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Thursday, 21 August 2003
Page: 19161

Mr SIDEBOTTOM (9:58 AM) —I am generally a positive character and today I am happy not to support the Telstra (Transition to Full Private Ownership) Bill 2003. The reasons I am not happy to support this legislation are, firstly, that we do not need it—on good economic grounds—and, secondly, it is not a piece of legislation that the Australian people support. I do not need to remind members of the number of surveys that members are doing. It seems that a member can do a survey and, if it suits the government's purpose, that survey is credible. If the survey does not suit the government's legislative purposes, then the survey is incredible—it is populist, it cannot make any sense, it has been rigged.

We have members on all sides of this House doing surveys which they regard, I am sure, as being professionally set out without trying to direct the answers. With all their in-built faults, these surveys clearly indicate from their responses that constituents do not support the full sale of Telstra. The people who do not accept those survey results turn around and say, `You have led the people. The people don't know,' or `We have far more information. The markets know best'—all this type of thing. The surveys clearly demonstrate that the people of Australia do not support the full sale of Telstra, especially those in regional Australia where, in many cases, telecommunications services are very patchy. A lot more work needs to be done to provide essential telecommunications services. In the hierarchy of community and social needs, telecommunications services are high on the list. That is why in 1991 Labor legislated that the privatisation of Telstra had to pass through parliament before it could go ahead. Before then—and that is why it is so important—a government could merely regulate it, make the decision. So that is why we are having this debate, and it is a very crucial debate.

We on this side of the House are told that, in terms of technology and economic arguments, we are the troglodytes. Yet there is more and more evidence to suggest that the whole privatisation argument is flawed anyway. But we do not hear that from those opposite—only that we are the economic troglodytes. I would like to explore that, if I may, to shed some light on that side of the argument, seeing as it has been thrown up at us so many times. Largely, I will turn to the work of John Quiggin on privatisation versus public ownership.

Mr Quiggin has a great deal of credibility in this area. He points out that, generally speaking, there are three benefits expected of privatisation—and a number of these have been reflected in template speeches presented by members on the other side in support of the full sale of Telstra. The first expected benefit is that privatisation will generate cash for the government to spend on desirable public purposes, such as retiring debt—we are increasingly told this. Secondly, privatised enterprises are more efficient than their publicly owned counterparts. That is an argument you get all the time. Thirdly, there is a belief that private ownership will impose capital market `discipline'—there is a term for you—on investment decisions. In short, you will not have the big finger or the long arm of the government regulating industry investment decisions.

So what in fact is the reality? Firstly, the idea that privatisation will generate cash for governments to spend on desirable public purposes has largely been discredited. Quiggin says the evidence suggests:

... that only in exceptional cases can governments realise sufficient savings, by selling assets and reducing debt to offset the loss of income streams generated by public enterprises. In the case of Telstra, the first and second stages of partial privatisation have already produced large and growing losses.

Not gains—losses. My colleague the member for Brisbane raised this idea in his speech on Wednesday. Let us look at the figures related to the so-called economic benefits to be gained from retiring public debt, and I am specifically referring to Telstra here.

I understand that $12.8 billion of public debt was paid off with the sale of the first two tranches of Telstra. This saved the government $2.7 billion in interest payments. However, it is very important to realise that the dividend forgone with the sales has been estimated at $2.78 billion, thus resulting in a net loss—that is net loss, not net gain—to the people of Australia of $81 million. The indications are that just such a scenario will be replicated on the full sale of Telstra, and the majority of Australians know this. On Thursday, 14 August the Leader of the Opposition clearly indicated that this would be the result. Indeed, market based projections of future dividend earnings prepared by Macquarie and UBS Warburg have indicated that the full privatisation of Telstra will cost at least $1.7 billion in the forward estimates of the budget. So there is the first little furphy exposed in this issue.

The second argument is that in competitive, service-oriented industries, where the case for government ownership is always weak, generally the evidence is that privatisation has generally been beneficial. But evidence, particularly in North America and OECD countries, increasingly shows that in the infrastructure sector, says Quiggin:

... commercialisation and corporatisation can produce cost reductions similar to and sometimes greater than those arising from full privatisation. (In both cases, such cost reductions must be measured against reduced community services, poorer working conditions and so on.)

