INSTITUTE OF PUBLIC AFFAIRS Review - IPA

INSTITUTE OF PUBLIC AFFAIRS

ReviewAutumn 1984 — Vol. 38 No. 1

ISSN 0019-0268

The Review is produced by the IPA in Victoria on behalf of the Institutes in all threeStates. The Institutes are non-profit educational organisations financed by businessenterprises and people throughout Australia. Each Institute is controlled by anindependent Council (see inside back cover).

VICTORIA

President Sir James BalderstoneDirector Rod Kemp

Address IPA,83 William Street,Melbourne, 3000.

Telephone: (03) 61 2029

NEW SOUTH WALES

Sir Eric McClintockAlec Simpson

IPA (N.S.W.),56 Young Street,Sydney, 2000.(02) 231 4755

QUEENSLAND

Sir James FootsLex Francis

IPA (Qld.),Box 2458,Brisbane, 4001.(07) 229 4465

Editor of the Review: Rod Kemp

The Institutes of Public Affairs seek to promote awareness and debate in matters ofcommunity interest. A basic aim of the Institutes is to advance the cause of freebusiness enterprise in Australia. In pursuit of this aim they endeavour:• To inform the Australian public of the facts of our economic system and to raise

the level of economic literacy in Australia.• To study the means by which private business enterprise can be made to operate

better in the interests of all sections of the Australian people.

New "National" Review

To Our Readers

This Autumn edition marks a further stepforward for the IPA `Review'. For the first timethe `Review' is being distributed by all three IPAs.

Some readers of `Review' may not be aware thatin addition to the IPA in Melbourne, there are alsoIPAs in Sydney and Brisbane.

These Institutes were established independentlyas separate entities each with its own Council,subscribers and work programmes. Theindependence of each will continue but a numberof steps have been taken to ensure a closerassociation between the three Institutes,

This `Review' represents one of these steps.The new arrangements offer important

advantages. The range of expertise available to'Review' will be broadened, `Review's' circulationwill be expanded and, because our ideas will reachmore people, we hope that the support available tothe Institute will be strengthened.

The IPA `Review' concentrates on issues whichare of special importance in the area of publicpolicy — tax reform, government spending,economic regulation, constitutional reform, themedia and so on.

In this issue, for example, we have a specialfocus on the media with contributions from PeterSamuel and Michelle Grattan.

The IPA (NSW) outlines its proposals on taxreform. Bob Ansett attacks government regulationand Professor David Kemp analyses the problemsthat inevitably beset government attempts at longterm economic planning.

We believe the `Review' is essential reading forthose interested in looking at ways in whichAustralia's economic performance can be improvedand in building up a strong voice in defence of freeenterprise and the values which underpin our socialstability and our economic and political freedoms.

Rod Kemp,Editor

SUBSCRIBER ADVICE Page 20

Contents

2 By-lines3 Editorial: Restructuring the

Australian Economy5 Privatization: Agenda for the

Next Decade6 Economic Crimes7 The Welfare Bill8 Economic Regulation_9 Consensus on Unemployment

11 Busting MonopolisticPractises; the Budget Story

16 Public Authorities as TaxingMechanisms

21 Privatization: the U.K.Experience

28 Full Employment: AnAchievable Objective

31 Why Governments Do NotPlan Effectively

36 Tax Reform39 Government and Small

Business43 Ideas and Insights

Media Section45 Threats to a Politically

Independent Media51 Left-Pack Journalism54 Mr. Hawke and Media

Management

Contributed articles bynoted authorities inAustralia and overseasdealing with matters ofpublic interest are publishedin IPA Review. ThisInstitute is not necessarilyin full agreement with theviews expressed in thesearticles. They are publishedin order to stimulate freediscussion and inquiry.

IPA Review-Autumn 1984

By-LinesJacob Abrahami: A Melbourne-based economic consultant. He has lectured at

Melbourne University. His main academic interests are in the area of incomedistribution and public finance

Bob Ansett: Chief. Executive of Budget Rent-A-Car and well-known spokesman forfree enterprise issues.

Ken Baker: Tutor In the Department of Sociology at La Trobe University, he haswritten extensively on media issues.

Professor Peter Dixon: Professor of Economics and Director of the Institute ofApplied Economic and Social Research at the University of Melbourne. He has beenclosely associated with the development of the ORANI model of the Australianeconomy.

Michelle Grattan: The Chief Political correspondent of the Melbourne-basednewspaper "The Age". She has also authored a number of books dealing with politicaltopics.

John Harrowell: A past National President of the Institute of Chartered Accountants,and for nearly five years a member of the Taxation Board of Review until his retirementin 1982.

Professor David Kemp: Professor of Politics at Monash University. Former Directorof the Private Office of the Prime Minister, 1981.

Professor Geoffrey Meredith: Professor of Accounting and Financial Management atthe University of New England in NSW.

Peter Samuel: Special Washington Correspondent, News Limited. He was formerlythe economics editor of the Canberra Times and a correspondent and columnist for theBulletin for 15 years.

Dr. Stanley Siebert: Lecturer in the Department of Industrial Economics and BusinessStudies at the University of Birmingham, UK. He has written a book "The Market forLabour: An Analytical Treatment" and has acted as a consultant for the RoyalCommission on the Distribution of Income and Wealth and the Manpower ServiceCommission.

2 IPA Review- Autumn 1984

Editorial

Restructuring the Economy... Starting with the Government Sector.

Mr Hawke's call for restructuring of the Australian economy =- the diversion ofresources to more productive areas of industry — makes not only economic sense but is.fundamental to realising the aspirations of the Australian people.

Improved living standards, job employment in the last decade hassecurity, expansion of opportunities, been in public sector and in (mostlyindeed, the funding of Australia's social Government financed) communitysecurity system, can only come from services. OECD data indicated thateconomic growth. public sector employment in

The debate about restructuring theeconomy tends to focus on protectedindustries in the manufacturing sector.Unquestionably, however, the mostinefficient, protected part of our economyis the non-market public sector, a sectorlarger in terms of its employment thanmanufacturing.

Any programme to divert Australia'sresources into more productive avenuesrequires a hard look at the total economy— private sector and public sector.A key problem

The problems in ensuring thatAustralian resources are managedefficiently and that industry iscompetitive, often lie closer to theCabinet room than the board rooms ofindustry.

In the last decade, there has been anunprecedented diversion of resources tothe government sector.

• In 1970, the Government share ofGDP (Commonwealth, State andLocal) totalled some 31 percent. Thisyear the Government share could riseto 44 percent.

• Virtually the only boom area of

IPA Review- Autumn 1984

Australia is one of the highest in theindustrialised countries.

• The number of government acts andregulations imposing additional cost,frustrations, obligations on theprivate sector have multipliedthroughout the decade.

The diversion of resources to the publicsector has been carried out through hugeincreases in taxes and charges, large-scaleborrowing programmes and deficitfinancing.

All these factors have a deleteriouseffect on the competitiveness ofAustralian industry and on the incentivesof businessmen to invest in the future.They have also diverted massive quantitesof Australian resources into investmentswhich often have been made with little orno reference to market considerations.

Squeezed between the demands ofemployees fighting to retain their after taxincomes and governments, ever hungryfor revenue, Australian industry has beenburdened by a high cost structure andpoor profitability.

Indeed, pressure from privateindustries for protection is in part a result

of the impact of public sector demands onbusiness costs.

Unless the diversion of resources to thegovernment sector is brought to a halt,and preferably wound back, then thetaxation burden on the private sectormust inevitably increase.The starting point

What is the prospect of the HawkeGovernment containing the growth of thepublic sector?

It has to be admitted that the record todate is not particularly encouraging.Commonwealth expenditure increased by8.2 percent in 1983/4, the highest growthfor 9 years And it appears that the HawkeGovernment in its first year has increasedthe number of Commonwealth publicservants by more than the previousgovernment did in its entire 7 years ofoffice.

Mr Hawke will be dealing veryincompletely with the problem ofstructural adjustment unless he isprepared to look at the size, the privilegesand the inefficiency of the public sector.

Comprehensive structural adjustmentpolicies should include the following:

• Government spending should beslowed to at least an average realgrowth rate of no more than 2

percent per annum. This is theaverage rate of growth of 'spendingunder the previous government, afigure thought by many to beexcessive. In fact, it could be arguedthat there is no real reason why, withthe economy starting to expandagain, there should be any realgrowth in government spending. It isdesirable that the rate of growth ingovernment spending be significantlyless than that of the economy as awhole so that the private marketsector can begin to expand after adecade of retreat.

A ceiling should be placed on furtherpublic sector employment, and astart made with the introduction ofemployment flexibility. There mustbe an immediate halt to proposalsthat could increase rigidities, such asproposals to extend public-service-type tenure in education.

A major increase in the extent towhich market criteria apply togovernment commercial activities.This would desirably include aprogramme of privatization ofgovernment commercial activities,and greater marketization* ofeducation and social ' serviceactivities.

'for example, use of voucher schemes to provide parents on lower incomes greater choice in relation to theirchildren's education. Similar schemes could be readily applicable to social services such as child care.Further Reading: Dr. Ken Minogue, The Seven Deadly Rigidities, IPA Review, Spring, 1983.

4 IPA Review -,Autumn 1984

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IPA COMMENTARY

Privatization...Agenda for the next decade

Electricity suppliers slashing prices asthey compete for customers.

Public transport usage rising as privateoperators attract commuters with fast,convenient and cheap services.

Qantas and TAA shares rising on thestock exchange as they report healthyprofits.

Telecom and Australia Post vigorouslycompeting with private operators forcustomers.

Fantasy land?

Yes, at present.

But five or ten years out — well, thepossibilities are there.

Certainly an interesting array ofeconomic, political and intellectual forcesis setting up the circumstances forwholesale restructuring of the publicsector.

Second, there is a growing realisation inthe community that public authorities areoften better at serving the interests oftheir employees and management than oftheir customers.

Third, public authorities have acquireda well-deserved reputation for being high-cost suppliers. Public-service-type rulesand regulations, plus their ready access tothe politicians and the treasury means thatthe search for economies does not receivesufficient priority.

Fourth, the problems of ensuringproper accountability of publicauthorities have become a continuingpolitical issue since the `Rae Report' in1978 drew attention to the lack ofeffective controls. An increasinglyinfluential school of economic ' thoughtargues that market forces are more likelyto serve public interests than politicalcontrols.'

Fifth, public support for authorities isundoubtedly being eroded because oftheir politicisation. It is increasinglyperceived that pricing structures canfavour powerful special interest groups.2In Victoria, this politicisation has taken asignificant step forward with some publicauthorities being used, in effect, as tax

States, must gather pace. It is a handy Finally, there is - the demonstrationway to keep down taxes or to find more effect of the Thatcher Government'sfunds to spend. privatization programme and the de-'R. Clarke and M. Porter 'State Enterprise Accountability: a Contradiction in Terms" Centre of PolicyStudies, Monash University.

'P. Hartley Cheap Resources info Expensive Energy, IPA Review. Summer 1984.

IPA Review-Autumn 1984

And a key aspect of this restructuringshould be the sale of major publicauthorities to the private sector, or`privatization'.

What are these forces?

First, governments all around Australiaare starved for funds. Selling off public

h - h' 1assets, w tc Is auread y occurrtng m some gatherers.

regulation in the U.S. of some majorutility suppliers. Australia must catch onsoon. (See Dr. Siebert's article on page 21)

Which Party will take up the challenge?The Liberal Party would seem most

likely to carry forward a programme ofprivatization. At the State and Federallevel some modest proposals have beenfloated.

The traditional support by the LaborParty for. the public sector may seem topreclude any privatization programme.Yet, Premier John Cain, has already soldalmost $500 million of Victorian publicassets since he came into office.

Economic Crimes...business bashing in Australia

Are investments and profits to beencouraged or restricted?

Is enterprise to be supported, orhamstrung by regulations?

Is business a worthy career for the `bestand brightest'?

These sorts of attitudes have asignificant effect on the environmentwithin which business operates and on itsability to perform its role as the engine ofeconomic growth, employment and livingstandards.

Stephen Lusher, a National PartyMember of Parliament, has shown howfar Australians will go to penaliseenterprise.

He produced a list of businessmen whohave been subjected to the extremepenalty of imprisonment to enforce laws

It is not not such a big step to go from,say, selling the railway rolling stock andleasing it back to the Government (whichhas in fact happened in Victoria) toinviting the private sector to run serviceson particular lines.

And Premier Burke, in WesternAustralia, is speaking about selling offhalf the State Insurance Office.

Like de-regulation of money markets,there is a certain logic to economic events,regardless of the political party in office.

Privatization is an idea whose time isabout to come.

•In the early 1970s a Grafton dairyfarmer went to gaol because he did notwant to pool his milk with a'productwhich he considered inferior. He wasnot allowed to install his ownpasteurization plant and was gaoledfor making illegal sales of milk.

'In 1977, a farmer from Yass, spent 16days in gaol for selling eggs other thanto the Egg Board.

• In February 1981, a Perth man wasgaoled because he carried scrap ironon his truck in competition with theState Railway without its approval.

'In March 1981, a market gardener inAdelaide was sent to gaol for sellingcucumbers without a license.

'In April 1982, a 38 year-old mother offive was gaoled for refusing to pay acompulsory hen levy.

Attitudes to private enterprise help which have the effect of restricting

determine a country's economic enterprise.performance.


'In December 1982, a Brisbaneshopkeeper was gaoled for sellingtinned food after-hours in hissuburban corner store.

'In January 1983, a Melbournebusinessman was given 5 days gaol forselling billiard tables on a Sunday.

No one would argue that the law shouldnot be enforced.

But these examples do highlight acurious set of values. The full force of the

law is used to penalise the entrepreneur.

The fact that this sort of `businessmanbashing' can occur without a communityoutcry (in contrast to that which occurswith, say, the gaoling of a union official)shows how distorted our values havebecome.

The restructuring of the economy -being promoted by the Prime Minister -will have to deal with basic communityattitudes.

The Welfare Bill...Ageing is not the only problem.

Much of the recent debate on thegrowth of welfare has focused on a needto contain spending on pensions for theaged.

The introduction of an income test onpensions for the over-seventies and theproposal for an- assets test are aimedparticularly at containing the growth ofexpenditure on aged pensions.

Over the last decade much of theimpetus for increased Governmentspending has come from other pensionareas. As the table shows the total numberof people in receipt of pensions andbenefits increased by 1,432,000 in thedecade to 1983.

SOCIAL SECURITY RECIPIENTS(Numbers'000)

increase1973 1983 1973-1983

Age Pensions 950 1417 467Invalid Pensions 171 277 106Widows Pensions 106 165 59Supporting Parents — 140 140Unemployment Benefits 38 635 597Sickness Benefits 18 64 46Special Benefits 4 21 17Total 1287 2719 1432


The major growth area was in theunemployed — providing 42% of theincreased numbers over the decade. Theaged account for about 33% of theincrease. The rise in invalid andsupporting parents pensions accountedfor much of the remaining 25%.

These figures do not include thedependants of those receiving socialsecurity benefits. When allowances aremade for this factor, over two-thirds ofthe increased expenditure on. socialsecurity pensions and benefits over thelast decade has been caused by theincreasing dependency on social securityamong people of workforce age.

Clearly unemployment has been animportant factor in the growth of thesocial security budget.

But the increase in spending alsoreflects decisions by successiveCommonwealth Governments to increasethe range of pensions and benefits -(e.g.supporting parents benefit) and make iteasier for people to obtain access to socialsecurity.

Indeed, it appears that social securitysupport in Australia can be more easilyobtained than in many other countries.

