PARLIAMENTARY STATEMENT BY THE PRIME MINipigR
TR1ANSPORT AND TELECOMMUNICATIONS REFORW , fo' 9N
8 NOVEMBER 1990-
Mr Speaker,
I wish to announce today a series of decisions affecting
telecommunications and aviation decisions which will help
turn these industries into world-class performers.
These decisions are yet another instalment of the
Government's drive for micro-economic reform a process
that is creating a more dynamic and efficient Australian
economy, an economy that can take on and compete with the
world's best.
These decisions are also just one part albeit a critical
part of thiLs Government's agenda of reform. They fit
closely with the progress made at the Special Premiers'
Conference on improving the efficiency of the processes of
Government throughout Australia, such as in the important
area of rail freight. They fit closely, too, with our real
and steady progress in making our waterfront more efficient.
All of this activity has one central goal a vital goal for
every Austra. lian: to equip our economy to deliver to its
citizens the quality of life to which they justifiably
aspire. For too long Australia was content to live with
inefficiencies and low productivity in too many of our
domestic industries. It is this Government's task
vigorously and rapidly to sweep away those old arrangements
and reshape our economy as a genuinely modern and
competitive one.
That is the simple and unarguable logic that has driven this
Government's commitment to, and achievements in, microeconomic
reform. The sometimes arcane jargon of the microeconomic
reform debate must not be allowed to obscure the
urgency and importance of that goal.
Mr Speaker,
As I've indicated this is not the first time this Government
has been able to report to Parliament on micro-economic
reform and it will most certainly not be the last.
However the decisions I will detail today represent perhaps
our most significant achievement to date in this field. We
have in the seven months since the election identified the
issues in telecommunications and domestic aviation reform,
conIul1e. d widely with those most directly affected by the
changes, and formulated imaginative and bold policies.
I a 2.
I mention-in passing, Mr Speaker, that we also managed to
fit into this tight time-frame an historic Special National
Conference of the Australian Labor Party which altered our
Party's platform to accommodate these changes. By any
standard the speed of the Government's action in this area
and our persistence in pursuing change is proof of our
commitment to reform of telecommunications and domestic
aviation.
Above all, Mr Speaker, these reforms are marked by one
special characteristic they are real-world solutions to
real-world problems. In this respect they are the
antithesis of the half-baked ideas floated almost daily by
the Opposition Leader and his frontbench colleagues. our
reforms CAN bie implemented and they WILL be implemented.
It is my important duty today to outline these reforms to
the House in the context of a broader progress report on the
microeconomic agenda.
Tel eco-rmmnication
Mr Speaker,
For most Australian households, the telephone provides an
essential lifeline to society; it is perhaps the most
important instrument of modern life. For Australian
business, it is literally an indispensable tool. It is no
surprise that providing telephones and related equipment to
Australians is a multi-billion dollar industry in fact, it
is one of our largest industries providing 143,000 jobs.
Telecommunications pose a number of unique challenges. The
pace of technological change regularly sees the major
advances of at few years earlier superseded by new
discoveries. This can easily render regulatory structures
out of date; it can also mean new export markets and
employment opportunities can swiftly emerge for an efficient
industry equipped to take them up.
So for Australia, we need to improve the efficiency with
which we deliver telecommunications services within our
country. It is equally clear that we must ready ourselves
to take advantage of new export and job opportunities that
will be created around the world, particularly with rapidly
rising living standards in the Asia-Pacific region. The
nations of the Asia-Pacific region have half the world's
population bu~ t only 17 per cent of its 500 million
telephones. Meeting the region's demand for new
telecommunicat ions services, servicing these vast new
markets, poses an enormous opportunity for Australia.
So it is entirely right that this industry should be as it
has been the subject of intense scrutiny and decisive
action by this Government. Indeed we are taking one of
Australia's biggest industries and reshaping it into a new,
vastly more dynamic structure.
In 1987 and 1.988, amid claims that sound familiar today
about threats to Telecom jobs, we initiated a series of
reforms allowring competition in the provision of customer,
equipment and value added services, and we established three
far-reaching reviews which have resulted in today's major
reforms. These reforms may be divided into four parts:
establishing a new competitor;
developiLng new services;
strengthening the regulator; and
ensuring a strong publicly owned telecommunications
company.
Each of these elements contributes to the same outcome:
benefits for Australia that are potentially limitless. We
will see massive new private investment in the Australian
economy; an expansion not a contraction of total jobs; a
fall in STD prices on major trunk routes by as much as
per cent; and the creation of substantial and enduring
export opportunities.
