John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

The President has received a letter from Senator Conroy proposing that a definite matter of public importance be submitted to the Senate for discussion, namely:

The Australian Government’s management of the last tranche of the Telstra sale has cost investors thousands of dollars as evidenced by:

(a)

the fall in the Telstra share price from $7.40 per share at the time of the T2 float to $3.64 today;

(b)

the fact that these shareholders have only recovered $1.86 in dividend payments; and

(c)

a net loss per share for Telstra investors of nearly $2 per share.

Stephen Conroy

Deputy Leader of the Opposition in the Senate Labor Senator for Victoria

I call upon those senators who approve of the proposed discussion to rise in their places.

More than the number of senators required by the standing orders having risen in their places—

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I rise today to speak on a matter of public importance: the collapse in the share price of Telstra since T2, and the contribution to its decline by the Howard government’s continual bungling, misrepresentation and financial incompetence on telecommunications. By now, Telstra shareholders must cringe every time they see a news report of a Howard government minister talking about Telstra. It would be an entirely understandable response. It seems that every time someone in the Howard government opens their mouth about Telstra, one way or another it is the company’s 1.6 million shareholders who are on the receiving end. Whether it is the Prime Minister’s incompetent spruiking of T2, the communications minister’s attacks on Telstra’s management or the finance minister’s botching of the announcement of T3, the Howard government is never short of a word that will hurt Telstra shareholders’ interests.

The detrimental impact on Telstra’s shareholders of the Howard government’s bungling, misrepresentation and incompetence in telecommunications started in 1999 when the government was pushing ahead with its sale of the second tranche of Telstra. The Prime Minister was travelling around the country and talking up the government’s T2 offering. John Howard, the Prime Minister, told Australians that T2 ‘will be an extremely good deal for those who get involved’. He told prospective investors that T2 was a ‘marvellous opportunity for more of the mums and dads of Australia to buy shares in this great enterprise’. The Prime Minister supported his claims by basing his T2 offer on a front-end loaded, tricked-up yield flowing from large Telstra dividends, coupled with an instalment payment structure.

However, those who listened to and believed John Howard’s claims about T2 have been badly burnt. Seven years later, Telstra’s share price is less than half its T2 retail offer price of $7.40. Small investors who bought into John Howard’s tricked-up T2 yield structure have now lost around $2 on every Telstra share they bought, even after the company’s dividend stream is taken into account. For every $1 that those small investors invested in T2, they now have just 74c left. That is right—for every $1 put into Telstra by those poor small shareholders, they now have 74c left.

I am sure that Telstra shareholders who bought into T2 on the strength of the Prime Minister’s word are now wishing that he had kept his mouth shut. I know for a fact that they were wishing that the Minister for Finance and Administration, Senator Nick Minchin, would have kept his mouth shut this week. The Telstra investors who have lost thousands of dollars by investing in T2 are rightly furious at Senator Nick Minchin for telling them this week that they have done very well out of T2. It is hard to know whether such a patently absurd statement is the result of economic incompetence or spectacular arrogance. It could of course be both. The fact that the minister then went on to say, ‘If they have not sold, they have not lost their money,’ simply beggared belief. Terry McCrann, in the Herald Sun, described the comment as one of ‘astonishing stupidity’, and he was dead right. Telstra shareholders would have been merely exasperated.

Clearly, Telstra investors have no chance of sympathy from this government when the minister is so out of touch that he does not even realise that his own mother has lost thousands of dollars from the T2 debacle. Senator Bernardi may well laugh, but this is the public record. Senator Minchin’s own mother has taken a bath. In fact, in question time this week, Senator Minchin hung up on his mum over Telstra and showed no sympathy for her losses or Telstra’s other 1.6 million shareholders, and they can hardly hold out for much compassion.

Nigel Scullion (NT, Country Liberal Party) Share this | Link to this | Hansard source

Senator Scullion interjecting—

Richard Colbeck (Tasmania, Liberal Party, Parliamentary Secretary to the Minister for Finance and Administration) Share this | Link to this | Hansard source

Senator Colbeck interjecting—

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I hear shouts from the other side that it is a risky business. It is if you suck them in and mislead them. These people chose to believe the Prime Minister. They actually made the mistake of believing the Prime Minister when he told them it was a great buy. He did not tell them it was a risky buy; he told them it was a great buy.

However, the Prime Minister’s incompetent spruiking of T2 was only the start of the Howard government’s attack on Telstra shareholders. A more recent example of Telstra shareholders being hurt by this government’s bungling in telecommunications can be seen in the government’s gag on Telstra’s management. The government’s efforts to gag Telstra management show a government that are completely out of touch with Telstra’s shareholders. Telstra’s long-suffering shareholders rightfully want to hear from the company’s management team about the prospects for the company. However, the Howard government do not understand this. I think that they do, in truth. I actually think that John Howard’s government understand exactly what they are doing.

