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Thursday, 21 August 2003
Page: 19164

Mr PYNE (10:14 AM) —The argument in favour of the Telstra (Transition to Full Private Ownership) Bill 2003 is really quite simple: the greater the delay in selling the remaining public share of Telstra, the greater the risk to Telstra and its shareholders. Previously the full sale of Telstra had been stalled due to below par services in rural and regional Australia. But the release of the Estens report demonstrates that these issues either have been addressed or are in the process of being addressed. There were 39 recommendations from the Estens report, which gave the coalition government a tick in terms of adequacy of services. More importantly the report was the catalyst for giving the bush another $180 million over four years to address a number of very important issues, particularly in the area of future proofing, so that we will be able to ensure that people, wherever they are, have access to the latest in broadband technology.

The fact is that this government has introduced consumer guarantees and delivered a network reliability framework. But Telstra cannot grow as a company and cannot reach its full potential until the shackles of part government ownership are removed. The current ownership structure of Telstra limits its ability to make strategic acquisitions and market expansions that will benefit shareholders, consumers and employees. Under the current ownership structure, Telstra is both owner and regulator. By divesting itself of ownership, the government would be in a more objective position to regulate Telstra than it is now.

The full privatisation of Telstra will benefit all stakeholders through efficiency improvements, great-er transparency and reduced risk to taxpayers. Labor's opposition to the full sale of the remaining government share of Telstra is not only hypocritical but also flawed public policy. If Labor is serious about ex-panding share ownership, as it has recently claimed, the fastest and most efficient way to do so is by allowing ordinary Australians access to the remaining 50.1 per cent of Telstra.

Labor holds itself out as the party that supports greater share ownership in Australia; it says it is in favour of wider share ownership. But it is the coalition government that, because of the sale of the first two tranches of Telstra, has made Australia into the largest share-owning democracy in the world per capita. In 1986, just nine per cent of Australians owned shares. In the time of this government that has increased, and 37 per cent of Australians now own shares. In 1984, just 2.4 per cent of Australian workers owned a share of their business. As a result of this government's doubling of the employee share ownership tax concession, six per cent of Australians are now worker capitalists. Australia's figure of 37 per cent compares favourably to 32 per cent in the United States and 31 per cent in New Zealand. There are 2.1 million Telstra shareholders. There are 560,000 people in Australia who bought shares for the first time in the sale of the first tranche of Telstra and 321,000 who bought shares for the first time in the second tranche. Almost one million Australians bought shares for the first time when Telstra was offered for sale, making the point that Australians want to be shareholders, invest in the stock market and have control over their own spending, their own investments and their own destinies.

In the past the Labor Party has agreed with us on this. The shadow Treasurer and member for Werriwa said he was in favour of greater share ownership and planned to act accordingly. But Workers Online had this to say about it:

Far from being Labor's new Light on the Hill, Latham's share ownership agenda is a dousing of the flame, a desertion of the ideas of working together as a society rather than as individual players for our mutual benefit. If we give up on this we may as well all join the Liberals.

As even the member for Werriwa knows, Telstra's growth is limited by its inability to issue new equity, effectively keeping its share price low and discouraging investor confidence. Telstra's ownership structure also prohibits it from participating in mergers and other consolidations between telecommunications companies. The Commonwealth Bank, National Railways and Qantas are all cases in point. After periods of partial privatisation, all of these were eventually fully privatised and allowed to reach their full potential in the marketplace. As the premier telecommunications company, Telstra has a very costly infrastructure which must be completely maintained and improved. The Labor Party has helped create a myth that Telstra's infrastructure was put in place decades ago and is an asset that will not depreciate. The government should be allowed to take on the role of telecommunications regulator; otherwise Telstra risks further and further decline.

It has been argued that Telstra has too many masters: the Commonwealth government and, through them, the electorate; its shareholders; the Australian Competition and Consumer Commission; the Australian Communications Authority; and its customers. Then there is industry self-regulation: the Telecommunications Ombudsman, the Australian Communications Industry Forum and the Telecommunications Access Forum. As telecommunications expert Warwick Smith articulated:

Investors know that Telstra is being pulled in too many directions, serving too many interests.

