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- QUESTIONS WITHOUT NOTICE
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QUESTIONS WITHOUT NOTICE
Superannuation: Parliamentary Scheme
(Crean, Simon, MP, Costello, Peter, MP)
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- Superannuation: Parliamentary Scheme
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Howard Government: Economic Policy
(Katter, Bob, MP, Costello, Peter, MP)
Environment: Land and Water Management
(Ley, Sussan, MP, Kemp, Dr David, MP)
Environment: Greenhouse Gas Emissions
(Thomson, Kelvin, MP, Kemp, Dr David, MP)
Australian Labor Party: Centenary House
(Gambaro, Teresa, MP, Abbott, Tony, MP)
- Howard Government: Economic Policy
- QUESTIONS WITHOUT NOTICE: ADDITIONAL ANSWERS
- PERSONAL EXPLANATIONS
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- BILLS RETURNED FROM THE SENATE
- BILLS REFERRED TO MAIN COMMITTEE
- TEXTILE, CLOTHING AND FOOTWEAR STRATEGIC INVESTMENT PROGRAM AMENDMENT BILL 2004
- PERSONAL EXPLANATIONS
- TELSTRA (TRANSITION TO FULL PRIVATE OWNERSHIP) BILL 2003 [NO. 2]
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- QUESTIONS ON NOTICE
Tuesday, 9 March 2004
Mr SIDEBOTTOM (7:12 PM) —In this debate on the Telstra (Transition to Full Private Ownership) Bill 2003 [No. 2], I assure the member for Page before he leaves the chamber, and the members for Pearce, Moncrieff, Herbert, Paterson and Flinders of two things: first and foremost, I have thought about this long, hard and seriously and, secondly, let me assure the member for Page and the others listed to speak that Labor will not sell the remaining part of Telstra. I noted that only six coalition members are listed on the list of speakers. The member for Page, the one member from The Nationals who came into this House to speak, is from a rural area. I do not know where all the coalition members are who were so keen, as the member for Page was, to come into this House and argue for the full sale of Telstra, in order to guarantee the provision of proper telecommunications services to rural Australia. I can tell you who are not in this House and listed to speak. They are the members for Riverina and Hume—people who abstained the last time we voted on this issue in this House.
I do not know what has happened to the member for Dawson recently or, indeed, the member for Hume in terms of the surveys that they have done on Telstra, and particularly the attitudes of their electorates. But I could bet you my bottom dollar that the responses of their electorates have not changed one percentage point. Nothing has changed in this debate since the last time we had it except that members on this side of the House are prepared to come in and argue why we should not sell the remaining part of Telstra. But members on the other side are not prepared to stand up and have their names and comments listed in Hansard explaining why they are prepared to go contrary to the wishes of most of their electorate.
A new word is being bandied about at the moment: it is said that we on this side are `populist'. One interpretation of populist is that you take note of what the people of Australia want and form policy according to those wishes as well as according to your principles. Populist is not always a dirty word. Those on the other side are pretty quick to hop on the populist bandwagon when it comes to saving their skins. So I do not want any self-righteous, hand-wringing lectures, thanks, from some members in this House about what is right in politics and what is not. We have thought about this. I, as an elected member of parliament, have thought about this, and I want to express my views on behalf of my electorate. That is what I am meant to do, that is what I am paid to do and that is what I will do.
First and foremost, I do not support the legislation before us, and I want that on the public record. Secondly, I do not support this legislation because my electorate does not support it. Thirdly, there are good economic reasons why we should not support this legislation, and I am very happy to argue those as well. There is no doubt about it, and members on the other side have pointed it out: telecommunications are very important in our world, particularly in our world of commerce and in our hierarchy of community and social needs. Telecommunications are not just luxuries any more; they are fast becoming part and parcel of what we regard as essentials. That is why in 1991 Labor legislated that the privatisation of Telstra had to pass through parliament before it could go ahead. Before then—and that is why it was so important—a government could merely regulate to make that decision. That is why we are having this debate, why we had the one before it and why we will have, no doubt, many more afterwards. The biggest surprise of all in this debate would be for the board and executive of Telstra. They would not have known that it was coming on, because it is not being done for the purposes of a double dissolution. The Newspoll today would tell you exactly why it is not a double dissolution trigger: no doubt it is to be used as part and parcel of this vague and interesting little argument about the obstructionism of the Senate.