For example, Dr. Sydney Sax, theformer head of the Commonwealth SocialWelfare Policy Secretariat, has arguedthat "The Australian system of minimumincome support is one of the mostcomprehensive in the developed world.Australia has come closer than any otherWestern nation to having a guaranteedminimum income. All but those who areable to choose not to work are assured ofsome income".

The need to bring Australia's

unemployed rate down to moreacceptable levels is clearly fundamental toa strategy of containing the welfarebudget.

Other eligibility criteria (apart from theincome test) governing access to socialsecurity may also need to be examined(work test, medical test for invalidity,sickness benefits, rules governing thesupporting parents benefit and so on).

A genuine attempt to containAustralia's burgeoning welfare budget(which is apparently desired by all mainpolitical parties) cannot be solelyconcentrated on the aged.

Economic Regulation...theory and practice

Economists offer two broadexplanations for the mass of governmentregulation which seems to weigh downour economy.

The 'public interest' explanationsuggests that much governmentalregulation seeks to promote economicefficiency which, among other things,helps protect the public from the unfairexercise of economic power.

The 'private interest' theory, on theother hand, argues that special interestgroups seek advantages for themselvesthrough regulation. Governments,seeking to win or maintain the support ofthese groups introduce regulation. Thebenefits of regulation are concentrated onthe special interest groups while the costsare widely dispersed, and scarcelyperceived, among the public.

The 'private interest' explanation isgaining support. Economists are finding

that in the majority of cases regulationseems to reduce rather than enhanceeconomic efficiency.

Certainly the continuing issue ofshopping-hours' regulation highlightshow Government interference in themarket can work against both economicefficiency and the public interest.

Interestingly, it also shows howregulation can ultimately damage theindustry it seeks to protect.

Australian shopping hours regulationthrows up a host of anomalies forproducers, shopkeepers and customers. Arecent example which has come to ourattention shows how the red meat sectionseems particularly disadvantaged.

Basically, red meat does not have thesame legal hours of sale as many otherproducts, such as fresh or frozen chicken,fish and a multitude of processed foods.

$ IPA Review-Autumn 1984

Supermarkets which sell over 50percent of red meat in Australia arerestricted in the hours that this productcan be sold in most States.

In Victoria the restrictions are mostsevere. It has been estimated that aworking housewife in a full-time day jobhas only about 7 percent of the time meatdepartments are open in supermarkets inwhich to make purchases.

In Queensland there is an antiquatedlaw that calls for a separate partitioned-off area within supermarkets in whichmeat must be sold.

The history of these restrictions onmeat sales appears to relate to the viewsheld in sections of the meat industry andthe trade union movement that the bestway to maintain meat sales is to preservethe specialist butcher. Instead, the effect

of restrictions has been to encourageconsumers to purchase alternative foods.

Per capita consumption of meat inAustralia has fallen dramatically, whileconsumption of fresh poultry, forexample, has almost doubled in the lastten years.

It would seem that the best way for redmeat to recover its market share would befor the product to be available in thewidest possible number of locations.

The `private interest' theory ofregulation helps explain the history ofshopping hours regulation.

What is more difficult to fathom is whyprimary producers have been prepared toaccept restrictions which are clearly totheir detriment and, indeed, to overallemployment prospects in the meatindustry.

Consensus on High Unemployment...because of industrial and political `realities'

Unemployment of around 10 percentreally amounts to a grave breakdown ofour economic system. One of the primeduties of governments — as Westernsocieties recognised around the end ofWorld War I1 — is to endeavour to rectifythat breakdown.

For over a quarter of a century after theWar Australia enjoyed the inestimablebenefits of full employment. Although wedid not think so at the time, it nowappears, in retrospect, like a "goldenage". In the last 10 or so years we havebeen plagued with high unemployment -sometimes over 10 percent and no end toit is yet in sight.

What has changed? What has gonewrong?

IPA Review - Autumn 1984

One thing that now seems to be lackingis the determination, the will, to find asolution. As in the years after the war webecome accustomed to taking fullemployment for granted, we seem now tohave formed a "consensus" on theinevitability of high levels ofunemployment. We are told repeatedlythat the days of full employment are gonefor good and that there is no hope orprospect of their ever returning.

Those fortunate enough to be in workhardly give a passing thought to theirunfortunate brethren trampling the streetsin search of a job. Any twinge ofconscience the employed may feel nowand again for those without jobs is allayedby the thought that they are providing forthem through their taxes.

These attitudes would have beeninconceivable to most of those who livedthrough the years around the end of andafter the War. The War gave rise to auniversal determination that the worldpost-war would be a better place in whichto live, that the chronic unemployment ofthe "in-between" years would not berepeated, and that everyone would havethe opportunity to work and would enjoysome measure of economic security.

The striking change in communityattitudes towards unemployment isgraphically illustrated by the followingquotation from an editorial in the IPAReview, January/March, 1973:

"Unemployment has assumed theproportions of a grave and critical issue inthe minds of the community because ofthe activities of the media --- particularlytelevision and the main daily newspapers.Scare, front-page headlines in the dailypress of the monthly unemploymentfigures appear with predictable regularityand the same evening are invariablyfollowed by doleful discussions on T. V.and radio current affairs programmes. Ayear or so ago when unemploymentsoared to around 2 percent, one stationbacked its commentary with pictures ofthe soup queues of the Great Depressionwhen unemployment was near 30percent."

Enough said!

The plain fact is that there is nopolitical leader — Liberal or Labor —

who is prepared unequivocally to commithis party to achieving levels ofunemployment which were taken forgranted just over a decade ago. This is afailure of will which Australians will nottolerate indefinitely.

Many of the policies which worktowards this goal, such as relating wagesto the capacity of industry to pay, cannotbe adopted, we are told, because of''political realities" or "industrialrealities'.

As Professor Peter Dixon points out onpage 28 high levels of unemployment arenot inevitable; full employment is anachievable objective. The IPA will bepublishing contributions in future fromother experts on policies which worktowards a full-employment economy.

Chifley and Menzies and their followersregarded full employment as thefoundation of a stable, caring andprogressive society.

The fact that in 1984 we arecontemplating continuing high levels ofunemployment is surely an indictment ofthe prevailing climate of opinion,particularly of the failure of our leaders toface up to and come to grips with theexistence of a major human tragedy in ourmidst.

The 'light on the hill' for the 1980s, forall political parties, should be fullemployment.

10 IPA Review - Autumn 1984

Case Study:

Busting Monopolistic Practices:The `Budget' Storyby Bob A nsett

Government regulation often supports monopolistic practices. But consumers,businesses and Government can all reap benefits from a more competitive market, asthis case study of the car rental market shows.

Looking back at the lessons learnt overthe past 5 years it is clear that competitionbrought about some very positive benefitsinto the car rental industry.

First, the cost of renting a car, allowingfor inflation, dropped below what it wasin 1970.

Second, the consumer was thebeneficiary of a vastly improved service.

Third, new innovations, includingcomputerised Central ReservationsSystems and a much wider variety ofrental cars, were introduced.

Fourth, the Government ended uptripling its income from Car Rentalairport operating rights.

And, contrary to the Avis argumentthat competition would mean acontraction of services, there are in facttoday many more Australian citiesserviced by the Car Rental Industry thanwas the case when Avis had a monopoly.Budget alone operates from over 220Australian cities.

The industry in the past 5 years hasdoubled its size and, more importantly,the percentage of the public renting a carhas grown from a meagre 3% in 1965 to inexcess of 20o today.

HistoryThe Australian Car Rental Industry

had its real origins in 1953, the year EricMclllree, founder and Managing Directorof Avis, returned from a hurried trip tothe United States where he saw greatprogress being made in that market placeby Avis and Hertz. He was particularlyfascinated by their concept of Fly andDrive.

Immediately upon his return toAustralia he registered the names Avis,Hertz, National and Budget.

The concept of flying andthen driving did not gainimmediate publicacceptance.

Mclllree then began negotiations withboth Avis and Hertz in an effort toestablish an affiliation which wouldprovide for an exchange of reservationsand credit card acceptance. Ultimately anagreement was struck up with Avis andAvis Australia was born. At the same timehe notified Hertz that he would sell themback their name ten years hence for thesum of $I.00AUS thus giving Avis a tenyear head start over its arch rival.

IPA Review - Autumn 1984 11

Following the American experience hethen canvassed airline operators andeasily persuaded them to co-operate withthe establishment of Car Rental facilitiesat capital city airports.

With the support of the airlines he thenpersuaded the Department of CivilAviation that there was a need to providecar rental facilities at capital city airportsand ultimately entered into a concessionarrangement with them.

The concept of flying and then drivingdid not gain immediate public acceptance.However he persevered and graduallydemand increased.

Several years later, Mr. Alex Katranski,moved from New Zealand to Australiaand established Kay Rent A Car. Shortlythereafter he persuaded the Departmentof Civil Aviation of the need for a secondoperator at capital city airports andultimately gained the appropriateauthority which was subject to hiscompany servicing the same number ofairports as Avis.

Kay found it economically unattractiveto operate in some of the smaller capitalcity airports, and elected to concentrateprimarily on Melbourne and Sydney, afact which was hammered home loud andclear by McIllree.

As a consequence of Mclllree'scomplaints the Department of CivilAviation then called for a 3 year solusAirport Car Rental Tender that requiredthe successful operator to provide servicesat an increased number of AustralianAirports. Avis won the tender andcontinued to build their airport business.In 1964 a 5 year solus agreement was putto the Car Rental Industry for tenderwhich was once again won by Avisensuring a monopoly until 1969.

Budget lobbiedparliamentarians,government departments andused T.V. to draw publicattention to the iniquitousmonopoly.

The year preceding the expiration ofthis contract saw Eric Mclllree devoting agreat deal of his time toward convincingthe Government and the Department ofCivil Aviation of the need to have a 10year solus contract, which he argued wasnecessary for the operator to enlarge itsnetwork of offices covering every CivilAviation Airport in Australia.

He argued there was insufficientbusiness at airports for 2 operators as thehigh volume outlets really subsidisedsmaller airports particularly in countryand remote areas.

Both Kay and Hertz who had recentlyentered the Australian Market after doingits 10 year penance, called for more thanone operator but they were unsuccessful.Again because of Avis' size and marketstrength, they once again won the tenderbased on a very complicated formula ofpayment. Overall the percentage workedout to be just under 4% which was low onInternational Car Rental standards.

Budget's developmentAfter Hertz entered the Australian

market in 1963 Eric Mclllree saw a threatto the dominance of Avis through KayRent A Car's increased downtown activityand now, with the International Hertzorganisation joining the fray, he feared aloss of downtown business. Still owningthe names Budget and National Rent ACar he decided to further frustrate the


development of his competitors bycreating a downtown discount companyunder the name of Budget.

I was employed to develop thecompany. Our objective was to divertdowntown business from Hertz and Kayby offering a "walk-in, , drive out"discount car rental service, thus allowingAvis to concentrate at the top end of themarket at airports and in the TravelIndustry with Hotels and Motels.

Budget grew rapidly and ultimatelybecame.. Avis' major competitor. WhenEric Mclllree died in 1973 I purchasedBudget from his estate.

The sale was completed in the latterpart of 1974 and my first objective was tolink Budget Australia with theInternational Budget Organisation. Atthis particular stage Budget hadapproximately 10% of the Australian CarRental market which at the time had aturnover of about $25 million employingapproximately 6000 vehicles.

Market shares were roughly:Avis 55%Kay 20%Budget 10%Hertz 8%Others 7%

After establishing a trading relationshipwith Budget International we immediatelycommenced our own lobbying campaignaimed at opening airports to competition.With 60% of the total Car Rental businessbeing conducted at airports Avis had aunique advantage over the rest of theIndustry.

Budget not only Iobbyed Parliamen-tarians and various Government

Supported by heavyadvertising campaigns, theindustry showed remarkablegrowth.

Departments but used television to drawpublic attention to the iniquitousmonopoly enjoyed by Avis. Theadvertising campaign was predicated onthe "Freedom of Choice" theme.

About the same time the TradePractices Commission came into effectand we put forward a submission statingthat the Avis' monopoly was in restraintof trade. However, at the timeGovernment authorities were exemptfrom the provisions of the Act, so ourargument was unsuccessful.

During the next few years Budgethowever expanded its network of officesgrowing rapidly from 20 to over 80 in 3years. The Company's market shareincreased accordingly by a further 5%.

Ansett purchase Avis

In 1977 Ansett Transport Industriespurchased market leader Avis from theestate of Eric Mclllree. Six months laterTAA followed and acquired Hertz.

The Ansett purchase of Avis waschallenged by the Trade PracticesCommission and, after a lengthy andcostly hearing, Justice Northrop deter-mined that Ansett's ownership of Aviswould not enable them to `control ordominate' the Australian Car Rentalmarket.

During this period the Industry was thebeneficiary of enormous visibility as itwas the first to challenge Section 50 of theTrade Practices Act and of course it

IPA Review- Autumn 1984 13

involved a dispute among members of theAnsett family. Supported by heavyadvertising campaigns the Industryshowed remarkable growth during thisperiod.

We introduced the "flatrate" which was ultimately torevolutionise the car rentalindustry.

In the meantime Budget beganpreparing for the new Airport Contractthat would commence in 1979. We wantedto ensure that all arguments were put tothe Department of Transport, as it wasthen known, so that when the newcontract was formulated it would takeinto account factors that were notpreviously considered. We argued thatcompetition would increase the marketand that there was no longer any validityto the Avis claim that if volume be sharedat major airports, remote and countryareas would lose services. At the time Avispublicly stated that should they lose theirexclusive position at airports after 1979they would withdraw from country andremote areas. I then gave a publicundertaking that Budget would replacethem instantly should they follow thiscourse of action.

I also argued that it was vital to haverepresentation in all country and remoteareas because the Car Rental Industry isby its very nature global and to securevolume commercial business fromAustralia's largest companies, it wasnecessary to offer a service at allAustralian Airports. Admittedly many ofthe areas serviced would be unprofitablebut collectively they contributed toward a

network that would be, in Totality,profitable.

In October 1978, seven months beforethe expiration of the 10 year exclusivecontract enjoyed by Avis, the Departmentof Transport announced terms andconditions for a new 5 year Airport CarRental Agreement.

Basically it recognised there should bemore than one operator but stipulated amaximum of two. One operator wouldhave an entire national network and thesecond, to be tendered on an airport byairport basis which, by its very naturewould create fragmentation, wouldprobably make the second operatorimpotent.

Lobbying campaignI mounted another extensive lobbying

campaign both publicly and behind thescenes with the then Liberal Government.Ultimately I gained an audience with thePrime Minister's Department whichenabled me to explain our position whichbasically declared that if there were only 2operators, it would more than likely beAvis and Hertz who were owned by thetwo domestic airlines, and the onlydifference to the consumer would be thecolour of their uniforms.

The issue finally became a Cabinetmatter and ultimately the Department ofTransport was instructed to reconsider itsAirport Car Rental Tender. .In earlyJanuary 1979 it came back with a revisedagreement calling for 2 national operatorsand a third position to be tendered on anairport by airport basis.

By this time the Car Rental Industryhad grown to an annual turnover of$75,000,000 operating approximately12,000 cars.


In July a new airportcontract will come into effectand it is likely there will befour national operatorsrepresented at theseairports.

Budget spent the next six monthsformulating a tender responseconcentrating on individual airports — atotal of 58. We also put in a secondary bidfor the national position but we were notat all confident of winning, believing thecombined financial strength of Ansett andTAA would ensure that their subsidiarycar rental companies would win thenational position.

However, as it turned out Hertz bid anexaggerated $8 million for the 5 yearcontract and was by far the highestbidder. We bid $3.1 million and won thesecond national spot. Avis bid $3.05million and were unsuccessful. Howeverso confident were they with their nationalbid, that they devoted little time andenergy toward working out an airport byairport bid and they ended up with onlyII airports. The remainder was shared byThrifty and Letz.

