by Professor Clinton Fernandes, UNSW Canberra.
MUA Hall, 46-54 Ireland St, West Melbourne.
28 November 2019
15 minutes. 15 minutes is all it took, and the effect has reverberated through Australian history 165 years later. Up to 40 miners were killed in the assault on the Eureka stockade, along with one officer and four soldiers.
The Eureka rebellion has become a formative event in the national mythology. For some, it’s a democratic uprising against imperial authority. For organized workers, it’s the first great event in the emergence of the labour movement. For others, it’s a tax revolt by small business. But however we interpret it, it’s clear that it was about class. As David Hosking sings in “Backbone River”, “You’re put in your place while [another group] wins the race without running … So at Bakery Hill, they said it’s either be killed or be mastered.”
It’s a mistake to think the people in Ballarat in the 1850s were more independent minded than Australians are today. One future Conservative prime minister of Great Britain was “aghast” at the “submissiveness” he sometimes encountered on the goldfields. The legend of the independent, free-thinking Australian mind puzzled observers, who saw plenty of evidence of “spineless timidity in the face of authority.”
Eureka showed that mindsets can change under the right circumstances.
Since I’ve been asked to speak on the theme of Australian independence, I thought some background would be in order, so we can understand a few distinctive aspects of our national character.
For more than 150 years, Australia lacked the diverse European populations that entered North America or other New World lands. There were no French, as in Canada, no Spanish, as in South America, no Portuguese, as in Brazil, no Dutch, as in South Africa. Since Australia was so far away from Western Europe, Europeans found it cheaper and easier to emigrate to North America than to Australia. The Australian population was almost exclusively of British stock – understandably, since the high cost of travel meant that immigration had to be fully subsidized, and the British government naturally preferred to pay for British migrants only. Assisted immigration built the Australian population for most of its history, and far more Australians are descended from assisted immigrants than from convicts. Britain also – naturally – paid for the transportation of British and Irish convicts, about 160,000 of whom came to Australia from 1788-1868. This settlement pattern made Australia the second most English country in the world – a demographic fact that holds true even in the early years of the 21stcentury. (The first is the United Kingdom, obviously!)
This settlement pattern had exceptional consequences. The British and Australian governments regulated conditions on board the migrant ships. Assisted migrants expected a minimum standard of food and medical care on board the ships, as well as living conditions when they arrived. When the economy slowed down, they expected the government to provide work for them. The government also reduced or stopped assisted immigration during difficult economic times. This distinctive scheme encouraged migrants to expect an interventionist government responsive to their needs. Governments in Victoria and New South Wales built and operated the railways, unlike in the UK or the US, where private companies operated most railways. At the end of the 19th century, the biggest firms in Australia were government-owned railways, whose workforces and revenues were much bigger than those of the mining, manufacturing and financial companies. Australian government railways offered their employees world-beating employment conditions, and even provided work for the unemployed during recessions, in line with government policy.
Australian unions formed one of the earliest and most electorally powerful labor parties in the world. Australia has a state broadcasting corporation funded by general taxation – the ABC – and a massive compulsory saving scheme – our superannuation – secured through workplace relations law. We tax tobacco higher than almost anywhere else. Our minimum wages are relatively high compared with the United States. In fact,many Australians prefer to see people out of work rather than in extremely low-paid jobs. There’s a continuing aversion to reducing minimum wages and penalty rates. In 2018, just six per cent of Australians had a net worth of less than US$10,000 – in contrast with 28% in the USA, which is also a rare example of a developed country without a statutory entitlement to annual leave.
Australian unions fought for and won benefits for society as a whole, unlike in the USA, where unions won benefits like health insurance from the company that employed them. And when the company folded or moved overseas, American workers lost their benefits. The wider society had little stake in defending them.
What explains this difference? After all, Australia and the USA have similar New World characteristics, both suffered heavily under the economic depression of the 1890s, and both experienced major industrial confrontations in which governments backed the employers and helped defeat the unions. formed one of the earliest and most electorally powerful labor parties in the world.
