Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answers given by the Minister for Finance and Administration (Senator Minchin) to questions without notice asked by Senators McEwen, Polley and Sherry today relating to the sale of Telstra.

In question time today, my colleagues have been touching on a number of aspects of the botched privatisation of Telstra as handled by Senator Minchin and Senator Coonan. But in question time today I raised an important new issue concerning the defined benefit pension promise made to those 1,800 Telstra employees who are still in the old Commonwealth Superannuation Scheme, commonly known as CSS.

Last year, in September, Labor was made aware by a number of employees that they could effectively lose part of the pension benefit promised to them, as a consequence of the Telstra privatisation. In response to those inquiries from employees, Labor asked in question time on 7 September 2005 what would happen to the superannuation benefits of those 1,800 employees who are members of the CSS and currently employed by Telstra. I make the point that, on the sale of Telstra, their employer does not change. Those 1,800 employees are still employed by Telstra. We asked Senator Minchin quite deliberately the question: what would happen to their superannuation on the sale of Telstra? Senator Minchin, to his credit, in September last year, responded by saying:

... the superannuation conditions would continue ...

But now we know that those superannuation conditions will not continue, because—and Senator Minchin himself admits this—as a result of a policy decision by Senator Minchin and the government these employees will be required to cease membership of CSS ongoing. And that has a very important and significant impact on the future pension promise, because those 1,800 Telstra employees who are currently in the CSS will not receive the pension promise made to them as a member of the CSS when they retire. They will not receive the pension promise that was entered into contractually when they joined the CSS.

I have been contacted by a number of the 1,800 employees who will have their pension benefit cut. Their pension benefit will be cut, and I gave an example to Senator Minchin in question time of a supervisor linesman. This is an individual who has contacted me and told me that, as a consequence of the sale of Telstra, he, along with 1,800 other employees, will not receive the pension promised. In the case of this supervisor linesman, who has been an employee of Telstra since he was 16 years of age, when he turns 55 his pension benefit will be cut by $11,000 per year as a consequence of the Telstra privatisation.

This is a consequence that Labor feared, and that is why we raised it with the minister last year. He gave a promise, he gave a commitment, that the superannuation conditions would continue. And now we know that for 1,800 employees this is not the case. There would be outrage in the general community if the hundreds of thousands of employees who are currently in defined benefit funds faced expulsion from those funds, the closure of the funds and a reduction in the pension promise made. There would be outrage if Senator Minchin applied this principle to the general community and to the hundreds of thousands who have defined benefit pension promises.

And the minister is not right in respect of the Commonwealth Bank or Qantas. He is not right, because in those two cases successor provisions were incorporated by the new entities, the privatised entities, in their pension funds to ensure that there would be no reduction in the pension promise made in the case of Commonwealth Bank or Qantas employees. The minister is not right when he makes that claim, because in those privatised entities the employees did not lose a benefit under the defined benefit promise that was made. That promise was incorporated in the new funds or the existing funds that the Commonwealth Bank and Qantas had. That has not happened with Telstra employees, and consequently 1,800 employees face a pension promise cut. (Time expired)

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I also rise to take note of the answers given by Senator Minchin in question time today. I will respond to Senator Sherry’s remarks of a few moments ago. When the Commonwealth Superannuation Scheme ceased, it ceased for the employees of Qantas in 1993 and for the employees of the Commonwealth Serum Laboratories in 1994. It ceased upon the sale of the Commonwealth Funds Management to the Commonwealth Bank in 1996 and the Australian Defence Industries Ltd in 1999. So this is not an unusual step; this is very consistent with previous government policy—not just this government’s policy but the former Labor government’s policy.

The employees of Telstra will have the option of moving into other superannuation schemes. Once the sale has occurred and the government is no longer the majority shareholder, those employees will cease to be members of the Commonwealth Superannuation Scheme. This is not a new concept. This concept was introduced when the legislation was passed last year authorising the further sale of Telstra. It is certainly consistent with the longstanding government policy that contributory membership of the Commonwealth Superannuation Scheme should cease when the government ceases to control the business. It makes absolute sense that, when the government has no control over an entity, it should not be running that scheme for those former employees. It is not fair on the taxpayers in that sense that they fund superannuation entitlements to employees who no longer belong to the Commonwealth in respect of their employment.

