Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Tuesday, 7 April 1998
Page: 2697

Mr ZAMMIT (9:57 PM) —I at the outset wish to foreshadow that at the consideration in detail stage of the Telstra (Transition to Full Private Ownership) Bill 1998 four amendments, which are now being circulated in the chamber, will be moved. I am a bit astonished at some of the contributions made by members of the government with regard to free enterprise, private enterprise, competition. All that goes out the window when the government refuses to allow real competition to occur. The only way real competition can happen is by introducing another carrier. That is just not going to happen, so what is the point of selling Telstra if you are not going to provide true competition?

A couple of statements were made in the chamber in more recent times in regard to overseas debt—statements that this will result in a great reduction in overseas debt. That is all well and good in one respect—that is, we have to justify to the Australian nation how it is that when the coalition government came in the overseas debt was $181 billion but it is now $222 billion. The application of $40 billion from the sale of Telstra will bring this nation back to where we were two years ago roughly.

Mr Brough —Public sector debt, mate.

Mr ZAMMIT —I understand that. I appreciate the member said `public sector debt'. I am saying the total overseas debt that has resulted in the Australian nation being faced with an overseas debt of $222 billion, which will come down to $180 billion after the sale of Telstra, which brings us back to where we were two years ago, which is not a very effective way of saying to the nation of Australia that we will be better off because we have sold Telstra. The fact is you cannot sell Telstra again once it is sold.

Since its establishment and formation in the early 1900s, Telstra, as it has now come to be known, has played a significant role in Australia's telecommunications industry. Up until last year, Telstra Corporation Ltd was a wholly owned Commonwealth enterprise—that is, we the Australian community were public shareholders. The partial sale of Telstra last year was welcomed and supported by the overwhelming majority of the Australian public, and I too supported the sale of one-third of Telstra.

Whilst the government is expecting investors to grab this opportunity and take advantage of the biggest float in Australian share market history, many are beginning to voice their concerns. I too have strong reservations why the full sale should not go ahead. Some recent polls would tend to agree with the view that it should not be fully privatised. For example, a recent survey in Western Australia indicated that 60 per cent of the population was against the sale. A survey in Melbourne also recently revealed that 58 per cent were against the sale.

The March Bulletin Morgan poll indicated 62 per cent were against this sale and, interestingly, that poll showed that 55 per cent of Telstra's current shareholders were against the full sale. Russell Baker, in an article in the March Bulletin, stated:

For those Australians who can't afford shares or who are risk averse, the prospect of full privatisation is worrying. All they may have to look forward to are cuts in services or higher charges when the shackles of social obligation are inevitably loosened after full privatisation.

There are real risks and implications associated with the fact that shares are part of the sometimes volatile stock market. This volatility is recognised to be a regular feature to the initiated who monitor, understand and may often pre-empt and deal with market fluctuations, whereas the average so-called—to the annoyance of many—`mums and dads', to whom these shares are directed, may lack an adequate understanding of what it means to be a shareholder and of the risks involved. Future investors should be informed that, although the sale of Telstra is backed by the government, there is no way for the government to guarantee share performance in an open market.

A recently released report prepared by the Australian Communications Authority into Telstra services following its partial sale last year has done nothing to boost confidence in a fully privatised Telstra. The report proved that the telecommunications carrier's service dipped following its partial sale. The report found that:

Telstra's performance in new connections, service restoration, fault reports and operator assistance calls declined sharply in the three months to 31 December 1997.

Even whilst under government ownership, Telstra fails to provide acceptable levels of service. How can the government ensure standards are maintained if it is fully privatised? Whilst under government control, Telstra has a national obligation to maintain its service at acceptable levels. Does no government control equal no national obligation? We need to be persuaded otherwise.

We have been told that revenue raised from the sale will be directed to retiring debt, and I have no doubt that the government intends keeping some of it to use for election sweeteners in time to come. I noted while reading the Senate Hansard that the Leader of the Australian Democrats, Senator Lees, has recently expressed this concern:

After tax and profit flows are taken into account . . . the public sector would be about $1.2 billion a year worse off.

Senator Lees and the Democrats are not the only ones who are concerned about the sale of the rest of Telstra.