One scholar suggested three factors in America that explain the difference: the unusual level of anti-union repression, the political importance of religion, and socialist sectarianism.
Repression was much more severe in the United States. It seriously damaged or destroyed the unions’ organizational base. The U.S. has an unusually violent labor history, with hundreds killed and untold thousands seriously injured in labor disputes. Many employers hired their own mercenaries and spies to crush unions, and many others outsourced these services to a thriving labor espionage industry.
Religion too, has been a much more prominent factor in the United States than in Australia. Australia did not create any home-grown religions such as Mormonism, Seventh-Day Adventism and Christian Science. For a long time there were comparatively few evangelical churches, unlike those that prospered in the USA. Australian churches were largely Protestant with a large Irish Catholic minority. The Church Act of 1836 established equitable funding for Catholic and Protestant denominations. Party loyalties in Australia were based on economic differences such as those between free traders and protectionists.
European socialism, especially the ideas of Karl Marx and Ferdinand Lassalle, had little influence in Australia, unlike in the U.S., where various groups engaged in heated and destructive conflict in the 19th century.
Great Britain colonized Australia when it was the greatest imperial power on earth. Australia thus began its existence on the winning side of a worldwide confrontation described variously as Europe against the Third World, imperialism versus anti-colonialism, developed versus developing countries, and so on. The settlers understood from the very beginning that they benefited from the strength of the Empire. They preferred the British Empire to any other, and sided with European rule over Asian colonies rather than any campaign for freedom or national liberation there.
The organizing principle of Australian foreign policy is to stay on the winning side of the global contest – a principle now receiving heightened attention in context of US-China relations.
The Eureka Stockade quickened the movement towards popular control of Victoria’s new parliament. Victoria’s mining and tax laws were rewritten. Previously, diggers were allotted a very small claim size, eight feet by eight feet. They had to pay up front for a miner’s licence and renew it every month, regardless of whether they discovered any gold.
After Eureka, there was a tax on gold exports: if you dug no gold you paid no tax. The levy fell on successful miners (and then only indirectly) rather than everyone at work on the diggings. And it was imposed at an administratively convenient point – in the shipping of the product.
Eureka thus established a risk-reward nexus.
I want to contrast the risk-reward policy after Eureka with a completely different policy today.
Today, the Australian public bears the costs and risks of investment whilst the benefits accrue disproportionately to small groups in control of vast concentrations of wealth and influence.
Beginning in December 1970, taxpayers paid for underwater scientific explorations of Australia’s offshore geology. Geoscience Australia, then known as the Bureau of Mineral Resources, Geology and Geophysics, conducted these surveys at considerable cost – and more importantly, it took on the risk of surveying because no private enterprise is willing to do that.
A specially designed ship traversed nearly 100,000 nautical miles in waters between 50 meters and 4,500 meters deep. It measured variations in the Earth’s magnetic field, thus allowing iron-rich objects to be detected. It also measured variations in the earth’s gravitational field. It took seismic soundings to measure water depths. The surveys revealed Australia’s underwater structure: the locations of rifts, faults, basins, and other features.
The surveys were the biggest single systematic marine surveys ever done anywhere in the world, collecting geo-scientific data covering almost 200,000 square km. Geoscience Australia, as it is known today, went from knowing almost nothing about the offshore features – not even what kind of features existed – to having a good idea of where the underwater plateaus, terraces, trenches, canyons and other features were located, what their dimensions were, where they were steep and where shallow, and how they were all organized together offshore. Many years of data processing took place after the surveys.
It soon became clear that most of Australia’s oil and gas reserves lay offshore in the seabed under the waters.