Budget then had six weeks to establish apresence on 58 airports. Avis used thetime to try to purchase from Thrifty,airport operating rights at Coolangatta,Perth, Hobart and Adelaide. They failed.On 1st July, 1979 Australian Airports

were opened up to meaningful car rentalcompetition for the first time.

At that stage Avis still had about 50%of the Car Rental Market, Budget 20%.Kay and Hertz, who had merged theprevious year, also had 20%.

Having fought so hard to win the rightto compete in the major market place ofthe Industry, we realised that it wouldtake a major incentive for customers toswing from Avis to Budget. So on the 1stof July we introduced "Flat Rate" whichwas ultimately to revolutionise theAustralian Car Rental Industry.

Within a period of seven monthsBudget picked up.. $22 million of Avisbusiness and became market leader inFebruary 1980 with approximately 32%of the market.

Hertz not only paid too much foroperating rights but were alsounsuccessful in generating any marketgrowth and their market share continuedto contract.

On the 1st July 1984 a new airportcontract will come into effect and it iswidely assumed there will now be fournational operators represented at theseAirports. This will provide furthercompetition and will more than likely bethe catalyst for a third major growth stagefor the Australian car rental industry. -

De-regulation has proved to be a verypositive thing for all parties for it allowsmarket forces to work unfettered byGovernment interference.


Public Authorities as TaxingMechanismsby Jacob Abrahami

State Governments are constantly searching for additional revenue sources. TheVictorian Government's new financial policies for its public authorities is garnering hugeamounts of revenue for the State Government. Jacob Abrahami outlines the policy andsome of Its likely consequences.

Tax innovations in one State (such asthe Financial Institutions Duty) can bequickly copied by other governments.There is no doubt treasuries in other statesare looking closely at the Victorianexperiment.

In the years 1982/83 and 1983/84Victorian Budget papers show State Taxrevenues will have sky-rocketed by over38 percent — well above the average rateof increase of the other five States(around 22 percent).

Almost one-third of this massiveincrease came from payments made bypublic authorities to the State'sconsolidated revenue. In 1983/84 thesepayments are expected to total $372million compared with $115 million justtwo years ago. (See Table 1).

Victorian State Governmenttax revenues have sky-rocketed by over 38 percentin two years.

In 1981/82 State instrumentalities inVictoria contributed 5.6 percent of Statetax revenue, but, following a 224 percentincrease in the amount of theircontribution in only two years, their shareof total State taxes will rise to 12.9 percentin 1983/84.

Table 2 summarises the revenue StateGovernments raise from imposts similarto those imposed by the VictorianGovernment on their public authorities.In the other States the authoritiescontribute between 1 percent (inQueensland) and 4.9 percent (in SouthAustralia) of State taxes.

(The figures exclude for example railfreight charges on minerals which areessentially a fee for service. These chargesare borne largely by overseas buyers ofAustralian minerals, and the revenuesobtained contribute handsomely to Statebudgets in Queensland).

The higher payments by publicauthorities to consolidated revenue inVictoria follows the introduction of tworequirements in 1982/83; the publicauthority dividend and the publicauthority contribution.

The public authority dividend reflectsthe requirement that selected, publicauthorities achieve a given rate of returnon assets employed in the enterprise. Toachieve this return the Government hasimposed an annual dividend of up to 5 percent of the State's equity capital in theenterprise.

Initially the dividend requirementsapplied to the State ElectricityCommission, the Gas . and Fuel


Corporation, the Melbourne andMetropolitan Board of Works and thePort of Melbourne Authority.

In 1983/84 the Grain Elevator Boardand the State Bank were added to the listof authorities required to make dividendpayments.

Total "dividend" payments byauthorities seem likely to continue to risesharply. Only the Gas and FuelCorporation and State Bank at presentpay the full 5 percent rate - the otherauthorities are required to work towardsthis goal. The government also has theoption of bringing other authorities underthe dividend requirement.

In addition, another concept - publicauthorities' contribution - requiresauthorities to make payments toconsolidated revenue for the use of State-owned resources. In line with thisrequirement the Government in1982/3raised the Statutory Contributionrate payable by the Gas and FuelCorporation from 15 percent to 33percent of adjusted turnover.Rationale

The Government claims that it isadopting economic and financialguidelines "necessary to ensure efficiencyand effectiveness in allocation ofresources".

One requirement for the efficientallocation of resources is full cost pricing.This occurs when consumers paysufficient to cover all costs - operatingcosts such as labour and fuel, as well as allcapital costs, that is interest and dividend.When less than full costs are charged anover use of resources leading to excessiveinvestments can occur.

The desired rate of return, according tothe Government's calculation is "at least

Table I

Victorian Statutory AuthoritiesPayments to State Tax Revenue

(SM)1981/82 1982/83 1983/84(e)

SEC 48.2 82.6 103.9Gas & Fuel 39.8 90.8 167.8MMBW - 30.0 55.0Port of Melbourne 1.2 6.1 6.0State Bank 20.9 26.5 35.5Grain Elevators Board - - 4.0State Insurance 4.8 0.2 0.2TOTAL 114.9 236.2 372.4

Sources: Victorian State Budget papers anddiscussions with officers of the variousState Authorities.Figures include payments under thedividend and contribution requirement ortheir equivalent before the introduction ofthe dividend requirement. The State Bankfigure for 1983/84 includes a payment tothe State equivalent to the Commonwealthincome tax rate for companies. Paymentsby the State Insurance office are madeunder legislation separate from thedividend and contribution requirements.

Table 2

Statutory Authority PaymentsShare of State Taxation Revenue

(%)1981/82 1982/83 1983/84(e)

Victoria 5.6 9.3 12.9N.S.W. 2.9 0.9 1.7Queensland . 1.2 1.2 0.8S.A. 5.0 5.5 4.9W A. 4.1 4.4 4.2Tasmania 2.9 3.6 4.4Sources: State Budget papers and discussions with

officers of the various State Treasuries andAuthorities.

Earmarked payments by public authoritiesto government departments and otherauthorities are generally not included.

5 percent". The Government argues thatif the public authorities are providing lessthan this return • then the resourcesabsorbed in providing the service are notbeing utilised at the most efficient level.

There are a number of difficulties withthis argument.

IPA Review - Autumn 1984 1 17

FallaciesFull cost pricing would in fact be only

one element in a comprehensive policy toencourage efficient resource allocation.The Government appears to recognise thisproblem and, among other things, tighterguidelines on the financial managementof public authorities have been adopted.

Public authorities, however, oftenoperate in monopoly or quasi-monopolymarkets and in addition are subject tocostly public-service-type employmentconditions.

A compulsory fixed dividendcan lead to inflated prices andinhibit development.

Guidelines are unlikely to be aseffective as market pressures (competitionfrom other suppliers, transferableproperty rights and so on) in ensuring costminimization through efficient resourceallocation.

For example, there is evidence, thatAustralian State-owned electricitysuppliers are over-manned compared with

The Victorian Government argues"It should be noted that in many cases

the imposition of such a dividendrequirement should not require increasedprices, charges or rates on the part of theauthority".

* * #"A central point [of the dividend

policy] is that there is no reason why itshould affect elecricity prices".

"... (the) real decline (that) has occurredin prices of major authorities since theadoption of real rate of return policies".

Victorian Budget Papers.However

"As a matter of record, it should bereported to share-holders that theadditional revenue likely to be derivedfrom the tariff increases is estimated tofall far short of the increased payments toTreasury, and recourse to short-termborrowing -may be necessary later in theyear".

Neil Smith, Chairman,Gas and Fuel Corporation of Victoria,

October 1982.

"The Victorian Government's policy oflevying taxation on manufacturingindustry through the State ElectricityCommission and Gas & Fuel Corporationcharges threatens the viability of allenergy-intensive activities in the State.

Government imposts on its own energyauthorities as a means of increasingrevenue have, in turn, increased the priceof natural gas supplied to Point Henry bymore than 60% since July 1, 1982".

John L. Diederich, Managing Director,Alcoa of Australia Ltd.

"Of particular concern is the way inwhich some States are charging StatutoryAuthorities a "dividend"... .If a publicauthority must find an additional $30million, it must then increase itscharges....

It is a bit of nifty financing whichaddsup to taxation by stealth".

Eric Risstrom, "Taxpayer",10 March, 1984.

18 IPA Review-Autumn 1984

privately owned Japanese and Germanelectricity companies. (See P. Hartley,Cheap Resources into Expensive Energy.IPA Review, Summer 1984). In such asituation where costs are greater than in acompetitive market environment, addingadditional costs such as a compulsorydividend, which can often be passed ontothe consumer, will not necessarilyimprove efficiency.

Indeed, compared with the free marketmodel a compulsory fixed dividend canlead to inflated prices and inhibitdevelopment.

A compulsory levy or "dividend" on apublic authority is quite different from adividend earned in a competitive market.The dividend in the private sector is aresidual — after payment to all otherinputs. It provides some indication as tohow efficient a business has been in suchareas as cost minimization, product andservice innovation and marketingstrategies compared with its competitors.

Private sector dividends can vary fromyear to year depending on the marketenvironment. The legislation allows forvariation in the rate of dividend up to 5percent. But, given the importance of thedividends in the total revenue, the StateGovernment could not afford to forgo its"dividends" even in time of economicdifficulties.

Another factor which clearlydistinguishes the private company fromthe public authority is the absence of thethreat of a takeover. The management ofa private company which does not providean adequate return is liable to be replacedby those who can more effectively employthe company's assets. The absence of thethreat of a takeover, together with themonopoly power of the' public

authorities, renders the rate of return onequity an irrelevant factor in promotingeconomic efficiency.

The revenues obtained fromthe public authorities are notbeing used to reducedistorting taxes.

The Victorian Government's policyalso has broader implications for resourceallocation. The revenue obtained from thenew policies is not being used to reduceother distorting taxes, such as payrolltaxes. Instead it is being used to expandthe size of the public sector.Pricing

The Victorian Government is runningthe risk that its financial policies on publicauthorities, particularly in relation toenergy suppliers, will add substantially toprice pressures with adverse consequenceson industry and individuals.

Figures in the last budget paperssuggest that in the last two years increasesin electricity and gas charges tohouseholds have not fallen below the rateof inflation. Charges to industrial andcommercial users have risen in real terms,in some cases very substantially.

Some of the immediate price effects ofthe new financial policies can be offset bygreater borrowings. The dividend policyreduces available funds for investment,unless compensated for by price increases.Increased borrowings can moderate theprice effects for a time, but this can onlybe temporary because ultimately the costof servicing the debt and the repayment ofthe loans will have to be reflected in priceincreases.

The Victorian Government's stated aimof improving resource allocation and at


The Government is leavingitself open to the charge thatpublic authorities are beingexploited for their revenue.raising potential to financethe rapid growth ofGovernment spending.

the same time ensuring greateraccountability of public authorities is notin dispute. However, the method ofimplementing this policy leaves theGovernment open to the charge that the

authorities are being exploited for theirrevenue raising potential to finance therapid expansion of government spendingin Victoria.

Other countries are recognising that agreater role for market forces is necessaryto ensure public authorities operate moreefficiently and respond more readily toconsumer needs. A comprehensive policyto improve resource allocation andefficiency' would start by looking closelyat the justification for monopoly powers(where they exist) for public authoritiesand the need for their ownership toremain in the public sector.

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20 IPA Review - Au umn 1984

Privatization: the UK Experienceby Dr. W. S. Siebert*

Of the traditionally capitalist countries,.the United Kingdom has gone furthest downthe road to collectivism. The British welfare state led the way for the rest of Europe,British unions are among the most powerful, and as recently as 1977 the movementtowards state control was strong enough to transfer two more major industries, ship-building and aircraft building, to government ownership. This background makes it themore surprising that it is in Britain that the first sustained attempt to reduce state controlof the economy is being made.

The British privatization experience haslessons for all those who seek to promotecompetition and limit the growth of statecontrol of the economic system.

It is probable. that the main factorsmaking the electorate's attitude towardsde-nationalizing industries morefavourable are the large losses suffered bythese industries, coupled with the fact thatthey have not increased employment.Public ownership, having begun earlier,had come by the late seventies to extendfurther in Britain than anywhere else inEurope.'

The U.K. nationalizedindustries appear to be moreinefficient than elsewhere inEurope.

Perhaps because the policy ofsubsidisation had gone on for longer theUK nationalized industries appear to be

more inefficient than elsewhere inEurope. Thus, the comprehensive studyby Richard Pryke provides evidence oflower labour productivity in Britain thanEurope in electricity, coal, rail,telephones, posts and steel.=

Certainly Pryke's book documentsmany painful cases of public sector mis-management. For example, the Union ofPostal Workers has been allowed toimpose a ban on the delivery of directmail advertising because this would`demean' postmen (p. 151).

For an example of waste, there is the`cathedral-like structure' (p. 187) whichBritish Steel decided to build to house arod mill. This caused the cost of the millto be 40% higher than a similar plant builtby a private firm (GKN). British Steel'slosses in 1982/83 were about £800 million— yet over the period since it wasnationalized its employment has fallen bynearly 40°'o (production workers, not

slam grateful to S. C. Littlechild for comments but retain responsibility for any remaining errors.'Monsen and Walters provide data on 11 industries (posts, telecommunications, electricity, gas, oilproduction, coal, rail, air, motor industry, steel, shipbuilding) in 18 countries and show this statement to betrue as of 1978 (Nationalized Companies: A Threat to American Business, New York: McGraw 1-fill, 183,pp. 18-19). France has since probably overtaken Britain.R. Pryke, The Nationalized Industries: Policies and Performance since 1968, oxford.• Martin Robertson,1981, pp. 35, 57, 82, 154, 179, 200 respectively.'Pryke gives figures on the high proportion of salaried staff in BS compared to other countries (op.ci(.,p. 201).


salaried staff, have borne the brunt of thisdecline naturally'). The major part of thisdecline is explained by a fall in BritishSteel's market share (Pryke, p. 195), not adecline in world trade in steel asproponents of public ownership oftenallege.` Therefore, the inefficienciesattending open-end subsidisation mightbe becoming more apparent to the voter.Trade union power

There is also the fact that the tradeunion programme seems to be weakerthan in the past. This can be attributed tohigher unemployment, and theunpopularity of the closed shop (whichseems to have doubled in coverage overthe seventies due to pro-closed shoplegislation.') The trade union programmeis also simply more nationalization, thistime of the banks, so as to `providedirection of investment'. So thorough-going is the planning put forward in the1983 Labour Manifesto (for example, the5 Year National Plan, and the `tripartiteNational Planning Council') that theelectorate must indeed have thought thatthe brink had been reached.

British opinion may havebeen influenced by the goodde-regulation example beingset in the U.S.

A further factor, which is irrelevant tothe principle of free enterprise, but mightin fact be quite important as a motive forthe Government, is that privatization

brings in revenue. This was certainlyimportant initially when a share in BritishPetroleum was sold off in late 1979. Assetsales financed government expenditure(which is still as high as ever).

Today however the revenue raisingaspect could be more of an obstacle,because there is some doubt as to whetherthe large sums required can be raised (seebelow). Finally, the US setting a good de-regulation example might have influencedBritish opinion. Nevertheless the debateremains finely balanced.The programme

The table (page 27) gives the list ofnationalized industries as they were in1979, the year when the list was longest,together with the position now and asprojected.' It can be seen that though notmuch privatization has occurred as yet, aconsiderable amount is planned. To dateenterprises employing only about 120,000have been transferred to the privatesector, compared with total nationalizedindustries employment of over 1'/z million(and total central and local governmentemployment of about 7 million — onethird of the labourforce). There has beenmuch debate but little action as yet, partlybecause so many objections have beenraised (see next section) but the Tabledemonstrates that if the plans put forwardare allowed to proceed a conservativeestimate of the industries that will remainin government hands is: posts, coal, rail,parts of steel and shipbuilding, and smallparts of gas and electricity — . about

'The TUC claims that the nationalised industries are in difficulty "because of the collapse in demand, notbecause of a lack of efficiency on their part" (TUC Annual congress, Report, 1981, p. 243).'C. Hanson, et.al., The Closed Shop, London: Gower, 1982, pp. 65-68.

