Keeping Prices Healthy

Roche, Upjohn, Glaxo Wellcome, Pfizer, Wyeth and Australia's very own CSL, are just some of the pharmaceutical companies operating in Australia.  Most pharmaceuticals are actually paid for by the taxpayer, whose contribution is over $4 billion a year.

According to the Productivity Commission, in Australia and New Zealand we get our pharmaceuticals at bargain basement prices.  On average, prices are 30-40 per cent of those in the US and 60-70 per cent of the UK.

The regulatory authorities in the Commonwealth Health Department and its various committees can feel pleased with themselves over these findings.  This is especially so since the Productivity Commission itself could not find anything different in Australia and New Zealand to cause the lower prices.

Pharmaceuticals bring massive savings to society.  Combating mental illness is one dimension.  In Victorian times, up to 10 per cent of the population was institutionalised for large parts of their lives.  It was not very long ago that something as common as post-natal depression caused thousands of women to be placed in psychiatric hospitals.  Today, the availability of modern pharmaceuticals means only a fraction of the mentally ill require to be housed in mental institutions.  Nowadays, most are actually productive members of the community.

Cost savings from pharmaceuticals are likely to become even more important as the population ages.  The cost of keeping someone in an intensive care nursing home is $100,000 per year.  Drugs which prevent or delay this -- for example, combating Alzheimer's -- aside from their immense personal benefits, bring colossal savings to the community.

It costs an estimated one billion dollars to bring a major new pharmaceutical product to the market.  The costs are greatly amplified by requiring up to a decade to pass through the regulatory mill.  The developer then has only a few years to cash in before patent protection expires.  Even when a new drug is found, it has only a 10 per cent chance of being profitable.

There are two conditions that allow Australia the capacity to negotiate low prices for pharmaceuticals.  The first is that, having been developed, the costs of producing pharmaceuticals are relatively low.  Secondly, it is necessary for pharmaceutical companies to be allowed to charge different prices in different markets.

To maintain this the manufacturer must be able to ensure that products sold in Australia cannot be re-sold into the more lucrative US and UK markets.  Such re-selling would undermine the higher prices in the major markets and force manufacturers to charge the same high price in Australia as they do in the US and UK.

If Professor Fels and his Australian Competition and Consumer Commission (ACCC) had their way there would be no such market differentiation permitted.  The ACCC has campaigned long and hard to prevent producers controlling the re-sale of their goods to other markets.  The campaign has already stopped record companies from selling CDs at higher prices in Australia from those overseas.  The boot is on the other foot with pharmaceuticals.  If the principle is extended to them, it would carry a $4 billion plus price tag to the taxpayer.

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Review of Exasperating Calculators

Exasperating Calculators
William Coleman and Alf Hagger
Macleay Press, 2001;  336 pages;  $24.20

To call someone an Economic Rationalist is to insult them.  To invite an economist to dinner is an act of treason.  How did this happen?  Exasperating Calculators is the story written by two Tasmanian economists, William Coleman and Alf Hagger, explaining these and other matters.  It is the story of a belligerent campaign among so-called intellectuals -- whom Coleman and Hagger label economic irrationalists -- attacking economics, economists and economic prescriptions.

The title of the book comes from the distinguished Australian historian Keith Hancock, who wrote in 1930, "Australians have always disliked scientific economics and (still more) scientific economists, ... the guardians of Australian orthodoxy [protectionists] have thought it necessary to refute these exasperating calculators".  Two exasperated calculators, Coleman and Hagger set out to destroy the enemy;  they do so admirably.

The principle antagonist is the sociologist Michael Pusey whose attack on economic rationalism was contained in his 1991 book, Economic Rationalism in Canberra:  A Nation Building State Changes its Mind.  Coleman and Hagger re-analyse Pusey's data, which was based on a survey of the attitudes to society of 215 senior officers of the Commonwealth public service.  Pusey concluded that there were too many conservatives in the ranks.  By which he meant too many people with an unsympathetic attitude to his preferred role for the public sector.  That role was as principal builder of the Australian nation.  Moreover, the economists among them were the "worst offenders" in failing to realise the destiny Pusey had marked out for them.  The trouble is, Pusey's figures are so full of holes and so appallingly interpreted, he proves nothing of the sort.  Pusey not only has a poor grasp of his method, he has no proof, for example, that the economists prescriptions to solve the issues of the day are less or more useful than non-economists.  Worse, nowhere in his book does he define economic rationalism.  That really exasperated our two calculators!

