostracism that was directed against them.  Although they did not care whether or not the bridge was built, they took their own history and traditions seriously, and were outraged by what they saw as the dishonest way in which these were being presented.

The fourteen came to be known as the "dissident women", a term which they initially disliked, because it suggested they were the ones who were going against established Ngarrindjeri traditions.  The "dissidents" were led by three remarkable women, Dulcie Wilson, Bertha Gollan, and Dorothy Wilson, and they asserted that had "secret women's business" really existed it was impossible that they would not have known about it.

This is a compelling argument.  Even though particular stories might have been confined to a select group, all Ngarrindjeri would have known the area around Hindmarsh Island was sacred in order to avoid any actions that might desecrate it, particularly if such actions could make the world sterile.

The women's statements led to a South Australian Royal Commission.  The "dissident women" were backed up by two anthropologists from the state Museum, one of whom, Dr Philip Clarke, was married to the daughter of a Ngarrindjeri leader who had become a prominent opponent of the bridge.  Clarke told the commission that one hundred and fifty years of anthropological and other observations had failed to find even the slightest hint of any Ngarrindjeri "secret women's business".

In December 1995, the Royal Commission found that Ngarrindjeri "women's business" was a total fabrication, created for the sole purpose of stopping the bridge.  The "dissident women" expected this would be end of the matter, and looked forward to rebuilding ties with family members and former close friends which had been damaged by the dispute.

Unfortunately, this was not to be.  Too many people -- academics, clerics, lawyers and politicians, as well as Aboriginal activists -- had invested their credibility and emotional energy in the "women's business" falsehood, and they were not willing to let the matter rest.  The High Court action was the culmination of a series of attempts to neutralise the Royal Commission's findings.

I rang two of the "dissident women" immediately after the High Court's decision was announced.  They were absolutely delighted that the truth had finally won out, and thought the many other Ngarrindjeri who know that the "women's business" claims are nonsense would be pleased as well.

In years to come, Hindmarsh Island may well be seen as a turning point in Aboriginal affairs.  It was perhaps the first time that a group of Aborigines, with no material interest in the outcome of a particular heritage dispute, had stood up to defend the integrity of their past against fraudulent, politically-motivated claims.

Their stand was not easy for them, but they persevered.  In all the fuss since last Wednesday's ruling they have been virtually ignored.  Apart from the bridge itself, there is one important piece of unfinished business relating to Hindmarsh Island -- honouring the "dissident women", whose honesty and courage should set an inspiring example to all Australians.  In the words of Dorothy Wilson's sister, Beryl Kropinyeri, "reconciliation starts with the truth".

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Gas Industry Regulatory Developments

A speech to the Prudential-Bache Conference on Gas Marketing,
Sydney, 31 March 1998.

INTRODUCTION

Regulation of the electricity and gas industries covers many different facets.  These include:

Market regulation

wholesale rules governing bidding, transport, connection

prudential requirements

retail access and connection

retail conditions of supply

retail metering

different conditions for different fuels

Ownership rules for the industry assets

government ownership

takeovers and amalgamations

cross-ownership rules

State ownership

concentration of industry players

Rather than repeating the descriptions that have already been covered, in this address I want to focus on some of the possible outcomes and deficiencies of the structural and regulatory arrangements that governments are introducing.

DIMENSIONS OF REGULATION

It is significant that the newly emerging electricity and gas markets have had a different birth from that of any other market structure that has emerged.  In general markets can be categorised in two ways:  commodity markets and those based on direct relationships between buyers and sellers.

Commodity markets developed from the common interests of buyers and sellers wishing to come together so that they can conveniently compare each others product offerings, assess prices, seek to defray risks by arranging for future delivery.  The coffee houses in which merchants exchanged what we now call derivatives grew gradually and spontaneously.  Other markets developed as sellers, or occasionally buyers, sought out specific opportunities to trade either by establishing contact with customers or suppliers or by setting up shop.

In both cases the rule of law, known and accepted property rights and mutual trust was essential to the development of the market system.  That is why it grew most fruitfully in Western Europe where there was a system of law and ethical standards that gave people the confidence to specialise and transact rather than remain totally self sufficient.

Markets that grew autonomously were the key to the growth of the modern economy and present living standards.