The Howard government feels threatened by a Telstra management that is bold enough to disagree with the government and wants to shut down the debate. The Howard government is too scared to have the policy debate about telecommunications regulation. It was only three months after the new CEO of Telstra was appointed, just over 12 months ago—I know it certainly seems longer to Senator Ronaldson—that Prime Minister Howard walked around this country and said, ‘Services are up to scratch.’ Do you remember that? We all remember that. Mr Trujillo, at a press conference just three months later, stood up and said: ‘I’ve got to tell the truth’—and these were his words—‘Telstra has underinvested in its own network. It hasn’t delivered the cutting-edge technologies that the company needs to guarantee its future profitability.’

Mr Trujillo blew the whistle on the government. That is why they hate him so much: because he has blown away the conspiracy of silence between the previous Telstra board and management, the government and the investment banking community about the true state of Telstra and where the company is at in the marketplace today. That is why, instead of having a debate about government policy, this government are trying to make Telstra executives the issue. They want to complain about Mr Trujillo, Dr Burgess and the chairman, Mr McGauchie. They want to make it look like it is all their fault. Instead of engaging in a policy debate, the Howard government are engaging in a personal vendetta against the Telstra management. The government are playing the man, not the ball, because they cannot afford to take the field of policy debate.

Once again, Telstra’s existing and prospective shareholders are set to pay the price for yet another incompetent intervention in telecommunications from the Howard government. Small shareholders go onto the scrap heap to protect the government with a glass jaw. It is completely unacceptable for the Howard government to gag the management of a public company. This is a company in which 1.6 million Australians own shares—encouraged by the Prime Minister. These Australians deserve to be kept fully aware of the company’s prospects. The market needs to be kept completely informed of Telstra’s situation. The editorial of the Australian Financial Review was 100 per cent right when it stated:

If a company of Telstra’s stature has ever made such an abject submission to the federal government in the modern era, The Australian Financial Review missed it.

The AFR hit the nail on the head when it said that the government’s gagging of Telstra management raises serious concerns about the extent of full and frank disclosure by Telstra of its true assessment of the impact of any new regulatory imposts. The AFR is right to say that regulation is important to the Telstra sale and that Telstra shareholders need to be properly informed of its impact. But don’t worry about that: this government is not going to let you hear that. It has put the fix in to make sure that Australians out there who want to understand the prospects of this company do not get told the truth.

Perpetual Investments—one of the biggest recommenders and brokers in the country—has told its clients: ‘A major factor impact in Telstra is the heavily regulated nature of the telecommunications industry in Australia. A highly regulated industry can create significant uncertainty for the companies within that industry and hence investors’. So the person whose name we are not allowed to speak, if you are a cabinet minister—Phil Burgess—has said that the idea that regulation and business are somehow two different things is a view that only a person from another planet could have.

It is critical that potential investors in T3 completely understand the impact that regulation has on Telstra’s prospects. For this to occur, Telstra management need to be free to speak their minds. Given the Howard government’s record of deception of Telstra, prospective investors in T3 need to hear both sides of the debate about the impact of regulation on Telstra’s prospects. Investors who were misled by Mr Howard’s irresponsible spruiking on T2 are right to take the government’s claims about the impact of regulation on T3 with a grain of salt. Telstra shareholders are right to want to hear the views of Telstra management on telecommunications over those of the Howard government. However, the Howard government is not interested in the interests of Telstra’s other shareholders; it is only interested in its own political interests.

Gagging the board alone was not enough for the Howard government. Gagging the management was not enough for the Howard government. In order to be able to get the T3 float away, the government needed to be able to offer investors a tricked-up dividend yield, and that meant locking Telstra into its forecast level of dividends. Never mind that Telstra will be forced to borrow to pay these artificially high dividends. Never mind that Moody’s, Standard and Poors and Citibank have all described Telstra’s forecast dividend levels as unsustainable. Can you imagine, if a Labor state government got a recommendation like that—that the government’s position was unsustainable—from Standard and Poors or Moody’s, what the public outcry would be? There would be a scandal. There would be front-page headlines and, even better, every one of those in the opposition would be screaming it from the rooftops. Never mind that the government is forcing Telstra to siphon money away from the types of capital investments which will improve the company’s prospects in the long term. Such a policy could hurt the company.

