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The term Pom (short for Pommy), which has muddled origins, is an alternative name for British people used primarily in Australia, New Zealand, and South Africa. Some still consider it an offensive word, but technically, it's no longer derogatory. The unofficial demonym was ruled unoffensive by the Australian Advertising Standards Board in 2006 and by the New Zealand Broadcasting Standards Authority in 2010 . But does that mean it's still okay to use? Because it has many contested etymologies, I'd say yes. How can you say a word is offensive without even knowing it's origin?
Either way, news of the Australians' amusingly-named mission has already reached Great Britain's Olympic team, and it seems to be doing the trick of riling them up. The chairman of the British Olympic Association, Lord Moynihan, isn't exactly offended, saying, "“I think the competitive banter we have between us and the competitiveness is absolutely brilliant. It makes the Games.”  However, he has since made a bet with his Australian counterpart, John Coates, on who will finish the 2012 games with more medals. The stakes? A magnum of champagne for however many more gold medals the victor wins.
I'm personally looking forward to a battle of both wits and athletics between the two Olympic teams. Let the games begin!