Taxpayers paid for even more surveys after that. Another specially designed ship conducted these surveys. The ship had advanced geophysical equipment and advanced navigation instruments including the first Global Positioning System ever installed on an Australian or Australian-chartered ship. Its air compressors, air gun arrays and seismic streamer reels occupied 342 square meters of space over three decks. Heavy geological equipment was also on board, such as a large coring and dredging winch containing ten kilometers of wire rope with a breaking strain of over 20 tons. This winch was the largest of its kind on an Australian ship and allowed rock and sediment samples to be taken from the deepest part of the seafloor around Australia. The geological equipment and laboratories occupied 170 square meters of space over three decks. The machinery wasn’t the only aspect of the project. Seismic data collection was a continuous, 24-hour operation from 20 to about 40 days. Three shifts of two technical officers monitored navigational and seismic acquisition. Two shifts of two engineering technical officers maintained air guns and compressors. An electronic specialist maintained the hardware, and two systems geophysicists on 12-hour call ensured data quality control. Five additional scientific crew were involved, as were experts in micropaleontology, geochemistry, heat flow, and side-scan sonar.
Now here’s what the federal government did with all that taxpayer-funded data. It handed it over to private companies for a pittance.
This was during Bob Hawke’s time as Prime Minister.
According to the Cabinet Minutes of March 22, 1988, the Treasury Department objected to all this valuable information being given away. It asked why “the Government should be willing to accept higher risks than the industry which primarily stands to benefit from any success.” It pointed out that “market failure in the petroleum exploration industry has not been demonstrated. At the least, increased industry participation in the program is warranted, and this would be best achieved by a much more substantial level of cost recovery.”
These concerns, expressed in 1988, had been a running sore in the 1970s, when economist Tom Fitzgerald concluded in a report to the Minister for Minerals and Energy that the government subsidies to the mining companies were more than they paid in tax. In the 1974 election campaign, Prime Minister Whitlam used the report to argue that Australia was “paying to be exploited.” He introduced tax changes for mining companies after his narrow election victory. But his defeat in 1975 saw the Fraser government roll these changes back, and a pro-corporate, low taxing approach was entrenched.
The Finance Department also spoke up, saying it was “concerned at the lack of visible evidence of industry participation in the CMP.” In particular, it said, a “level of cost recovery well in excess of the five percent of program costs” was warranted. It was not as though the offshore exploration sector suffered from too much competition. On the contrary, the Finance Department argued, there was a “high level of industry concentration in offshore exploration” and this small sector would derive “significant benefits promised by the CMP in reducing exploration risks.”
But the government had made up its mind.
As with so much else in Australia, the public paid for the foundational work, and large private companies benefitted from the resulting opportunities. While the public absorbed the costs and – crucially – the risks – of investment in fundamental research, the corporate sector stood to benefit from the energy riches in the continental shelf. In reality, this meant that a tiny minority of people in control of huge concentrations of capital were able to set up the North West Shelf Gas Project off the coast of Western Australia, near the Pilbara town of Karratha. On September 4, 1984, West Australian premier Brian Burke formally opened the $27 billion Project, which was operated by a then little-known company called Woodside Petroleum. It began exporting liquefied natural gas (LNG) in 1989. The Project has today become one of the largest LNG producers in the world. Woodside has become Australia’s largest stand-alone oil and gas company, and one of the top 20 stocks in the Australian Stock Exchange (ASX) by market capitalization.
The Australian government deployed the full weight of its diplomatic, legal and scientific assets over decades to secure massive benefits for Woodside’s shareholders. The most important factors in Woodside’s success, its founding chairman later reminisced, were the exploration licenses for the North West Shelf and keeping the company in Australian hands. In return, according to Woodside’s own calculations in February 2017, the government received approximately $26 billion in royalties, excise and taxes from the North West Shelf Project since it began in 1984.
The Road Not Taken
By contrast, Norway made better use of the oil and gas in its continental shelf. The Norwegian government owns two-thirds of the shares in Equinor, formerly known as the Norwegian State Oil Company. Equinor’s workers elect three of the 11 directors. The Norwegian government created the Government Pension Fund Global in 1990 to invest Norway’s oil revenue. The Ministry of Finance owns the fund on behalf of the Norwegian people, and determines its investment strategy. The Fund had more than 9 billion kroner (almost $1.5 trillion Australian dollars) in 2019. This was a handsome investment for a country with less than six million people.
The Commonwealth should have insisted on equity in the North West Shelf Project at the very beginning, when share prices were affordable.
