Berealgetreal:
Pilot A has been in the industry for 15 years with an unblemished record but is related to someone who is being watched by the authorities. Now what? Ultimately being related doesn't mean you are connected (quite the opposite in some families!). There are people at the airport today that are in this very situation.
I think the encryption issue is probably the quickest least expensive way to trap most of the problems and the government to its credit is trying on this front.
My dear Sir, I think you are just a tad naive.
"ultimately being related doesn't mean connected". I'm afraid it does in the eyes of the law. If you have a criminal acquaintance, and you have a clearance of some sort, any communication of any type with them must be reported.
What happens next can be "sorry son, we are removing you from operations, nothing personal against you but we cannot take the chance, etc." It is important to understand that such a decision is not arguable, appealable or subject to review because its 'operational". Your career is now in tatters. This threat has already been made to a relative.
Under such a scheme there will be no moslem pilots in Australia and no pilots with moslem friends or relations.
To put that another way; can't you just see the newspapers screaming: "Pilot of crashed aircraft knew Imam!".
As for encryption breaking - also a waste of time because you assume that 100% of communications will be scanned, which they won't and effectiveness isn't going to be 100% either.
What you don't understand as well is that the authorities are incapable of differentiating between a business related comment: "I'd like to put a bomb under Qantas" - meaning the speaker doesn't like their business model or customer service received but has no intention of violence, and someone with real terrorist intent. Furthermore the authorities are quite likely to confuse the two different intents when it suits them.