It is therefore something of a concern that the utility markets have been developed by governments rather than evolving from the voluntary interactions of buyers and sellers.

It is perhaps partly because of this that we have institutions in gas and electricity with vast rule books.  Of course, the essential facility nature of many of the services in the industry make it different from that of many others.  But Byzantine structures are in place to provide checks and balances.

DIFFERENCES BETWEEN THE STATES

The freedom of gas consumers to seek out their own sources of supply varies considerably between the jurisdictions.  New South Wales is moving most rapidly towards the open market and Western Australia is the slowest.  Table 2 illustrates the timetables

Table 2:  Gas Deregulation Timetables
Timing	NSW	Vic	Qld	WA	SA	ACT
end 1997	100 Tj			500 Tj
end 1998	10 Tj	500 Tj		250 Tj	100 Tj	10 Tj
end 1999	all	100 Tj			10 Tj	all
end 2000		5 TJ		100 Tj	all comm.
end 2001		all	all		all

While these regulatory matters on gas and electricity are irritants that might offer incumbents in some States certain advantages, they are not fundamental flaws.  A further potentially vexing issue in gas is the different regulatory bodies.  Although the Code is to be the basis of decisions, its frailty which I will address shortly, can be magnified by the existence of different State regulatory bodies.

COMPETITION AND MARKET FAILURE

Market failure is a rather misunderstood term.  It is a precise term in economics that refers to the inability of markets to provide the lowest cost solution because of the occurrence of monopoly.  It is sometimes used by regulators as a term to portray a market outcome that does not accord with what they expect to occur.

Competition is not valued as an end in itself but as the means of promoting efficiency.  This has two aspects.  First, monopoly is likely to mean a waste of resources because the producer's natural interest in maximising profit can be married with an ability to do so through forcing up the price by restricting supply.  Secondly, commercial rivalry is also superior to other arrangements in driving costs down and ensuring the lower cost outcome is passed on to consumers in lower prices.  Competitive firms must constantly seek cost savings and other ways of maintaining or improving their profits and these cost savings are largely converted into consumer benefits as rival suppliers adopt similar techniques.

These criteria must be used to assess the merits of the gas regulatory code.

THE NATURAL GAS PIPELINE CODE

The Intergovernmental Agreement on access to natural gas pipelines was signed in November of last year, at the heart of which is the Code.

The foundation of the agreement is "free and fair" trade in gas.  But the means which seek to achieve this are very heavy handed regulation.  Hence, while it is an improvement on the State based monopoly regimes that presently exist it does not pave the way for free market entrepreneurial action.  The provisions for pricing and access are in fact highly prescriptive and where there is flexibility it is often in directions that offer too much discretion to the regulator and thereby reduce certainty on the part of the operator.  Such loss of certainty is likely to raise the return needed to justify pipeline operations and reduce activity in the business.  While the Code purports to be a light handed approach, it is not flexible.

The Code is concerned to prevent excessive profits on the part of pipeliners.  It has four principle objectives:

• to provide open and transparent processes for establishing access to pipelines;
• safeguard against abuse of monopoly power;
• allow customer freedom of choice;
• provide rights of access to pipelines on "reasonable" conditions.

All but the third of these goals are interventions into business decisions.

Such goals have clear merit where a facility is a genuine natural monopoly.  They seek to prevent firms gaining monopoly profits.  However, the pursuit of "excessive" profits or economic rents is a legitimate business goal and one that almost all firms strive towards.  Suppressing that pursuit will reduce activity and those regulatory measures should therefore be confined to tightly defined and rare circumstances.

GENERAL ISSUES

THE ISSUE OF NEW VERSUS EXISTING PIPELINES

Existing pipelines which serve as non duplicable facilities and which face no competition from other pipelines, present a powerful case for regulation of some sort.  Where no pipeline currently exists the regulation on a new line should be minimal.  Yet, in the draft Code, the onus is reversed.  A new entrepreneurial pipeline is required to prove that it should not be covered, and the Code itself would appear to offer few circumstances when this will be accepted.