The government is not concerned with the long-term interests of Telstra’s shareholders; it is only interested in its own short-term political interests. So in the lead-up to the government’s announcement of its intentions to proceed with T3, news reports began appearing quoting government sources demanding that Telstra maintain dividend payments at its forecast levels. Newspaper articles started appearing suggesting that the government was contemplating sacking the board. The message to the Telstra board was loud and clear: fall into line on dividends or face the sack. Again, Telstra shareholder interests were not in the government’s mind at any stage during this monstering of the Telstra board. The government completely ignored the fact that in the secret briefing document provided to the government by Telstra management in August of last year, the government had been told—and these were Telstra’s words to the government in August last year:

The Telstra board has already recognised that this kind of borrowing to pay dividends is not a sustainable policy or practice ...

The government completely ignored the fact that just last month, during the announcement of Telstra’s annual results, Telstra had stated that the level of future dividends will be subject to regulatory outcomes—that was just four weeks ago. The government completely ignored the fact that since the announcement was made every regulatory decision, including the biggest one from Telstra’s point of view, the ULL pricing, went against Telstra. The government was not interested in the long-term impact that this enforced dividend policy would have on Telstra or its other shareholders. All it was interested in was its own short-term political interest. Again, Telstra shareholders will pay the price.

If gagging the Telstra management and leaning on the board over dividends were not enough, in the last two weeks the Howard government has launched a new front in its campaign against Telstra shareholders. The Howard government’s bungled announcement of the structure of the T3 sale, yet again, shows its willingness to sacrifice Telstra shareholders for its own political interests. When the government snuck out the announcement, at 5.30 on a Friday afternoon, that it would proceed with T3, it failed to provide any information about the details of any existing shareholder entitlements in T3. An observer might have thought that in the 12 months between the passage of the Telstra sale legislation and the government’s announcement of the sale structure a decision might have been able to be made on this issue. However, this important element of the T3 offer was either forgotten or purely incompetently left out of the government’s announcement of its intention to proceed with T3. I know Senator Minchin is chasing a new press secretary, but surely somebody could have managed to put the paperwork together.

That completely inept failure created the real possibility that Telstra’s share price would plummet when the markets reopened on the Monday morning. Come the Monday morning, investors would have been free to dump their existing Telstra holdings, safe in the knowledge that they would be able to buy it back more cheaply in T3. However, with those investors having read the commentary in the weekend papers warning of the risk, the government again acted incompetently to try to avert that result.

To prop up the share price when trading resumed, the government’s T3 sale team told journalists at the Australian Financial Review, the Australian, the Age and the Sydney Morning Herald that existing Telstra shareholders could expect a discount on T3 shares. In the words of the Financial Review, one individual working on the sale told the AFR on 27 August that a discount was ‘in the mix’ for the sale. This ambiguous intervention promoted speculation in the share market and was designed to prop up the Telstra share price when trading resumed. However, once the government was confident the share price of Telstra would not collapse, it began telling the very same journalists, whom it had already briefed, to play down the suggestion of a shareholder discount in T3. That is right: on Monday morning, faced with the collapse of the Telstra share price, the government put a story into the papers that said, ‘Do not sell, because there will be a discount if you hold.’ But, 24 hours or 36 hours later, the same people are on the phone to the same journalists telling them, ‘We did not really mean that, so talk it down.’ As a result, the share market has been in a state of utter confusion on the value of Telstra ever since. In relation to Telstra stock, Mr Ivor Ries, of EL and C Baillieu, notes:

The stock is suffering from chronic uncertainty because the Government has not announced any of the terms of the entitlement, so the stock is trading in an information vacuum ...

The Financial Review quoted another stockbroker as saying that if Telstra were ‘a small mining company the stock would be suspended by now’. There are some people in this chamber that know about these rules. They are going to be speaking in this debate, and I look forward to their contribution. People with financial services licences know the obligations about the marketplace, so I want to know what has been going on. We on this side would like some answers.

So, as a result of this government’s incompetence, shareholders are left in the dark because their Telstra shares are trading in a market that lacks the basic information relevant to the value of the shares. It is in this environment of uncertainty that the government is planning its final deception of prospective Telstra investors. Small investors considering participating in the upcoming T3 float should ask themselves one simple question: would I buy a used car from Mr John Howard? After hundreds of thousands of Australians were burnt in T2, small investors should take the government’s salesmanship on Telstra with more than a grain of salt.

Unfortunately, the way that the government has structured T3 creates the real possibility that small investors could be duped once again. The government’s sales pitch on Telstra relies on a tricked-up short-term dividend yield for investors in T3. By leaning on the Telstra board to guarantee a large dividend this year, while also spreading the cost of T3 shares across two payments, the government has created an artificially high short-term return for investors in T3.

There is a reason Mr John Howard is adopting this complex structure for the sale: it is designed to lure investors in with a strong up-front return. But they will get burnt a few years down the track. It is important to remember that this return is artificial and that many have questioned its sustainability. This is just like T2: retail investors buy now and pay later, but they will buy now and pay hard later for trusting John Howard. John Howard is laying a trap for small investors: buy Telstra now for the juicy yield and get burnt in two years when institutions drop the stock.

