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Just found this out today (wish I knew about frequent flyer gazette before). I think their euphemism is points dilution!!!
Anyway I've logged a complaint with Westpac as the Altitude people wouldn't even talk about it with me.
Having just had $560 devalued to $500 I'm quite annoyed.
I guess they only do it because they know they can get away with it. Personally I haven't forgotten the Ansett Rewards debacle, so unless I get my bucks back next week, I shall be stopping at one of the myriad non Altitude booths at the airport and changing all my accounts.