Telstra, as a public company, will be an entirely different corporation from the one in government hands. The bottom line is that it will operate in the interests of shareholders, as required by the Corporations Law. In any privatisation route for public assets, it is imperative, therefore, that the government of the day takes into account the taxpayers' interests. We need only to examine what has happened to other fully privatised entities when it comes to customer service. Few people would argue that service to the consumer has increased. We need only to look at what is occurring in some of our banks since privatisation and deregulation: the queues, the impersonalisation and the dehumanisation of transactions.

To whom will the management of Telstra owe that accountability? As a fully publicly owned enterprise, the answer is painfully obvious as far as the public is concerned: to the shareholders, of course. We have been told ad infinitum that there will be guarantees of all sorts to protect rural phone users—untimed local calls, a price cap for regional users, et cetera—but how can we guarantee the guarantees? As I have personally experienced, categorical guarantees by governments at times are not worth the paper they are written on.

The initial stages of any sell-off may appear positive and healthy. However, the consequences and repercussions—often not fully thought out or unforeseen—must be fully analysed in the interests of the public as a whole and not simply for some vested interest group. I am of the view that our core utilities must be efficiently run within a government regulatory structure to ensure that services to our people, above all, are maintained and enhanced. What is required is the creation of a privatised culture of management whose focus is enhanced customer service which, in turn, will translate into higher usage and higher profits.

Economic analysis would suggest that a company should not be valued in terms of its dividends only and that retained earnings which are reinvested in the growth of the enterprise should also be taken into account. Professor John Quiggin, senior research fellow in economics at James Cook University, notes that:

. . . assuming a sale price for Telstra of $4.5 billion, the government could reduce its interest payments by about $2.5 billion per year this year (and every year into the future) by selling Telstra and using the proceeds to repay debt. The Government, however, would lose its claim to two-thirds of Telstra's earnings. This year, the value of this claim would be $2 billion and the Government would be ahead by $500 million. Telstra's profits have been growing rapidly and the market obviously expects that this growth will continue, whether or not it is fully privatised.

The assumption is that Telstra's profits will grow in line with nominal GDP—that is, around five per cent a year. On this assumption, the short-term net benefit to the government would disappear within five years, to be replaced by a steadily increasing stream of losses. This would be consistent with past experiences.

There has not been one major privatisation in Australia where the government has made a profit relative to the alternative of retaining ownership. In short, the effect of a full sale of Telstra would be negative over a period of time. Many Australians are beginning to fear that, should this occur, it will be followed by an increase in taxes, forcing the average income earning Australians—that is, the majority of Australians—to incur this cost and pay the price for the gains of a minority, those wealthy enough to buy shares in the corporation.

In an article in issue 264 of the Australian Public Eye, investment expert Daryl Dixon accuses the government of failing to properly inform investors of the capital gains tax on shares purchased in the first Telstra share offer. Individual investors, he advises, are subject to a 48.5 per cent tax on any gain received. I wonder how many investors have been made aware of that.

I noted in the Senate Hansard recently a question without notice asked by Senator Lees in the Senate on 30 March 1998 which is of particular significance in this debate. It would appear that Minister Alston made certain statements claiming that community service obligations, like untimed local calls, as well as foreign ownership restrictions, can and will be retained and strengthened after privatisation. That statement that was made is very important. However, as Senator Lees subsequently asked, while this may be true in theory, isn't it false in practice? The same arguments were trotted out in the case of a fully privatised Qantas and also Optus, both of whom later successfully lobbied government to relax foreign ownership restrictions.

What is even more interesting came up following a supplementary question to the minister from Senator Lees, who asked:

Is it not true that you signed a declaration in December last year to abandon foreign ownership limits for both Optus and Vodafone?

The minister's reply was:

I do not think I signed anything in relation to Optus and Vodafone. I may well have been consulted by the Treasurer. You may be right. Maybe I signed it.

However, in a later statement, as recorded in the Senate Hansard of 30 March 1998, Senator Lees stated:

I have before me here, and seek leave to retable, three documents with the minister's signature on them that sign away all foreign ownership controls—

I will repeat that: all foreign ownership controls—

on Australia's second and third largest carriers.