'Government projections are reported in the Financial Times, Jan. 28 1984 and Feb. 71984. Other suggestionsare contained in M. Beesley and S. Littlechild, 'Privatization: Principles, Problems and Priorities , LloydsBank Review, July 1983: and T. Eggar, K. Carlisle and M. Grylls, 'Reversing Clause IV — A policy forDenationalization', Conservative Political Centre. January 1984.


700,000 to 800,000 jobs. This is still alarge number (in particular there is nogood reason why coal which is facingrising demand — see below – - should beretained), but it does mark a decisivebreak with the past. 4

The revenue from sales of companieshas been running at about £ 0.5 billionsince 1979. It is expected to increase to £2to £3 billion over the next 3 years (untilthe elections in 1987). The £ 3 billionestimated value of sales in 1983/84 (thisincludes sales of council houses) comes toabout 1 %a of GDP.

The opposition to privatizationThe arguments . surrounding

privatization can for the sake ofdiscussion be classified under threeheadings: efficiency issues, unemploy-ment issues and practical details (e.g. howshould the transfer be made — shouldshares even be given away, as suggestedby Samuel Britian of the Financial Times,November 17, 1983). We will concentrateon the first two headings.

Efficiency issues: We expect a privatefirm to have lower unit costs andtherefore prices than a similar public firmbecause private owners have a stake in thefirm, and they have chosen to run the firmbecause it suits their talents. A civilservant is not risking his own capital, neednot be a good manager (he may be a goodcivil servant, which requires differentskills), and is not policed by shareholdersor the threat of takeover. If a subsidy isprovided for the publicly owned firm theargument is strengthened. If the privatelyowned firm is operating in a monopolisticenvironment the argument is weakened —

but monopoly unsupported by govern-ment is not common.

A conservative estimate ofthe industries that will remainin Government hands is:posts, coal, parts of steel,shipbuilding and some partsof gas and electricity.

A private monopolist is able to chargemonopoly prices, so regulation may becalled for. But regulation is still betterthan outright public ownership because inthe private regulated firm the owners stillhave a stake and there is a bettercorrelation between effort and reward formanagers due to the fluctuating sharevalues of the firm.

All the above is well known, and hasbeen well demonstrated in David Davies'classic comparison of Australia's privateairline Ansett with its publicly ownedcounterpart Trans Australian Airlines.'These airlines have the same aircraft,same routes, and have to charge the samefares. The only difference is in propertyrights. The private airline is significantlymore efficient (lower unit costs) than thepublic. It is logical therefore to expectpublicly owned firms to perform worsethan privately owned firms, and theevidence shows that in fact they do. It is apity that some people, even professionaleconomists,' remain to be convinced ofthis.

There are difficult decisions to be madeabout the competitive framework intowhich some of the privatized firms are to

V. G. Davies, 'The efficiency of public versus private firms: the case of Australia's two airlines', Journal ofLaw and Economics, 1971, updated Journal of Law and Economics, 1976.

'See e.g. D. Heald, Public Expenditure, Oxford: Martin Robertson, 1983, P. 309.

IPA Aeview- Autumn 1984 23

be launched. Too much should not bemade of this, because for most of theindustries multiple ownership and/orforeign competition is possible — steel,electricity generation, ships, cars, coal arecases in point. The Bill for theforthcoming privatization of BritishTelecom has been criticised for decidingto sell the company as one unit. There isto be one competitor on trunk lines(Mercury), and an Office ofTelecommunications (OFTEL) tomonitor prices. But it is true that thedominant position of BT as equipmentbuyer might lead to elimination ofcompetition. It might well be that morecompetition is required than Mercuryalone can provide.

The trouble is that there are a variety ofpressures militating against the break-upof nationalized companies when they aretransferred to the private sector. The firstis the popular worship of size. The size ofBT is apparently a consequence of thegovernment's aim that it should be the'flagship' of Britain's informationtechnology industries — with "the sizeand resources needed to lead an effectiveattack on overseas markets" (FinancialTimes editorial, Jan. 18, 1984). The factthat small companies are more flexible,that when mistakes are made they aresmall mistakes which are easier to correct(and do not suck the state in), that unionsare more easily contained in small thanlarge companies — these lessons of thepast 30 years seem not to have beenlearned.

The second pressure is that theproducer groups in the nationalizedindustries themselves want to go privateas a single entity. British Airways is

agitating to keep its allocation of 80% ofBritain's overseas routes and bar the entryof other competitors such as BritishCaledonian. The chairman of British Gas(Sir Denis Rooke) has been attracting agreat deal of publicity in his stand forretaining British Gas's monopoly. Theunions are even more interested inresisting break up since they would thenhave to organise company by companyinstead of having a large nationalmembership handed to them on a plate.Unfortunately, as is bound to be the case,the producer groups have moreinformation and more at stake thandisinterested parties, so the governmentbows to their lobbying.

The third pressure not to break uparises from the fact that the morecompetition that is envisaged for aprivatized firm, the lower will be itsmarket value when sold. But the sale priceshould be a secondary consideration. It isnot funds for government, but highproductivity and low prices in industrythat are the main objectives.

Unemployment Issues: The strongestobjections to privatization come from theunions and the Labour Party. Thisobjection is partly ideological in the senseof a belief in collectivism per se, and it isalso related to the diminution of unionpower that privatization will bring (uniondensity in the public sector approaches90% compared with 30-40% in the,privatesector). But the objection is also related togenuine fears of unemploymentconsequent upon privatization. Thepublic share these fears: "You don'tsimply bankrupt state industriesemploying masses of people ".9

'Said by Mr. Norman Lamont, Minister of State in the Department of Trade and Industry — quoted inFortune. Oct. 31, 1983. p. 64.


Regulation is still better thanoutright public ownership,because the owners have astake.

The following resolution made by theshipbuilding unions in connection withplans to privatize parts of shipbuildingconveys the intensity of trade unionobjections: the Confederation ofShipbuilding and Engineering Unions"accepts absolutely the need for the mostharmonious and close working of allparties within the Industry in order tosteer the Industry through the presentdifficult World Marketing situation, andof course to provide maximumemployment for our members. Wereaffirm that such relations can only bemaintained on the basis of the Industryretaining its present Nationalized form,under Public Ownership. We thereforereject totally any attempt by theGovernment to introduce any elementwhatsoever of de-nationalization,whether it be Hiving-off or Sale ofShares". 1 ° As a union representative says,"If the Government hive off theprofitable parts of British Shipbuilders,the unprofitable parts will go to the wallunless the government is prepared toprovide additional finance". "This isundeniable.

The unions want cross-subsidisation(indeed this is one of the aims ofnationalization — as noted by Beesley andLittlechild), but the aim of privatization isto prevent it. Looking a few years back,to the mid-seventies, it is worth noting the

grounds on which unions promotednationalization. J. Hepplewhite(Amalgamated Society of Boilermakers),said "We want more British ships to bebuilt in British yards. The Governmenthave a job to do to bring the shipownersaround to co-operation with the publiclyowned shipbuilding industry".' 2 Whenthe industry was nationalized the unionsspecifically wanted `no closures' ofunprofitable yards. Thus nationalizationwas seen as an instrument of coercion andcross-subsidisation.

In considering the fear ofunemployment, it is important to separateout those industries which face potentiallyrising demand from those which facefalling demand. In the former, followingBeesley and Littlechild (op.cit.), we couldput airlines, telecoms, coal, electricity,gas, airports. These industries coverabout 800,000 people (see Table). Thoughsome of these industries are doing badlyunder the present mis-management, thereis no reason to expect them to do so underprivate ownership. Therefore for firmsemploying about 800,000 the threat ofunemployment related to privatization isnot great.

Those industries which face static orfalling demand are rail, posts, steel,shipbuilding and perhaps British Leyland(employing about 70,000). It is only thelatter three for which some privatizationis currently being considered; theircurrent employment is about 250,000.Many of these people will lose their jobswith private (or any) ownership. Suppose,to be concrete, that 150,000 will becomeunemployed and have to move to new

"House of Commons Official Report. Standing Committee D, British Shipbuilders Bill, 1st Sitting,30 November 1982, p. 11, statement by Mr. D. Dixon, MPfor Jarrow."Mr. D. Dixon, Ioc.cit."TUC Annual Congress. Report, 1976, p. 611.

IPA Review-Autumn 1984 25

jobs in other industries. A way ofcompensating these workers must befound in order to stop them (and thepolitical organisations in the towns wherethey live — for steel and shipbuilding arehighly concentrated) leading the fightagainst privatization.

More attention must be paid to thelegitimate fears of people who willbecome unemployed, even iftransitionally, as a result of privatization.While 150,000 is not a small number, it issmall in relation to the UK workforce (20million). A compensation or Buy OutPlan should be devised to accompanyeach specific industry privatize Lion plan.This plan would make clear to :he publicthe limited nature of the problem, andreassure them that generous steps hadbeen taken to deal with displacedworkers.

It should be remembered that failure toplan compensation could mean that theopportunity will be lost to save thetaxpayer static losses of about £2 billion ayear (the total of nationalized industrylosses) and dynamic losses (the poorgrowth, low profits and highunemployment associated withnationalized mis-management) probablymuch larger than this. It might beobjected that no one asked the individualsin question to go into declining industries,the pay in which any way reflects the risksof redundancy. But this ignores the factthat the workers are well unionised andthe unions can be expected to press forretention of workers. We have abargaining situation in which there isscope for compensatory payments as abargaining counter facilitating the processof change.Conclusions

A first lesson to be learned from Britishand European experience is that an

expansion in state control of theeconomy, once embarked upon, is hard tostop. As the state grows forces are set inmotion which encourage further growth;there is positive feedback. This feedbacktakes the form of unions becoming betterorganised, and attitudes towards profitsand the price system deteriorating.

The most important lesson tobe learned from the U.K.privatization experience is toconsider not only theindustrial organisation side ofprivatization but also theindustrial relations side.

A further lesson is how badly stateenterprises are run. This is the logicalconsequence of the management incentivestructure in these enterprises. A largebody of evidence now supports the logic.It is this evidence which probablyaccounts for the shift in public opinion infavour of privatization.

In the UK the plan is eventually totransfer about one million state jobs (outof seven million) to the private sector.These plans will result in an expansion insome industries consequent on bettermanagement, and a contraction in others.In the short term about 150,000 peoplecould lose their jobs — but a betterestimate of this should be made.

The strongest opposition toprivatization has been on unemploymentgrounds. The unions (who have othermotives as well) and the public unite onthis. In fact the unemployment objectioncan be solved by negotiating Buy Outplans. There are not many peoplerequiring to be bought out, and thebenefits to society are large. The


redundancy side of transferringenterprises to the private sector has beenneglected with consequent severe politicalsetbacks.

The most important lesson to belearned from the UK experience is toconsider not only the industrialorganisation side of privatization but alsothe industrial relations side.

The Privatization List1979 Industry List Employment Current Status and Plans•*(pp(t} 1982

British Aerospace (70) 51% sold February 1981British Airports Authority 7 To be transferred to private sectorBritish Airways. 43 To be transferred to private sector.British Gas 105 Retain national distribution; sell oil

interests (Enterprise oil-projected1984/5) and retail outlets regionalcompetition

British National Oil Corp. (1) 51% sold as Britoil Nov. 1982 (1stcall); N. Sea oil licenses and 11% BPalso sold.

British Rail 227 BR hotels sold Nov. 1982; Sealinkferry and Hoverspeed sale projected,also British Rail Engineering; nomajor plans.

British Shipbuilders 67 Naval and offshore yards to be sold;merchant yards and ship repairretained.

British Steel 104 50% to be transferred?British Transport Docks Board (7) 49% of Associated British Ports sold

February 1983.Rritich Watrrwavc —

Other major companies: ICL (25%u sold); Ferranti (50%); Fairey (100%); British Sugar (24%); Cable andWireless (50%); part of British Leyland (Jaguar, Land Rover, Unipart) to be sold, and perhaps all of RollsRoyce.

èxcluding bracketed industries

• •see text footnote (p. 22)


Full Employment:An Achievable Objectiveby Professor Peter Dixon

It seems apparent that many commentators and politicians believe that we must livewith the current high levels of unemployment for the foreseeable future. Politicians nolonger find it necessary to be seen as pursuing full employment policies. The public hasgradually become convinced that full employment is an unrealistic objective.

Recorded rates of unemployment inAustralia have been above 5 per cent since1974. Recently they have reached 10 percent. When hidden unemployment isconsidered, then the under utilization ofthe workforce might be close to 15 percent.

Politicians no longer find itnecessary to be seen aspursuing full employmentpolicies.

We find our politicians and publicservants devoting increasing shares oftheir energies to the design, promotionand implementation of schemes such asthe Victorian Government's "Employ-ment Initiatives Programme" or theFederal Government's "CommonwealthEmployment Programme." Theseschemes are capable of redistributingunemployment and, by providing jobs forparticularly disadvantaged people (e.g.people who have suffered unemploymentfor more than six months), they spreadthe burden of unemployment moreequitably. However, they are not capableof significantly reducing the overall levelof unemployment.

I believe that high levels ofunemployment are not inevitable. I can

see no demographic or technologicaldevelopments over the last ten yearssufficiently large to explain why fullemployment should be feasible in 1974but not in 1984. What I see is a decade ofrapid increases in the real costs ofemploying labour (especially in 1973-5and 1980-2). I also see a decade in whichthe slow growth of world trade and therapid growth in the size of Australia'sworking age population indicated thatreductions in the real costs of employinglabour were probably required for themaintenance of full employment. I believewe can once again have full employmentwhen we are prepared to reduce the realcosts of employing labour.

Some readers may wonder whathappened to Keynes. Australia hadcontinuous full employment (say less than2 per cent unemployment) from WWIIuntil the early seventies. This perfor-mance was a spectacular improvement onthat of the 1930s when unemploymentaveraged well over 10 per cent. The reasonfor this improvement, we were taught,was that governments (following theprescriptions of Lord Keynes) learnt howto prevent unemployment by carefulmanipulations of aggregate demand viamonetary and fiscal policy. It now seemsdoubtful that simple Keynesian policieswere responsible for the macroeconomic


successes of the fifties and sixties. Myown guess is that these successes followedfrom favourable wage movements.

The fifties and sixties were a period inwhich wage movements tended to lagslightly behind the productivity increasesassociated with technical progress. Inother words, employers were not requiredto increase the pay of workers at a fasterrate than workers were able to increasetheir outputs of goods and services.Nevertheless, I believe that demandmanipulation can play an important rolein restoring full employment, but only incombination with an appropriate wagepolicy.

We can once again havefull employment.

The idea of a two-pronged attack onunemployment combining wage policywith demand manipulation has beenhighlighted by Dixon, Powell andParmenter.' They argue that demandstimulation can create jobs but only at theexpense of the balance of trade. Theircalculations show that in the absence ofimprovements in Australia'scompetitiveness, half of any policy-induced increase in real aggregate demandwould be satisfied by increases in importsand diversions of exports back onto thedomestic market. Consequently theyemphasize the need for reductions in coststo improve Australia's trading postitionas a prerequisite for employment-creatingdemand stimulation.