There will inevitably be many voices raised after a pipeline is committed seeking lower haulage charges.  The entrepreneur will wish to avoid being hostage to such pressures.  To this end, the entrepreneur will require assurances from the regulator on prices, in the absence of which many worthwhile projects will not proceed and in other cases new capacity will be restricted to only that amount which is fully committed at the outset.  In the latter case, the decision is likely to be sub-optimal since the capacity of a pipeline is related to the square of its diameter and the costs of building in incremental capacity are, accordingly, relatively low.

If there is no pipeline serving a place and a new one is proposed, the pipeliner should be free to determine the terms on which it does business.  The community can only gain from the new facility and the pipeliner is constrained in his pricing and other conditions by the ability of rivals to offer a pipeline alternative or by the existence of the pre-existing sources of energy.

The outcome of an entrepreneurial pipeline is seen in Goldfields where WMC/BHP/Normandy took the risks and built a pipeline to supply their own needs.⁽¹⁾  Having done so, the consortium is relatively unconstrained in charging others, including Alinta Gas, a price that is close to what the market will bear.  This appears to be unacceptable under the Code.  Thus, under s.3.28, the arrangements are designed to preclude a pipeline from obtaining any greater profits than the regulator anticipated, and this is further amplified in s.3.33(e) which requires a tenderer to produce a policy regarding "additional revenue", a provision that does not seem to have a reciprocal arrangement where there is negative additional revenue.

COMPETITIVE TENDERS

The parts of the Code dealing with tenders present difficulties of themselves.  A competitive tender for the construction of a pipeline is an appropriate means of pursuing a development when the Government has determined that there is a market need and there would be many businesses seeking to take up the opportunity.  It is, however, not clear how the Government would have access to that information in advance of profit oriented businesses.  If a profitable opportunity exists to supply an area with a new pipeline, it is most unlikely that the first party to discover this would be a Government agency.

If a private business were to spot an opportunity and subsequently be required to tender for the right to provide the means to meet it, that business will have incurred costs on which other businesses would free ride.  To require the opportunity to be tendered would be analogous to placing similar requirements on the proposers of a new paper mill or smelter.  It would discourage market searching activity and innovation.

Tendering is really only appropriate where there are Government or private monopoly restraints, which have impeded developments that offer obvious profit opportunities.  In such circumstances, or where the pipeline needs government assistance to facilitate rights of way, an auction may be the best way of allocating the rights to the pipeline.  However, the best approach is to remove the impediments which prevent worthwhile developments from proceeding.  In any event, where one party is successful in offering the best price, that party should not be sheltered from future competition including from those parties whose bids were rejected.

WHERE THERE IS PIPELINE ON PIPELINE COMPETITION

The foregoing highlights a further issue.  Where there is adequate competition, no regulation is necessary -- after all, the regulation proposed is nothing other than synthesised competition.

In this respect, the provisions for revoking coverage are unclear.  Although s.1.30 says revocation must be recommended if it is no longer uneconomical to have another pipeline provide the services, the services are not defined.  Revocation is only unambiguous where another pipeline parallels the existing line and there is surplus capacity.  It would not therefore automatically apply to the BHP/West Coast line which provides competition to the Cooper Basin suppliers for the Sydney market.  It is likely that if the BHP/West Coast line is to be covered under the Code, its design and capacity would be affected.

If the Code is not to be an impediment to efficiency and to businesses striking their own deals as they do in other areas of commerce, it should ensure that regulatory oversight is confined to the core areas and does not attempt to provide an insurance to "fairness" or some other notion where rival suppliers are in place.  It follows that where there is more than one pipeline serving an area or passing relatively closely to the same area, unless one of the pipelines is unable to provide competition (because its capacity is trivial compared with the other) coverage should automatically be revoked.

SPECIFIC ISSUES

There are concerns that gas regulation, in seeking to combat the detrimental effects of monopoly will create its own deficiencies.  These would stem from:

• insecurities on the part of those whose success may generate increased value in their ability to retain for themselves a large share of that value;  those insecurities may stem from:
  • "free rider" problems whereby innovation is discouraged because there is an imbalanced risk/reward outcome;  the innovator gets slender benefit from success because other parties are given a share of the success by Government, while costs of an unsuccessful venture are sheeted home solely to the firm itself;  and
  • fears that the Government may take a view on the price that can be charged which will offer inadequate compensation for the totality of risk involved.
• requirements on the part of suppliers to offer more information than they would prefer, thereby revealing profitable opportunities to their competitors or offering their customers excessive bargaining leverage.
• paperburden costs entailed in submitting applications for approvals to regulatory bodies.
• an inability to combine different businesses together so that risk is reduced.

