The truth behind the Australian Government forcing NW out of the market is that NW went against the "spirit" of the agreement which was reached when they were granted approval to operate via Osaka to Sydney. It was stated that they were not to carry more than 50% of the their loads in Japan originating traffic, and at different times (when checks were done), NW was found to be carrying up to 85% Osaka-Sydney traffic. With load factors of 85% from Osaka-Sydney it was obvious that passengers did not want to fly to the US via Japan. Although this may have been a political decision, it is also very much an economic one for the Australian and Japanese carriers, who have for years fostered traffic on the Japan-Australia route, only to have an American carrier step in to try and steal this business away from them. The US government tried to threaten QF with scaling back their route authority into LAX, but QF and the Australian government did not budge, and in the end NW gave up their unwinnable fight and stop all services to Australia.
Also, add to this:
At the time of this uproar over NW breaching the spirit of the agreement, the Prime Minister here in Australia was Paul Keating. It just so happens that his sister, Anne Keating, was the Australian regional manager for a major airline, and that airline was none other than United Airlines. There were rumours in the industry at the time that Anne was also putting pressure on the government to pull up NW, and her job was made all the more easier because her brother was the Prime Minister. But of course, these were only rumours, but as the saying goes, there is also some degree of truth in a rumour, but we will probably never know if it is 100% true or not.