Joint Meeting with the Liberal Club

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The La Trobe University Charles II Society cordially invites The La Trobe University Liberal Club to a joint meeting and discussion on the topic of the Telstra Privatisation.

To be held at 12 noon on 11^th September 2003, in the Rod Joyce Room, La Trobe University Eagle Bar.

The discussion will be divided into two sections:

Would the privatisation be good policy?

Would the privatisation be good politics?

We will aim for half an hour's discussion per topic, after which we can vote on the full sale of Telstra in a joint sitting!

I have attempted to write a discussion paper which would be controversial in the context of two 'right' clubs discussing privatisation, and would hopefully generate debate. This paper constitutes my substantive contribution to the discussion, and therefore I shall chair the meeting. (Let me reiterate: if I was asked to express my precise opinion on privatisation, the resulting essay would differ from this paper).

Regent Trevor, Charles II Society.

Discussion paper:

1. Full Sale of Telstra: Good Policy?

John Howard told the Liberal Party's April 2000 National Convention that the government's economic reform programme, "has not been pursued because we want to get an A+ in the exam for economic rationalists. . . Economic reform is about making people feel more secure, happier, more able to care for their families. . . Economic reform is the flesh and blood of social reform. Economic reform without a social goal, or a social vision, is an economic reform that is destined to fail and ought not to be embraced."¹

Keeping the Prime Minister's words in mind, any discussion of the merits of the full sale of Telstra must make considerations which go beyond a mere cost-benefit analysis. Simply measuring whether the Government could save more by selling Telstra and paying off debt than it would by collecting the dividends may be relevant to the question, but it is not the whole answer.

What is the purpose of Telstra?
Is it only to provide the people of Australia with access to telecommunications? Does it have important strategic purposes (both economic and otherwise)? Or is the purpose of Telstra, like many corporations, to maximise profits for the benefit of shareholders? How can these purposes most effectively be balanced?

Government ownership of infrastructure
Some would argue that Governments simply should not be in the business of owning telecommunications infrastructure. Indeed, we have seen many incompetent governments in Australia - governments which misused state enterprises for political purposes, allowed them to languish in order to avoid necessary but electorally unpopular reforms, or simply neglected them. (The Kirner era in Victoria demonstrated some of these problems).

However, if Governments are incapable of running telecommunications companies, why did the Government accept the sale of a controlling share of Cable & Wireless Optus to SingTel (owned by the Singaporean Government), despite warnings from intelligence agencies that it was a bad idea? (The intelligence concern related to Australian telecommunications assets owned by C&W Optus. Singapore's record on such matters does not sparkle... Incidentally, the Singaporean Government also made a bid for Ansett). SingTel is apparently making money under Government control, and apparently we are confident enough in their Government's ability to run business effectively. Do Australian governments differ?

Should the Government give away the power to provide strategic guidance to our telecommunications environment, where appropriate? (Yes, we can regulate a privately owned Telstra, but if the whole purpose of the exercise is to get government influence out of business, wouldn't such regulation would also be illegitimate? Would the ACCC be able to regulate such a large private company?

Competition
We all know that Telstra is not the most efficient or effective company about. This can be traced fairly clearly to its legacy as a massive, bureacratic monopoly. Since the company's corporatisation and the introduction of some foreign competition, things have improved, marginally. Would the sale of the remaining Government share of Telstra change the nature of the organisation? To the extent that the corporatised Telstra is still driven by political considerations today, privatisation might lead to the 'rationalisation' of staffing. But would it also lead to the rationalisation of service provision, or other considerations? Is this worth the financial windfall?

2. Full Sale of Telstra: Good Politics?

I must say that in those parts of the parliamentary debate I have heard, I have been disappointed in the performance of the Government side. Both Kennett and Keating were able to communicate a manic enthusiasm for the enormous financial benefits of privatisation. However, in both cases there was already an atmosphere of economic peril. Does that atmosphere currently pervade Australia's sceptical and conservative electorate? If the proceeds were going to go on education and health (or other sweeteners), it might be a different matter, but the Government's economic wizzardry has perhaps taken away public interest in repaying debt. Polls would appear to indicate antipathy to this proposal at present. Is this the right time to privatise Telstra?

On the other hand, one has to wonder whether the ALP has any alternative that might convince the public, or whether this is more of the same unimaginative obstructionism. Last time they were in Government, they sold the Commonwealth Bank in two tranches, each time breaking explicit election promises. They have little credibility on the issue, and the 'Third Way' seems to be what the Russians call "sitting between two stools." I believe it was Michael Kroger who called the Bracks model "Poor man's economic rationalism."

Dividing the Opposition
There are some indications that Senators outside the major parties might support the Bill in exchange for targetted 'sweeteners'. (Polite talk for bribes delivered to their electorates!) Meg Lees has signalled that environmental concessions in South Australia would help her make up her mind. Even Bob Brown may consider voting in favour of the Bill in exchange for an end to logging in old growth forests. Anything that gets the non-major-party elements of the Senate voting with the Government will weaken the Opposition, which has been able to treat the minor parties as auxillary wings of the ALP in the past.

Dividing the Government
On the other hand, the wedge could be turned back against the Government. Many backbenchers are very worried about the consequences for their own seats, and the ALP has been making a lot of the uncomfortable position in which this places the Nationals. National Party Senator Kay Hull moved an amendment to call a Referendum, however the vote was put before she could secure a seconder. Both Hull and Liberal Alby Shultz abstained from voting on the Bill, which passed the House of Representatives 78:59. The comfortable margin of the vote conceals the potential for deep division within Government ranks.

Rural and Regional Electorates: the Achilles Heel
The crucial importance of rural and regional electorates to the prospects of any Government will, I am sure, not be lost on those attending this meeting. Many country people are understandably concerned about the provision of services under a laissez-faire telecommunications regime. Bank deregulation has left an unpleasant legacy particularly in isolated electorates.

Does this legislation pass Howard's test of socially useful economic reform?
Will the Liberal-National Coalition lose the country vote?
Which side of the Senate chamber will be more divided over the issue?

Hopefully this discussion will generate some interesting ideas.

Sources:
¹ Michelle Grattan, Australian Prime Ministers, New Holland Publishers, Sydney, 2000, p.457.

Other source: Luke McIlveen, T3 must jump last big hurdle, The Australian, 22 August 2003, p.6.

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Copyright Š2003 La Trobe University Charles the Second Society.