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Paradise lost -

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TRACY BOWDEN, PRESENTER: It's a slice of Australian territory 1,500 kilometres off the east coast,
but for decades Norfolk Island has had its own parliament with sovereign powers over immigration,
taxation, customs and quarantine.

A recent slump in tourist numbers has undercut the main source of revenue, forcing the island to
seek a bailout from the Federal Government worth almost $4 million.

The deal comes with strings attached that will see Islanders paying income tax for the first time
and giving them access to welfare benefits.

But some Norfolk Islanders are not so keen to surrender their independent status.

Greg Miskelly reports.

GREG MISKELLY, REPORTER: It's famous as a penal colony, a place of almost unthinkable brutality.
But today, Norfolk Island is a carefree and unique location, with its own laws and customs. It
flies its own flag and wearing seatbelts is optional, but waving 'G'day' at your neighbour is not.

It's always a place where paying income tax and rates is unheard of and livestock have right of way
on the road.

David Buffet is the island's Chief Minister and he's served in 12 previous assemblies since
self-rule began here in 1979, including four times as leader.

DAVID BUFFET, CHIEF MINISTER: Everyone who's experienced the global financial situation, and that
has not passed Norfolk Island by. We needed to take the initiative in this financial year and
reasonably early in this financial year and reasonably early in this financial year to be able to
survive this financial year. And that's dire.

GREG MISKELLY: Tourism is the lifeblood of this place, but in recent years the number of visitors
has dropped dramatically. So, in 2007, the local government took over financial control of the
island's struggling and unprofitable jet airline service, Norfolk Air.

DAVID BUFFET: We're running an airline because nobody else wants to run an airline to this place.
That's really it in a nutshell.

GREG MISKELLY: Late last year, a memo of understanding was signed between Norfolk Island and the
Commonwealth. In exchange for almost $4 million of emergency funding, a major reform process was
agreed to. Many Norfolk Islanders now feel betrayed by their own government.

RIC ROBINSON, SOCIETY OF PITCAIRN DESCENDANTS: You want the money, here's the trade-off, and that's
our self-government gone down the gurgler.

GREG MISKELLY: Ric Robinson is the community leader of the island's Pitcairn descendents. His
British and Tahitian ancestors first settled on Pitcairn Island after the famous mutiny on-board
Captain Bligh's Bounty.

RIC ROBINSON: All 193 people came here to live from Pitcairn. Since then, we've been recognised by
the UN as the Indigenous people of Norfolk Island. It's our homeland. And that's the part a lot of
Canberra people don't understand: it's our homeland.

GREG MISKELLY: In 1856, the islanders took up an invitation from Queen Victoria to inhabit Norfolk.
Every year they now pay tribute to their forebears on a public holiday known as 'Bounty Day'. It's
a close-knit community where traditions die hard.

Ric Robinson's wife is the acclaimed author Colleen McCullough. Born in Australia, she's called the
island home for 32 years.

COLLEEN MCCULLOUGH, AUTHOR: It's a kind of 30 pieces of silver situation, really, because the
amount of money concerned, the Australians'd spend on fireworks. ... They have these people
following them around with rolls of toilet paper and brown noses.

GREG MISKELLY: Next month, Simon Crean, the Minister for External Territories, plans to visit the
island. He can expect quite a reception.

COLLEEN MCCULLOUGH: He will be full of political zeal for political systems which are not suitable
for a 2,000 people on a speck in the middle of an infinity of ocean.

GREG MISKELLY: Local environmentalists say this open air tip is an example of where Norfolk Island
needs more modern solutions. Plastic rubbish and building waste are simply burnt and then just
dumped into the sea.

MIKE KING, LEADER OF THE OPPOSITION: The environment has been getting less and less allocation of
funds over the years, a very, very small proportion. We're burning toxic materials. We do not even
have the capacity to measure the extent to which we are polluting our waterways and our air. These
things have to change.

GREG MISKELLY: Mike King is the sole ALP member in the island's assembly and describes himself as
the Leader of the Opposition.

MIKE KING: No-one wants to pay income tax, but I think more people realise now that that's the only
solution available to us, the only progressive solution that is available to us.

GREG MISKELLY: It's one of the most remote communities in the world and one without a safe
anchorage. Using the 19th Century skills of their ancestors, everything, including cars and trucks,
is unloaded from a small supply vessel. It looks romantic, but there are huge costs.

ROBYN MENGHETTI, FARMER & RESTAURANTEUR: If you want to buy fresh milk, it's $7 a litre. If you
want to buy a kilo of yoghurt, which is a pot, $16. And yes, we don't pay tax, but we have a lot of
other levies and fees that we pay. The freight charges for example, just to bring goods here, are
just horrendous. And so the cost of our goods here are much more expensive than what you pay
anywhere else in the world.

GREG MISKELLY: Robyn Menghetti supplies her popular restaurant with pasture-fed beef bred on her
own property. Before she married a local farmer, Robin Menghetti served as the island's CEO and she
says the need for reform was apparent years ago.

ROBYN MENGHETTI: It's not like in Australia, if you've got a local council, they deal with rubbish
and roads. Here, we deal with rubbish, roads, immigration, customs, schools. You're talking about a
population of less than 2,000 being able to sustain all those services with a government
infrastructure which is horrendous in comparison to the size of the community. It all had to burst
at some stage, and I think that's what's happened.

GREG MISKELLY: At Kingston Pier, Archie Biggs and Les Quintal are speaking the Norfolk language, a
salty mix of 18th Century English and Tahitian.

Once hidden from outsiders, today it's being passed on in the island's school rooms.

LES QUINTAL, TOUR OPERATOR: We're culturally different and it is very important for us to have some
form of self-government. Australia's always been in the background. At the end of the day, we can't
live without Australia. So if we can work harmoniously together, I think that would be a fantastic
outcome. As an example, on my passport it says that I'm an Australian. I'm fine about that, but in
my heart I'm a Norfolk Islander.

GREG MISKELLY: At a sunset dinner for tourists, these local girls are performing the famous Tamure.
Next month, they'll be travelling to Tahiti, both to dance and explore their Polynesian heritage.

COLLEEN MCCULLOUGH: Norfolk Island's unique; there is no other place like it. There will always be
places that retain their own unique flavour. I would hate to see that go.

DAVID BUFFET: That's a danger that Norfolk Island will face in some of the ways ahead. I don't
share the view that it will be lost. It may mean that we need to work harder and fight harder for
its preservation, and encourage further, even amongst our own, that it is important and should be
preserved.

GREG MISKELLY: Locals talk of four different eras of settlement here, from the ancient Polynesians,
who seemingly came and left, to two harsh penal colonies, both eventually abandoned, to today's
independent community, founded by the Pitcairn Islanders more than 150 years ago. Many are
wondering if this current era is also coming to an end.

RIC ROBINSON: We're gonna lose our culture, and that's all mixed up with our way of life. And that
would be more than just sad, it'd be a calamity.

TRACY BOWDEN: Greg Miskelly reporting from Norfolk Island.