The real debate about the sale of Telstra concerns what is best for Telstra as a telecommunications company. Australians are extraordinarily well protected in the telecommunications market. The regulation of the market is comprehensive and gives consumers the confidence that they are receiving quality service. In the Australian telecommunications sector, there is a clear universal service obligation to ensure that standard telephone services and payphones are reasonably accessible to all people in Australia on an equitable basis. There is the customer service guarantee as well as special benefits to rural and regional Australia.

The latest report of the ACA on the performance of the major telecommunications carriers demonstrates the very detailed scrutiny under which the carriers now operate. There are measurements of how well Telstra performs in making new connections, in fault clearance and, for mobile networks, in call congestions and call dropout rates. Call centre performance and mobile phone portability are also measured for all carriers. Under legislative measures there are foreign ownership restrictions, with aggregate foreign ownership limited to a 35 per cent ownership stake in Telstra and individual foreign ownership limited to a five per cent ownership stake. Under its current ownership structure, Telstra remains in commercial limbo. At a time when the Australian business community needs to be thinking globally and expanding its horizons, Telstra is restricted from doing so.

As it currently stands Telstra is unable to raise further equity, which is affecting its capital efficiency and constraining its ability to take advantage of global growth opportunities. If Telstra is unable to expand and compete, it will not be able to position itself as a key telecommunications player beyond its present domestic focus. Telstra must be able to respond quickly, and its current structure prevents that. Telstra needs more flexible access to capital, and currently Telstra is significantly restrained from doing that because of legislative measures and its inability to raise equity.

But the greatest risk for Telstra shareholders is a federal Labor government. As a dominant shareholder, the federal government may weigh up not just commercial considerations but also political considerations. There could be circumstances with a future federal government where political considerations are put before commercial factors and the interests of investors. This mix means that the management of the company is split between the board of directors and the Minister for Communications, Information Technology and the Arts. What does this mean for consumers and shareholders? A Simon Crean government would see the member for Melbourne, Lindsay Tanner, as minister for communications. The member for Melbourne has given consumers and shareholders a terrifying glimpse of Telstra under a Labor government. The member for Melbourne is on the record advocating plans for Telstra which include selling off its profitable arms, such as its mobile and pay TV businesses, to allow a future Labor government to buy back its core network.

Under that proposal the government would retain majority ownership of the network sector while the retail arm would be fully privatised. Of course, as with most policies Labor puts forward, the member for Melbourne did the famous Labor Party flip-flop with double pike and eventually washed his hands of the policy. He may have been mugged by the member for Werriwa. Notwithstanding the fact that the member for Melbourne has never been a taxi driver, the member for Werriwa is not loath to go for the biff against members on his own side—just ask the members for Griffith, Reid, Batman and Grayndler. He recently told Paul Kelly of the Australian that he was in favour of market economics. So he may well have taken the truncheon to the member for Melbourne's policy—which is just as well: Telstra is owned by millions of Australians who bought it on the understanding they were buying into a fully-fledged telecommunications company.

Labor's ill-fated plan would simply have been an exercise in ripping the heart out of Telstra by stripping it of its crucial assets in a very clumsy attempt to buy back a network to appease the Labor Party's union mates, most of whom just happen to work in the network area. The result of this would be a government controlling all of the low-growth areas but setting prices so that the company could not make a profit. It was a plan which, in the words of our minister for communications, Richard Alston, would turn Telstra into a `backwater utility'. Labor wanted to keep all of the old non-performing low-growth areas under government control, presumably setting the price so that Telstra could not possibly make a profit, loading it up with all the universal service obligations, providing taxpayers with all the commercial risks which are inherent with upgrading work and, at the same time, flogging off everything else. Because they privatised everything that moved when they were in government, they know that privatisation is an inevitability; and because their union masters will not let them do it they are scurrying around trying to find alternatives.