As Terry McCrann, financial adviser and financial expert has noted in the Herald Sun:

Understand that the Government is quite deliberately setting out to artificially entice you to invest. It is doing so by giving you an unsustainable supercharged dividend income.

Telstra has given T3 investors only one year’s security on its dividend payments, and then it is anyone’s guess. Both Moody’s and Standard and Poor’s agree that it will be unsustainable for Telstra to pay its current level of dividends next year. As Charlie Lanchester of Perpetual Investments has noted:

It’s certainly a concern if you are buying for the yield. There is a bit of confusion.

The simple equation for potential T3 investors is that, once the dividend drops, so does the Telstra share price. As Marcus Padley, author of the Marcus Today newsletter, has said of T3:

If yield is the only thing people are buying it for, then you would have to be extremely fearful of what price Telstra is the day after it went ex-dividend, because if people are only holding it for the yield, it’s going to get carted out ex-dividend ...

As Terry McCrann has noted, small investors who buy Telstra now for the tricked-up yield risk getting burnt in two years when the dividend gets cut and the institutions cut and run. The institutions have made their view of the T3 offer clear. These are the institutions. These are the big boys. Geoff Wilson of Wilson Asset Management noted soon after the announcement of the structure:

The way it will be structured will be very attractive from a short-term perspective.

However, Mr Wilson went on to say that he doubted that he would be in the stock in two years time. That is right: he said that he doubted that he would be in the stock in two years time. Get in, rip out the yield, rip out the dividend and then dump it. And guess who is going to be left holding the baby.

Even worse, at the same time as Telstra’s unsustainably high dividend starts to fall, the overhang of Telstra shares in the Future Fund, if the government has its way, will be dumped on the market, further depressing the share price. Just as the institutions are getting out because the supercharged dividend price is starting to go ex dividend, the Future Fund will start selling 30 per cent of the stock on the market. By dumping more than four billion Telstra shares in the Future Fund, the government has created an overhang that will depress the Telstra share price for years into the future. The Howard government’s economic incompetence has crippled this nation, and Telstra shareholders in particular, at every turn.

This is a financial scandal. This is another trap designed to mug Telstra shareholders—just as Paul Neville indicated when he said that incentives are okay and entitlements are okay, as long as they don’t ‘suck people in’. That is exactly what is going on. The chairman of your own regional telecommunications committee knows exactly what you are up to. He has blown the whistle. He says you are trying to suck in small investors, and he is dead right. (Time expired)

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

When I walked in here this afternoon, I was fearful that I would see the broadcasting light on, and my fears were confirmed. That could be the only reason why we would hear the speech we had from Senator Conroy today. It was a set piece that, quite frankly, would make you wonder what is going on. Everyone knows that Senator Conroy—much to his horror—is actually the shadow shadow minister. The real shadow minister, of course, is Lindsay Tanner, the member for Melbourne. Today’s speech was another attempt by the shadow shadow minister to justify the position that he actually does not enjoy, as we learned from Mark Latham’s book. Senator Conroy does not enjoy this portfolio but, to his great credit, he is fighting very hard to keep it.

I noted with interest that there was a lot of talk about mothers today. I am not too sure that we should be going down the path of talking about the mothers of members of parliament, but that was raised today in the context of the Minister for Finance and Administration. I pose a question: what is the difference between the mother of Wayne Swan, the member for Lilley, and Senator Conroy and the Australian taxpayer? What is the difference between those three? The difference is that the member for Lilley and Senator Conroy are quite happy to bag the living daylights out of Telstra—to bring the Telstra price down—but they are also quite happy to lump the Australian taxpayer with 30 per cent of Telstra ad infinitum. They are prepared to sacrifice with the dog, as they describe it, the Australian taxpayer through the Future Fund indefinitely, but apparently the same rules do not apply to their mothers.

This just shows the utter stupidity and hypocrisy of the position of the Australian Labor Party. What fascinates me is the difference between the member for Melbourne in the other place and Senator Conroy. If you find a position from Senator Conroy, you will find a different position from that of the real shadow minister. They have been going hammer and tongs on this for about two years. Bubbling away under the surface is a fight of some magnitude.

Today Senator Conroy talked about Telstra borrowing to pay for special dividends. He was lampooning that as being totally inappropriate. Again, the real shadow minister for communications, the member for Lilley, said this last year:

Labor welcomes today’s announcement to the Stock Exchange by Telstra that it will focus on its existing business and return money to shareholders.

That was in relation to the announced special dividend—the same special dividend that Senator Conroy was attacking here today.