Senator Sherry mentioned a figure of 1,800, but he did not mention it in context—that there are 1,788 employees who are still members of the Commonwealth Superannuation Scheme out of a total workforce of 49,443. The figure of 1,788 represents less than four per cent of the total Telstra workforce—so four per cent or less are potentially affected by this. Those members will now have the option to either join over 80,000 current and former Telstra employees in the Telstra super scheme or to join another eligible superannuation fund. This is not uncommon in this type of transaction.

The existing benefits of Telstra employees who are still in the Commonwealth Superannuation Scheme will be protected. Their accrued benefits are guaranteed under legislation and will be paid in full by this government. The future superannuation arrangements that will apply to Telstra employees who will exit the Commonwealth Superannuation Scheme after the sale of Telstra will be a matter for Telstra administration, post sale. Like all employers, Telstra has an obligation to make superannuation contributions in respect of its employees.

I understand that Telstra management recently wrote to employees explaining the arrangements. A predominant issue in Senator Sherry’s question was this: why not just let Telstra employees remain in the Commonwealth Superannuation Scheme? The reason is that it would be inappropriate for taxpayers to fund the superannuation entitlements of employees of entities not controlled by the government. That is a fairness and equity issue that we need to address for all employees and all taxpayers.

It is important to acknowledge the reasons why we are selling Telstra, and this is just one issue. The government has gone to the past four elections promising to sell its Telstra shares, and it is now delivering on a longstanding promise and commitment. This situation is not unusual; it is not something that has not been declared before. The public is fully aware of the government’s commitment to sell Telstra. Legislation was passed last year allowing the process to move forward. The timing is now upon us and the process is now moving forward in a smooth and logical progression. We must bear in mind that this is one of the largest organisations in the country. In the process of selling such an organisation, there will be issues that arise from time to time that spark emotion and debate; however, the government is committed to furthering this cause with minimal fuss and minimal disruption and taking into account the entitlements and benefits of employees.

Kate Lundy (ACT, Australian Labor Party, Shadow Minister for Sport and Recreation) Share this | Link to this | Hansard source

I want to tell the story of a portfolio so badly handled and so neglectful of the urgent social and economic needs of Australians in relation to the telecommunications network that real damage is being done to our potential to innovate with broadband and digital services. This is the legacy of the Howard government in these early stages of the 21st century. It is a complete foul-up—a complete preoccupation with an ideological privatisation agenda that has led to the compromising and undermining of genuine competition and decent service quality and a stifling of higher bandwidth services.

All of these policy failings were perpetrated as the Howard government sought to prop up Telstra’s share price. This was informed by the government’s desire and consistent motivation, election after election, to sell off the rest of Telstra. But they and Telstra were complicit in preventing the innovative bandwidth services. It was about cutting capital expenditure and keeping costs down; it was not about investing for the future. This manifested itself in a number of ways. Many of us remember staged inquiries by this government over the last 10 years, claims that the network was up to scratch and the minister’s claim—I know it is hard to believe these days—that Australians did not want or need broadband and using that as a way to try to stifle demand for the sorts of services that we knew we were missing out on. They even said that pair gains did not exist—broadband-blocking technology, again a cost-cutting measure for Telstra’s investment in their network. All of this conspired against and led to a failing network that was not keeping up with the social and economic demands of this country.

Then what happened? Along came the three amigos, who were not happy even with this level of complicity. They wanted more—more regulatory holidays and less competitive pressure. And they had a lever to pressure the government with. It was, of course, privatisation. They needed all of this because, I suspect, their bonuses depended on it. So we have watched what I would describe as the ‘Chairman Worm’, the ‘Chief Worm’ and his ‘Wormettes’, in the can of worms that is Telstra in the 21st century, wriggle out of the grasp of the government’s control.

The new management have sought to imprint their US style tactics of depleting all but the most profitable services on these ideologically driven dopes on the other side of the chamber, who have predictably responded with even dopier tactics as they flail about appointing mates to the board and fiddling with the wording of the prospectus so as to continue their perpetual spin.