In an article that appeared in edition 14 of Options, a journal I have published from time to time, former Keating minister Gary Johns—a former colleague of those opposite—discussed the dangerous strategy of holding out for too long for sweeteners from a proposed full sale of Telstra. In his article, Johns wrote:

The nearer Telstra comes to full privatisation the higher the price demanded by the hold-outs, in particular the rural voters. Like the proverbial widow sitting in the last house needed by the property developer there comes a time when the premium price is withdrawn, the developer gives up, or goes ahead without it. There is a shopping centre at Caloundra in Queensland's Sunshine Coast where a little old house sits right in the middle of a shopping centre car park. Presumably, the owner held out for more money, or just the fear of leaving home, and when the developer could wait no longer, the shopping centre went ahead anyway, complete with a house marooned in a sea of cars and shopping trolleys.

When the time comes you can be sure the beneficiaries of the estate will not reap a premium on the house. Who would buy it, what rent would it command? Are the hold-outs of the Telstra sale running the same risk as the shopping centre widow? Will the desire to regulate and press further obligations on Telstra make it less worth selling and, more important, a less valuable corporation?

That is what Gary Johns wrote. The Labor members opposite would do well to think about their former colleague's analogy.

Mr Snowdon —Unlikely.

Mr PYNE —Members on this side of the House know it makes sense. You would do well to think about it, Member for Lingiari.

Mr Snowdon —Thought about it; dismissed it—it's irrelevant.

Mr PYNE —The former member of this House makes a lot of very good sense.

Mr PYNE —Well, he was a minister! You have to admire Labor's audacity in relation to the sale of Telstra. Labor have not only privatised more government instrumentalities than the coalition has even tried to do but also managed to put all the money that they gained from privatisation into the bottom line of the budget. They simply threw it to the winds on things like the Working Nation program, which did not produce a single net job, and on huge budget blow-outs for the Submarine Corporation to pay for submarines. This government has at least used the money from privatisations to reduce the government debt left behind by the Keating-Beazley government.

When in government, the ALP managed to privatise not only the Commonwealth Serum Laboratories but also National Rail, Qantas and the Commonwealth Bank. The most egregious of these privatisations was definitely the Commonwealth Bank because in that case the minister for finance at the time, Ralph Willis, actually wrote in the prospectus for the partial sale of the Commonwealth Bank that the government had no intention whatever of further reducing its shareholding. The former Labor minister for finance was lucky not to be prosecuted under section 996 of the Corporations Law, which is about making false and misleading statements in a prospectus. When Labor was in government, it actually told people who were preparing to buy shares in the Commonwealth Bank that they could rely on the fact that the Commonwealth government of the time would not sell down its remaining stake in the Commonwealth Bank.

In question time in this place, Ralph Willis was asked, `So, unlike before, this time your commitment is ironclad?' And he replied, `Absolutely, yes.' That was in October 1993. It was not long after that that they were hawking off the rest of the Commonwealth Bank to the stock markets. What did they do with the money? Treasurer Peter Costello's practice with respect to the proceeds of privatisation has been to reduce government debt. What has been the effect of this? It has taken pressure off interest rates, it has helped to encourage growth in the economy and it has helped to reduce unemployment.

The sound nature of our economic management has helped to create jobs, free up the economy and encourage investment from overseas. What makes anybody think that the ALP, if they were in power again, would not sell the remaining part of Telstra? Labor not only have form on privatisations; they planned to sell Telstra before the 1996 election—just like the Commonwealth Bank. The member for Brand has admitted that in 1995 he attended a meeting with then Prime Minister Keating and John Prescott about selling Telstra to BHP. Not long after that, it was revealed that the Department of Finance had prepared a five-tranche full sale of Telstra to go ahead in 1994, 1995 or 1996, depending on the outcome of the election.

The tragic aspect of this debate for Australia is that Labor do not know why they are opposing this bill. Australians no longer know what the Labor Party stand for and, in many instances, Labor MPs do not even know what they stand for. By supporting this bill, the Labor Party can prove to the electorate that their days of rank opportunism are over and that they are returning to the days when they had some credibility with regard to policies on privatisation. I commend the bill to the House.