It is not just in the area of special dividends where Senator Conroy and the real shadow minister for communications, the member for Lilley in the other place, are opposed; it is also in relation to regulation. In February of this year, when the government made its announcements in relation to where it was requiring Telstra to go with separation, Mr Tanner said that not only did he support the government’s regulatory framework but he claimed credit for it. He actually went on to say that it was Labor policy at the previous election. It does not really stack up, but it is always flattering to hear the other side talking positively about what you are doing. He said:

... we are strong believers in a genuine internal separation of Telstra between wholesale and retail, so we can have fair-dinkum, level-playing-field competition ...

They are the comments of the real shadow minister, the member for Lilley. Senator Conroy’s comments are totally opposed. The point I am making in relation to this is that the Labor Party is a policy-free zone in relation to communications. There are two men fighting over the one job who take an absolutely opposite view in relation to the serious matters that confront Telstra and the Australian taxpayer.

The other matter that causes me great concern is the hypocrisy of the Labor Party in relation to privatisation. The Leader of the Opposition, the member for Brand, has been talking about privatisation since the early nineties. He is the one who boasted about the sale of Qantas, CSL and the Commonwealth Bank. And he stood up in the other place, and gave speeches elsewhere, talking about the fact that he was a great supporter of privatisation and that the then Keating and Hawke governments were equally supportive. If I can find the quote I will read it. It will be just at my fingertips I hope—it is indeed, luckily.

On 24 August 1994, the then Minister for Finance, and now Leader of the Opposition, delivered a speech entitled ‘Paying for our future: the changing role of public investment’. We actually got to hear what Mr Beazley really thought about privatisation when he was being totally honest. He said:

Privatisation fits in with the Government’s broader economic imperative to create jobs ... Privatisation is not pursued because of a New Right ideology ...

He then went on:

Privatisation, for instance, can strengthen the performance of enterprises by allowing private capital injections, as happened with the sale of the Commonwealth Bank ...

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

Who said that?

Michael Ronaldson (Victoria, Liberal Party) Share this | Link to this | Hansard source

It was the then Minister for Finance and now Leader of the Opposition, on 24 August 1994, in a speech entitled ‘Paying for our future: the changing role of public investment’. What honourable senators will no doubt find fascinating about the Labor Party’s present policy in relation to 30 per cent of Telstra going into the Future Fund and remaining there is that that happens to be the exact figure that the Australian Labor Party had put on their sell-down of the Commonwealth Bank. That 30 per cent rings some quite remarkable bells.

On this debate on a matter of public importance that was lodged with the Senate, I think it is a pity that Senator Conroy has not fully detailed what has been provided to T2 shareholders. I think, in the interests of completeness, he should also have inserted that there had been franking credits of some 78c, which he neglected to mention.

This motion is formulated under the guise of accountability and general business accountability, and I find it quite extraordinary that a party with its track record of public accountability and business accountability is lecturing this government in relation to the Telstra share sale. This was the government who delivered us Ros Kelly and the sports rorts affair—a classic example of public accountability. This was the government who allowed one of its own members to claim a compensation payment for a motorcycle accident that occurred out the front of this place. That government allowed him to sue himself. This is the same opposition—and they will not be in government for a long, long time—whose member was found by a royal commission to have falsely denied to the public her knowledge ‘of the affair that she was involved with’—a business affair, I hasten to add. This is the same opposition which has a building called Centenary House, about two kilometres away from this place as the crow flies, and which has allowed the Labor Party to receive some $36 million-plus extra into its own pockets. This is accountability Labor Party style, and we will not be lectured by them in relation to this matter.

Lyn Allison (Victoria, Australian Democrats) Share this | Link to this | Hansard source

The Australian government’s management of the last tranche of the Telstra sale is a matter of public importance. In fact, it is a matter of public disappointment. The situation of Telstra’s share price is a complex one. The Democrats recognise that there are many factors that have affected the Telstra share price, including the dotcom crash and the worldwide trend downwards in the value of telecommunications companies. In Australia the share prices of other telcos have also dropped considerably.

However, there is no denying that Telstra shareholders from the second tranche have suffered. The Telstra share price fell from $7.40 a share, at the time of T2, to $3.64 today. And we think the federal government has to shoulder a large amount of the blame for that. Senator Minchin is reported to have said:

My mother, like many Australian investors, knows the risks of investing in the Australian share market, and those risks were pointed out in full at the time of T2.

But just how true is that? I seem to recall that the federal government at the time was heavily spruiking the sale of Telstra. The Prime Minister said:

All I can say is that buying into Telstra 2, as buying into Telstra 1, will be an extremely good deal for those who get involved.

And you will remember that, at the time, T1 was hugely undervalued by the government, and shares went up almost immediately after the float. So this message would have been heard loud and clear by those people the Prime Minister was trying to appeal to. The government promoted the sale as an opportunity for small investors, first-time investors and mum and dad investors, urging them to participate in the Australian share market. And it worked. Telstra shareholders represent 1.6 million Australian electors—far more than the shareholders of, for instance, AMP, with 900,000; Commonwealth Bank, with 740,000; or BHP Billiton, with 375,000 shareholders.