If Australia could combine costreductions with demand increases then thecalculations by Dixon, Powell and

Parmenter indicate that significantincreases in employment could beachieved without inflationary pressureand without deterioration on the balanceof trade. Such a two-pronged approach toour employment problems would alsoproduce a balanced stimulation of theeconomy. Demand stimulation isparticularly important to the non-tradingpart of the economy, while costreductions are vital to the trading part.

The difficult problem is how tocombine demand stimulation with costreductions. An approach to costreduction, which is being increasinglydiscussed by both employee and employergroups, is some form of wage tax bargain.The major component of costs is labour.The cost of labour is made up of takehome pay, various loadings and taxes.One way of reducing labour costs wouldbe to reduce PAYE and payroll taxes.This could allow a reduction in labourcosts while maintaining the take home payof employed workers. It would need to beaccepted that the tax reductions were notdesigned to increase take home pay, butto reduce employment costs. It wouldneed to be accepted that the taxreductions would add to profits. Withsuch acceptances the tax cuts wouldfacilitate the required two-pronged attackon unemployment. They would reducecosts directly and stimulate demand,especially business investment arisingfrom increased profits. Further demandstimulus would be associated with theresulting employment growth.

I am sometimes asked why a demandstimulus must be accompanied byreductions in labour costs as themechanism for maintaining trade

'Dixon, P. B., A. A. Powell and B. R. Parmenter, Structural Adaptation in an Ailing Macroeconomy,Melbourne University Press, Melbourne, 1979.


balance. Would it not be easier to restrictimports through increased protection orby exchange rate devaluation? I believethat neither of these policies is effective.Increases in tariffs lead to increases in theconsumer price index which feed intowages and reduce the competitiveness ofthe export sector. Calculations in Dixon,Powell and Parmenter suggest thatimprovements in the balance of tradefrom tariff-induced reductions in importsare outweighed by reductions in exports.Similarly, devaluations are inflationaryand have no discernible long-run impacton the balance of trade.

It seems that the employedmajority with the support ofthe Arbitration Commissionand Government is unwillingto make sacrifices for thebenefit of the unemployedminority.

Another question which often arises indiscussions of wage tax bargains concernsthe effect on the Government's budget.Calculations by Corden and Dixon'indicate that a wage tax bargain which

increased the demand for labour by 5 percent could be introduced with only aminor deterioration in the Government'sbudgetary position. Much of the revenuelost through reductions in tax rates wouldbe regained through increases in the taxbase associated with increasedemployment and profits. Other savingswould be achieved from reductions inunemployment benefits.Conclusion

A sad aspect of our current economicsituation is that we seem to have given upon the objective of full employment.Recent National Wage decisions haveconcentrated on the need for full wageindexation to maintain industrialharmony. At the same time it is widelyrecognized that lower real wage costs arerequired if we are to reduceunemployment. It seems that theemployed majority, with the support ofthe Arbitration Commission and theGovernment, is unwilling to makesacrifices for the benefit of theunemployed minority. However, if wewere to implement the type of wage taxbargain that I have outlined, substantialbenefits would accrue to those currentlyunemployed without requiring sacrificesfrom those currently employed.

'Corden W. M. and P. B. Dixon, ' A tax-wage bargain in Australia: Is a free lunch possible?". EconomicRecord, 56, September 1979, pp. 209-221.

30 IPA Review - Autumn 1984f

Why Governments do not planEffectivelyby Professor David Kemp

Government regulation is frequently justified on the ground that "planning" isneeded. Governments over the years have attempted to "plan" the development of themotor vehicle industry, or "plan" the development of alternative fuels, or of theresources Industry more broadly. On a grander scale governments have even soughtfrom time to time to "plan" whole societies or economies. Others, less ambitious, havebeen content to lay down plans to reduce inflation or unemployment.

The motivation to "plan" is to achievegreater certainty and greater predictability- at least in relation to matters that areimportant to the planners. Plans may behighly elaborate, systematic and detailed,or closer to broad strategies. Whatever itscharacter planning implies a longer-timeperspective on our decisions. It appeals tothe rational person in all of us: who doesnot believe that we should attempt toforesee problems we might face and takeaction to avoid or solve them? We allattempt to plan to a degree in our ownlives. We would be less than responsible ifwe did not attempt to plan.Failures in Government Planning

Yet if planning in the abstract is oftendesirable, the record is plain thatgovernments - ambitious or modest - findit immensely difficult to plan effectively.Indeed the big • governments we nowpossess often become major sources ofuncertainty and confusion in the minds ofleaders and decision-makers in otherinstitutions, let alone in the minds ofindividual people as voters, taxpayers andconsumers. Public servants wonder whatchanges new decisions will require toexisting procedures; businesses and theprofessions wonder what new taxes andregulations will be imposed on them, andwhether existing commitments will

survive; trade unions have sought to bindthe government with an Accord whosefuture is continually in question; the wagefixation system is facing one of the majorchallenges in its history.

Governments often becomemajor sources of uncertaintyand confusion in the minds ofleaders and decision makersin other major institutions.

Governments have failed to planeffectively to reduce unemployment orinflation or to greatly stimulateinnovation, productivity and efficiency.Even in areas under almost completegovernment control, such as power,tertiary education or public transport thefailure of governments to providecertainty and confidence is legend.

The claim by governments that they can"plan" appeals to a desire for certaintyand predictability at the centre of oursociety, but the claim sounds hollowindeed against such realities as teachersurpluses (or shortages), or the incessantdelays to large development projects, letalone such long term "failures" as themess of the tax system or the uncertaintiesof industry protection policy.

IPA Review. Autumn 1984 31

Of course we would all like to plan torestore economic growth and fullemployment and zero inflation: but howbest to do it? As an astute Americancommentator on politics, AaronWildaysky, has said, planning is not theanswer. How to plan is the problem.Establishing an advisory unit called anEconomic Planning Advisory Councilspeaks well of the aspirations behind it,but will still leave us far from the goal ofplanning effectively to produce greaterprosperity, freedom and humanfulfillment.

In practice there are hugegaps in our knowledge -even in the knowledge ofgovernments — and some ofthese gaps will never be filled.

Why the vast gulf between aspirationand reality? The reason is in fact notcomplicated at all. As Wildaysky has saidon another occasion, to plan effectivelyplanners need both relevant knowledgeand sufficient power, and governments asplanners have neither.Vital knowledge is lacking

The greater the scope of the activities tobe planned, the more knowledge isrelevant to the success of policy. Inpractice there are huge gaps in ourknowledge — even in the knowledge ofgovernments — and some of these gapswill never be filled. The most obvious isour ignorance of the future. Our capacityto "project" and "forecast" is limited,but more important we cannot foresee thetechnical innovations, the advances inscientific knowledge, or in socialphilosophies, let alone changes in theinternational economic system or in ourown, that have demonstrated the capacity

to transform our society within a very fewyears. But there are two other major gapsin our knowledge, quite apart from ourignorance of the future, that prevent the"long-term planning" that in ourdaydreams we might like to have.

To plan effectively the planner needs toknow the effect of his actions: whatcauses what. Our ignorance of howsocieties work is still very great, and muchof the content of political debate is overjust this question: what will the effects ofsuch and such a programme be. Evenwhere important lessons have been learnt,as in economics, there is often areluctance to accept what is known,because the ideology of planners inclinesthem to want to believe that the world isvery different from the way it really is.

Indeed governments with immensepower to plan, as in the socialistcountries, have failed to plan effectivily toachieve either economic prosperity oreven a reasonable certainty of their ownsurvival. As events in Poland show, thepower of these enormously centralisedgovernments is not total, and combinedwith their ignorance of how to achievewhat they want, falls far short of what isnecessary to plan the futures they conjureup in moments of ideological fervour.

There is a third kind of knowledgewhich planners Iack and which is arguablythe most important of all, although it isperhaps the most difficult to recognise.This is the knowledge that individualpeople have about their own values andthe knowledge which arises out of theirown experience during their lives.

This unique experience and thesepersonal values are the basis on whicheach person decides how his or herpriorities are ordered, and these orderings


are often established only at the point ofactual decision. This knowledge can beexpressed and utilised through marketprocesses, as individual consumers andproducers deal with each other or maketheir decisions. It is not available tocentral authorities, nor ever can be, andits inaccessibility to those at the centre is afundamental incompetence of authoritiesto plan effectively to meet the needs ofindividual people. It lies at the heart ofthe failure of socialist governments. It isone of the main reasons why attempts ofeven democratic governments to regulatehave consequences which are unforeseenand lead to inefficiency in the use ofresources. Only in wartime will mostpeople submerge their other values in theinterests of the overriding value ofnational survival.

Even when people know far enoughahead what they want to encourageattempts to plan, central authorities findit exceptionally difficult to obtain andprocess this information: there is oftentoo much to be handled by a few decision-makers. This is the "informationbottleneck" which is ultimately aninsuperable problem for those inauthority, though they may try to relieveit by a variety of strategems: such assummarising, delegation, or processing itin various ways (at the cost of losses ofinformation) before it is brought forwardfor decision.

It is worth making the point that theseobstacles to effective planning are notpeculiar to governments. All authoritiesface them to some degree. Big companiesface great problems of efficient centralplanning; big unions often have tooperate with little precise knowledge ofthe views of their members. Governmentsare different in that they face problems

arising from the greater scale of theirdecisions, and not infrequently theoverblown character of their aspirationsto plan.

These then are the major gaps in theknowledge of governments which inhibittheir capacity to plan effectively toachieve the better society they areconstantly promising us. But not only dogovernments lack the knowledge theyneed, they also lack the power.

Essential Power is LackingIt is lack of power — often related to

lack of knowledge — which explains whygovernments are •so notoriouslyineffective in planning even thoseactivities which are directly under theirauthority, such as their own publicservices and government controlledactivities such as education, transport,taxation, social security programs, oraspects of health.

Governments are notoriouslyineffective in planning eventhose activities which aredirectly under their ownauthority, such as their ownpublic services.

Governments must not only rely oninstitutionally biased information fromeach of the relevant institutions as a basisfor decisions. They also need the supportof people in these institutions, and of theclients and members of the public whomay be directly affected by, and benefitfrom, the activities of their institutions.Teachers may resist the closure of aschool, unions or local communities mayprevent nationalisation of the railnetwork, doctors may oppose changes tohealth arrangements and so on.


In a democratic society every personand group which believes that it may beaffected by a decision of government hasa right to express itself and to seek topersuade the government to its view. Andbeyond that, governments themselveschange, and the commitments andperspectives of the incoming governmentmay differ in many ways from those ofthe outgoing government. To expectpolicy coherence over the decisions of'big' government, let alone persistence indecisions over time, is to live in cloudcuckoo-land.

Plans and DemocracyPlanners in government are for this

reason often antagonistic to democracy,and attempt to take decisions out of thehands of elected governments and placethem in non-elected semi-permanentplanning agencies. Yet there are at leasttwo fundamental weaknesses in thisapproach. One we have seen in theplanning failure of even thosegovernments which are non-elected andwhich are semi-permanent, thegovernments of the socialist states. Thesegovernments cannot avoid thefundamental incompetences of centralisedauthority which arise from their inevitableignorance of matters which are essentialto the efficient and effective working of asocial and economic order, and theproblem of effectively processing thatinformation which is available at thecentre.

The other weakness is the failure toappreciate the essential virtues of thedisorderly democratic process. Ifindividuals and groups are preventedfrom expressing themselves throughdemocratic procedures, their discontentswill not vanish -- they will simply seekother avenues for expression, perhaps in

riots, revolutions or military coups — asthe socialist countries are finding. Andthe reduced responsiveness ofgovernments will ensure that grievancesmultiply even more rapidly. Democracy— as Churchill said — is the worst formof government, except for all the others.

In reality, handing any field of activityover to government to "plan" is virtuallyto guarantee that there will be continuinguncertainty, unpredictability, andagitation over its future. The mote secureand confident institutions are those notdependent on government. It is in . relationto government transport, governmenteducation, government-run hospitals, thegovernment-run power industry, that thedeepest dissatisfactions are felt.. Of thethree great powerful sets of institutions inAustralia: government, unions andbusiness, it is private enterprise whichstands highest in public esteem: the onlyone of the three subject to daily influenceby individuals through the markeplace.

Of the three great powerfulsets of institutions in society:government, unions andbusiness, it is privateenterprise which standshighest in public esteem.

Can we then do better for ourselves?Yes, if we abandon the chimera thatgovernments can "plan" effectively allthe vast range of activities they aredragging into their purview, and recognisethe reality, which should be all tooobvious, that governments cannot domany things, and that far from beingnatural long-term planners of our lives,democratic governments are uniquelyshort-term in their perspectives.

l IPA Review- Autumn 1984

Planning within limitsThe cliche that "a week is a long time in

politics" expresses a deeper truth aboutgovernment than many realise — onegreat strength of democratic politics is itscapacity to deal with those tensions andpressures and conflicts which arise in theshort term in any free society. Ifgovernments neglect these for the longterm they will find that they become lesseffective and their societies lesssatisfactory for people to live in. The taskof leadership is to find among the shortterm solutions those which offer the besthope of acceptable longer termconditions.

Each of us of course has a capacity toplan within limits — even governments.Wise government will make use of theknowledge and planning capacities ofbusinessmen, volunteers, individuals andprovide ways for people to reconcile andharmonise their different priorities. It willnot overburden itself by trying to takeaway the capacity to plan fromindividuals and groups 'and locate thisauthority in government itself. For whenthis happens, we experience not a greaterconfidence and certainty that we knowwhat policy is — on the contrary weexperience a disruptive and ineffectualgovernment which breeds uncertainty andby undermining predictability orincreasing the difficulty of independentaction, stultifies decision-making in othersocial and economic institutions.

Governments should certainly persist intheir attempts at planning of a particular

kind: they should plan to provide theframework of laws and policies withinwhich their citizens — individuals,consumers and producers — can use theirexperience, and whatever foresight theymay possess, to attempt to realise thosethings that are important to them.

A government which lets itscitizens do their own planningwithin a framework of certainrules will find that it presidesover a more governablesociety.

Governments should allow the vastresources of knowledge in their societiesto be utilised by their citizens in effectivedecisions, and create the conditions inwhich their citizens can plan as best theycan. Governments cannot do thatplanning for them, and the attempt to doso simply ends up creating uncertaintiesand insecurities. And governments onlymake life more difficult for themselves byattempting to plan to achieve objectiveswhen the requisite knowledge and powerfor success is unavailable.

A government with the wisdom to let itscitizens do their own planning within aframework of certain and just rules willfind that it presides over a more satisfiedand more governable society — if onewith a tendency to constant change andinnovation. It is also likely to havecitizens who are prosperous andcompetent.


Tax Reformby John Harro well

In late February the IPA (NSW) published an "Outline of an Alternative andSimplified Tax System for Australia" *. In this article the author of the paper, Mr. JohnHarrowell, discusses his approach to tax reform; some of the problems and difficultiesassociated with tackling the task. He stresses the need for wide public debate of theissues.

The basis for proposing genuine reform toour taxation system must be to look at thepresent Act and concentrate on thoseareas where it has failed. My recentexperience as a Member of the TaxationBoard of Review perhaps enables me todo this better than many.

Every proposed change needsto be justified by being seento correct a part of thepresent law that is creatingdifficulty and, possibly,confusion.

It would be a pointless exercise to scrapthe present Act and start afresh withoutregard to the lessons we have learnt inoperating it. Nor do we want to introducechange 'for change's sake', and we musttry to eliminate (or at least, minimise) ourown personal views and 'hobby horses'.

With these principles in mind, a closestudy of the problem areas should leadlogically to what the basic parameters ofan alternative tax system ought to be.Every proposed change needs to bejustified by being seen to correct a part ofthe present law that is creating difficultyand, possibly, confusion.