PRICING POLICIES

The pricing basis for existing pipelines leaves too much discretion to the regulator and is likely to be over complex in establishing prices for different services.  In terms of the price base, notwithstanding CoAG agreements that optimised deprival value be used there is provision for other approaches.  At the minimum, pricing must be based on replacement costs -- the alternative sets the price too low and leads to both excess demand for the service and inadequate incentive to increase capacity or build rival lines.

Not only is there too much discretion on the part of the regulator in the price setting methodology, but the depreciation schedules under s.8.30 may lead to different rates for different parts of the pipeline depending on its use.  This will give rise to highly complex and somewhat illogical pricing decisions.

The pricing formula is in general over prescriptive and likely to bring departures from efficiency.  Thus, for example, the discouragement of front ending (s 8.31) is difficult to understand.  Typically, many new firms in a competitive market will introduce low prices when demand is being grown and seek to recoup losses in the mature market that grows.  Many new products are priced low to start with -- some are even given away free!.

The tariffs are set on the basis of the Service Provider earning a reasonable revenue.  But price is also the most efficient means of allocating demand between rival users.  If the price is to be fixed, either usage will be misallocated or the users rather than the pipeliner will receive the incentive to construct new capacity -- in other words the incentives are placed with the wrong party.  This is notwithstanding s.8.2 which seeks to offer incentive mechanisms seeking to price so that the market clears.  Use of any depreciation schedule in setting the price is likely to mean the price is too low to attract additional capacity.  Rent controls prevent the building of new houses!

Other deficiencies include:

• While some price regulation may be necessary for existing pipelines, new pipelines under s.8.13 are equally targeted.  Yet any possible customers on a new pipeline route can only be better off as a result of the enterprise.
• The determination of new facility capital bases on which charges can be levied (s8.15 etc) requires the regulator to know as much about the business as the owner.
• The surcharge for "Speculative Investment" (s8.21) is especially cumbersome as an approach and leaves little scope for a rent-seeking entrepreneur to take risks and obtain commensurate rewards.
• The prudent discount provisions under s8.40 puts the pricing fully under the control of the regulator.
• The limit of five years certainty that can be given to the pipeliner in terms of price.

Some of these issues assume particular importance in the derivation of reference tariffs.  These tariffs appear to be determined by the pricing principles in section 8.  There is a danger that such prices would become a price floor, not the price cap that might be justified for a presently existing monopoly pipeline.  In the latter case, there would need to be some price shifting among customer classes for the pipeline to recoup its permissible margins.  There may be occasions where this becomes impossible because the customers refuse to pay a surcharge are unable to bear it, while in other occasions the tariff will have forced a re-weighting between customers which is unlikely to represent a shift towards greater efficiency.

The deficiencies of the present proposals are tacitly acknowledged in the sections of the Code that deal with Queuing policy.  This seems to establish rights to negotiate access to spare or developable capacity based on some time of registering concept.

The appropriate approach is surely to ensure the parties most anxious to obtain the capacity receive it.  This must entail some form of pricing mechanism, perhaps an auction.  None of this is outlined in the Code.  Indeed, the sections dealing with spare capacity (s.5.4, 5.5, 5.6, and 5.7) are designed to place pressure on the Service Provider to release spare capacity.  The procedures to prevent hoarding should be sufficient for this including the requirement that the Service Provider have at least one totally independent director (s.4.4(b)).

CONCLUDING COMMENTS

Australia is not alone in embarking on a Brave New World in electricity and gas marketing.  The design of the market structures has involved considerable expertise and ingenuity on the part of a great many people as we turn the old centrally planning and centrally supplied markets on their heads.  There are clearly vast gains already being reaped in the economy from a market rather than government owned system.

The very high prices being paid for transmission systems in gas and electricity indicate a view among buyers that the existing revenues can be increased.  There are four ways that this can be brought about:  by squeezing out costs, by inventive tax related schemes based on the interface of different depreciation provisions overseas, by growing the businesses and by banking on persuading the regulator to grant rate increases.  Probably all four are in the minds of the buyers but only two of them -- and the two which offer least prospects -- can be said to be wealth generating in the real sense.