Many of the investors in the Telstra 2 sale were first-time investors—so-called mum and dad investors—who had no experience whatsoever of the stock market and, arguably, no real understanding of the risks. And why would they think it was risky? The government was telling them that this was an extremely good deal. Surely the government’s spruiking of the T2 shares was ethically wrong when it could not guarantee that the share price would be maintained or grow. In fact, what the government did then would surely be legally wrong now. Part 7 of the Corporations Act deals with insider and manipulative trading, as well as broader provisions dealing with misleading and deceptive conduct. Specifically, part 7.10, section 1041E prevents ‘false or misleading statements’ and section 1041F prevents ‘inducing a person to deal’.

It could be argued that a reasonable person might be misled into believing that statements made by ministers and other government members at the time were informed comments and predictions. While it is arguable that ministers have some protection in this respect by virtue of section 5A(4) of the Corporations Act, the protection is very limited because of section 8AT of the Telstra Corporation Act. Nonministers have no such immunity. Whether legal or not, the question of whether it was ethically wrong, I would argue, remains.

The government are now planning to sell 20 per cent of the shares to a new lot of investors. They are doing so at rock-bottom prices and are obviously feeling quite guilty about the treatment of T2 shareholders, as they are contemplating a discount or some other incentive to existing shareholders. The government have been accused—rightly, I think—of using speculation to prop up the share price. But just how responsible is this? I think this is a matter the Senate should concern itself with. Don Gimbel, who has been managing funds on behalf of Australians and Americans for 40 years, told the Sydney Morning Herald: ‘To try and flog this on ma and pa is a disservice to the Australian people.’

It is the opinion of the Democrats that the government’s decision to proceed with the float of $8 billion worth of shares in Telstra is foolish and incompetent; we have said that on a number of occasions. This massive float will drive share prices down even further, and institutional investors will snap up shares at bargain basement prices and the little guy will not benefit at all, in our view. Parking 30 per cent of the shares in the Future Fund is likely to have a further dampening effect on the share price.

But the threat to Telstra shareholders does not stop there. One of the arguments the government have made for selling Telstra is about the situation of being owner and regulator—that it is in conflict and untenable. The government have argued that they will be in a better position to regulate Telstra and the telecommunications market once they are no longer shareholders. Presumably the result of ‘better regulation’ will be a weakening of the monopoly power of Telstra, which will presumably drive down the share price. Yet wouldn’t it be politically damaging for the share price to go down, given that a potential 2.5 million mums and dads may own Telstra shares? And, if the government are mindful of the political fallout, will they in fact appropriately regulate? The conflict of interest here remains. In fact, it has perhaps become even worse than prior to any of the tranches of Telstra privatisation.

We say that the government has well and truly bungled the management of Telstra. It has shown itself to be ideologically driven on privatisation, despite the absurdity of proceeding in the current climate. Australian shareholders and Australian taxpayers should be angry. They have a sale with no guarantee of protection for consumers, they have a sale with no guarantee that broadband will be rolled out and they have no influence over Telstra. This situation is likely to get worse, not better.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I came here this afternoon prepared for a serious debate on the sale of Telstra and Telstra generally, but I must say, having heard Senator Conroy, that I have never experienced a more confused, illogical and hypocritical contribution than that which Senator Conroy gave today. It was a contribution that could rightly be described as a boondoggle. I do not want to be personally insulting to Senator Conroy—he is a nice enough sort of fellow and quite friendly—but he really should stick to things that he knows, such as stacking branches in the Victorian Labor Party or going back to driving trucks or whatever he did in the Transport Workers Union before he came here.

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

Senator Abetz interjecting—

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Is that what it was? I thought he was a truck driver; he was pretty big in the truckies union. That is what he should stick to and he should stay away from the things that he quite clearly does not understand. His contribution quite dramatically demonstrated a complete lack of understanding—indeed, an ignorance—of the financial markets and the share markets. In fact, Senator Conroy’s speech and contribution was downright insulting to the investors in Telstra and those who are considering investing in Telstra.

If there is a problem with the price of Telstra at the moment—and I emphasise ‘if there is’—you can lay the blame directly at the feet of people like Senator Conroy and Mr Wayne Swan, who have been consistently running down the company and raising issues that are not real issues and doing whatever they can to reduce the value of the company. You have heard from Senator Conroy this afternoon and about Mr Swan saying that he would not recommend these shares to his mother or to the people of Australia. Having said that, Mr Swan wants all the Australian public, through the Future Fund, to be kept as owners of the shares. The arguments are just so illogical and contradictory that it is difficult to fathom which angle the Labor Party is coming from.

