The meaning of 'association'

In a decision that will intensify the debate over ‘activist’ judges, today in the Federal Court Justice Jeffrey Spender ruled that the decision by Immigration Minister Kevin Andrews to cancel the visa of Dr Mohammed Haneef was invalid.

Spender J ruled that s501 (6)(b) was incorrectly invoked by the minister when making his determination to cancel the Indian doctor’s 457 Visa. His Honour states that "the test which the Minister applied was not the test called for by s501 (6)(b). As a result of this misconception as to what the exercise of the statutory power entailed, there was a purported, but not a real exercise of the power conferred by s 501 (3)."

To help readers come to terms with the decision I have pasted the relevant section of the Migration Act below, and bolded the key sections. If you have more time on your hands you can read the full decision here.


As I write the government has announced that it will appeal the decision, so this will no doubt continue to be an issue right up until election day.

Section 501 of the Migration Act
Decision of Minister--natural justice does not apply
(3) The Minister may:
(a) refuse to grant a visa to a person; or
(b) cancel a visa that has been granted to a person;
if:
(c) the Minister reasonably suspects that the person does not pass the character test; and
(d) the Minister is satisfied that the refusal or cancellation is in the national interest.
(4) The power under subsection (3) may only be exercised by the Minister personally.
(5) The rules of natural justice, and the code of procedure set out in Subdivision AB of Division 3 of Part 2, do not apply to a decision under subsection (3).
Character test
(6) For the purposes of this section, a person does not pass the character test if:
(a) the person has a substantial criminal record (as defined by subsection (7)); or
(b) the person has or has had an association with someone else, or with a group or organisation, whom the Minister reasonably suspects has been or is involved in criminal conduct; or
(c) having regard to either or both of the following:
(i) the person's past and present criminal conduct;
(ii) the person's past and present general conduct;
the person is not of good character; or
(d) in the event the person were allowed to enter or to remain in Australia there is a significant risk that the person would:
(i) engage in criminal conduct in Australia; or
(ii) harass, molest, intimidate or stalk another person in Australia; or
(iii) vilify a segment of the Australian community; or
(iv) incite discord in the Australian community or in a segment of that community; or
(v) represent a danger to the Australian community or to a segment of that community, whether by way of being liable to become involved in activities that are disruptive to, or in violence threatening harm to, that community or segment, or in any other way.

Market Jitters

Contagion, Correction, Conflagration.

Call it what you will, the past week has been a shocker for market watchers and investors. Even my modest portfolio has taken an absolute pasting. (I wonder, is it still a portfolio if you only own one stock?) And, this week, as I braved the business pages to try and find out what the hell was happening to my nest of eggs, I noticed a number of references to the crash of 1987. While none of the commentators were suggesting that the current correction could be as bad as 87, I think it’s always good to have an understanding of what’s gone before you. Especially when money’s involved.

As a Berlin tour guide once told me as we stood in the shadow of the Brandenburg Gate, "History doesn’t repeat itself, but it very often echoes." With those words of wisdom ringing in my ears, I tried to find out what had happened during the crash of ‘87, and whether we can learn anything from it as we come to grips with the current correction.

In 1987 I was in year two at a little school in the centre of Adelaide. I prided myself on my basic arithmetic and monkey-bar agility - the business of the ASX was of no concern. Life was simple. Bob Hawke was Prime Minister of Australia, Paul Keating was his loyal treasurer (yeah right) and Carlton beat Hawthorn in the VFL grand final.

As with most trends in Australia, to understand the origins of the ‘87 crash we need to look to the US. The US economy had enjoyed unbridled growth in the lead up to the crash and by mid-August the Dow Jones Industrial Average (DJIA) had climbed above 2700 for the first time in its history.

The strong growth was partly due to generous tax concessions for the interest paid by companies on the debt incurred during mergers and acquisitions. Confused….you’re not alone. The tax breaks stimulated a flurry of takeover activity and speculation and share prices responded accordingly. A number of large pension funds had also invested in the market, putting even more upward pressure on prices. As a result of these stimuli, the price to earnings ratio widened markedly in the lead up to the ‘87 crash and left many analysts wondering if the market was overpriced.

One of the most prescient analysts at the time of the ‘87 crash was economic historian J.K Galbraith. Writing in the October 1987 edition of the Atlantic Monthly, Galbraith warned investors that a financial storm was brewing just over the horizon. "America has let its infrastructure crumble, its foreign markets decline, its productivity dwindle, its savings evaporate, and its budget and borrowing burgeon. And now the day of reckoning is at hand." He didn’t have to wait long for his doomsday prediction to come true. The ink was barely dry on his article when things started to unravel on the NYSE.

On October 14, the US House of Representatives announced that it was dropping the tax concessions associated with mergers and acquisitions. Investors who had been factoring continued takeover activity into their value estimates were all of a sudden thrown a curve ball by the federal government. In an instant, investors were forced to reassess the value of some of the Dow’s biggest stocks.

On the same day, the US Commerce Department announced that the August trade deficit figures were far worse than it had originally forecast. It was a combination punch that split the market’s eye and left investors with a bad case of double vision.

On the 16th the exodus began. The Dow Jones fell by 4.6% and international markets followed its lead. But worse was to come. As traders retreated to the relative safety of their homes for a much-needed weekend, the perfect financial storm continued to strengthen.

Monday the 19th will forever be remembered as Black Monday. As the market opened, huge selling pressure forced 95 S&P500 stocks to halt trading (about 30% of the total value of the index). The futures exchange continued to trade and the losses were significant. The trading system was overloaded by the demand and it became impossible for those on the floor of the NYSE to get up-to-date prices. At 1pm, news spread around the trading floor that the chairman of the SEC wanted to discuss the possibility of temporarily shutting the NYSE to try and stem the bleeding. The news only made things worse. By the end of the day the S&P500 had plunged a record 18%. The futures exchange had fared even worse, losing 29%. Click here to see a graphic representation of the crash.

So what was the Australian experience during October 1987? As Australian economist Andrew Charlton says, "when the US economy sneezes Australia catches a cold." This was certainly the case in ’87. Just like the US market, the All Ords had climbed to unprecedented levels prior to the crash. Deregulation had lead to a significant credit boom and commodity prices were lifted by the growth in the South East Asian economies. The market rose by 60% in the nine months before the crash and was loaded with debt. That’s not the case today, the fundamentals are stronger. The price to earning ratio of the current market is far healthier than it was prior to 87 and, despite the ongoing volatility, it looks like the bargain hunters are starting to put some upward pressure on prices again. That’s a good sign.