In the paper I have done my best toapproach the difficult task of reform in

* #this manner. The logical outcome of thisprocess is, in my view, a system of threetaxes, in which no one of them isdominant, as is the case with Income Taxin the present system.

Thus, in my , proposals, income tax is'downgraded', with the result that thetake-home pay for all taxpayers will begreater than it now is.

The balance of revenue required tocover the cost of government would bemet by a 'purchase' (or transactions) tax,and a capital gains tax.

In the paper I have not put forward anyrecommendation of the form a 'purchase'tax should take (VAT, Sales Tax,,etc.) butthere is now a wealth of overseasexperience of these taxes on which to basethe decision. It is recommended however,that such a tax be a comprehensive one inwhich only some of the essentials of day-to-day living are exempt.

A capital gains tax will not be a bigrevenue-raiser but its presence in thetripod of taxes is essential so asp to closeoff an obvious area of tax avoidance.

However, I do stress that I would notbe recommending the introduction of abroad-based 'purchase' tax or a capitalgains tax whilst the present income taxlaw remains in force.

Copies of the Paper are available, free-of-charge, from IPA (NS W).

36 IPA Review • Autumn 1984

Contributing to the present Act'scomplexity are the many functions it iscalled upon to perform. Thus, in order toachieve a much simplified system, it isnecessary to Iimit the function of tax actsto that of raising the required level ofrevenue.

All incentives and forms ofassistance, both to individualsand those ,engaged inbusiness, be by way of directpayments and shown on theexpenditure sid e of the budget.

The paper therefore proposes that allincentives and forms of assistance, bothto individuals and those engaged inbusiness, be by way of direct paymentsand shown on the expenditure side of thebudget for all to see.

The proposals are not aimed principallyat our politicians, but to the communityat large. The NSW IPA President, SirEric McClintock, comments in hisForeword to the paper that its publicationis designed to stimulate public interest anddiscussion of this most critical issue andhe hopes that it will lead to "a universaldetermination to challenge the pervadingmood that to devise a taxation systemwhich is understandable, fair andequitable to all Australians is beyond thewit of man".

I will not attempt to summarise theproposals any further in this short article,because it is essential that it be read intoto. It is a plan for a comprehensive andintegrated tax system, so individualrecommendations should not becommented on in isolation, and withoutreference to inter-related ones.

I do not expect readers to agree with allaspects of the paper but I do ask that

criticism of any one part does not becomeoverall condemnation of the proposals.They are only a starting point fordiscussion, and genuine reform can onlycome eventually through much hardwork, discussion and debate on the partof those who have the will to achieve thatend.

A complex law (such as now exists)cannot be replaced by a simple law (suchas I am proposing) without upsettingthose with sectional and particularinterests, so I am sure some of therecommendations will attract vigorousopposition.

I do hope that those who may opposeany part of what I have written will atleast first study closely the overall thrustof the full proposal.

The present system cannot be criticisedeffectively by the layman because heknows he does not really understand it.But a new system that is simple, and canbe understood, will attract readycriticism.

There are also influential groups withinthe community that have a vested interestin the complexities of the present Act: fortax èxperts' interpreting and advising onthe present law is a livelihood. Change toa simpler system might well jeopardizethis situation.

However, on reflection, we must allsurely agree that it is of no benefit to thecountry and to the taxpaying communitythat so many highly intelligent and expertskills are devoted almost exclusively todoing battle with the Tax Office.

The introduction of a simplified taxsystem will, I suggest, not put theseèxperts' out of work, but will enable


It is of no benefit to thecountry and to the taxpayingcommunity that so manyhighly intelligent and expertskills are devoted almostexclusively to doing battlewith the Tax Office.

them more fully to advise their clients onhow to maximise the efficiency andproductivity of the business, without their

advice being distorted by taxconsiderations.

The time for facing up to the task of taxreform is long overdue. Going on as weare may well see the introduction of abroad-based 'purchase' tax, a capitalgains tax, and even (worst of all) a wealthtax, on top of the present Income Taxstructure. In my view a wealth tax is thelast resort of a government when the taxsystem has failed.

In other words, if we do nothing we willonly get what we deserve.

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38 IPA Review- Aulumn 1984

Government and Small Business...The right hand gives, but the left hand takes.by Professor Geoffrey Meredith

Governments all around Australia have `discovered' small business but theirprogrammes of assistance are often outweighed by the adverse effects of othergovernment policies, particularly taxes and charges.

Based on commitments made bypoliticians in the early 1980s it looks as ifthis decade is shaping up to be an era forthe small business owner. Politicians andtheir advisers appear to have "found"those owners of Australian controlledenterprises — the so-called small businesscommunity.

Current Governments inVictoria, South Australia andWestern Australia have cometo power on a strong smallbusiness ticket.

The late 1960s saw an initial nationalstudy of small business. Cabinet receivedthe Wiltshire Report in 1970, but it took achange in Government in 1972 for anyaction to flow — the establishment of theNational Small Business Bureau in 1973.Initially starved for resources, a furtherchange in Government (at the nationallevel) was necessary before policy andaction shifted from the Bureau at Federalto State levels. The "right hand" ofGovernment had begun the process ofproviding resources for small business.Each State now has a small businessagency or corporation or the equivalent.In one way or another they -

• provide information for owners.• produce publications of interest to

small business.

• fund counselling services.• co-ordinate (and at times supply)

training.• support loan guarantees

Right handsCommitments by political parties

suggest that the "right hands" willincrease the flow of resources to the smallbusiness sector. Current StateGovernments in Victoria, South Australiaand Western Australia came to power ona strong small business "ticket". As afollow-up to elections, South Australiahas completed an inquiry into smallbusiness; and Western Australia plans toexpand the operations of its SmallBusiness Advisory Service. However,commitments do not end there. TheQueensland National Party, following itsre-election as Government in October, hasappointed a Minister for Industry, SmallBusiness and Technology, with seniorCabinet ranking.

From its election commitments, FederalGovernment appears geared to upgradethe Department of Industry andCommerce Small Business Branch to aDivision with several branches.

Few commentators would question theneed for a voice for small business and theneed for changes in Government attitudesto the sector; however, there must bedangers that enthusiasm for election


success will encourage Governments toadopt policies not in the long-run interestsof small business.

Left handsGovernments are seen often as helping

small business with "the right hand" andhindering with "the left". Governmentannounces some new assistanceprogrammes for small business but at thesame time introduces new revenue-raisingmeasures which have major impacts onsmall business performance.

New revenue-raisingmeasures can have majorimpacts on small business.

One example is the much criticised taxwithheld under 'Prescribed PaymentSystem'. Claims and counter-claims havebeen made recently on this tax.Government claims it is fair and is gearedto catch the tax-avoiding "rich"taxpayer. Small business claims theprocedure will adversely affect businesscash flow and profits while increasingbureaucratic record-keeping. Further, it isclaimed many large businessess will beexempt from the legislation — the realburden will fall on small business.

This withholding tax example is onlyone of many complaints by the smallbusiness sector about government actionswhich are having a significant impact onthe sector, while apparently not adverselyaffecting large enterprises.

Division 7 taxation; import and exportregulations; loan availability; increases inlocal government charges; increases inbusiness registration charges; publicauthority charge increases; demands forinformation by government departments— could all be cited as examples where

legislation has been approved without anyapparent attempt to assess the impact ofprocedures on the small business sector.

Three classic examples of Governmentaction creating cost burdens for smallbusiness are the:

* growth in real/effective cost oflabour;

• growing impact of Governmentindirect taxes and charges;

• paper burden on small businessmeeting bureaucratic information

• needs of Government.Owners as employers are concerned

about real cost per effective man-hour.The impact of Government action hasbeen twofold — to increase labour cost,and reduce effective labour time. Overallimpact on effective labour cost per hourhas been disastrous.

Consider a skilled worker paid a grosssalary of $20,000 per annum withexpectations of working 40 hours perweek. The full cost to the employer islikely to increase by at least 22.5% — to$24,500 per annum. The additional$4,500 could flow from workers'compensation insurance, payroll tax,superannuation (soon to be compulsory,apparently), cost of replacing employeeon a short-term basis during generous sickleave, recreation leave, long-service leaveand annual statutory holidays. Thus the$9.62 cost per hour (2080 hours at a grosssalary of $20,000) climbs to $11.77 perhour (for the total annual cost of$24,500).

However, this is only half the story.While Government action has led toincreased total costs, Government hasalso supported decreased working hours(and has been a pace-setter in this regard)— 40 hours may become 37 hours perweek. These 37 hours are only effective

40 IPA Review-Autumn 1984

for 42 weeks — deduct from 52 weeks 4weeks for recreation leave, 2 weeks forstatutory holidays, 2 weeks for trainingand 2 weeks for sick/long-service leave.Thus the "ideal" of 2080 hours reduces to1554 hours per annum (42 x 37) and theeffective cost per hour climbs to $15.76 —a massive 64%a above the "basic" $9.62.

All three levels ofGovernment — Federal, Stateand Local — are guilty ofimposing even higher taxesand charges.

To add insult to injury, whileemployees (with Government support) arebeing granted increased wages and fringebenefits and reduced work hours, smallbusiness owners see themselves workinglonger hours for declining returns.

Government taxes and charges presenta similar picture. Small business ownersare justified in complaining on a numberof issues:

• Government charges and taxes ingeneral move in one direction — up!The private sector can be forgiven forwondering why increased efficiencyand/or economies of scale don't leadto occasional decreases in taxes andcharges.

• All 3 levels of Government -Federal, State and Local — are guiltyof imposing ever higher taxes andcharges on the public.

• While the private sector is encouraged(required?) to demonstrate improvedefficiency and an ability to controlcosts, there is no demonstratedevidence that the majority ofGovernment Departments/-

Authorities attempt to apply conceptsof managerial (cost) reporting andaccountability. How often is thepublic informed of the cost of roadconstruction (by Government) perkilometre? Cost of informationservices? Cost of small businessadvisory activities? Cost of airportmaintenance? Cost of Governmentprinting offices? How often are these(and a multitude of similar servicesundertaken by Government) costscompared with the cost of similarservices offered by the private sector?

Finally, the paper burden problemscontinue as small business owners arefaced with growing demands fromGovernment for more facts and figures onperformance. This paper burden wasrecognised as "a burden" in 1978 and theFederal Government of the daycommissioned the Australian Bureau ofStatistics to measure the "burden". AReport released in March, 1980, revealedsome startling figures for the 1978calendar year:

— Businesses in Australia completesome 10 million CommonwealthGovernment forms each year.

— The annual cost to the smallbusiness sector for CommonwealthGovernment paper work was some$173 million.

— For small businesses employingbetween 11 and 20 the average costof the paper burden per businessvaried between industry sectors:—Manufacturing $1868 per businessWholesale trade $3064 per businessRetail trade $1294 per business.

It is worth noting that the ASS datacollection procedures were subjected tosevere time and budgetary constraints."Cost of paper burden" was as perceived


by the enterprise owner and was meant tocover:

• fees paid to any outside agents,• cost of additional bookwork,• the direct cost of completing

Government forms.

In the words of the ABS publication(December 21, 1979): "Analysis of theseproblems indicates that the estimates maybe understated".

Legislation which reducesincentives to risk-taking isanti small business.

The result: many successful smallbusiness owners are deciding that "it is alltoo hard" and are selling out or closingdown. While this may be dismissed as"private enterprise in action", this trend

should be considered seriously byGovernment. Small business is privateenterprise. Small business is competition.If Government wants an economicenvironment with few operators, then anappropriate strategy would be toeliminate small business. However, ifGovernment wants an environmentrepresenting competition and all itimplies, policies must be developed toencourage new enterprise establishment,and growth of successful enterprises.Legislation which reduces incentives torisk-taking is anti small business.Governments cannot give (or appear togive) with the right hand, and keep takingwith the left. Problems are compoundedwhen Governments are seen to use "theright hand" only on or before electiontime and cause havoc with several "lefthands" between elections.

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Ideas and InsightsThe following extracts from articles and speeches received at the IPA since our last

'Review' may be of interest to readers.* * * *

Labour Costs andEmployment

A sustained increase in employmentgrowth requires higher levels ofinvestment, according to the OECDSecretary-General Emile van Lennep.Labour costs, however, remain too highin a number of countries to sustainadequate employment and investment.

"Some encouraging developments havetaken place as of late. In a number ofOECD countries, social partners,sometimes in concert with governments,have succeeded in moderating the growthof real wages relative to productivitytrends.

Various changes in collectivebargaining processes have alsocontributed to improved cost pricerelationships: for example, greaterdecentralisation of wage negotiations insome countries; a general weakening ofwage indexation processes; newapproaches to salary determination in thepublic sector; and increased flexibility inrelating wage settlements to particulareconomic ' circumstances in individualenterprises."

Mr. Emile van Lennep,OECD Secretary-General,

OECD Observer, November 1983.

In contrast to the encouraging trendsoverseas, wage-setting arrangments inAustralia have moved towards greatercentralisation and a strengthening of wageindexation processes.

Business andGovernment

Industry should not rely on governmentsupport according to Sir JamesBalderstone, Chairman-elect ofAustralia's largest company, BHP, andPresident of the Institute of PublicAffairs.

"I have no time for the philosophy thatwe can permanently solve our industrialproblems by government hand-outs,intervention or ownership. We can andmust all do more to help ourselves.

Jam quite certain in my own mind thatreliance on Government support is in thelonger term unhealthy and to beavoided. "

Sir James Balderstone,Chairman-elect of BHP,

Speech to Australian Academyof Technological Sciences, March 1984.

State GovernmentCharges

The rapid increase in many StateGovernment taxes and charges is ofgrowing concern to industry.

"The costs of State Governmentservices and taxes, of Workers'Compensation Insurance are increasing atan alarming rate, and there seems, as yet,to be little recognition by StateGovernments that their mounting coststructures are progressively reducing the


capacity of industry to maintain, let aloneexpand, employment prospects.

In order to generate wealth, both as acompany and as a nation, we mustrecover and maintain our internationalcompetitiveness by lightly controlling ourcost structure. "

Mr. Milton Bridgland,Chairman of ICI Australia,

Annual Meeting, February 1984.

New TaxesMost Governments around Australia

do not have a programme to actually cutdown the overall burden of tax. On thecontrary, there is a constant search fornew sources of revenue.

"While tax payments are an importantand necessary contribution by businessenterprises to the community, it is not inthe interests of the community to increasetaxation to the level where returns toinvestors become inadequate andeconomic growth suffers. Clearly, thereturns of shareholders in Alcoa ofAustralia have not been adequate.

I believe that the same can be said ofmuch of Australia's mineral industry. It issurprising that against this factualbackground much of the intellectualresources of governments appear to bedevoted to finding ways of imposing new

taxes and charges on the industry."Sir Arvi Parbo,

Chairman of Alcoa of Australia,Annual Meeting, February 1984.

The Cost of RegulationIt is extremely difficult to assess the

cost to the community of the burden ofmuch government legislation.

"The tangible evidence withincorporations is the growth of corporatelegal departments and the inordinateamount of time managers and our lawyersspend ensuring absolute compliance withso many complex and, at times,conflicting laws. That cost of complianceflows through to consumers.

Less tangible is the deflection ofintelligent minds from productive work tosterile, unproductive tasks — not tomention lost business opportunitiesresulting from this preoccupation. Thoselost opportunities lead to lost wealth andjobs — although some cynics might saythat these are offset by jobs for lawyersand growth in the public sector."

Mr. Kevan Gosper,Chairman and Chief Executive Officer,

Shell, Address to Corporate Lawyers'Association,

April 1984

IPA `FACTS'

BULK COPIES OF `FACTS'An increasing number of companies are ordering bulk copies of

"Facts" — an IPA quarterly publication — to distribute to employees.

