Senator ALLISON —My question is to the Minister for Communications, Information Technology and the Arts. I refer the minister to Minister Fahey's appointment of a probity adviser to inquire into the operations of CS First Boston following cancellation of their operating licence in Japan. I remind the minister that CS First Boston are the lead managers of the Telstra 2 share float. Will that inquiry also look into the role of CS First Boston in the first Telstra float, particularly the scandalous undervaluation of Telstra shares which cost taxpayers $5 billion in unrealised proceeds? Will it ask why CS First Boston advised the government to price shares at $3.30 when major stockbroking houses like JB Were and HSBC James Capel were advising their clients that Telstra shares were worth $4?

Senator ALSTON (Communications, Information Technology and the Arts) —Here we go again. This is the crowd that do not even believe in privatisations, let alone want to take account of the way in which the real world marketplace operates.

Senator Schacht —Don't upset her. You are not supposed to abuse them any more. They are on your side now. You have broken the rules now.

Senator ALSTON —It is all right. I told you we would not declare your low impact as silly, but I could reconsider.

The PRESIDENT —Senator Schacht, that is a most inappropriate interjection and I ask you to abide by the standing orders.

Senator ALSTON —Quite right. Senator Allison does not even pretend to understand how the marketplace operates, let alone understand that there is always a great element of uncertainty in terms of the forward movement of share prices which are obviously significantly affected by other factors quite often beyond the control of individual companies, let alone local markets. In other words, international factors, particularly in the US, can have a very significant impact upon the ultimate share price and its trajectory. To suggest that somehow because the share price of Telstra rose as investors recognised that it had great long-term potential represents some sort of scandalous undervaluation is a preposterous proposition that can only ever be trotted out in hindsight.

In other words, if the share price had gone down, we would not for a moment have Senator Allison saying, `How could they possibly have come up with that figure?' Senator Allison must be aware of the numbers that were put on the total market cap of Telstra by the other side. Over a period of three or four years it ranged from $15 billion to $20 billion. When we said $20 billion we were laughed out of town. We are now up in the stratosphere compared to those earlier predictions. Those numbers are ones that were put forward in good faith by those responsible. We have no reason at all to regard the assessments made at the time as deserving of any probity inquiry.

The fact is that the concerns that Mr Fahey has addressed were ones that involved him approaching Mr Andrew Rogers before the Japanese Financial Supervisory Agency handed down its sanctions against CS First Boston on 2 August, and the chief executive of investment banking at CSFB Australia, Mr John Wylie, has made it plain on the public record that the issues examined by Japan's Financial Supervisory Agency had no impact on the Australian operations of the company, were not related to share trading and equity capital and there is no suggestion that these issues, which are peculiar to the Japanese financial market, apply anywhere outside of Japan. So in other words, it is perfectly proper for Mr Fahey, out of an abundance of caution, to have a look at what it was that led to that action being taken by the Japanese authorities. But that in no way of itself reflects upon the process that was followed in the course of T1. The government has no reason at all to go down the path that you are suggesting.

Senator ALLISON —Madam President, I ask a supplementary question. I thank the minister for his answer. However, he talks about the benefit of hindsight but this government had foresight. It had the advice of major stockbroking firms—it had the advice of the Australian Democrats—that these shares were worth more than $4 each. Again, I ask: how is it that the float advisers got this so terribly wrong? How is it that within weeks those Telstra shares were worth $4 and how is it that CS First Boston was again contracted to help run the second float? Will they now be removed and what action will the government take to recover the $5 billion lost on the first Telstra float because of poor advice?

Senator ALSTON (Communications, Information Technology and the Arts) —I suppose this gets a good run in the Democrat newsletters because it plays to the prejudices of those who have not a clue about how privatisations operate in the real world. I seem to recall that about two weeks before Telstra 1 actually went to market there were some significant events that caused certain people to say that we should postpone the float, that we should not really go ahead at all. Were those people fundamentally wrong? You weren't one of them, I take it. You sat on your hands just hoping that the share price would dive, I suppose, so you were very keen for us to go ahead into those stormy waters. Of course what happened was that people recognised the underlying strength of the share and the management behind the company. That is a judgment that people will continue to have to exercise. I do not pass any judgment on its current valuation or its prospects for the future. I simply say that you appoint experts to give you that advice and we did just that. (Time expired)