I am conscious that I have said little about state gas market arrangements and particularly the contrived bidding market proposed for Victoria.  Whether or not such a spot bidding requirement needs to be created remains open.  In many respects its construction is founded upon the monopoly held by Esso/BHP.  The Wagga link may well be sufficient to break that monopoly and create a more spontaneous derivatives market.

---

FOOTNOTE

1. In fact, following their original proposal going to tender.

Privatisation is Best Bet for Power Assets

In spite of election commitments, the South Australian Government has bitten the bullet and taken the road to electricity privatisation.  Premier Olson is pointing to the cash benefits of privatisation and suggesting continued government ownership would put $1 billion of Commonwealth Government Competition Policy payment funding in jeopardy.

While in strict terms this is untrue, it does pass one reality check.  For States to receive those payments they must satisfy somewhat vague requirements to dismantle regulatory measures that impede the full blast of competition.

Graeme Samuel at the National Competition Council is the gatekeeper of the Competition Policy payments.  Last year, the NCC buckled when faced with opposition from tough talking State Treasurers who refused to countenance any threat to their payments.

But Mr Samuel is gaining greater credibility for the NCC as he stumps the country arguing the virtues of abandoning restraints on competition.  His increased public profile gives the NCC a greater authority to advise Peter Costello against making the payments to State Governments that are dragging the chain on competition reform.  In future the NCC will be no pushover for States which avoid opening markets up to competition but still want the special payments.  Private ownership certainly offers better assurances that Governments will not be favouring a State owned firm.

As a part of the competition policy process, South Australia is committed to joining New South Wales and Victoria in the National Market, scheduled to commence in March.  From that time the South Australian power business, Optima, and its retailer, ETSA, will gradually face increased competition in their presently sheltered State market.

This will mean lower prices for South Australian electricity customers.  Those South Australian politicians who see the National Market as a vehicle to allow the lions in the bigger states to dine off the carcass of their consumers are missing the point ­ without it businesses and consumers in the State will be disadvantaged.

There is also an overwhelming case for breaking up the existing assets.  South Australia's generators within a single business have monopoly powers under any ownership and the business should be divided into at least two parts.  ETSA, as a distributor/retailer, does not have monopoly powers under the national market but is very large.  Dividing its retail/distributor arm into two would add greater competition.  Moreover, as in the eastern states, its transmission business should be split off.

At present the tightly controlled dual generating and retailing monopoly provides the South Australian Government $240 million per annum revenue.  The sale of the State's electricity assets would return over $4 billion.  Fortunately for the State Government, it has recently revalued its assets.  As a result it will not need to share a significant proportion of these funds with the Commonwealth, which now allows only the depreciation value specified at 30 June 1997 to be written-off for tax purposes.

With a sale price of $4 billion at a 6% rate of interest, the State would receive a similar return to that it presently obtains.  However it would do so without the grave risks to those returns consequent on the loss of monopoly pricing powers and the intensification of competition from inter-state generators and retailers.  The National Market and the pressure for genuine competition reforms means the current margins of the businesses will come under pressure.

In considering the sale of the assets, the South Australian Premier has indicated a disposition towards a Victorian style trade sale.  The ETSA board favours a float.  There could be an element of self-interest in this (a new owner would promptly install its own board) but a partial trade sale for some elements of the businesses may make sense.

Trade sales may well save prospectus costs and in some cases gain a premium from buyers who want total control.  But this latter point can be overstated -- six of the nine Victorian power businesses were sold to consortia.

The ETSA board also acknowledges that trade sales to US concerns may provide a better price if the buyers can take advantage of some specific US taxation provisions.  Naturally this issue will need to be explored.  But floats open the sale process to the widest possible range of buyers;  these include several fledgling specialist infrastructure fund management institutions.  The widest range of buyers will generally allow sellers to extract the highest price.

The overriding goal is to place firms in private hands where they are fully free to take business risks and cut costs.  South Australia's decision follows moves towards privatisation in Tasmania, hand wringing in New South Wales and private electricity developments in Western Australia.  The National Market, great sale prices and the demonstration effect of the economies made in the privately owned Victorian industry provide a compelling impetus to privatisation of electricity supply.

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