Dr SOUTHCOTT (6:50 PM) —In the debate already today we have heard the Leader of the Opposition (Mr Beazley) state his firm opposition to the privatisation of Telstra. An earlier Labor leader—and his mentor—Bob Hawke, in the 1985 Chifley lecture, asked the rhetorical question: what in the name of reason is the justification for breaking up and selling off the great and efficient national assets like the Commonwealth Bank, Telecom, TAA and Qantas? The Leader of the Opposition today sounded very much like Bob Hawke back in 1985. But Labor have some form on this. We know Labor's form. Within seven years, the Commonwealth Bank was sold, TAA was sold and Qantas was sold. The Labor Party have been all over the place on this issue.

This exchange occurred specifically regarding Telecom with Paul Keating in 1994 when he was on the Lateline program with Kerry O'Brien:

KERRY O'BRIEN : So it doesn't matter whether it's publicly owned or privately owned?

PAUL KEATING : Not of its essence, no.

KERRY O'BRIEN : Then why don't you sell it?

PAUL KEATING : Well, it depends what environment the Government has chosen. The Government has chosen to have Telecom in public ownership and to set up a competitive framework with a duopolist. Now, we're now considering where that duopoly goes after 1997.

The Labor Party have restated their commitment now to keep Telstra in public ownership. There was even some talk at the Labor Party conference of perhaps buying back the Telstra shares from the mums and dads who bought them. If the Labor Party is really committed to government ownership and to state ownership of government business enterprises, then what they should do is put up a policy motion at the ALP conference and propose to renationalise Telstra.

Then we would see the cost of what their policy is. At the moment, the dividends that we receive from Telstra are only half of what it costs us to service the debt of having Telstra in government hands. By privatising Telstra, we would be able to save something like $3 billion on our government debt and reduce our government debt by $40 billion. Historically, privately run firms have been more efficient than publicly run government business enterprises. That seems to be the general consensus and the evidence is in on that.

Government business enterprises have greatly improved their efficiency since the late 1970s—and I recognise that—but that was coming off a very low base. Organisations like Australia Post and Telecom were coming off a very low base in labour productivity and total factor productivity.

One of the problems has been the absence of commercial practice, the absence of incentives for managers and the fact that government business enterprises are not subject to the discipline of capital markets, shareholders or takeovers. There is no incentive in GBEs to minimise cost and no incentive to make a profit. The problem with the community service obligations is that up until recently they have largely been hidden. They have not been transparent at all.

There is no reason why you cannot have Telstra, privately run, owned by the private sector, owned by the mums and dads of Australia, and have community service obligations transparent and remove the cross-subsidies that already exist in Telstra. The United States has never had publicly owned phone companies, yet they manage to have community service obligations. People in the bush in America manage to get access to a phone.

The ALP also argues they want us to consider technology that has not been invented yet. This is an argument to keep Telstra in government hands, that we should keep it on the off chance there might be some technology that is invented in the future so people will be able to get access to that—the emerging and new technologies. As the Leader of the Opposition and also the former Minister for Communications and the Arts, the member for Dobell (Mr Lee), understand, legislation is already there that deals with emerging and new technologies and there is no problem in the future for this parliament to legislate for the private companies to provide these sorts of things if we are dealing with a privately run Telstra.

The community service obligations is a job for regulation. It is not something that requires us to own it to deliver it. Privatising Telstra would also give Telstra access to the capital markets to develop these technologies. Vining and Boardman in a 1989 study compared the performance of 500 firms, both private and government business enterprises. They found robust evidence that publicly owned enterprises are less profitable and less efficient than private corporations. I have already mentioned some of the advantages of privatising. The fact that we can reduce our government debt by $40 billion will reduce our savings on our interest bill by $3 billion a year.

Again, Labor has been inconsistent on the subject of privatisation. They privatised Aussat, the satellite. Graham Richardson in his book Whatever It Takes indicated that the debate, rather than being about greater competition in the early 1990s in telecommunications, was actually about privatising Telstra. They were Graham Richardson's words. The privatisation of Telstra that is being proposed would be the second largest privatisation in the world. Only the Japanese Telecom would be larger. It may be—and it is covered in the legislation—a 600 pound gorilla, but it would probably need two gulps at the share market. It is likely that we would see two tranches in terms of a public float.

Former Minister for Finance Kim Beazley talked about the arguments in favour of selling off public assets. He said that the arguments in favour of privatisation were, firstly, to improve the efficiency of government business enterprises by exposing them to competition in the market for their products. Yes, I agree with that. I think Telstra fits this case. The second argument in favour of privatisation was to reduce the budget deficit and thus the level of public sector debt. That is correct. We would do this by $40 billion. The third argument in favour of privatisation was to allow the enterprises to raise new equity capital rather than relying on government capital funding. Those are the Leader of the Opposition's criteria for privatisation. He should tell us why doesn't the proposed privatisation of Telstra fit that criteria.

Again, regarding the performance of Telstra, a 1993 study showed that while Telstra was under government control it was performing at about 80 per cent of world best practice. In fact, the member for Dobell was the minister at the time. What Labor are proposing in us not repaying our debt—they want to keep the debt—is the equivalent of an intergenerational Concorde scheme. Some people might have heard that in Sydney there is this scheme going around called the Concorde scheme. The passengers, the copilots and the pilots come along with $2,000. It is totally illegal. What generally happens is the passengers get caught paying $2,000 and the pilots go off with $16,000.

Labor's attitude towards debt is equivalent to an intergenerational Concorde scheme. The people who have to pick up the interest on the debt and who have to continue to pay it are the younger generation. It is the whole issue of intergenerational equity, which we are going to cover in our charter of budget honesty. At the next election there is now a very clear choice between the Labor Party, who have said Telstra is going to stay in government hands, and the Liberal and National parties, who propose to privatise it.

Using the proceeds of that privatisation to reduce debt will save the interest on long-term debt for the government by $3 billion a year. That is $3 billion a year long term that a Liberal-National Party government would have to spend on health care, aged care or tax cuts—$3 billion available for recurrent spending every year.

Privatisation not only reduces debt, reduces the interest and structurally improves the budget position but also allows greater share ownership and participation. It allows more rational management and pricing and can also improve competition. Again, Telstra's labour productivity is still poor compared with its overseas counterparts and privatisation would help their productivity. That has been the experience around the world. That is consistent with the historical empirical evidence.

The partial privatisation of Telstra was a great success—1.8 million Australians took part in the float, including over half a million Australians for the first time. Direct share ownership now stands at 29 per cent of adult Australians. Forty per cent of adult Australians actually take part in the stock market including indirectly. Only the United States has a higher level. Ninety-two per cent of Telstra employees took up the share ownership scheme. Surely that is a big vote of confidence by Telstra employees for the partial privatisation of Telstra. The Labor Party has no response to this increasing level of mum and dad share ownership. I seek leave to continue my remarks later.

Leave granted; debate adjourned.

Sitting suspended from 7.00 p.m. to 8.30 p.m.