It would appear from the argument the Labor Party are proposing that, every time they talk about their three mines uranium policy, that may have an impact on those mum and dad investors who invest in shares of uranium exploration companies. Perhaps every time the Democrats and the Greens get up and attack the forestry industry they might be having an impact on those mums and dads who have quite wisely—in my view, although I am not a financial adviser—acquired shares in any number of the forestry companies around the place.

There was some suggestion that comments by the Prime Minister might have affected the sale price of T2. I do not think that is right. I want to quote this paragraph from a letter from the then Minister for Finance and Administration, John Fahey, that came with the prospectus for T2. I want to quote it in full because it clearly identifies the government’s position and it is an appropriate statement from the government:

Investors should be aware that the value of instalment receipts and shares can go down as well as up, and that an investment in Telstra is not guaranteed by the Commonwealth. You should read this offer document carefully, and the separate Appendices if you wish, before you make any investment decision. You should consult a Stockbroker or financial adviser if you are unsure about whether to invest in Telstra.

You cannot get anything clearer than that and that is, of course, the way everyone enters into investments in the share market. In recent times, I have bought and sold a few shares—not always successfully—but if they go down, I do not turn around and blame the government. I do not even blame the Labor Party or the Greens. These are decisions that I, as an investor, make and I suggest they are decisions that every investor will make. As I say, I think that Senator Conroy is downright insulting to investors to suggest that they enter into share investments without properly considering what is happening.

The hypocrisy of the Labor Party is identified and highlighted again by what is almost their passion for stopping the sale of Telstra, I might add while the coalition is in government. We all know that Mr Beazley, when he was the Minister for Finance, actually got his department to put up a submission for the privatisation and sale of Telstra. Every time the debate about privatisation and sale of government assets comes up, it amazes me that the Labor Party cannot remember the days when, having promised before an election not to privatise the Commonwealth Bank, immediately they won government after that promise, practically the first thing they did was to privatise the Commonwealth Bank. That was supported, I might say, at that time by the opposition because it was the right decision. But the Labor Party made it.

Not only did they privatise the Commonwealth Bank; they privatised Qantas, CSL and ADI—all, I would suggest, appropriate things to do in an economy like Australia’s, which was undergoing economic reform. That was the right thing to do, they were right to consider it and, had they remained in government, I will guarantee you that they would have sold Telstra long before this. They would have been able to do it perhaps at a share price of $7.40 because the opposition, had we then been in opposition, would have supported it because we know that it is good for Australia and good for our economy. But the Labor Party continue to play this charade here that, having privatised just about everything else that was left standing, they would not privatise Telstra. I have said this many a time: if the Labor Party had won any of the last few elections or if they happen to win one in the future and Telstra is not by then privatised—and it will be—the first thing they would do would be to sell Telstra. We know from experience just what their comments mean when it comes to selling or not selling.

Senator Conroy then, as part of his scattergun approach, started talking about the services of Telstra not being up to scratch. I remember the days when the Labor Party used to run the government instrumentality of Telstra or whatever it was then called. The services in those days before privatisation were just appalling. Instead of leading the world, as Australia now does in telecommunications, we were dragging along well at the end of the chain. As someone who lives in country Australia and who travels very regularly in remote parts of this country I can say to you that the telecommunications service we have here is brilliant and it is better than most others anywhere else in the world.

I know that this is not always a popular argument to take to the country. There is some concern, I acknowledge, in places about Telstra not being privatised but, when you sit down and discuss the issue with those who have that view and ask them how services have been improved in recent years, most will grudgingly agree that Telstra have done a magnificent job in the recent past. They can always do better, and they will, but it should not be left up to a private commercial company to provide services that perhaps are not profitable. That is a job for government to do by subsidy and it is a job that this government will continue to do. It should not be a matter for a commercial operation to have to fund. Our government will continue to do that, but you can be assured from Labor’s approach to rural and regional Australia that, were Labor ever again to attain government, the first thing they would do would be to cut the subsidies to rural and regional Australia in telecommunications and other areas. Labor’s matter of public importance today is really a mishmash of ideas. It has not been well argued and it is not an argument that I think the Senate should take much more notice of. (Time expired)