If the minister cannot even remember doing this, how can we trust this government to look after all consumers once Telstra is sold, if it is sold? How do we get the guarantees from this government that actually mean anything . . .

I fully supported the sale of one-third of Telstra, but only one-third. To sell the rest of Telstra and turn it into a fully privatised enterprise would, I believe, be a retrograde step for all Australians except those who want to buy shares in it. It would be a monumental mistake. There is no doubt that, with a fully privatised Telstra, management would come under more and more pressure to deliver strong returns to its shareholders. The long-term interests of consumers, the community service obligations, such as timed calls, and the already depleting services to our regional Australian countrymen and women would come under increased pressure.

Let us examine who will be better off if the rest of Telstra is sold. It is true that a number of Australian investors will benefit; there is no question about that. But the largest group will be foreign investors, who will take up some 35 per cent of shares. How does this benefit Australia and Australians? Competition is only a good thing if it gives rise to a better, more efficient and less expensive service to consumers. What this government ought to be concentrating on, rather than selling off the rest of Telstra, is putting in place strong safeguards to ensure that the public's interest is at the forefront of all their policy reforms.

We are all aware of examples, under the partially privatised Telstra, of very important services once provided to the rural sector have already been eliminated. Additionally, the Minister for Finance and Administration (Mr Fahey) has not ruled out—and this is extremely important—the emergence of a strategic stakeholder in Telstra in the form of an overseas telephone carrier, although the government's preference is for Telstra to be fully owned by individual Australian investors. How can it be guaranteed that it does not fall into the hands of an overseas investor? I share the concerns of many in our community. This will lead to less accountability and, like the privatised Commonwealth Bank, a fully privatised Telstra will become more ruthless in its practices to ensure higher dividend returns to shareholders by cost-cutting, downsizing and outsourcing. Every Australian in some way or other relies on Telstra. The government should retain control. The government has relinquished control of one-third; it must hold on to the rest.

There is an overwhelming weight of international evidence that employment levels have typically fallen sharply when public utilities were privatised. For example, in the case of the Telecom Corporation of New Zealand, almost 50 per cent of the jobs have been abolished since privatisation. Pressures for constant job reduction lead companies not only to cut staff numbers directly but also to remove staff from their books by such mechanisms as outsourcing. This latter strategy may even be pursued, regardless of any significant cost savings to the company, in order to improve employment ratios and satisfy market analysts. The result may be a marked reduction in both consumer service and employee conditions.

We are already experiencing these types of situations. A constituent in my electorate, a solicitor by the name of John Fisicaro, phoned my office expressing anger at having been left with a pile of rubble on the footpath outside his home for a long period of time. A member of my staff phoned the local council, who advised that Telstra had been digging for cabling. Council gave my staff a contact phone number. A member of my staff phoned and was told that the cabling dugouts had been undertaken by a contractor who, it would seem, had not bothered to repair the damage to the footpath. The Telstra person said he would chase up the matter. It was eventually fixed. However, it required my constituent phoning me, much time and effort and many phone calls before anything was done. Is this quality service? Is this efficiency?

In spite of the guarantees, Telstra has already embarked on encouraging its technical staff to work as contractors, thus moving them from a primary to a secondary labour market which is characterised by irregular hours, lack of job security, poor remuneration and poorer terms and conditions, and in the long run there will be a cost to society. Furthermore, as my example indicates, the company's capacity to meet service orders will be reduced by the degree of autonomy enjoyed by the contractors.

If the government continues along the path of full privatisation, what the Australian people need are solid safeguards by way of immutable statements in the memorandum of association and articles of association preventing takeovers from international, foreign owned enterprises. Whether privatised or not, there must be provisions in place that services to all Australians are made available equitably and cheaply. Our rural Australian country men and women must be ensured full services, access to the latest communications technology, an efficient service and repair structure and price caps.

We all acknowledge the enormous role of Telstra in the national economy and the community generally. Let us keep it accountable to that community. I do not believe that the guarantees are viable. I do not believe that the cost benefits are there. I do not believe that the financial returns are worth it. I do not believe that thousands of Telstra staff will escape retrenchment. I therefore cannot support the sale of the remaining two-thirds of Telstra.