The demand for "Facts" continues to grow. People welcome thepresentation of key economic information in a straight forward manner.

Contact Mr. N.D. Wright (03) 61 2029 for details on ordering bulkcopies, or write to IPA, 83 William Street, Melbourne, Vic., 3000.


SPECIAL MEDIA SECTION:

Threats to a Politically IndependentMediaby Ken Baker.

The IPA has published a number of articles on the media over the last year. In thisissue contributions by two noted journalists, Peter Samuel and Michelle Grattan, arepublished. This article draws together some of the major criticisms of the media whichhave emerged.

The modern mass media should bebulwarks of democracy: independent,critical, investigative, defenders ofpeople's rights and the public interest.The media claim to be the publicwatchdogs demanding, as a result, theright to inquire into the workings of othermajor institutions in our society and intothe actions of the individuals who controlthem.

Given the extension of the powers ofthe State in modern society, theimportance of the media in performingtheir role as public watchdogs in mattersof government is particularly pertinent.

The essential conditionsnecessary to the media'sdemocratic role are by nomeans secure in Australiatoday.

The media perform a key role in thefunctioning of a democracy by keepingpeople informed about the workings ofgovernments. They contribute to themaintenance of an open society byfacilitating the free exchange and airing ofa diversity of viewpoints. Yet the essentialconditions necessary to the media'sdemocratic role are by no means secure inAustralia today.

# * * titOne of the key defences of a free press

lies in the existence of diversity ofcomment and perspective. Out of thisdiversity it is assumed that a clearer viewof truth will emerge.

Diversity in the media can be eroded bymonopoly, by undue dependence ongovernment, by biases inherent in theinstitutional interests of large mediaorganisations and by internal pressuresfor ideological conformity.

It is clear from the material we publishbelow that these are not just theoreticaldangers. They are aspects of a mountingthreat to a free and politicallyindependent press in Australia.Pack journalism

Rather than diversity, academicresearch and comments by journaliststhemselves suggest that there is today atendency to a herd mentality amongpolitical journalists, a conformity ofviews which can have detrimental effectson reporting.

This mentality arises partly from theleadership of the strongest personalitiesamong the journalists, partly from theemergence of an ideology in the mediawhich elevates criticism to an end in itselfat the expense of an ideal of balancedevaluation, partly from the physical


Press relations withprime ministers

"It was the case that some reporters,especially radio reporters, had developedstrong personal attachments to Hawkeand privately hoped he would win. "

Ann Summers,Gamble for Power, 1983, p. 136.

"The emotional temperature betweenHawke and Fraser media contingents ...was vastly different.

Let me explain by example. Fraser's"money under the bed" remarks were fedto Hawke by the media for comment theway lunch is fed to the performingdolphins in a marineland park, butHawke never faced sustained examinationover his economic policies: a promisedbriefing on prices-and-incomes policynever occurred, indeed was neverdemanded by the press gallery".

Robert Haupt,The National Times,

April 15-21, 1983, p. 18."If Malcolm Fraser had come to China

and announced he had a plan which coulddouble the capacity of the Australianindustry to produce raw and semi-processed steel, he would have beenreported, with universal cynicism, as theseller of snake oil".

Michelle Grattan,The Age, Feb. 13, 1984, p. 13.

"Fraser's relationship with the pressfrom the beginning of his rise to theposition of Prime Minister has beenhostile, largely because of the way thejournalists had seen the rise beingmanipulated. They also strongly objectedto his press avoidance tactics. Fraser's

lack of rapport with the press contrastedstrongly with Whitlam's relationship withthe press."

Patricia EdgarThe Politics of the Press, 1979, p. 175

"...well, he (Fraser) knew that thejournalists in the main had nothing butcontempt for him as a politician, as abloke who had sanctioned, indeed gonealong with what Kerr had done. I thinkyou know, that he sensed that most of thejournalists there really weren'tsympathetic at all even though they mayhave been trying to do a fair and honestjob, but they were in no way sympatheticto Malcolm. "

Journalist quoted in P. Edgar, p. 176.

"I don't doubt the "e.âtion in TheAustralian that most of the CanberraPress gallery wanted Mr. Fraser to go, butI think that professionalism generally gotthe better of them in their work. Thegallery's shameless partisanship of 1972did teach some lessons".

David Bowman,Australian Society,

April 1983, p. 30."Mr. Duffy (Minister for

Communications) said that "98 per cent"of the media were on side with theGovernment"

Report in The Age,April 4, 1984, p. 1

"The startling fact is that thisGovernment is less tolerant of criticismthan the last; it expects less criticism andis not used to it."Michelle Grattan, The Age, April 7, p. 10.

46 IPA Review - Aulumn 1984

environment of political reporting whichthrows journalists together as a group onmany occasions (including in the PressGallery itself). It may even arise from abias in the academic studies leading tojournalism. (See "The Politics of MediaStudies", IPA Review, Summer, 1984).All of these can have some effect on thephenomenon of the "group mind" -pack journalism.

A major survey of Washington mediapersonnel conducted by Stephen Hess hasshown that over 90 percent of workingjournalists rate pack journalism as aproblem in their profession.* As PeterSamuel points out in this `Review' theideology of the pack is often left-wing inits selection and analysis of issues.

While comparative research is lackingin Australia, Michelle Grattan in herarticle (page 55) notes the vulnerability ofjournalists to be absorbed in a generalconsensus.

And as David Bowman, former editorof the Sydney Morning Herald,commented in April last year, journalists'"sympathies are most likely to be with theLabor Party whatever their commitmentto the professional middle". (AustralianSociety, April 1983, p. 31).

Michelle Grattan contrasts thefavourable attitude of the press to theHawke Government with the scepticaland highly critical approach which was

often adopted towards its predecessor.

There are a number of reasons for thisdiscrepancy of treatment. The HawkeGovernment is still enjoying ahoneymoon period. The personality ofthe leader and his ministers may have alsohad some effect. But the political valuesof journalists would also seem to be asignificant factor.Media management

Pressures applied by governments arealso influential in inhibiting diversity inthe media. There are two main pressures;one directed at journalists and one at themanagements of media organisations.The first is exemplified by the growingimportance of "media units" (see box),the second by the use of economicpressures and regulatory power.

The most important consequence of thecentralisation of news management inmedia units is the restriction of access toall but official channels of news release sothat vastly complex governments speakwith only a single voice.

A feature of news management bygovernment has been the apparentunwillingness of many journalists on the`front line' to challenge these techniques.

A further issue here is raised by thepotential conflict of interests that canarise between a journalist's capacity tooffer balanced and independent criticismsof political affairs and the career

The Cain Government's media unit"The media unit represents a new style removing any chance of journalists

of handling the press which involves developing relations .with ministers whichpooling journalists and not attaching might lead to uncovering, rather thanindividual press secretaries to ministers. It covering up, important stories."has been criticised as costly. David Hirst,

The system has also been criticised .for The Australian, January, 1984.Stephen Hess. The Washinoinn Ronn..ia.Q T1,. fl.nnIinn, tn,. t; , n r 1091 .. I &A


ambitions of media personnel which oftentake them into highly paid positionsserving the government.

There are some counter tendencies, forexample the development of freedom ofinformation procedures by government.How effective this comparatively recentinnovation will be is not yet evident.

However, it is clearly a paradox whenthe same parties which in oppositionchampioned freedom of informationhave, now that they are in government,institutionalised measures to restrictmedia access to information.

There is an important qualification tothis argument for more media access toinformation, one that is raised by PeterSamuel in his article. There existsituations, such as when national securityis at stake, when the public interest is bestserved by excluding the media fromsurveillance of government activities.Big government

It has long been recognised bysupporters of liberty that economicfreedom and political freedom go hand inhand. The more dependent individualsand organisations are on government, thegreater the opportunities for governmentsto use the privileges they grant to stiflecriticism and hence free debate.

A feature of "big government" is thatmany organisations in society areincreasingly tied to the State throughsubsidies, regulation and theirdependence on government for approvalof various activities. Governments todayhave an unparalleled opportunity to exertpower over many institutions. This tendsto close up sources of information tojournalists (organisations receivinggovernment grants may be unwilling tostate their views frankly for fear of

Rewarding friends,punishing enemies

"Newspaper managements have, hear, putthemselves and their editors at hazard. Theinterconnection between newspaper ownershipand investment in other activities subject togovernment control or influence (radio,television and films, agriculture and miningand civil aviation, to say nothing of organisedgambling and property development) has leftactive editorial independence vulnerable topolitical pressure.

Some managements have been reckless inabandoning the conditions necessary tomaintain the editorial independence of theirnewspapers. Others have been cautious andrestrained. But all have done so to somedegree.

For example, each of the three mainnewspaper companies owns newspapers whichhave published competitions and gamblinggames ("Whingo", "lingo" or whatever),which require approval from a StateGovernment — approval which can begranted, postponed or withheld.

Now a good politician is one who, amongother things, knows how to reward his friendsand punish his enemies. And recent experiencehas shown that there are several goodpoliticians in Australia in positions of powerwho have become very effective at distributingthe punishments and rewards.

Given the growing threats to the public'sright to know and to the editorialindependence of newspapers, are weapproaching the end of the era of the free.responsible and politically independent pressin Australia? Probably not; at least not yet.However, that the question can even be askedshould trouble us all — and, one hopes, ourreaders, too."

Creighton Burns,Editor,`The Age' 8th March, 1984

Speech at a conference ofAustralian and Japanese editors


government retaliation). It also affectsnews organisations themselves.

The Editor of `The Age', CreightonBurns, in an historic statement, has drawnattention to the increasing hold ofgovernments over the media broughtabout by the involvement of mediaorganisations in activities heavily relianton government approval and control.

Parties which championedfreedom of information inopposition now that they arein Government haveinstitutionalised measures torestrict media access.

It could be said that the problem Mr.Burns points to in relation to the editorialindependence of newspapers appliesequally to many business enterpriseswhich are dependent on the governmentfor many critical decisions affecting theircorporate well-being.Some solutions

The issues outlined in this article in partreflect wider problems in the society, suchas the growth of the State and the spreadof an intellectual culture which has madecynicism toward traditional Westernvalues fashionable. Clearly, there aresections of the media which do exhibit alaudable degree of independence fromgovernment. Nevertheless, there isgrowing concern, even within the ranks ofthe media, that steps be taken to protectand strengthen the independence,diversity and objectivity of the media.

First, it is imperative that mediaorganisations take more account of theinfluence of sociological factors on theway journalists report the news :— thesocial pressures that act to compel

conformity in sections of the pressgalleries, and the influence of theideologies of journalists on the way theyreport reality. More effort should bemade to ensure a diversity of politicalperspectives in the recruitment of mediapersonnel. Just as important is the need tostrengthen an ethic of professionalismfirmly grounded in democratic valueswhich would help bolster the integrity ofjournalists against insidious socialpressures.

Second, as I have argued in a previousarticle, there are serious problems in theliterature of media studies which formspart of the academic training ground forjournalists. Much of this literature simplyreinforces the hostile attitudes to Westerndemocracies which Peter Samuel arguespervade the Western media. The qualityof this literature ought to be improved.

In order to counter manipulation bygovernment media units, journalists needto adhere more vigorously to the aims of agenuine investigative journalism,undeterred by the self-interested efforts ofgovernments to centralise control overinformation.

Oppositions ought to aid this bythemselves developing more effectivetechniques to counter the tendency forgovernments to try to monopoliseinformation control. Indeed, on the faceof it, oppositions would seem to have aclear potential advantage in gaining accessto the media, given the shared concern ofthe media and oppositions with offeringcritical appraisals of governmentalperformance.

This may well involve a more efficientorganisation of staffing resources byoppositions, so that more seriousspecialised research into the various


spheres of government activity can beundertaken.

Finally, the problem of big governmentand the potential it offers for control isendemic to our system. If the economics

of modern media require that largeorganisations own many outlets it isessential that these organisations havemaximum independence fromgovernment.

The Centre for Independent Studies

OCCUPATIONAL REGULATIONAND THE PUBLIC INTEREST:

COMPETITION OR MONOPOLY?Robert Albon and Greg Lindsay (eds)

Contributions byMichael Aitken, Don Anderson, Ray Ball,

Christopher Findlay, John Logan, Frank Milne,John Nieuwenhuysen, R. R. Officer

Gary Sturgess, Peter Swan, David Williams,Marina Williams-Wynn

CIS$8.95 per copy. P.O. Box 92(90c postage)

St. Leonards, N.S.W. 2065.


Left-Pack Journalismby Peter Samuel

Journalists are typically portrayed as independently minded individuals who pursuetheir stories without fear or favour. U.S. research suggests the image is not quitematched by reality.

# #Jeanne Kirkpatrick, the outstanding

intellectual of the Reagan Adminis-tration, recently asked rhetorically: "Candemocratic governments survive thesystematic and unsystematic distortion ofpolitical reality by the press, radio andtelevision? .... Great concentrations ofpower in the media are as dangerous tohuman freedom as are greatconcentrations of power ingovernments". (Encounter magazine,November, 1983).

The great concentration of power in theAmerican media (perhaps in the Westernmedia more generally) is not aconcentration of ownership but aconcentration of ideology. Among thosewho work in the media there is awidespread and deep attachment to a left-of-centre ideology, deeply sceptical aboutconservative values, democraticinstitutions, free markets, the family andthe rule of law and prepared to give thebenefit of doubt to revolutionists,reformists, utopians, left terrorists andcommunists.

Concentration of power inthe U.S. media is not a resultof ownership but ideology.

I'm all for scepticism. Free journalistsmust be sceptical and there will always betension between governments andjournalists because it is theirresponsibility to ask awkward questions

and report the truth stripped as clean aspossible of the euphemisms andrationalizations in which officials willoften suspend their professionalscepticism when dealing with the left.

For example, in reporting the Lebanonwar journalists uncritically accepted andreported day after day PLO-compilednumbers of supposed civilian casualitiescaused by the Israeli invasion. (FrankGervasi, "Media Coverage: The War inLebanon", Centre for InternationalSecurity, 905 16th NW, Washington DC).In El Salvador they uncritically reportnumbers of right wing "death squad"killings as compiled by liberation-theology Catholic organisations that areclearly pro-communist (see David Asman,Wall Street Journal, February 10 —"Behind the Human Right Tallies"). Inthe downing of the KAL airliner, theywere all too ready to report, in a waywhich gave credibility, the Sovietsuggestion that it mistook the Koreanjumbo for a much smaller, differentshaped and darkened US spyplane. Aformer Soviet air-defence radar operatorwas resident in the US and willing to givethe lie to this, but was shunned. (ArmedForces Journal, March, 1984).Rainbow of political viewpoints

A pluralist society deserves a pluralistmedia in which reporters andcommentators reflect the rainbow ofpolitical viewpoints. They should mirrorthe various political viewpoints of the

IPA Review-Autumn 1984 51

community for which they are writing orbroadcasting roughly in proportion to therepresentation of those viewpoints.Presently the media is patentlyunrepresentative, practising an elitistpack-leftism. That is quite simply becauseof the leftist convictions of theoverwhelming majority of the staff ofmedia organisations. That fact is welldocumented by the large study of eliteopinions conducted by Robert Lichterand Stanley Rothman under the auspicesof the Research Institute on InternationalChange, Columbia University. The resultsof 24 hour-long interviews with a sampleof journalists and broadcastersresponsible for news content at "the mostinfluential media outlets" in the USA arereported in "Public Opinion" journal,October/November 1981.

Amongst those who work inthe media there is a wide-spread and deep attachmentto a left-of-centre ideology.

No wonder the public is subjected toleft-pack journalism!