From this shaky foundation came a flood of other irrationalists.  Political scientist Robert Manne rushed in with the book, Shutdown:  Economic Rationalism and its Consequences.  Our exasperating calculators cut a swathe through the Manne diatribes.  They conclude, "in his treatment of Economic Rationalism, Manne combines a studied pose of wisdom with an ingenuous candour about his ignorance".  The economist Clive Hamilton of the Australia Institute, weighed in with The Mystic Economist.  He argued that man should be reunited with nature and that he should be guided by feelings rather than intellectual powers.  To which Coleman and Hagger reply, "we believe Hamilton's cultivation of feelings to be the product of weak mindedness".  They also take the big stick to Nugget Coombs, a once distinguished public servant and head of the Reserve Bank, who unfortunately took a turn for the worse once he lost the reins of power.  Coombs discusses the influence of John Stuart Mill on economic thought, describing Mill as an academic and clergyman.  Our calculators remind the reader that Mill was a life-long atheist who never sat in a lecture theatre in his life and spent his professional life working in the East India Company!

These are the juicier moments in a serious demolition job of those who sought to harm the intellectual foundations of economics using inferior tools.  The book is also highly critical of economists for not telling their story, of letting ignorance and fear replace rational analysis.  Unfortunately, the much-delayed response to the campaign of economic irrationalism may have caused a loss in the recruitment of future economists.  In recent years there has been a 13% fall in students enrolled in economics at university, at the same time as an 18% enrolment increase in all degrees.

The story of economics is outlined in the chapter "Educating Rita".  Here we learn that neoclassical economics is not another name for economic rationalism.  Neoclassical economics is positive economics;  it is about how a modern economy actually works, not about how it should work.  Its role is to assist in the evaluation of economic policies, not to determine what policies are desirable.  Modern mainstream economics does not say to governments "withdraw", "cut back", "do not interfere", it says the reverse.  Know your economic responsibilities and pursue them with vigour.  Governments have a market support role, and a market oversight role, and a role to see that overall economic activity is maintained at the right level.

Economic irrationalists do not like the superior ability of economics to explain certain economic phenomena.  That jealousy, coupled with the political desire by groups to use governments to obtain an advantage in the marketplace, is a prescription for irrational policy.  Economists do not pretend to have all of the answers, but at least they keep count of our follies.  Ask one to dinner one night -- they can be fun.

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Misguided Views from Defenders of the Clever Country

How are distinguished dissident scholars treated by the defenders of "Knowledge Nation", the "Clever Country", or whatever other slogan marketing men coin for the ideal of a scientifically literate Australia?

Badly, if the Canberra Times' reaction to the death of Professor Derek Freeman on July 6 offers any guide.  Just seven days later, the paper's editor Jack Waterford wrote that Freeman, one of Canberra's most eminent academics, was "barking mad", and that a previous editor had banned most coverage of the professor's activities "because it was not good form to make fun of the insane".

Waterford's comments immediately raised two significant questions.  Since when has it been "good form" to cause gratuitous distress to the grieving family of an honourable man?  And are any other prominent individuals being subjected to the Canberra Times' self-imposed censorship?

Professor Freeman was an anthropologist who achieved international fame in the early 1980s for showing that Margaret Mead's idyllic portrayal of a sexually permissive adolescence in Samoa was false.  Many people, including anthropologists who had previously dismissed Mead as more of a populariser than a scholar, could never forgive him.

It may seem strange to make such a fuss about research on teenagers in a remote South Pacific country carried out by a woman at the beginning her career.  But the results of that research, published in 1928 as Coming of Age in Samoa, had an influence far beyond the confines of anthropology, popularising a view about human culture that is fundamentally misguided, although still remarkably prevalent.

The book launched Margaret Mead on the path towards her eventual status as an American icon.  Time Magazine once declared her "Mother to the World";  she appeared on a recent United States stamp commemorating the 20th century;  and the committee celebrating this year's centennial of her birth is chaired by former U.S. President Jimmy Carter.