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

I think we are all very privileged that Senator Conroy has raised this issue today because we have actually seen the birth of a new branch of economic theory. I would like to call it, for want of a better word, ‘roosternomics’. I refer to it as ‘roosternomics’ not because of the description given to Senator Conroy and a few of the other roosters by Mark Latham and not even because of the cocksure and theatrical manner in which Senator Conroy delivered his sterling address to this chamber and to the people at home; I call it ‘roosternomics’ for the simple reason that the rooster always takes credit for the sun rising. So small and so limited is the rooster’s intellect and grasp of the laws of physics—in this case, the motion of the earth—he insists that he is responsible for the rising of the sun. The only way that Senator Conroy’s arguments can be sustained is if ‘roosternomics’ takes both sides of the equation. Senator Conroy is not alone in adhering to ‘roosternomics’, because the Leader of the Opposition, Mr Beazley, is also a proponent of it. According to Mr Beazley, if we sell our Telstra shares, or if we sell them and park some in the Future Fund, there is going to be an overhang, the share price will fall and the investors will suffer. But, of course, if we decide not to sell the shares and park them in the Future Fund, the market will say there is excessive regulation and it is hamstringing the ability of the company to compete on an equal footing.

‘Roosternomics’ is not limited to Telstra. The opposition’s basic philosophy goes like this: ‘When we are in government we can sell 11 different companies’—Senator Macdonald talked about some of them like CSL and the Commonwealth Bank—‘we can sell the family silver but, rather than investing that money in productive enterprises, what we are going to do, according to “roosternomics”, is pour it into a black hole—a $96 billion black hole that existed in 1996.’ But of course they will not acknowledge that there is a black hole. They will deny it, as Mr Beazley did. He said in 1998 that there was no black hole and no $10 billion deficit. But, of course, the undeniable truth came out when Gareth Evans, a former senator, said that the deficit in 1995 and 1996 was actually $10.3 billion.

Once again, ‘roosternomics’ has both sides of the argument. The theory goes like this: you can spend your way to prosperity, you can continue to spend and spend, and you will eventually get richer. It does not work like that. The world does not work like that. You have to save and you have to invest. Part of investment for Australians is in the share market. We are one of the great share-owning democracies. We have a very clear and straightforward corporations law which, for prospectuses for initial public offerings on the share market, spells out very clearly the risks of investment. We have professional advisory services across the country which people can avail themselves of. But it is not enough to be condemned for not disclosing the risks to shareholders on behalf of Senator Conroy, because I think what he is doing is having a shot at the other ‘roosternomics’ advocate, Stephen Smith. I would like to quote what Mr Smith when he was the shadow minister for communications in 2000. He said:

... shareholders in Telstra, like shareholders in any company, purchase shares with their eyes open and they take the consequence of the market going up and the market going down ... they buy with their eyes open and, like everyone else, they take their chances in the marketplace.

That is ‘roosternomics’, isn’t it? We have another conflicting opinion based on both sides of the argument. As a professional investor, and previously as a professional adviser, I have endured the vicissitudes of the market and taken them with equanimity. You just have to accept it. But, of course, the mum and dad investors do not always have that same approach to it, and so they rely on professional advice.

Senator Allison was talking before about how we overcharged the people of Australia under the Telstra 2 sale. I go back to 1999, again, and Senator Allison is actually on the record as quoting an analyst saying that they were expecting an increase of up to 40 per cent, windfall gains for the investors in Telstra 2. So, whilst she acknowledges all the analysts now, she was prepared to ignore what they were saying earlier on. Senator Allison made these comments in the context of saying we should have charged more for Telstra 2. That is quite contrary to what she is saying now. She may not be a fully paid-up member of the ‘roosternomics’ fan club, but she is certainly on her way to getting there.

The other quote that I think we need to bear in mind today is from Terry McCrann. Mr McCrann has been quoted extensively by the Labor Party from some of his recent judgements, columns and articles about our performance in selling Telstra and offering it to the public to make it a more flexible, positive and dynamic company. In an article headlined ‘Coonan should take a bow, Beazley should bow out of it’, Mr McCrann makes a number of claims but the essence of it is this:

Beazley set the tone for his opposition colleagues, all of whom have distinguished themselves with observations ranging from the inane to the utterly irrelevant.

I think that sums up pretty eloquently the case of ‘roosternomics’—the inane to the utterly irrelevant. We have Senator Conroy standing up and deciding that he will be the champion of the mum and dad investors. Let me tell you now that the champion of the mum and dad investors is this government. This government has put more wealth into the pockets of everyday Australians and done more to lower taxes for Australian men and women than any government in Australia’s history. This government has done more to encourage investment in superannuation, which encourages strong investment in our share market, which provides much-needed capital for the development of Australia and our positive economy as it is going forward.

I consider us very privileged to have seen the birth of this new economic theory. It has been a long time in gestation but, while the rooster makes a lot of noise, he does not deliver much. That is why there is only one in every henhouse; they do not lay any eggs and you get no service from them. That is what will happen with the Labor Party. If they ever get into government, the people of Australia will be utterly dismayed at their performance.

George Brandis (Queensland, Liberal Party) Share this | Link to this | Hansard source

The time for discussion of the matter of public importance has now expired.