Senator MACKAY (2:01 PM) —My question is to Senator Coonan, the Minister for Communications, Information Technology and the Arts. Can the minister confirm that, under the Howard government's price control arrangements, Telstra's standard line rental charges have risen from $11.65 per month in January 2000 to between $26.95 and $29.95 per month today? That is almost triple, Minister. How can the minister justify these massive increases under the Howard government's price control arrangements, when even Telstra admits that this financial year it stands to make $180 million from the latest increases alone?

Senator COONAN (Minister for Communications, Information Technology and the Arts) —Thank you, Senator Mackay, for the question. It is going to be nice to have a whole new range of people asking questions, much as I enjoyed Senator Conroy and—

Senator Sherry —You are still representing the Assistant Treasurer, I note. Don't worry, we won't forget you.

Senator COONAN —Thank you. Senator Mackay raised an issue about Telstra's line rental increases. Telstra's ability to raise line rentals is constrained by the price control arrangements that are imposed upon Telstra. The government imposes retail price controls on Telstra to drive efficiency improvements and to lower overall prices for consumers in markets where competition is not yet fully developed. Within these constraints, Telstra, like any other company, may vary its prices as it considers appropriate. Telstra's compliance with the price controls is assessed annually by the ACCC. A breach of the price controls is a breach of Telstra's licence condition, and Telstra can be penalised with a $10 million fine.

The government has accepted the ACCC's and the Productivity Commission's advice that gradually increasing the line rental charges to reflect the costs of providing telephone lines is in the long-term interests of consumers. Labor, of course, dismisses this argument—and I expect Senator Mackay does—thereby showing little regard for the views of independent experts. The government is very conscious of the need to protect low-income consumers from what you might call the shocks of line rental increases. To protect low-income consumers, the government has imposed a licence condition on Telstra that requires it to offer an annual $170 million package of assistance measures for low-income consumers. The package of measures is assessed by the Low Income Measures Assessment Committee, made up of representatives from peak bodies.

Looking to the future, the government has directed the ACCC to review the existing price control arrangements, and the scope for further line rental increases will be considered as part of this review. The Low Income Measures Assessment Committee's assessment of the low-income protection arrangement was that Telstra has responded genuinely and comprehensively to the licence requirement to provide a program to assist low-income Australians to access telecommunications services.

It is interesting to note that this is an area—one of the few, I think, since I have been looking at what the opposition has been saying about telecommunications policy—where Labor has said it would freeze line rental increases and continue to call for price decreases. It is obviously simplistic to force Telstra to lower prices, and it would probably have fairly adverse consequences. Telstra accepts the impact on its revenue and profitability will be passed through to shareholders in the form of lower dividends. The other possibility is that Telstra will look to make up the revenue shortfall by increasing prices for other services, thereby affecting consumers. The point about this policy on line rentals is that it delivers an appropriate outcome for consumers and particularly for low-income consumers.

Senator MACKAY —Mr President, I ask a supplementary question. The minister talks about the shocks of line rental increases, but tripling them in four years is a major shock to consumers. Is the minister aware of Prime Minister Howard's statement on the Neil Mitchell program on 30 April that Telstra's massive line rental increases were a matter for Telstra? John Howard said:

On the contrary, isn't it a fact that the Howard government initiated, negotiated and implemented the very price controls in 2002 which have allowed Telstra to massively increase its phone line rental fees? Minister, why did the Prime Minister attempt to deceive Australians in his statement of 30 April? Will the minister now correct the record for the Prime Minister?

Senator COONAN (Minister for Communications, Information Technology and the Arts) —I thought that I had outlined in fairly serious detail, in an attempt to answer Senator Mackay's question, the policy and that the price controls do allow a regime to be delivered that takes into account the needs of consumers, particularly low-income consumers. It is perfectly true—and I agree with the Prime Minister—that the government is not there to micro manage Telstra. The government is there to ensure that there is a regulatory regime that delivers for consumers proper outcomes and that will allow Telstra to operate within a commercial framework in such a way that it is not so constrained that it cannot actually operate. Obviously there is a balance to be struck and that has in fact been done with the benefits for consumers.