Mead went to Samoa with a task that had been set for her by her teacher, Franz Boas, who wanted to test his conviction that it was culture, and not biology, that was the overwhelming determinant of human behaviour.  She would investigate whether the emotional turbulence and crises that were a common characteristic of adolescence in America were also present in societies with very different patterns of culture.

Mead's research supposedly showed that Samoans went through an adolescence that was "peculiarly free" of stress.  And this was because in Samoa -- unlike what was then the practice in Western countries -- the community did not attempt to curb teenage sexual activity.

This was great news for the then-young discipline of cultural anthropology, struggling to establish the autonomy of its subject matter.  There was no biologically-based human nature, for human beings were almost infinitely plastic, capable of being "relentlessly shaped and moulded" by cultural forces, which of course, were the very phenomena that anthropologists specialised in studying.

But Mead's research was also music to the ears of a much wider group -- progressives who wished to cast off the shackles of a restrictive sexual morality and change many other aspects of social life that were usually believed to express an underlying human nature, such as gender roles, or competitive behaviour.  Mead's book quickly became a best-seller, and its conclusions were adopted as conventional wisdom by large numbers of educated people.

Freeman, who first went to Samoa in 1940, and who, unlike Mead, was fluent in the Samoan language, published two major books analysing Mead's research.  Basing his findings on a wide range of sources, including his own fieldwork, historical documents and Mead's own letters and papers, he demonstrated that Samoan sexual mores and adolescent behaviour were very different to the impression given by Coming of Age in Samoa.

Freeman showed that Mead had been too pre-occupied with secret research she was doing for a museum to carry out a proper study of Samoan adolescents.  As she came to realise that she could not fulfil the task Boas had set her, she turned in desperation to a couple of Samoan female companions, and interrogated them about their sexual activities.

Embarrassed by her insistent questioning about a forbidden topic, the two young women resorted to a customary practice Samoans call "taufa'ase'e", or prankish hoaxing.  Unaware that their fibs might find their way into a book, and have a profound effect on the way Western intellectuals thought about the cultural patterning of behaviour, they had a great time fooling Mead into believing the very opposite of the truth about Samoan adolescent life.

The animosity that Freeman provoked from Mead's legions of supporters was extraordinary -- though perhaps not surprising.  They subjected him to a continuing campaign of vilification that could have destroyed a lesser person.  Amongst their many falsehoods was the claim that Freeman was a coward for waiting until Mead's death in 1978 before going public.  In fact, he had personally told Mead of his disagreement with her work many years previously, and some months before she died he had offered to send her a draft of his first book.

As those who have seen The Heretic -- David Williamson's fine play about the Samoan controversy -- will realise, Freeman could be a difficult man.  But he was also a great scholar, whose contributions to anthropology went well beyond debunking Margaret Mead;  and his intellectual and moral compass was more firmly grounded than was the case with most of his critics.  Derek Freeman was the kind of person that a nation which is really serious about its intellectual life should do everything it can to foster.

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Rejoice, For the Choice is Yours

In recent days, Tony Abbot has drawn down the predictable, intemperate responses for his startling revelation that even poor people exercise choices in their lives which affect their well-being.

Before considering this as a social proposition it is worth looking at the proverbial big picture.

Are we, as a society making an effort to ease poverty?

The figures seem to say yes.  At the beginning of the new millennium we are spending close to one-tenth of our national income through governments on social security and welfare.  This compares with a figure of 5% in the early sixties and 7.5% in the early '80s.  Given that real national income has doubled in the last 20 years, it means that real welfare spending almost tripled in that time.

Then there are tax concessions -- about two thirds of the $19 billion in annual tax expenditures are attributable to social security and welfare -- around 2% of GDP.

The flip side of this is that there is some pretty savage levelling down as well as up.  To pay for these income transfers we have one of the most progressive income tax systems in the world and, in this process, make the rich and the not so rich significantly poorer than they would otherwise be.

Nevertheless, Australians still manage to give to charity out of their net incomes.  There are a myriad of private charitable organisations.  These are supported by public and private donations, the latter worth about $3 billion annually at last count.  About half a million Australians work in the welfare sector, many of them unpaid.

None of this takes into account the additional one-eighth of national income we spend on other social programs -- education, health, housing and community amenities.

