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Friday, 20 February 1987
Page: 471

Mr MACPHEE —by leave-I congratulate the House of Representatives Standing Committee on Expenditure for producing this report on the Auditor-General's efficiency audit report of some aspects of the Overseas Telecommunications Commission's operations. It is a very clear and concise report and it identifies areas in which the Government and OTC must take action. The Minister for Communications (Mr Duffy) has said that the Government will respond positively to some of the recommendations, but it is very clear from the Committee's report that the audits are extremely useful if they are broad enough in scope and if they deal with the subject matter in a speedy fashion. I hope that the Minister will ensure that future audits are broader in scope and that they are also processed much more expeditiously, whether it is by OTC, Telecom Australia, Aussat Pty Ltd or other bodies within his portfolio. I would like the Minister to undertake to ensure that other organisations follow this practice, because it is extremely important that any bureaucratic inefficiency which exists be identified and eliminated.

It is also clear, from the Green Paper produced by the Minister for Finance (Senator Walsh), which has been discussed publicly by a number of bodies but not in this House, that further costs would be imposed on these organisations. The Minister is probably of the same mind. It is important that these instrumentalities be freed from many of the constraints now upon them, such as those by the Public Service Board, by the Department of Local Government and Administrative Services, sometimes by the Crown Solicitor and even, to some extent, by the Department of Employment and Industrial Relations. These sorts of obligations to report to so many departments, apart from the Minister's own Department, add to the costs and the bureaucratic inefficiency of these organisations. It is bad enough when the Government does not remove those, but what the Minister for Finance proposes would actually compound the problem and make these organisations even less efficient. All of that will, of course, lead to higher prices for phone calls, postal charges and the other services that these instrumentalities provide. I therefore hope that the Minister will continue to press his Cabinet colleagues for the rejection of the views of the Minister for Finance.

It is also very important that we look at the major proposal in this report, because the Minister for Communications clearly did not persuade his Cabinet colleagues to respond to the recommendation as positively as he should have. Recommendation 2 of this report states:

The Government review the basis for determining the dividend that OTC pays to the Commonwealth and in so doing, take into account the requirements for capital reinvestment.

I believe that the Committee makes out a very good case in support of that recommendation. It says: . . .

OTC has suggested that a more equitable basis would be an agreed percentage of after-tax profits and suggests 40 per cent as appropriate . . .

Because dividend payments to the Commonwealth form part of OTC's cost structure, the effect of this will be to increase OTC's prices unless there are compensating reductions in other costs.

A very important statement of the Committee appears on page 11. It states:

Under the Overseas Telecommunications Act 1946, dividend payments are determined by the Minister for Communications with the concurrence of the Minister for Finance, having considered the advice of the Commission.

that is, the OTC-

It is OCT's view that:

the Commonwealth's present method of determining a dividend target is unsatisfactory. Decisions are, in practice, made by the Government on a year-to-year basis and the long term needs of the business become subordinate to the Commonwealth's budgetary demands . . . In 1983, the Government agreed to set a dividend target for the five-year period to 1987-88 of 10% of Capital and Reserves in order that the Commission could plan its capital expenditure programme and utilise a combination of debt and equity to finance large submarine cable projects. The 1985-86 target was altered to 12.5% of Capital and Reserves. The 1986-87 target has been set at 15%.

I point out that that alteration was quite arbitrary. Here we have a very important instrumentality of the Commonwealth which is charged by this Parliament with a number of social and economic objectives, one of which is to provide telecommunications via submarine cables. It does so with very expensive equipment which takes years and years of planning. It strikes an arrangement with the Government for a 10 per cent of capital and reserves dividend and, arbitrarily, to try to reduce the Government's deficit, it is asked to increase that in spite of the agreement and regardless of the consequences either to the long term program of laying cables or to the charges that it then has to pass on to the consumers of its services.

We find that, in response to that recommendation, the Minister was able a few minutes ago to say only this:

This position was endorsed by the Government in December 1986 when it considered OTC's participation in the network of optical fibre submarine cables proposed for the Pacific region and subsequent interconnection to Europe. However, this does not obviate the need for the Government to set a dividend for OTC from time to time.

That is not only equivocal but also begs the entire recommendation of this Committee. Of course the Government should fix a dividend. The OTC has recommended a formula. If it is not the best formula, the Government has an obligation to say so. The Government has not given a formula. It gives no certainty to this organisation or to any of the others with similar difficulties. What that means is that not only in this year's Budget but also perhaps in the May statement that the Treasurer (Mr Keating) will introduce-the mini-Budget in May-this organisation will be milked again to try to make the deficit look a little less than it really is.

But who will bear the burden for that? It will be the people who need to use telephones organised by OTC, whether by satellite or by submarine cable. It will also put in jeopardy the very things that the Minister has said are worth while. That includes the prospect for local manufacture of these cables-and the employment that goes with that, they being private sector activities-as well as the important long term telecommunications links between Australia and the rest of the world. Under the OTC proposals, Australia would become the third largest owner of submarine cables, after the United States of America and Great Britain. It is terribly important that OTC knows where it stands regarding dividends. I congratulate the Committee. I understand that the Chairman of the sub-committee wishes to say a few words. The Committee's recommendations are sound. The Government owes it to the organisation, and to all of those who benefit from its services, to adopt the report of the Committee.