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Friday, 18 October 1996
Page: 4490

Senator LUNDY(10.08 a.m.) —It is very interesting for me to have this opportunity to contribute to this debate on the Telstra (Dilution of Public Ownership) Bill after hearing the ranting diatribe from our colleague across the chamber Senator O'Chee. Australia and indeed the world are in the midst of an evolutionary phase in the development of telecommunications. The convergence between the technologies is indicative of the new approach to information services in the corporate sector.

The rapid advances in digital compression technology and processor capability are reshaping our expectations of the level of service that we will have available to us. Governments are confronted with fresh challenges as new and hybrid technologies emerge. The task this presents is to ensure that the public interest is served, not the interests of private corporations, as Senator O'Chee alluded to.

In Australia, the countdown to full and open competition is continuing, but the legislative framework still needs to be finalised. This whole transition is occurring at a time when technological convergence in information service and delivery is becoming a feature of telecommunications entities as they position themselves to maximise market share and subsequent profit.

How the government handles this transition will be a considerable factor for both the future viability of the Australian telecommunications industry and the quality of services available to both homes and business, whether in rural or urban areas. Both these issues present significant challenges for legislators. It is essential that we reach out and seize the opportunities that are presented to us through this period.

As I mentioned before, Senator O'Chee made a ranting contribution to this debate. Senator O'Chee spent a large percentage of his time dwelling on what Labor has done and what has happened in the past. I think this is a very telling point about the attitude of this government. Does it care about what happens next, about the future, or is it too committed and too bogged down in trying to discredit decisions that have been made previously? I say that its energies would be far better spent on the future of the telecommunications industry and its services to customers in Australia. What happens next year? What happens the year after that?

The government should get its focus right. If this government had any vision beyond the next election, it would realise that decisions made now will determine whether or not Australia continues to ride the technology wave or just falls off the back, never to catch up. A long-term view in telecommunications is crucial.

Australia is currently uniquely positioned in telecommunications in a global sense as well as in a national sense. We live in a country where our vast geography has by necessity created a dimension to our industry that is unparalleled anywhere else in the world. Australia's leading role in the development of optical fibre is one example. We have heard again this morning that it is that optical fibre roll-out that presents a unique perspective to our industry and its development here.

Many of these strengths must be attributed to the role that Telstra has played as a publicly owned corporation. The introduction of full competition can and will be used to further this advantage, but partial privatisation or full privatisation—which we know will be the eventual outcome—is not going to have any impact on the improvement of competition. This role of Telstra as a publicly owned corporation must not be squandered or abused, and that is what this is all about. The privatisation would equate to just that.

To sell Telstra in the way that this government proposes represents the extraordinary contempt with which this government holds the people of Australia. To even attempt to sell in the period of legislative change that we are going through with telecommunications is absolutely ludicrous in the extreme. This government wants to squander one of the best opportunities that this country has had for industry development.

As a participant in the committee that inquired into this matter, I found that, not surprisingly, ideological obsession was exposed as the primary motivation for pursuing this sale. Not only is this government seemingly oblivious to the opportunities, but it is unwilling to acknowledge the damage that its agenda with respect to Telstra will inflict upon the industry.

The linking of some of the profits from the sale of Telstra to the funding of the Natural Heritage Trust programs represents the most cynical political move ever seen. It was with great mirth that I heard Senator O'Chee speak about cynicism with respect to Labor's approaches to this particular issue. The Australian community and the environmental organisations have been exposed to blackmail. Ironically, not through the Telstra inquiry, but through the inquiry into the Natural Heritage Trust of Australia Bill, those same environmental organisations have discredited entirely the linkage and the attempt at blackmail by this government.

It is becoming quite common knowledge that this linkage is the source of some hilarity within the government ranks. I think this says so much about the regard that this government holds for the people its represents, particularly those people who have conservation and repair of our natural environment as their primary concern. It is a slap in the face.

Given the linkage with the environment bill and the ideological motivation for the sale, what does this in turn say about the government's attitude towards the role that telecommunications play in our society? The ability to communicate and access to information are determinants of power in our society. Telstra's dominant role in telecommunications makes it a player in ensuring equity of access—the ability for everybody to use the services it provides.