In all, this is a solid effort to help the poor directly.  It is nothing to be ashamed of.  Both the Australian public and, I suggest, Mr Abbot, are a long way from taking the Marie Antoinette line of "Let them eat cake" as alleged in Mr Beazley's simplistic sound bite yesterday.  We are working off a high baseline.

Are the numbers of the poor increasing?

Here the debate takes off in all directions.  Commentators of different political persuasions deploy aggregate statistics or upwardly mobile poverty lines or specific instances of hardship or simply what they think ought to happen.

The fact seems to be that neither relative nor absolute poverty has increased in the past two decades and that the poor, along with the rich, are getting better off.  Both have shared in a very long period of economic growth.  And it would be a very serious indictment of all the governments of the past 20 years if the massive and massively increased public spending on welfare had produced no net gain for the poor.

It is worth noting that this gain is despite adverse trends such as throwing many older males on the unemployment scrap heap, a huge increase in single supporting parents, more aged pensioners and a much bigger tertiary student population (who will go on to earn well above-average incomes for the rest of their lives).

Can poverty be eradicated?

Two thousand years ago, a famous welfare activist -- Jesus Christ -- said "The poor are always with us".  He combined this acceptance that the problem was enduring with an exhortation to extend charity to the poor and sick.

In some ways we have not moved on -- the poor are still with us.  In other ways we have -- to be poor in Australia in 2001 bears no relation to the same state in the year AD 1.

If Jesus agrees with Tony Abbot that we can't eliminate poverty, what can we do to reduce it?

If we want to do this we need a much more intelligent discussion than we are having or we will be stuck with the policies that have failed for 2000 years or more.

When welfare activists say that government can do much more for the poor it is fair to ask is that "much more" than the $70 billion we already spend.  If so, then we will need big tax increases to bring it about.  Politicians jumping on the Abbot-bashing bandwagon should come clean on this.

If they mean that we need to have more effective programs they are right.  After all, we have put enormous resources into programs and the poor are still there.  What we do now know with certainty is that simple income transfers don't lift people out of poverty, they may keep them there.  Some solid new proposals would help here, together with performance forecasts showing how many people would be lifted out of poverty.

This brings us back to Mr Abbot and a group of other disparate characters, including Jesus, who think that this is not a one-way street.

One of our most revered institutions, the Salvation Army, was built partly on the belief that poverty and alcohol were inextricably linked and that an individuals could "take the pledge" and assume control of their lives.  John Wesley preached the same message of self-reliance to the poor and it brought a better life for many.  Smoking Quit lines and Gamblers Anonymous know that the start of long term recovery is when the individual decides that he or she has a problem and determines to do something about it.

They need the programs but there has to be a personal commitment too.

More fundamentally, if you take away that personal power of choice, you rob the individual of an important element of their self-respect and hope.  And you rob society of the principle that we all need to contribute as well as take -- the widow's mite.  If you tell people that they are victims without any control over their fate then poverty programs will be self-perpetuating.  In a separate context, the (now politically incorrect) Noel Pearson has seen these dangers of long-term welfare reliance and the role of self-help.

In the end we all have choices.  The way we exercise those choices affects our lives, rich and poor.  We can all help ourselves and others.

Is it really "insensitive" (words of yesterday's SMH editorial) to suggest that individuals might have choices in their own lives?  Or is it patronising to suggest that they don't?

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Alienation Laws Next in Line for Overhaul

This week the High Court Chief Justice Murray Gleeson made comment on the nature of parliamentary democracy that has particular relevance to the alienation issue and the application of income tax law to Australia's 1.6 million independent contractors.

Justice Gleeson's comments related to the danger posed to democracy of regulation being in the hands of government authorities instead of parliament.  This is the core problem that caused the community backlash over the tax alienation rules.

Anyone who reads the 44 paged Explanatory Memorandum to the alienation legislation and the 324 clauses in the draft tax rulings will be more confused at the end than when they began.  The devil's detail puts the power in the discretionary hands of the ATO.

Take just one example.  To pass the business test a contractor must have clients that are "not associates of each other".  But the definition of "associate" is not clear.  If an IT contractor does work for IBM and also works for another company partially owned by IBM are the companies "associated?"  Do common directors constitute "association?"  The legislation is unclear and the lack of clarity means the answers are subject to interpretation by the ATO.