The power of the privatisation argument is waning. However, those on the other side have claimed that we on this side are troglodytes in terms of the argument about privatisation. However, there are economic schools of thought that do not support the privatisation argument and I would like to present those. Those on the other side are quick to push the line that modern economic theory says that you should privatise, when in fact that is still controversial and highly debatable.
I would like to refer to the work of John Quiggin—as I did last year in this debate—on privatisation versus public ownership, particularly in a paper for Australian Policy Online, edited by the Institute for Social Research, Swinburne University of Technology. Quiggin has a great deal of credibility in the area. He points out that generally speaking there are three benefits expected of privatisation. A number of these have been reflected in the template speeches presented by those opposite. The first expected benefit, according to Quiggin, is that privatisation will generate cash for the government to spend on desirable public purposes, such as retiring debt. Secondly, privatised enterprises are more efficient than their publicly owned counterparts—this is an argument that we very often get from the other side. Thirdly, according to Quiggin there is a belief that private ownership will impose capital market discipline on investment decisions. So, in short, you will not have the big finger or the long arm of the government regulating industry investment decisions.
So what in fact is the reality? Firstly, the idea that privatisation will generate cash for governments to spend on desirable public purposes has largely been discredited. Quiggin said the evidence suggests:
... that only in exceptional cases can governments realise sufficient savings, by selling assets and reducing debt, to offset the loss of the income streams generated by public enterprises.
In the case of Telstra, the first and second stages of partial privatisation have already produced large and growing losses.
Note that he says not gains but losses. Colleagues who have spoken in this debate earlier, such as the member for Brisbane, raised this idea earlier in their comments on the legislation.
Let us look at the figures related to the so-called economic benefits to be gained from retiring public debt, and I refer specifically here to Telstra. I understand that $12.8 billion of public debt was paid off with the sale of the first two tranches of Telstra. This saved the government $2.7 billion in interest payments. However, it is very important to realise that the dividend forgone with the sales has been estimated at $2.78 billion, thus resulting in a net loss. That is a net loss, not a net gain, to the people of Australia of $81 million.
The indications are that just such a scenario will be replicated on the full sale of Telstra, and the majority of Australians know this. On Thursday, 14 August 2003 the member for Hotham clearly indicated that this would be the result. Indeed, market based projections of future dividend earnings prepared by Macquarie and UBS Warburg have indicated that the full privatisation of Telstra will cost at least $1.7 billion in the forward estimates of the budget. So there is the first little furphy exposed in this issue.
The second argument is that in competitive, service oriented industries, where the case for government ownership is always weak, the evidence is that privatisation has generally been beneficial. But evidence, particularly in North America and OECD countries, increasingly shows that, in the infrastructure sector, as Quiggin says:
... commercialisation and corporatisation can produce cost reductions similar to, and sometimes greater than, those arising from full privatisation. (In both cases, such cost reductions must be measured against reduced community services, poorer working conditions and so on.)
Thirdly, there is the belief that private ownership will impose capital market discipline on investment decisions. What are the allocation of investment assumptions behind the argument for privatisation? Evidence indicates that the public sector has been far from perfect in the planning and implementation of infrastructure investment decisions. I think we would all agree with that. However, this is absolutely nothing compared to the record of bubble-and-bust private sector investment decisions surrounding the Internet and telecommunications sectors made by private capital markets. Day in and day out on the share market, we saw these companies crashing and the irresponsible decision-making associated with it. World wide, the energy sector has fared no better and the results of that are clear for everyone to see. So the privatisation argument is, by way of empirical evidence, quite dubious and shaky, unlike the view on the other side, which claims that it is sacred law in economic theory. There is no mention of this litany of failure in the speeches from members opposite, only rehashes of the so-called benefits of privatisation, which have been shown to be flawed.