That brings me to the most recent debacle—the way in which the government is proceeding with the T3 sale. I do not think anything said by the Minister for Finance and Administration in the chamber today or elsewhere will absolve this government of their extraordinary intervention in this float. I reiterate the questions asked today and yesterday by my colleagues. What about probity? What about ethics? What about compliance with the law? Why was ASIC involved? What didn’t the government want in the prospectus—because surely it could not have been any worse than what is in there?

I would suggest that the fact that Mr Cousins was the Prime Minister’s adviser for 10 years is cause for concern not only for the reasons described by the worms in the can of Telstra but also because his advice must have been appalling, given Mr Howard’s terrible stunt of ideologically visionless handling of telecommunications in Australia for the last 10 years. What advice was being given, I ask, by the former CEO of Optus Vision? That is a far more damaging legacy than the $4 billion loss he oversaw.

To conclude, I will highlight the level of executive intervention and interference in Telstra by the Howard government. The government initially sought in inappropriate and sneaky ways to work with Telstra to keep their costs down and their profits fat. This was to maximise the share price in the previous sales. However, more recently, the bullying and desperate ways of the government have demonstrated an arrogance that I think is unsurpassed.

The government think they are above the law. They have demonstrated contempt for legitimate policy tools that have always been available to government to improve the quality of broadband and other services in telecommunications throughout the country. These include: quality service regulation; competition policy, including access regimes; licence conditions; and digital content rules. They have all been there for the using, but the government chose to abuse all of them. Perhaps the gravest indictment is the government’s complete incompetence. Australians no longer believe what they are told by a tired, out-of-touch government that does not have a clue about what this country’s telecommunications needs really are.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I rise on the same subject and wish to respond to the accusation, effectively, made by Senator Sherry against me in particular and to the inference, if not the direct statement, that in some way I misled the Senate on the position of Telstra employees who are at this stage still in the CSS. As I said in my answer, we are talking about some four per cent of the Telstra workforce who are still members of the CSS.

Senator Sherry referred to an answer that I gave in response to a question from Senator Marshall on 7 September 2005. Senator Marshall asked me specifically about a payment which the government had made of $3.125 billion to Telstra Super to absolve the Commonwealth government of its liabilities and to ensure that those liabilities could then be met in full by Telstra Super. That was a very good arrangement for taxpayers and for the company. In fact, it was supported by the Labor Party at the time. Senator Marshall asked me further questions about what that payment might mean in the event of any further selldown of Telstra shares.

In my answer on 7 September, I said that I would be happy to come back to Senator Marshall to confirm the arrangements. What Senator Sherry has quite mischievously ignored in his statements today is the fact that, on 8 September, the very next day, I had incorporated in Hansard a further answer to Senator Marshall’s question on this subject. I wish to refer to that incorporated answer in the Hansard because Senator Sherry has quite mischievously ignored it in accusing me of misleading the Senate. On 8 September 2005, I said:

In March 2004, the Australian Government paid the Telstra Superannuation Scheme $3.125 billion in return for extinguishing the Australian Government’s liabilities to the Scheme.

I emphasise that this payment is to the Telstra Superannuation Scheme, not to Telstra itself.

Once the Australian Government ceases to hold majority ownership of Telstra, superannuation arrangements for Telstra employees will be a matter for Telstra. Telstra has an obligation, like all employers, to make contributions in respect of its employees.

Issues relating to membership of the Telstra Superannuation Scheme are also a matter for Telstra.

For those Telstra employees who are members of the Commonwealth Superannuation Scheme, membership will cease once the Australian Government ceases to hold majority ownership of Telstra, but the Government will continue to be responsible for meeting the obligations, going forward, in respect of the past service of those employees.

This is consistent with the agreement between the Government and Telstra referred to by Senator Marshall in his question yesterday.

It is also consistent with long standing Government policy, that contributory membership of the Commonwealth Superannuation Scheme ceases in circumstances where the Government has ceased to have control of a business unit, such as QANTAS.