This is bound to lead to anomalies.  For example the ATO has been known to reject contractor airfares as deductions because the travel allegedly constituted travel to and from work.  Yet if the contractor's client paid the airfare the expense would be tax deductible for the client.

The alienation legislative uncertainty contrasts to the successful approach under PAYG.  The historical concern of the ATO with contractors was that they fell outside the PAYE common law definition of employees thus denying the ATO legislative power to require remittance of tax at the point of earning.  This has been fixed under PAYG where now straightforward legislation defines how "at source" tax remittance is required for direct and labour hire contractors.  There is no confusion and contractors know where they stand.  This high standard of legislative clarity is what is needed for alienation.

And when the swirling confusion of the alienation act is stripped away, 2 simple questions seem to sit at the core.  When does a payment to an "associate" (a spouse) constitute income splitting and when is an alleged business expense actually a personal expense?  These deduction issues are not contractor specific but apply to all income earners.

If a person makes payment to a spouse when the spouse has not worked, or claimed phone expenses when the calls were private, this is fraud and already caught within the tax act.  If the fraud provisions need to be tightened and made specific, do it!  But the approach under alienation has been a convoluted attempt to describe what a business is, rather than detailing what deductions are disallowed.

It's like trying to catch a mouse by putting traps in every square centimetre of the house but none in front of the mouse hole.  The infested house still stands but no human dares go in for fear of being trapped by unintended consequences!  Lack of certainty over what is or is not an acceptable business expense cause people to not engage in business.  Opportunities are lost.

However the problems over this current approach to alienation needs to be kept in perspective.  The ATO and government deserve commendation for success in completing perhaps the largest reconstruction of tax administration attempted in any country and within a staggeringly short time span.  The outcome is a better and more equitable administrative system of tax collection.

The BAS and alienation issues have been comparatively small glitches borne from the ATO having to comprehend a rapidly changing work culture in which people work but are not employed.  This new way of doing business is alien to the direct experiences of ATO personnel and is perhaps the real "alienation" issue that needs addressing.

The business comprehension problem by the ATO is not isolated to Australia.  The UK tax authority's similar approach to targeting contractors found its way into the UK High Court.  In commenting on the UK dispute the judge said that the difference between the tax authority and contractors is, "one of approach rather than one of really indicating a dispute of fact".  The urgent need is to achieve an accurate understanding of the way business structures and relationships are changing.

The decision by the government to drop the ATO assessment requirement for those who failed the "80% rule" is as the HIA said a "stunning victory for common sense".  The next step is to look to simplify and tighten the legislation even further so that taxpayers and the ATO have clear legislative instructions to guide their actions.

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Think Twice Before Adopting European Labour Relations

Amongst union leaders, Europe is the preferred benchmark for labour laws.  Whether it be a protected role for unions, collective bargaining, minimum wages, holidays, dismissals laws, parental or carer leave, worker consultation or dismissal laws, Europe is seen as setting the pace.

Although we hear quite a bit about the generous working conditions of European workers, we hear little about their wider effects.

A recent study by the Centre for European Policy Studies shows why, and the news is not good, particularly for those Europeans at the margins of the work force.

The study found that while labour productivity -- which in the long run is the main determinant of wage rates -- has grown markedly in the US and Australia over the last decade, it has been stagnant in Europe.  Indeed, over the last five years, labour productivity has actually shrunk across the European Union (EU).  Total factor productivity -- which measures the combined output of land, labour and capital -- has also stagnated in Europe.

What this means is that the Australian and US economies can now grow at about 1.5 percentage points (sixty per cent) per year faster than the EU without igniting inflation and higher interest rates.  It also means that, over the medium term, US and Australia can expect to find jobs for the thousands of people entering the work force each year, while there is little scope for job-creation in Europe.

