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Thursday, 29 May 1997
Page: 4057


Senator HARRADINE(7.37 p.m.) —Clearly Senator Allison was not here on the last occasion we debated this matter. If she had been here she would have realised that the government made it perfectly clear that, had I voted `no' on that occasion, they would have had no hesitation in using this as a double dissolution trigger. So one was faced with the choice of a third of Telstra's shares being made available to the public or the whole lot being sold. Had the government gone to the polls at that time with a double dissolution—they were riding high—they would have been re-elected and would have sold the lot. If that is what Senator Allison wanted, she would have got it. They would have sold the lot. They would have had the numbers here to get the matter through and the whole of Telstra would have been sold.

I had to make a judgment about that. Having made a judgment about that, I am not going to canvass the other areas. I canvassed those the other evening. But, having made a decision about that, the question was how the float would be arranged. That is why I put forward the concept of optional redeemable preference shares. The reason I did that was that I believe one government in power cannot bind another government in respect of these particular matters, although it seems to be done quite regularly.

The Australian Democrats, rather than biting at people's heels, should have at least attended the meeting and considered the matters on their merits. It is all very well for Senator Allison to come in here, make a set speech and then shoot away. They were not present at the Senate Economics Legislation Committee. Had they been present at the economics committee, I believe they should have seen the merits of optional preferential shares.

As I observed, the long-term optional redemption preference shares with no fixed dividend rights but with dividends tied to the dividends on ordinary shares would function much in the same way as ordinary shares in terms of the market signalling to Telstra's management. If that is what the government were on about—better management—then the optional redeemable preference shares option would have been the way to go. I invite honourable senators to consider my minority report. Rather than it being a face-saving device, I was hoping to get some support in respect of that matter. But no support was really forthcoming.

The Labor Party, in other actions they might be contemplating, say, in New South Wales—and I make my position clear: I am not happy about the sale of natural monopolies—ought to have a look at the issue of redeemable preference shares so that a future state government, if it wants to, can redeem the shares in an easier manner than if it had to face a situation where the institution was totally privatised.

I did point out in my minority report that redeemable preference shares would have been a fairer method of not tying the hands of future government. If the Democrats and the opposition are serious about this question of returning Telstra to full public ownership, then let me remind them that I pointed out in my minority report how that could be done, at a considerable cost. The Labor Party perhaps should think about what it might say to future shareholders of Telstra. Is this the opposition's policy—that at some stage it would go along the pathway to buying back the third of Telstra that will end up in the public's hands? If that is the case, then it would be interesting to see how that might affect the float. Investors should note that if the partial privatisation of the AIDC could be reversed then of course so can the partial privatisation of Telstra.

I have made it perfectly clear in my minority report that I do not accept that economic theory in any way justifies the sale of natural monopolies and that to sell a natural monopoly is to sell a licence to tax. I have made that perfectly clear. But I also made it perfectly clear what influenced me. In retrospect, one must realise that the whole of Telstra would have been sold had I taken steps other than those that I did take.

I want to say something about the government response that we are debating. I must say that I was less than impressed with the obfuscation of Treasury's explanation about the interpretation of section 46D of the income tax law. I invite honourable senators and the public, particularly persons in the financial markets, to have a look at the transcript and just see how Treasury did perform. What came out very clearly in this process was that Treasury did not in fact know the corporate law, could not give a straight answer on either tax theory or tax law and was desperately concerned about, I believe, making—what it should have made very clear to the committee—the correct response on these particular matters.

It is of some interest that we had witnesses who noted precisely how Treasury's advice on redeemable preference shares was contradicted by its own paper on taxation of financial arrangements. Witnesses quoted back the Treasury its own paper to prove it wrong. I note that the government feels the injection of private equity ownership is not a process that can be reversed without impeding the effective functioning of capital markets. I must say that this is a bit rich when Treasury in the recent budget has set about destroying confidence in the imputation and business tax systems by attacking eligibility for franking credits, losses of business trusts and shareholder loans from private companies. Given the chaos caused in the derivatives and managed funds markets by the Treasury in the recent budget, what I set out in my minority report, which was prior to that, is a model of moderation.

What we seem to have from Treasury is, as one writer to the Financial Review recently pointed out, a theory of taxation reform which is chaos theory. The Treasury appears to the observer as not wanting a stable tax system. I do not see a conspiracy theory here, but you can get a situation where everybody is sick of the current taxation and then—all of a sudden—we have a GST which will save everybody. I sometimes wonder whether that is behind all of these matters. I notice that my time has expired. I ask honourable senators to have a look at this.

Question resolved in the affirmative.