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Monday, 21 June 2004
Page: 31029


Mr McMULLAN (7:28 PM) —We seem to be remarkably short of a relevant parliamentary secretary or minister for this portfolio area. I hope someone is about to make sure that someone comes along as soon as possible. To facilitate business, let me proceed on the assumption that that person will be in a position to respond on the basis of staff advice when they arrive. I want first to raise some queries concerning the sale of Telstra, particularly in the light of today's announcement by Telstra, and the response to it by the Minister for Finance and Administration jointly with the Minister for Communications, Information Technology and the Arts, concerning what is headlined on the web site as `Billions for Telstra shareholders'—that is, the decision announced today by the Telstra Corp. chairman, Mr John Ralph, to return $1.5 billion to shareholders annually for the next three years through special dividends and/or share buybacks. This adds to the very interesting circumstance we find ourselves in with regard to the budgetary implications of the sale of Telstra.

The opposition have been arguing—and I have been arguing on our behalf for some time—that putting aside our broader and much more important arguments about the sale of Telstra, which are not relevant to this discussion and come up in a different portfolio, there are serious budget implications of the sale of Telstra that have been totally overlooked by the government and totally fraudulently rebutted. The most obvious point as a starting point is that the cost of the sale of Telstra in three tranches, as estimated by the government previously and reflected in the explanatory memorandum and in the budget, is $218 million per year for three years—that is, $654 million paid to merchant bankers and lawyers. So we have the first element of the budget equation, which is the $218 million for the sale.

What we have to do—and the Treasurer said this in the House recently—if you are going to claim that we, the opposition, do not have to spend that $218 million a year—that total of $650 million—is take into account the public debt interest saving and the dividends forgone. Now that is true. We now know from information publicly provided by the government what those two numbers are. The dividends forgone based on the government's assessment, which is the market consensus of a 28c dividend per share forecast, means the dividends forgone would be $601 million. We can assess the PDI savings, because in a second reading speech on 10 October 2003 Senator Minchin indicated the bond rate that should be applied and if that is applied to the sale price you get a PDI saving of $622 million. The arithmetic of that is quite simple. This results in a cost to the budget of $197 million in the first year of the sale alone—a negative figure of $197 million. But this does not take into account the significant extra return to the government from today's announcement. If Telstra is proposing to return $1.5 billion per year to shareholders and the government owns 50 per cent, then the straightforward calculation is that that is worth $750 million per year to the government to the budget in payments.

The situation is actually more complex than that because that would be the case if all the money were paid in special dividends. But Telstra is saying that will not be the case; some of it will be in a share buyback. So, to the extent that there are special dividends, it means that the government—if it were to sell Telstra—will be forgoing even more dividend revenue—hundreds of millions more, but we do not know how much. Additionally, if the share buyback proceeds we have the government in the ironic position that either it sells some of the shares into the buyback, which gives it a substantial short-term return, or it retains the shares—and, for a government committed to reducing its share equity, it actually increases its proportionate equity in Telstra, which has consequential implications for subsequent dividends.

So we have a situation now where Telstra announced today the way in which it will go about focusing on its core business and giving a better return to shareholders—I broadly welcome that—but it is creating a more complicated situation for the government in trying to pretend other than that this is a proposition that is bad for the budget. (Extension of time granted) So I am looking for the government to respond—it always refuses to respond to this because, frankly, it does not have an answer—to the arithmetic of the budgetary implications of the sale of Telstra, which is actually not complicated in its essence. The moving parts are the PDI, the public debt interest, saving which the government trumpets but ignores the fact that that is virtually cancelled out by the dividends forgone—and as a result of today's announcement may be more than cancelled out by the dividends forgone—then you have to add in the cost of the sale. Every way you calculate that you come out with a negative budget outcome. I challenge the government to say which of those various factors that we have outlined is not correctly summarised, because they all come from government figures. Also, what is the further implication to the budget of the sale of Telstra welcome announcement today of its proposition to return greater return to shareholders, which the government has properly welcomed? They are the unanswered questions, because the government does not have an answer and I continue to pursue it.

There are bigger issues about the sale of Telstra than its budgetary implications, but those are for another debate in another circumstance. They are not matters that I am traversing here today. I have raised them on plenty of other occasions, as have the Leader of the Opposition and our shadow minister, and the government has other people who respond to that in other portfolios. It is not an issue I am seeking to raise. I am simply saying: if the government insists upon its view that, for broader national interest reasons which it holds—which we do not share—it wants to sell Telstra, it has to come clean on its budgetary implications and it has to deal with today's further announcement that retaining Telstra in public ownership will give an even bigger return to shareholders, because Telstra is going to give shareholders an extra $1.5 billion, which on the face of it is an extra $750 million return to the budget each year from Telstra if the government retains its 50 per cent interest.