On 8 September 2005—13 months ago—I made it abundantly clear in this place what the circumstances would be with respect to those Telstra employees in the CSS upon the cessation of the government’s majority ownership of this company. For 13 months, Telstra employees in the CSS have been under no doubt as to exactly what the situation would be should the government diminish its shareholding in this company and no longer be the majority owner.

The statement was set out clearly. I am disappointed that, in his attack on me, Senator Sherry did not inform the Senate of what I said on the very next day, 8 September 2005, on this matter. He is mischievously misinforming Telstra employees in the CSS by suggesting that I said anything other than what was made clear on 8 September—that is, we would honour those obligations up to the point where the existing accrued entitlements of those CSS employees would be honoured in full. However, their membership of the CSS will cease upon the government no longer having a majority shareholding. So I reject absolutely what is at the least a very mischievous remark made by Senator Sherry, and I hope that he will withdraw it this afternoon.

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I rise to take note of answers given by Senator Minchin on the subject of Telstra. It seems that this government’s mismanagement of Telstra knows no ends. Let us cast our minds back to last year, when we saw the government use its numbers in this place to force the Telstra sale legislation through the Senate. At about that time last year, the government deliberately withheld from minority shareholders the contents of a report detailing that the company had been borrowing from its reserves to pay dividends and that services in regional Australia were below standard. We saw the government’s contempt for the committee system and its contempt for mum and dad shareholders when it allowed the committee looking into the sale only one day—one day—to examine the legislation.

Now we are seeing it yet again. This out-of-touch government has embarked on a $20 million dollar advertising campaign—utilising taxpayer funds of course—to promote the T3 float. With a quick flick through the channels on television last night, Australians everywhere would have been bombarded by the flashy ad campaign sugar-coating the sale. According to an unnamed media buyer, this massive spend during Australia’s top-rating television shows was to ensure that ‘everyone from the Prime Minister down will be watching’.

More than $45 million of taxpayers’ money has been spent by this government on the three Telstra floats. That is money that could have been much better spent. A novel idea would have been to ensure that Australian families have access to high-speed broadband—or maybe the government could have improved services in regional areas.

Perhaps the reason this government feels so compelled to throw so much money at this float is that it knows just how much hurt the Prime Minister’s mismanagement of Telstra has caused. After the recent negative publicity surrounding Telstra and the government’s own actions, the Prime Minister is keen to entice Australian investors to jump on board again. Or maybe it is just that the government got a nice taste of the advertising world with its foray into propaganda with Work Choices. More than $250 million in advertising was included in the 2006 budget—that is on top of the $1 billion this government has already managed to spend during its term in office. This arrogant government should implement the Auditor-General’s advertising guidelines, which were adopted by the Joint Committee of Public Accounts and Audit. Instead, the Prime Minister is using taxpayer funds to convince investors to take a punt on T3, while at the same time undermining the board and management.

The Telstra board’s opposition to the government’s nomination of Mr Geoff Cousins as a director is clearly spelt out in the T3 prospectus. This is the same government that wants to sell off Telstra. Yet it seems that Mr Howard does not wish to relinquish control—as is evident in his attempt to appoint a government spy to the Telstra board.

Yesterday we saw the release of the T3 prospectus delayed because the government was using its bullying tactics on the Telstra board in dealing with the contents of the prospectus. The Prime Minister is continuing to put his own political agendas ahead of the interests of the Australian public and Telstra’s shareholders. They deserve to be told the truth. We all remember when Mr Howard told Australians that Telstra was a great buy at $7.40. Australians do not want any more political spin. They do not want any more of their money thrown away in trying to sell Telstra—which supposedly the Australian government owns on their behalf—back to them.

Australians want only to see that Telstra is being managed and run properly—that communications services throughout the country are being improved, that high-speed broadband for all Australians will become a reality. And they want it sooner rather than later. If all this were already the case, the government would not have to pour such obscene amounts of money into advertising T3. That money could be used, as I said, to reinforce and improve services in regional Australia. Australians would be able to see T3 for the investment it is, without all the political spin that this government has come to rely on in an attempt to undo the damage of its mismanagement of the Telstra sale.

Question agreed to.