Thirdly, there is the belief that private ownership will impose capital market discipline on investment decisions. What of the `allocation of investment assumptions' behind the argument for privatisation? Evidence indicates that the public sector has been far from perfect in the planning and implementation of infrastructure investment decisions. I think we would all agree with that. However, this is absolutely nothing compared to the record of bubble-and-bust private sector investment decisions surrounding the Internet and telecommunications sectors made by private capital markets. Day in, day out on the share market we see these companies crashing and the irresponsible decision making associated with it. Worldwide, the energy sector has fared no better, and the results of that are clear for everyone to see.

The privatisation argument is, by way of empirical evidence, quite dubious and shaky. There is no mention of this litany of failure in the speeches from members opposite, only rehashes of the so-called benefits of privatisation, which have been shown to be flawed. Some of those opposite have advanced the argument that the privatisation of a monopoly such as Telstra is desirable because under public ownership the government faces a conflict of interest between its roles as a regulator and an owner. But this argument defies commonsense and, according to some economists, it defies the economic theory of principal-agent relationships. In simple commonsense terms, the idea that governments should not own bus-inesses they need to closely regulate makes about as much sense as the idea that you should not own your own home because of the conflict between your roles as a landlord and a tenant. It is only in separating ownership and use that conflict exists.

Sound economic analysis is consistent with commonsense. Basically, the closer and more complex the relationship between government and its enterprise or business, the stronger the case for ownership as a control mechanism. In the case of a monopoly such as Telstra, the most important regulatory decisions relate to prices for consumers or for third-party access. With privately owned monopolies there is an inherent conflict—namely, if the price is set too high consumers will suffer, while if the price is set too low investment will be inadequate. As a regulator, the government has a conflict of interest. On one hand, regulation is supposed to set efficient prices but, on the other hand, as representatives of consumers, governments have an incentive to fix prices at inefficiently low levels. Public ownership balances the incentives facing governments. If prices are set below the socially efficient level, the benefits to consumers are offset by a loss in revenue. The converse is true if prices are set too high. John Quiggin has summarised this by writing:

There is an inevitable conflict between the interests of producers and consumers ... Where the number of producers and consumers is large, this conflict is resolved through competition in the market. But the fundamental institution for resolving social conflicts is democratic government.

The economic and social benefit arguments for public ownership of Telstra are sound. Increasingly, evidence world wide makes the case for privatisation more and more shaky. I honestly believe that, for all the methodological faults that may be involved in the surveys I have mentioned, the Australian people inherently see the sense in the economic argument to retain Telstra in public ownership, as well as in the social benefit argument. I honestly believe they innately know that to be true.

That is certainly the case in my electorate, where the sale of Telstra has twice been an issue in our elections. That policy has been rejected twice, and Labor's support for the retention of the public ownership of Telstra has been supported twice. Indeed, the state of Tasmania supports it. Labor are not just negative on this issue for the sake of being negative. Our position has been quite clear. It has been thrown up many times that Labor privatised in the past. In fact, it is almost a heehaw presentation—`Labor privatised in the past, and we know they want to privatise now. It'll come out in the future.' That is a pretty good argument! We all know that each of those privatisation decisions had its own rationale and merit. Labor are not opposed to privatisation per se. This heehawing is silly stuff, pumped out by an office boy or girl in some minister's office.

We do oppose the privatisation, the further sale, of Telstra. We also positively support the return of Telstra to its core responsibilities of delivering high-quality telecommunications services which are accessible by all Australians. We will intensify the focus on the delivery of broadband services to ensure that Australia is leading the world in high-quality technological access for businesses. We will ensure that Telstra is more strictly regulated and that there is a clear internal separation between Telstra's activities as a wholesaler, owner and manager of the network and as a seller of telephone calls and communication capacity so that we have a clear and genuinely competitive environment and a genuine level playing field between Telstra and its competitors, who use Telstra's network. Finally, Labor will introduce strengthened protections for telecommunications consumers in a range of areas that apply not only to Telstra but also to its competitors. It makes sense that we reject this government's ideological bent to fully privatise Telstra. It does not make economic or social sense for them to do so.

The DEPUTY SPEAKER (Mr Jenkins)—Order! Before giving the call to the honourable member for Sturt, I say to the member for Lingiari that, whilst he is away from the chamber representing the parliament in other places and climates over the next few months, he might acquaint himself with standing orders 55, 56, 57 and 58 and remember these requirements when entering the chamber in future.