The "media elite" as described in theLichter-Rothman study never voted morethan 19 percent for a Republicancandidate and voted between 81 percentand 94 percent for Democrat candidatesin the last four presidential elections! Asthe study reports: "Over the entire sixteenyear period, less than one-fifth of themedia elite supported any Republicancandidate. In an era when presidentalelections are often settled by a swing voteof 5 to 10 percent, the Democratic marginamong elite journalists has been 30 to 50percent (points) greater than among theentire electorate.".

American journalists are politicallyunrepresentative.

They are also arrogant. They invoke theFirst Amendment of the US Constitutionto assert their right not only to freedomfrom censorship and control, but to asserta right to unlimited access andinformation. They falsely claim the presshas some constitutional right toaccompany US military forces onoperations and that governmentinformation cannot legitimately bewithheld from the press and generalpublic — that government has no right tosecrecy.Grenada Mission

The Grenada mission in late October1983 was a fascinating case study. Nojournalists were allowed to land with USforces when they moved in to take thatisland from Cuban and local communistforces. Of course, journalists were rightto want to go along. They should want tobe there to report the action •for theirreaders and viewers. But they werecompletely wrong to assert that they had aconstitutional and historic right to bethere, as they did with virtual unanimity,reflecting once again the pack thinkingthat unfortunately pervades theprofession.

Historically, the press has always beenrestricted and often excluded fromcovering military operations. The mediawere simply displaying their ignorance ofthe history of their own profession, orwilfully misrepresenting it, when theyclaimed journalists have traditionally hadfree access on the battlefield. LesterKinsolving, a leading Washingtonjournalist, researched the history of theprofession's treatment in time of war andgives examples which shows there is aconsistent history of conflict betweenmilitary commanders and reporters andof restrictions by commanders onjournalists.


American journalists arepolitically unrepresentative.The historic examples of Mr.

Kinsolving are worth quoting _if onlybecause of the nice parallels they providewith current events: "As to the newsorganizations' operations, they appear tohave overlooked the battle of Vicksburg.That brought another delegation ofprotesting news leaders to the WhiteHouse 120 years ago. General WilliamSherman had not only prevented anyreporters from covering his flank attackon Vicksburg via the Yazoo River but heactually court-martialled one of the sixreporters who disobeyed this order,Thomas W. Knox age 28, the leading warcorrespondent of the New York Herald.Knox disobeyed Sherman's order byaccompanying the Yazoo expedition. Hisdispatches were intercepted by Sherman'ssoldiers ... Sherman summoned Knox,refuted most of the details of his story andsaid the reporter had not only disobeyedhis orders excluding reporters from thecombat zone but had also violated thearticles of war which required that allnews dispatched be submitted to thecommanding officer before being sent forpublication.

Knox who was a large and sarcasticNew Englander known to his colleaguesas `the elephant' replied with a smirk:`You are regarded as the enemy in our setand we must in self-defense write youdown'. Knox then travelled to Cairo,Illinois where he filed the interceptedstory which was picked up by a number ofadditional newspapers. His graphicdescription of the casualty rate gave greatcomfort to the Confederacy and spreadgloom in the north. On Sherman's orderKnox was promptly arrested, jailed andtried by court-martial and found guilty,

but much to Sherman's disgust since thegenerals wanted Knox hanged, he wassimply ordered out of the war zone..."(tape-recording of Kinsolving).Press self-righteousness

Kinsolving cites many examples ofcases where journalists have beenaccused, and often justifiably, of actingas enemy agents, and have been excludedfrom the battlefield.

The public are not fooled by press self-righteousness. In Grenada the noise ofjournalists grinding their own axes waseasily discerned by the American public.The commentator John Chancellor whodid an editorial on the NBC televisionnetwork . complaining about the exclusionof the press from the Grenada landingsaid the phone calls afterwards ranagainst him five to one. The tradepublication, "Editor and Publisher",found in a survey of daily newspapers thatletters ran three to one in support of theReagan Administration's exclusion of thepress.

There is a need to recruitjournalists who reject thepack leftism presently sopervasive.

Max Frankel, editorial page editor ofthe "New York Times," remarked thatmany of the public thought the journalistswanted to go in to Grenada "to sabotagethe operation rather than to report it".

If the current low standing of the mediain Western countries is to be raised thenproprietors, managers and editors need tocome to terms with the bias of most oftheir staffs and to embark on a long-termeffort to recruit and cultivate journalistswho reject the pack-leftism currently sopervasive.


Mr. Hawke and Media Managementby Michelle Grattan *

Mr. Hawke and his Government have developed the techniques of media managementto new levels of sophistication. A noted political journalist, Michelle Grattan, hasanalysed some of these techniques.

Everyone acknowledges Bob Hawke's further independent information, so

enormous skills as a communicator. Less maximising the chances of having the

has been said about how Mr. Hawke has story presented as they want it.

transformed the relationship between the I'm not talking here about "leaks", but

Prime Minister and the journalists whose rather the reporting of Prime Ministerial

job it is to report and comment on the stories such as, for example, Mr. Hawke'sFederal Government. Yet that is one of

his important achievements in his first steel initiative.year. It is one which makes harder acritical analysis of his Government.

Mr. Hawke has brought order andstructure into leader-media contact. Histechniques are in complete contrast tothose of his predecessor, Malcolm Fraser— and much more effective.

No one who spent any time around Mr.Fraser would say he believed in opengovernment, or was philosophicallycommitted to giving journalists muchaccess or information.

Thi, Hawke entouragebelieves in the centralisationof information.

But at least in the latter stages of hisGovernment he was unable to control the"gates" of information.Contrast with Mr. Fraser

Mr. Hawke volunteers moreinformation and he makes sure it isinfinitely better packaged than did Mr.Fraser. On the other hand, in manyinstances his "gatekeepers" are moreskilled at ensuring it is difficult to get• "The Age" has given permission to reprint this article which appeared in its 20th February edition.

indeed, the recent Hawke trip is a niceillustration of the Hawke media style -- astyle seen in its purist form when PM andjournalists are together in a VIP planeoverseas.

When abroad Mr. Hawke gives morePress conferences than did Mr. Fraser,who also talked extensively to the mediawhen travelling but often on anunattributable "background" basis.

Mr. Hawke's best medium is televisionand he is highly sensitive to its needs. InSingapore, he wanted to break his talkswith Lee Kuan Yew between the, one-to-one and all-in (officials present) sessionsbecause he knew television needed anearly "grab" to meet its satellite deadline.

With Mr. Hawke, what you see ontelevision is about what you would havegot if you had been there on the ground orin the VIP plane — minus a bit ofsporting and social chit chat.

When travelling, Mr. Fraser would, ifpressed when talking to journalists at theback of the plane, launch into extensive ifconvoluted discussion about whatever


issues were on his mind or on theitinerary.

Mr. Hawke will usually resist talkingabout substance in these informalsessions; he prefers to keep it light andbright.

Further, the Fraser staffers on trips(and at home) were more willing to argueabout the propositions their leader wasputting, seeking to explain or rebut mediacriticisms.Centralisation of information

The Hawke entourage believes in thecentralisation of information. Presssecretary, Geoff Walsh, ex-'Sun', Àge'and 'Financial Review' journalist whowent to Mr. Hawke during the electioncampaign from the ALP Secretariat, is adiligent "gatekeeper". The travellingexperts, whether staff or bureaucrats,brief the Press under his eye, or the eye ofPeter Barron, Mr. Hawke's adviser onpolitics, including the politics ofcontrolling the media.

The media have voluntarilyrelinquished the right itinsisted on with Mr. Fraser:to question him anywhere,about anything.

Question the staff outside formalframework and two things are obvious.They are highly cautious and they are alsoinclined to report back to the Presssecretary who is likely to contact thereporter.

The advantage of centralisinginformation as much as possible isobvious when you look at the reporting ofthe steel initiative.

One reason why the travelling mediahas difficulty in taking that at other than

face value was because of the limitedinformation available on the spot.

Of course, even the best gate-keepercannot always stop things getting a littleout of hand, as with the reports that Mr.Hawke was conceding thousands of jobswould be lost in restructuring. That time,Mr. Hawke probably suffered rather thangained by not backing up his publiccomments with more private briefing.

At home, one of Mr. Hawke'ssignificant media achievements has beento get rid of the "gutter" interview.

As soon as he won office, he said hewould hold regular Press conferences butwould not be bailed up at doorsteps. Itwas a move welcomed by the print media(who had often criticised Mr. Fraser forhaving gutter interviews but refusing tohave full Press conferences). Sometelevision journalists, especially LaurieOakes, had more doubts and, inretrospect, they were right.Press conferences

Mr. Hawke has kept his word onregular Press conferences. But hedetermines the time of these and, as theyare often about set events and statements,he starts with the advantage. Byacquiescing in the abolition of the gutterstop, the media have voluntarilyrelinquished the right it insisted on withMr. Fraser; to question him anywhere,about anything, leaving him with thealternative of answering or being seen, infront of the TV cameras, to refuse toanswer. If reporters try to "doorstep"Mr. Hawke he simply says: "You knowthe rules".

Bob Hawke brings some psychologicaltechniques to bear in managing the media:they derive from the different facets of hiscomplex personality.


Journalists like to be likedby Mr. Hawke and he seeksto absorb them into hisconsensus.

He is a man of extremes; immenselywarm and charming and, not to put toofine a point on it, rather a bully (hisadvisers have worked hard to subdue thislatter trait).

Journalists like to be liked by Mr.Hawke and he seeks to absorb them intohis "consensus". (He was very impressedin Japan to be told of the role of themedia in promoting industrydevelopment).

A slap-down by Mr. Fraser was almosta compliment; the same treatment hurtswhen meted out by Mr. Hawke.

Mr. Hawke, who will tell you howbadly the Canberra Press gallerycompares with the Melbourne industrialroundsmen of his day, is trying to createthe same relationship in Canberra as hehad with his industrial reporters.

To the extent he succeeds, his opinionof the Canberra journalists will no doubtrise. But the national media will alwaysremain somewhat more elusive, becauseCanberra is a big pond in which he is butthe largest of quite a few fish.

Mr. Hawke uses intimacy, or theappearance of it, and his approval, or thewithholding of it, as tools.Need for distance

Take names. At Press conferences, hewill often repeat a questioner's name as asubtle sign of approval (as well as giving

the more overt sign of complimentingpeople on questions). In privateconversations he uses the nicknames hisstaff have given several journalists:"Butch", "Maccers". In Korea, in arecorded Press conference, he said"Butch" instead of "Barrie".

(Bill Hayden sometimes uses "Mr." or"Miss" to signal disapproval and createdistance or, more neutrally, to show thereis a certain formality in the Minister-journalist relationship. In contrast, whenPaul Keating uses a questioner's name ata Press conference, there are noovertones).

It was all a lot easier whenthe Prime Minister and themedia enjoyed a healthy andovert dislike for each other.

None of the above points are made incriticism of Mr. Hawke. The ability tomanage and manipulate the media is oneof the most valuable skills a politician canacquire. Bob Hawke has that skill 'inabundance. It is not surprising if he takesevery advantage of it.

The point is: the journalist's trade is aquite different one with requirementsoften at odds with those of the politicians.It involves critical analysis which does notjust degenerate into criticism for the sakeof it, often a fine line. It calls for thepreservation of some distance.

It was all a lot easier when the PrimeMinister and media enjoyed a healthy andovert dislike for each other, and the PrimeMinister was not so good at the game.


IPA CouncilsVICTORIA'SIR JAMES BALDERSTONE,(President and ChairmanExecutive Committee)SIR WILFRED BROOKES,C.B.E.. D.S.O. (Past President)

'HUGH N. MORGAN, (Treasurer)F.M. BETHWAITEJ.D. BOOTHM.D. BRIDGLANDSIR LAURENCE BRODIE-HALL,C.M.G.D.J. BRYDOND.R. BUNNEYJ.A. CALVERT-JONEST. MARCUS CLARKSIR PETER DERHAMJ.D. ELLIOTTD.L. ELSUM

'SIR FRANK ESPIE, O.B.E.SIR JAMES FOOTSA. GIBSONC.B. GOODER. KEVAN GOSPERSIR ANDREW GRIM WADE, C.B.E.J.A. HANCOCK.O.B.E.D.M. HOCKINGSIR JOHN HOLLANDR.J. HORNSBYJ.A. LECKEYSIR ERIC McCLINTOCK

,DENYS I. McCULLOUGHJ.A. McINTOSHSIR JAMES McNEILL, C.B.E.W.D. McPHERSONL.J. MANGANJ.L. NAVE

'G.M.-NIALLHI LTON J. NICHOLAS, O.B.E.SIR IAN POTTERJ.W.R. PRATTN.E. RENTONP.1). RITCHIENORMAN N. ROBERTSON, C.B.E.

"PROFESSOR JOHN ROSENORMAN W. SAVAGE, A.M.R.A. SIMPSONJ.H. VALDER, C.B.E.

"THE HON. VERNON WILCOX,C.B.E. , Q.C.

•E.recurive Committee

'SIR ERIC McCLINTOCK (President)' H.M. ANDERSONJ.N. BARBER1. BOOTH

"J.W. BUTTERSJ.R. CADWALLADERJ.G. CAMPBELLD.M. CARMENTR.L. DEAN, C.B.E.SIR NOEL FOLEY, C.B.E.J.R. HARROWELLPROFESSOR W. HOGANW.J. HOLCROFT, A.O.L. HOLLINGSA.S. McLELLANDR.P. MEAGHER, Q.C.W.P. NICHOLASM.T. SANDOW

Management Committee

QUEENSLAND'SIR JAMES FOOTS, (President)J.A. MILLS(Chairman Executive Committee)J.L. AMIES. C.B.E. E.D.SIR JAMES BALDERSTONESIR CHARLES BARTON,O.B.E., E.D.MALCOLM BLAIKIESIR THEODOR BRAY. C.B.E.J.F.S. BROWN, A.O., M.C.RAY BROWNPROFESSOR A.A. BROWNLEAI.G. CAMERONR. DONALDSON,K.H. DREDGEPAUL DUBOIS A.M.

'LM. DYMOCKDR. A.M. FRASER

•GERRY GAI.LAGHERPROFESSOR R.C. GATES, A.O.CLYDE GILMOURNEIL D. GOLDSMITHP.J. GOLDSTON, A.O.R.H. GOUGH

NEIL M. GO W, C.M.G.H.A. GRIFFITHSDR. R.S. GYNTHERK.H. HAFFENDENTHE HON. MR. JUSTICE HOARE,C.M.G.'TED HOOKJ.K. HOWES. O.B.E.DR. W.L. HUGHES, C.B.E.WARREN HYNERICHARD JOELL.T. KNEVITT, C.M.G.

'PAUL LEESIR ERIC McCLINTOCKSIR ROBERT MATHERSA.L. MOROKOFFA.M. MURRELL

'J.C. MYERS'NEIL NICKLASONPROFESSOR D.J. NICKLINR.J.C. O'LOAN, C.B.E.KEVINO'SHEAL.T. PADMANW.A. PALMERWARWICK PARERW.A. PARK, C.B.E.W. HUNTER PERKINS

'SIR RODERICK PROCTOR, M.B.E.J.C. ROMERR.R. RUSSELLRAY SADLERNORMAN W. SAVAGE, A.M.THE HON. SIR REGINALDSWARTZ, K.B.E., E.D.

`PATIENCE THOMS, O.B.E.JOHN TOPLEYB.D. WATSON

•E.recutive Committee

INSTITUTE OF PUBLIC AFFAIRS, 3 William St., Melbourne. Tel: 61 2029

CL%j1^NAU5 RA^7_ by Sands Mc McDougall (A.ta Pty. Ltd. — May 1984

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INSTITUTE OF PUBLIC AFFAIRS Review - IPA