Over the last five years, there has been an apparent improvement in the employment record in many EU member states.  However, upon closer examination, the record is not as good as first appears.  First, the recent improvement comes from a very low base in the early 1990s, when unemployment averaged around 12 per cent across the EU.  Second, 85 per cent of employment growth over the last five years in Europe has been in part-time or temporary jobs.  Third, there are already signs of employment growth slowing, with unemployment still averaging between 8 to 9 per cent in most countries.  Fourth, the jobs have been highly concentrated amongst men in the prime 24-54 age group.  Indeed, unemployment amongst prime-aged men is virtually zero in Europe.  People on the margins of the workforce, however, including the young, women and older workers, have experienced only marginally better employment prospects, and much worse than those found in Australia.

The reasons for Europe's limited capacity to grow and its poor employment record are its labour regulations.  Europe employment protection laws are some 15 times tougher than those in the US and much tougher than those in Australia.  Thus, firms in Europe are reluctant to hire new workers.  Pay-roll taxes, which are used to fund workers' compensation and unemployment, are imposed at rates exceeding 20 per cent in many of the countries on the continent.  Minimum wages are high.  And unions shops and compulsory collective bargaining are still the norm.

European leaders recognise that their labour laws are holding them back.  Indeed, they recently agreed to a wide-ranging reform agenda.  Progress is, however, proving to be difficult.

In short, Europe's problem are the very same things that local unions seek to adopt downunder and should be avoided.

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Assimilation Offers New Hope

Supporters of Aboriginal rights are worried that the current round of revelations about the culture of violence that afflicts many Aboriginal communities will provide ammunition to the wrong kind of people.

Last week the co-chairman of Reconciliation Australia, Fred Chaney, said "there's this desperate ideological desire at the moment to trash the rights debate and promote assimilation".  And Melbourne academic Robert Manne claimed that allegations against ATSIC leaders will give comfort to "the new assimilationists who are opposed to the idea of Aboriginal self-determination".

Unfortunately, many advocates of the Aboriginal cause see their commitment as an indication of their own moral worth.  This prevents them from accepting that those who find fault with their favoured notions could be acting from decent motives.  Criticism is taken as a sign of wickedness, or blind adherence to ideology.

Perhaps their contemptuous attitude to criticism would be justified if they could show that life was getting better for ordinary Aborigines -- rather than for a small and privileged minority -- as a result of the approaches they have been advocating since the 1970s and 80s.

But for over a decade a number of well-informed observers, both Aboriginal and non-Aboriginal, have been pointing out that things have actually got far worse for many Aborigines.  Indeed, in an interview in The Bulletin this week, Noel Pearson even suggests that while the old mission days in Cape York "weren't bloody Club Med", they bore favourable comparison to today's nightmare of alcohol-induced violence.

So although the phrase was coined as a term of rebuke, I am one person who is quite happy to be called a "new assimilationist" -- as opposed to the old kind, who were far too patronising, coercive and insensitive for my liking.  But despite what Chaney and Manne might think, "new assimilationism" is much more likely to ensure the human rights of Aborigines, as well as genuine self-determination, which must first be focused on the individual, not a collective.

And what is the creed of a "new assimilationist"?

It starts from the principle that Aborigines are Australian citizens, whose future is indissolubly linked to the rest of us, and to whom the same rights and responsibilities must apply.  This does not mean that Aborigines should lose their identity, any more than I, or most of my fellow Jews, have lost our Jewishness because of our devotion to Australia.  Indeed, although I can understand why some individuals in the past denied their Aboriginality, I find it difficult to respect such people, and much prefer those who were always proud of who they were.

"New assimilationism" also acknowledges that Aborigines suffered great injustices in the past, as a result of policies and practices that were sometimes malevolent, sometimes well-intentioned, and sometimes merely indifferent to their needs.

But while some of the harmful consequences no doubt persist into the present, the all-too-common tendency to invoke this history as an alibi for today's destructive behaviour only perpetrates further damage, ensnaring Aborigines in the trap of victimhood.  In Noel Pearson's words, this takes away the last thing that people have, "their own power to change".

And as the anthropologist Peter Sutton has recently pointed out in a far-reaching paper called "The politics of suffering", some of the worst levels of violence and other social problems exist in places where Aborigines were long shielded from the worst impacts of the European presence.  These were places where people were still able to make traditional use of their lands, and "where cultural assimilation forces were the least applied".