It could have insisted on income-contingent subsidies in the same way that Australian students are required to pay back their university fees once their incomes exceed some amount.
It could have insisted on a golden share of any intellectual property arising from the project over its lifetime. These alternatives would reward inventors whilst also giving society some additional benefits.
The above discussion of geoscience and state subsidy is not merely of historical interest. It is very much an ongoing activity. Take a look at the economics of Geoscience Australia’s work in the central North West Shelf. Known as the Dorado petroleum system, it comprises an area bigger than the Grand Canyon, all of it underwater. Geoscience Australia’s work has revealed vital new insights into the region’s structural architecture and hydrocarbon potential, with immense significance for hydrocarbon exploration, extraction and profits. It constitutes another massive public subsidy on the part of the taxpayers.
To reiterate: the risk absorbed by the taxpayer is more important than the cost.
You may have heard about the prosecution of Bernard Collaery and Witness K, scheduled for 2020. It appears that the government’s use of our intelligence services for corporate commercial benefit runs parallel to its use of geoscientific surveys for similar outcomes.
Another point on independence, just to conclude.
When U.S. President Donald Trump won the November 2016 election, he made a victory speech promising to rebuild America’s infrastructure. That speech sent the price of iron ore soaring to US$75 a ton – double the price at the start of 2016.
Companies like BHP Billiton and Rio Tinto stood to benefit hugely.
Little wonder, then, that infrastructure was a high-priority item on Prime Minister Turnbull’s agenda in his February 2018 meeting with President Trump. Turnbull offered some of Australia’s superannuation pool to fund Trump’s infrastructure plan.
You might think we should use our superannuation funds to build our own infrastructure.
But some of our major companies are in fact US-owned.
BHP Billiton is about 73% owned by American-based investors. Australian-based investors own less than 10 per cent of it.
Rio Tinto is about 65% owned by American-based investors. Australian-based investors own about 12% of it.
In the past decade, $14 billion in Australian super funds have been invested in US infrastructure: the Indiana Toll Road, LNG terminals, parking garages.
Can you think of infrastructure projects in Australia where some of the A$3.3 trillion in superannuation funds can invest?
Infrastructure Australia has published its Infrastructure Priority List for 2019. It lists eight High Priority Projects. Here they are:
In Victoria: the M80 Ring Road upgrade, the Monash Freeway upgrade Stage 2, and the North East Link to connect M80 and M3.
In NSW: the M4 Motorway upgrade, the Sydney Metro city and southwest (rail), and Western Sydney airport (aviation).
In QLD: Brisbane metro (public transport network).
In Western Australia: the Metronet Yanchep Rail Extension.
The locations are understandable because economic activity in Sydney and Melbourne together accounted for 53% of national growth in 2018.
40% of our population is in Sydney and Melbourne. Apart from city-states like Singapore and Monaco, Australia is the most urbanized country on earth.
But what about the projects themselves? Are there better things that should be built? Who decides? Independence means having our views reflected in policy, not replacing a flag or a queen.
As at June 2019, we were 57th in the world in broadband speed. Could this be improved?
By 2034, our population will be 31.4 million, a 23% increase. By 2040, 40% of cars will be electric, and they’ll have the potential to store electricity to a similar capacity as the proposed Snowy 2.0 scheme. Could infrastructure be built to speed the transition to renewable energy?
The Prime Minister has announced his intention to invest in transport infrastructure across Australia over the next decade. Will these be individual or collective transport solutions? Who will benefit from the contracts? Can the Australian government not obtain shares in companies that obtain these contracts? Just as with the geoscience and our offshore oil and gas wealth, the government can insist on equity in these companies. It can insist on more revenues as these companies incomes rise from collecting tolls and other payments, just as Australian students are required to pay back their university fees once their incomes exceed some amount. It can insist on a golden share of any intellectual property arising from these projects over their lifetime. These alternatives would reward inventors whilst also giving society some additional benefits.
Thank you for inviting me to address you.
Professor Clinton Fernandes
School of Humanities and Social Sciences
P.O. Box 7916
Canberra BC ACT 2610