Senator FAULKNER —My question is directed to Senator Alston, the Minister for Communications and the Arts. Minister, do you stand by your statements that there is no windfall gain arising from Telstra's record profit of $2.3 billion for 1995-96 and that suggestions that part of that profit should be used for such purposes as funding the Natural Heritage Trust are `spurious economics`?

Senator ALSTON —What is required here is a careful examination of the figures. For example—

Senator Bob Collins —Is this what you said to Tim Fischer, Richard?

Senator ALSTON —Do you want the answer or not? The operating profit after tax and minority interest was $2.3 billion in 1996. In June 1995, that figure was $1.755 billion. If you look at the dividend figure of $1.368 billion, you find that is only about $74 million more than the implicit figure which we had budgeted for. In other words, there is a very minor increase.

Senator Schacht —What was the dividend last year compared with this year?

Senator ALSTON —Look, I know it is a bit simplistic and your approach does not readily lend itself to this sort of analysis, but there are two elements: one is the dividend payment and the other is the increase in corporate taxation. Senator Kernot was arguing that the increase in corporate tax was very significant because she said it was something like 76 per cent compared with 7.9 per cent last year. The fact is that that 7.9 per cent did not relate to Telstra. That is an overall increase in the level of corporate taxation and that disguises a multitude of ups and downs, pluses and minuses. It certainly does not tell you anything about the level of increase in Telstra's corporate taxation contributions last year, nor does it tell you what its increase might be this year.

Senator Faulkner —So do you stand by your statement?

Senator ALSTON —I am in the process of explaining it to you. It is also very important to recognise that, because you are talking about the aggregate of contributions to revenue, there is no such thing as a windfall in this situation any more than there might be if BHP suddenly had a record result and increased funds were available. You cannot simply say, `Well, that means we got more than we expected; we can therefore spend that money.' You have to balance this out. You have to look at all the pluses and minuses, as I said in my release yesterday.

Senator Kernot interjecting—

Senator ALSTON —I am sorry, I cannot hear but I presume we will have this debate in the MPI. To the extent that the increase is due to an increase in its market share, then that is at the expense of its competitors. You may well argue that that means that their contribution to corporate taxes would be commensurately less. So there is no basis for saying that a one-off increase in the level of corporate taxation constitutes a windfall gain in this area any more than it does anywhere else.

The same applies to the dividend payment. The dividend payment is substantially taken into account in the budget projections. In fact, we have already received 50 per cent of that figure announced last Friday. So that has already been factored in and received. The next amount will not be payable until December this year and that will then take account of the lag effect. That will be part of what was announced on Friday as well.

You have to remember that about 90 per cent of the total increase in operating profit is due to an increase in revenue—about $1.1 billion—and efficiencies constitute less than 10 per cent. On that basis, you cannot possibly assume that this is anything other than a snapshot of the performance of one corporation at a particular point in time. It tells you nothing about next year and how it will perform then.

Senator Bolkus —So how does this compare with the price for the proposed sale?

Senator ALSTON —I have made it clear to you: the dividend was broadly anticipated in budget statement No. 4. The level of corporate taxes is quite a spurious figure because it is not related to Telstra's level of increase; it is related to the overall level of corporate tax payable in the last financial year. That is no more a windfall gain than any increased performance by any other company. (Time expired)

Senator FAULKNER —Madam President, I have a supplementary question. I thank the minister for that straightforward explanation of how he stood by his statements that to use part of the profit of Telstra for a purpose such as funding the Natural Heritage Trust was spurious economics. Given that you have made that statement, Senator Alston, will you now repudiate the Acting Prime Minister, Mr Fischer, and his statement that was reported on page 1 of the Australian this morning that Telstra has delivered a couple of hundred million extra to the budget which could be spent on other policies? Who is right, Minister—you or Mr Fischer?

Senator ALSTON —I am not sure how that constitutes a supplementary question, because it has nothing to do with whether I stood by my statement that there were no windfall gains—and I clearly do. I have made it very clear to you that I am not in the business of offering gratuitous advice to anyone except your good selves, and I will do that as often as the occasion requires it. The fact is you want to know as a matter of public policy—

Senator Sherry —What do you know?

Senator ALSTON —I know you do not want to know. What I am being asked is whether there is a windfall profit there that would somehow be available for others to spend on other purposes. Well, there is no magic pudding.

Senator Schacht —The Deputy Prime Minister thinks there is.

Senator ALSTON —I do not know whether you have even the vaguest idea of how these things are calculated. I think it all just washed over you. I explained to you that there are two critical elements: the dividend payment and the increase in corporate taxes. I have explained why both of those do not constitute a windfall gain; yet you seem totally oblivious to the economics of the argument. I can understand why you would take that approach. (Time expired)