Dr Sutton, a respected and experienced anthropologist who is on the council of the Australian Institute of Aboriginal and Torres Strait Islander Studies, and who is friendly with many Aboriginal leaders, would not call himself an "assimilationist".  He thinks that it has justifiably become "a pejorative description", and that "the arrogance of many manifestations of assimilationism in years gone by almost defies belief".

Nevertheless, substantial parts of his paper reinforce the most contentious feature of the "new assimilationism".  This is the insistence that an understanding of the social pathologies that afflict many Aboriginal settlements must also consider the part played by traditional values, attitudes and practices that may still persist, though in variously modified ways.

These potentially harmful elements of the pre-European culture are not just confined to the most obvious, such as the very high levels of inter-personal violence, including violence against women.  They may also include some of the more admired aspects of Aboriginal cultures -- such as the enormous emphasis that is placed on kinship, which can undermine any commitment to "the common good", and beliefs about the supernatural, which induce individuals to seek external explanations for misfortune, thus avoiding responsibility for their own actions.

Many of these cultural elements may have been adaptive under the conditions of a hunter-gatherer economy.  But in their current forms, and under contemporary economic and social conditions, they can greatly impede the very objectives which most Aborigines seem to desire -- physical security, good health, prosperity, the ability to take control over their own lives, a viable future for their children.  Without these, all talk of "self-determination" is a mockery, a recipe for perpetuating the thuggery and corruption that is prevalent in contemporary Aboriginal politics.

However, "new assimilationism" also acknowledges a fundamental truth.  Governments and other sympathetic bodies can provide resources and assistance when requested;  they can reconsider their promotion of a romanticised traditional culture;  and they can be more candid about likely incompatibilities between ancient practices and contemporary aspirations.  But the impetus for effective change can only come from Aborigines themselves.

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The IT shortage and the Universities

The nation is facing a growing shortage of IT specialists.  While there are numerous causes and solutions, the key lies with the universities.

Over the last decade, the demand for IT professionals has grown at a phenomenal rate -- in excess of 10 per cent per year.  While universities and TAFE colleges have expanded enrolments, they have failed to keep up with demand.  Moreover, Australian IT professionals are being lured offshore in growing numbers by big pay cheques and a low Aussie dollar and there have been restrictions on immigration of IT professionals As a result, there is currently a shortage of people with IT skills.

This has proven to be a boon for the IT profession.  IT graduates command the four highest starting salaries amongst university graduates.  Unemployment is virtually non-existent in the industry.  And average wage rates for experienced IT professionals exceed those of seasoned lawyers.

The expectation s are for demand to continue to out-strip supply with a shortage forecast of between 27,000 to 40,000 IT professionals over the next five years.

Given the big role IT plays in the boosting productivity throughout the economy -- with about one-third of productivity growth in recent years being generated from the use of IT -- a skills shortage of the forecast magnitude will have a deleterious impact on the nation's growth prospects.

One solution is to allow higher immigration of people with IT skills.  The simplest way to do this is to make it easier for the thousands of foreign students studying IT in Australian universities to stay.  The Howard Government has recently moved in this direction by increasing the number of immigration places for IT professionals and allowing overseas IT students to apply for immigrant status.

Another solution lies with increasing places in private training courses -- whether at universities, private college or within firms.  The return on IT training is -- at 30 per cent -- high enough to encourage people to pay and the scarcity of staff should induce employers to contribute.  Though as long as governments continue to pick-up the tab on higher education generally, few people or firms are going to want to do so.

The main solution lies in getting greater through-put out of the universities -- which supply 47 per cent of IT professionals.  To do this at least three changes need to be made.  First, the universities must be allowed to pay competitive wage rates.  Currently, they are forced by DEETYA to apply a uniform band of wages across all disciplines.  These wages might be fine for a sociologist or biologist but they fall far short of the alternatives available to good IT people.

Second, universities must be allowed to be more responsive to student demand.  Universities are currently funded by the Commonwealth according to fixed numbers of places calculated using a fixed and arbitrarily set of relative costs factors.  Since there is excess demand for all courses, the universities are under no pressure to reallocate resources to higher valued areas.  Since the cost factor allotted to IT understates the true cost to the university, there is a strong fiscal incentive not to shift resources to IT courses.

Third, more funds should be allocated to the universities.  However, this is unlikely to solve the IT shortage, unless the funding structure and incentives are changed first.

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