In the current context the government must move decisively to ensure equity of access. Ministerial direction must be maintained if people are to be considered before profit. The broad terms of reference in the Senate inquiry into the Telstra (Dilution of Public Ownership) Bill allowed a wide expression of views on this matter. The range of issues explored form a solid base of information for use when decisions are taken regarding the post-1997 regulations and, indeed, the degree of intervention that occurs in the telecommunications industry. It is crucial that this wealth of knowledge, facts and opinions brought into the public arena as a result of the Senate inquiry be used as widely and as extensively as possible. Not to do so would be a further contemptuous act by this government.

It is, however, not surprising that the government so vehemently denigrated that inquiry process. When you look at the outcomes, it becomes obvious that they anticipated there was no substance to their argument. It may be that the government never anticipated having to justify the privatisation—instead, hoping to rely on blackmail to find the cross-bench support necessary for this bill's passage through this place. Despite the grandest efforts of this government, the only skerrick of productivity benefit that could be attributed to any privatisation of a public utility was that of a Chilean company under Pinochet's dictatorial regime, and that was a mere 1.5 per cent. They had to dig pretty deep and look far and wide to come up with that one, I can assure you.

It is significant that the primary evidence used by Telstra, by the Department of Finance and by the Department of Communications and the Arts was exposed as being fundamentally flawed. Whatever argument the government puts up on this in refuting the evidence put forward, you cannot refute the words on the papers of the studies that they use to prop up their arguments.

The evidence to which I am referring, a World Bank study, published in 1992, entitled Privatisation: The Lessons of Experience, by Kikeri and others, is not an empirical analysis of the benefits of privatisation at all—which is what the government has asserted. This report is but an appraisal of privatisation policies. It does not even attempt to analyse the improvements in services or productivity that may or may not arise as a result of privatisation.

This is even acknowledged in a later World Bank study by Galal and others, published in 1994. In this report of the 7,000 or so privatisations that have occurred, only around 2.5 per cent are in OECD countries—that is, comparable countries to Australia. In the same report research summaries of the welfare consequences of 12 privatisations are examined, of which only three are in telecommunications companies.

A further indictment of the comparative value of these studies to Telstra is an admission by the authors of the 1994 report that says:

We are less than sanguine when it comes to selection bias. Our cases are by no means a random sample of public enterprises around the world.

With regard to the 1992 report, the author offers the justification for privatisation in the following words:

. . . evidence from a wide variety of countries shows that far too many State owned enterprises have been inefficient and have incurred heavy financial losses . . . In many countries they have been an unsustainable burden on the budget and the banking system, absorbing scarce public resources.

This is hardly a description of Telstra, which is producing multibillion dollar profits this year. There is no doubt that, in the light of such flimsy evidence, the government has turned to repetitive derogation of the inquiry process and the majority report where we have proven there is no factual substance to their argument at all, despite the earnest assertions otherwise by Senator Tierney and Senator O'Chee. It has been shown that there is no substantiation and no benefit to the public or to the future of the telecommunications industry at all.

It is also quite significant that Telstra's employment levels, jobs—reminding you, of course, that the jobs issue formed the basis of the election campaign for this government back in March—would be reduced by 24,000 via a strategy exposed by my colleague Senator Carr during the course of this inquiry. So I am flabbergasted to hear Senator O'Chee's assertions here this morning that, in fact, jobs will not go. Sorry, we know they will, we have the facts—and Telstra have acknowledged that. Project Mercury represents the shedding of one-third of Telstra's employees—one-third!

It is interesting to see that downsizing of that nature has been criticised by its main proponent, Stephen Roach, a leading economist currently with Morgan Stanley. This fellow led much of the debate which promoted corporate downsizing as a means of retaining a competitive edge. Now Mr Roach has reassessed his views. I would like to share a few comments from Mr Roach with respect to this type of downsizing. He says:

. . . the former approach only hollows out companies without providing general economic growth.

In a recent Australian interview he went on to say that:

. . . if all you do is cut you will eventually be left with nothing, with no market share.