The underlying conviction of these reforms is that
introducing a new competitor into Australia will stimulate
Telecom into lifting its performance for the customer
whether that customer is business or an ordinary household.
But to ensure early benefits are obtained, it will be
important to manage the first phase of competition
carefully. In this first period with only one competitor to
Telecom, AUSTEL and the Trade Practices Commission will be
able to ensure Telecom is not able unduly to exploit its
entrenched position of great strength. If this duopoly is
to serve its; purpose and if the possibility of collusion is
to be avoidEtd, it must have a finite term. We have decided
that after 30 June 1997 the duopoly will terminate, paving
the way for there to be no limit on network competition.
AUSSAT will form the base for the new competitor and it will
have unrestr7icted rights to provide all telecommunications
services. Legislation to this effect will be introduced to
Parliament t: his evening.
AUSSAT will be sold and the new competitor will be up and
running before the end of 1991. The sale will be carried
out by a Task Force responsible to the Minister for
Transport and Communications, based in his Department, and
reporting both to him and to the Minister for Finance.
All restrictions preventing AUSSAT from providing the full
range of services will be removed by the end of this year.
Telecom's representatives on the AUSSAT Board have been
directed to resign forthwith and the Government will
purchase Telecom's shareholding at its commercial value as
at 24 October 1990.
4.
The new cairrier will interconnect to the existing network at
a price that will allow Telecom/ OTC to recover the
additional cos3ts it incurs in providing facilities and
services to the new carrier, and to underpin community
service obligations.
Regulatory safeguards will be put in place to ensure
effective competition:
We will require Telecom and OTC separately, and after
their merger into a new entity to provide
interconnection on an equal access basis to the second
carrier for both domestic and international services;
We will subject Telecom/ OTC to separate price caps for
local, trunk, and international services;
We will ensure that-Telecom carries and completes calls
without diminution of quality on behalf of the second
carrier, and provides it with all ancillary and
supplementary services such as billing, operator and
directory services, and full access to information
about customers and traffic flows;
and we wrill insist on transparency in the financial
transactions of both the new OTC/ Telecom entity and the
new carrier.
Our intention is to see new services develop both during the
period of duopoly on the basic network and beyond.
During the period of the duopoly, up to 1997, a broad range
of competitors to Telecom and the new entrant will be
encouraged in markets other than the basic network.
First, we will licence a third mobile phone operator. The
area of mobile telephony is booming; further technological
and service improvements can be expected. It is,
effectively, an alternative to local exchanges and, while
expensive at present, it may, with further technological
change, be th." e way of the future in telecommunications.
Additional mobile licences may be made available in 1995.
Second, and in support of the decision on mobile telephones,
the Government has adopted the AUSTEL report on Cordless
Telephone services, allowing unrestricted competition in
this area.
Third, we will remove all restrictions on resale, including
on domestic and international telecommunications capacity.
There will be no diminution of the rights of existing
operators in this area. Furthermore, AUSTEL will review the
terms of resale, including the extent to which resellers can
establish their own switching equipment. These changes will
provide a major boost to value added service operators,
their business clientele and to research and development
efforts.
I I
Fourth, as the first phone monopoly held by Telecom ends on
June 1991, the Department of Transport and
Communications, in conjunction with AUSTEL, will bring
forward a Cabinet Memorandum on the appropriate network
termination point for both licensed carriers prior to any
new carrier arrangements coming into place. Telecom will,
in any event, continue to offer a first telephone.
Mr Speaker, the role of the regulator in conjunction with
the Trade Practices Commission, in promoting early and
effective competition will be pivotal.
In order to strengthen AUSTEL for this role, the Government
has decided that AUSTEL's decisions on issues under its
control will be absolute and final.
AUSTEL will be given the power and the resources to:
arbitrate on all interconnection charges between the
two network carriers;
control numbering;
manage Australia's input to international standards;
prevent the misuse of market power; and
report annually to the Government on safeguards and
their effectiveness, and, importantly, on customer
satisfaction.
AUSTEL will also have a role in ensuring that Australian
industry benefits from these changes without compromising
the overall objective of improved services for consumers.
Mr Speaker,
Throughout our deliberations we have been determined to
maintain a strong public-sector presence in Australian
telecommunications, particularly because of its important
role in discharging community service obligations. We will
not place in the hands of future Treasurers or Ministers for
Finance the responsibility for delivering services in areas
where compet: ition does not eventuate, nor do we expect a new
philanthropic owner for Telecom could be found who would
provide them.