Some of those opposite have advanced the argument that the privatisation of a monopoly such as Telstra is desirable because, under public ownership, the government faces a conflict of interest between its roles as a regulator and as an owner. Indeed, that was at the very heart of the argument of the member for Moncrieff. But this argument defies commonsense and, according to some economists, it defies the economic theory of principal-agent relationships. Let me explain. In simple commonsense terms, the idea that governments should not own businesses that they need to closely regulate makes about as much sense as the idea that you should not own your own home because of the conflict between your roles as a landlord and as a tenant. It is only in separating ownership and use that conflict exists.
Sound economic analysis is consistent with commonsense. Basically, the closer and more complex the relationship between government and its enterprise or business, the stronger the case for ownership as a control mechanism. In the case of a monopoly such as Telstra, the most important regulatory decisions relate to prices for consumers or for third party access. With privately owned monopolies there is an inherent conflict—namely, if the price is set too high, consumers will suffer, while, if the price is set too low, investment will be inadequate. As a regulator, the government has a conflict of interest. On one hand, regulation is supposed to set efficient prices but, on the other hand, as representatives of consumers, governments have an incentive to fix prices at inefficiently low levels. Public ownership balances the incentives facing governments. If prices are set below the socially efficient level, the benefits to consumers are offset by a loss in revenue. The converse is true if prices are set too high. John Quiggin has summarised this by saying:
There is an inevitable conflict between the interests of producers and consumers ...
He goes on to say:
Where the number of producers and consumers is large, this conflict is resolved through competition in the market. But the fundamental institution for resolving social conflicts is democratic government.
The economic and social benefit arguments for public ownership of Telstra are indeed sound. Increasingly, evidence worldwide makes the case for privatisation more and more shaky. I honestly believe that, for all of the methodological faults that may have been involved in the surveys of many members in this House, particularly in the last debate that we had on this issue, the Australian people inherently see the sense in the economic argument to retain Telstra in public ownership, as well as in the social benefit argument. I honestly believe they innately know that to be true. That is certainly the case in my electorate of Braddon, where the sale of Telstra has twice been an issue in our elections. Indeed, bring it on for the next one, because it will be the same result. The policy has been rejected twice.
Mr SIDEBOTTOM —Take it on record, my friend. The policy has been rejected twice. Labor's support for the retention of the public ownership of Telstra has indeed been supported twice and will be supported again, so bring it on. Indeed, the state of Tasmania supports it. Labor are not just negative on this issue for the sake of being negative. Our position has been quite clear. It has been thrown up many times that Labor privatised in the past. In fact, when you listen to the other side, it is almost as though the template of notes given to members opposite must mention this several times, because they go through their list of privatisations of past Labor governments. They read their little template list and make sure they have all of their information. You will notice that most on the other side never have original speeches—they are all the same.
Mr Hunt —I have, my friend!
Mr SIDEBOTTOM —You've never had an original thought or speech, friend.
Mr Hunt —Then why don't you put your notes away?
The DEPUTY SPEAKER (Mr Wilkie)—Order! The member for Flinders will have an opportunity to speak shortly.
Mr SIDEBOTTOM —We do oppose the privatisation—the further sale—of Telstra, but we do not necessarily object to privatisation per se. We positively support the return of Telstra to its core responsibilities of delivering high-quality telecommunications services which are accessible by all Australians. We will intensify the focus on the delivery of broadband services to ensure that Australia is leading the world in high-quality technological access for businesses. We will ensure that Telstra is more strictly regulated and that there is a clear internal separation between Telstra's activities as a wholesaler, owner and manager of the network, and as a seller of telephone calls and communication capacity, so that we have a clear and genuinely competitive environment and a genuinely level playing field between Telstra and its competitors who use Telstra's network.
Finally, Labor will introduce strengthened protections for telecommunications consumers in a range of areas that apply not only to Telstra but also to its competitors. It makes sense that we reject this government's ideological bent to fully privatise Telstra. It does not make economic or social sense for them to do so. I look forward to this government putting their legislation up at the next election so that the people of Braddon can vote on it for a third time and reject it outright once again.