. . . at the end of the day you can create wealth only if you've got a corporate sector that has its act together and takes a long term strategic view.

That long-term strategic view takes me to the next few points I would like to make.

It is quite significant that there has been a reduction in investment in hardware and infrastructure within the Telstra research laboratories, or TRL, with Telstra choosing instead to focus on information services. This is despite specific acknowledgment by Telstra management that TRL's strengths in these areas have `served Telstra, its predecessors, and the country very well'. In response to questioning in estimates as to who will take up the slack with respect to this research, Telstra believes that the manufacturers will. The manufacturers identified, of course, are Alcatel, Ericsson and Siemens and, to a lesser extent, Nortel. I think everybody knows that these are not Australian companies, although they do have significant presence here.

Since March, 44 staff from TRL have been given the punt, and another 133 jobs will be going in TRL. The vast majority of those jobs are in the professional and technical areas. This represents a 30 per cent cut to TRL—the research arm of Telstra. I think this highlights a very disturbing shift in Telstra's research and development policy and reinforces the need to ensure public accountability through the implementation of regional industry development strategies.

Another signal from Telstra is that, in their pursuit of potential private investors and their efforts in tidying up the books, they are sacrificing long-term projects. They are sacrificing long-term projects that would have positioned Telstra down the track in a position of strength, in the way that studies and investment they conducted many years ago did.

One such project that has been abandoned recently is, of course, the Gungahlin broadband project. Gungahlin is a region in the ACT; it is a new suburban area. This particular project was abandoned in its original form at about the same time—surprise, surprise—as the privatisation bill hit the lower house. A different project has since emerged to assist in the damage control that the company had to initiate to buffer themselves not only from investor backlash but from charges that, in fact, it did represent a move away from long-term research into short-term strategies with a short-term gain.

Policies of the Labor government over the last decade have generated one of the fastest OECD growth rates in the research and development investment by business as a share of GDP. However, Australia still retains one of the lowest ratios of business expenditure in research and development to GDP, at 0.7 per cent. The fact is that you need to look at those broad policy settings in the context of what is happening in Telstra with their investment in research and development and how an emphasis on privatisation can detract so wholeheartedly from long-term investment in research and development.

In commenting on the changes within TRL's resource allocation, Telstra management has acknowledged that it does demonstrate that there is a movement of the research focus into new areas, particularly in the broadband, multimedia and content areas. These were the areas that the Gungahlin broadband project in its original form was going to deliver, but somehow Telstra has found the justification to move away from that investment in hardware and infrastructure, which has really been at the backbone of their developmental and innovative areas.

With respect to this issue about research and development, there is a report entitled Australia and the Knowledge Economy, which is from the Centre for Strategic Economic Studies. It states:

. . . we conclude that there is a powerful body of evidence linking increased levels of investment in business research and development to increased exports.

So this really begs the question about the relevance of R&D investment. What is the relevance? We know that there is a significant relevance of growth generally, in terms of growth of jobs and in terms of growth of exports.

As highlighted in the majority report, this fact exposes the reduction in the 150 per cent tax concession to 125 per cent—which was a decision by this government—for the flawed policy that it really is. This conclusion demonstrates how it will have the effect of impacting directly upon the potential of exports in Australian industry generally. The same report identifies two scenarios for research and development: the first will take us to a minor increase in that ratio between business expenditure and GDP, and the second will take us to a slightly larger expenditure. Both are based on previous assessments.

So, sadly, this government has taken a backward step in their budget, with cuts to research and development across the board. Another backward step in their pursuit of privatisation of Telstra is the dampening effect that that has placed on the strategic long-term investment of that organisation. Another backward step in their blind ideological assertion is that job shedding is the only way to improve Telstra's competitive edge.

A quick snapshot of the effects of deregulation and privatisation of Telecom New Zealand provides a very useful insight as to the potential negative effects on local industry, where employment in electronic manufacturing firms fell by over 40 per cent. There is a real opportunity here to make a public asset really work for the benefit of all Australians, for Australian industry and for innovation. There is no evidence that privatisation will bring about the efficiencies and improved services claimed. Take the blinkers off. Do something practical for the people. Keep Telstra in public hands. (Time expired)