We will not attempt to deceive the people of Australia into
believing that such an option is practical.
We will ensure that the community's expectations are met:
that prices fall in real terms across a range of services;
that untimed calls continue to be offered to households;
and that rural and remote services do not vanish.
Telecom operates, for principally domestic purposes, a wellbalanced
telecommunications network but it does not have a
major export focus. In part, this is due to an artificial
barrier between Telecom and OTC. This barrier will be
removed by my Government, and a new corporate focus provided
by merging the organisations.
That focus will have three basic purposes:
first, under the challenge posed by a new, privatelyowned
and fully-resourced competitor, to pass on to
customers in the form of lower prices and better
service, the huge productivity gains that are inherent
in this industry's technological explosion;
second, to provide the basic opportunity for the new
entrant to compete, encouraged both by the decisions of
a newly-strengthened AUSTEL and the incentive created
by the terms of the merger process itself; and
third, to market its combined strengths overseas
aggressively and to pursue with much greater vigour
than previously its undoubted abilities in research and
development.
A fee will be, paid to the Government as a result of the
merger of Telecom/ OTC. The level of that fee will be set by
the Government in consultation with the new entity. It will
also pay a fee for its mobile phone licence.
In order to ensure that interconnect and equal access
arrangements between the carriers are not unnecessarily
delayed, AUSTEL will have to certify that these are in place
in all capital cities and will soon be available in
provincial ciLties before the merger is finalised.
Until that tiLme, OTC and Telecom will operate independently
but with the benefit of an interim group board to oversee
their collective operations in the transition to
competition. This month marks the beginning of deregulation, with the
abolition of the Two Airlines Agreement.
By terminating this infamous relic of Coalition inertia, we
have opened the door to dramatic growth in this vital sector
of modern transport.
The latter-day converts to micro-reform who sit opposite
displayed their true colours when they were in Government
with their consistent failure over decades to remove this
Agreement. They were responsible for slowly strangling
domestic aviation and pushing high costs onto the Australian
consumer.
As a result of our decision to terminate the Agreement, we
see new services, lower prices, a new airline hard
evidence of the value of the decision to Australian
consumers. In order to strengthen the hand of current and future
entrants into domestic aviation, and in order to provide an
appropriate environment for the sale of Australian Airlines
and part of ( Qantas, the Government has decided to:
lift the foreign investment limits relating to
investment in Australian domestic airlines by foreign
airlines servicing Australia from 15% to 25% for an
individual holding, and to 40% in aggregate;
maintain a stable policy environment for aviation for
the remainder of this Parliament.
This decision to put further major policy change in this
area on hold is sensible. It would be madness to introduce
a major chan! ge such as deregulation and not give it a chance
to work. It would similarly be stupid to attempt to sell
the airlines while shifting the goal posts for potential
purchasers. Our decision preserves future policy options.
The foreign investment changes offer clear opportunities for
the New Zealand carrier to enter the Australian market. In
addition, we have opened up the freight route across the
Tasman and are now nominating two additional carriers to
serve that market. In the light of these decisions, we will
also discuss with New Zealand the question of closer
aviation relations in the context of next month's review of
the Closer Economic Relations arrangement.
Mr Speaker, the sale of 100 per cent of Australian Airlines
and 49 per cent of part of Qantas will strengthen them and
enable them to provide much-improved services to Australians
and Australian businesses. They will be recapitalised.
They are likely to form strategic partnerships. In all,
they will be more competitive, and this nation will be
better off as a result.
The sale of both airlines will be handled by the Minister
for Finance in close consultation with the Minister for
Transport ard Communications. The Government will take its
own decisions on the issues related to sale, but it
recognises that the airline boards have a right to be heard.
Special arrangements will apply to the part-sale of Qantas.
In order to accord with our bilateral air service agreement,
the foreign investment limit in Qantas will be set at the
generally accepted international benchmark of
In addition, although Qantas will remain as our single
designated international passenger carrier for the
foreseeable future, the Government recognises that with
the success of our reforms of international charter programs
for air freight there is a potential role for a second
designated freight carrier. A process is currently under
way to assess expressions of interest.
Australia, Qantas and our tourism industry will continue to
benefit from our intention to continue to sign new bilateral
Air Service Agreements and to welcome charter programs.
There are gains still to be made, both from traditional
markets and from a more intense focus on regional
opportunities. Land Transport
It is not a well-recognised fact that of all the areas of
micro-economic reform, land transport offers the greatest
potential gains. The Industry Commission has estimated
these to be worth over $ 4 billion a year.
At the recent Special Premiers' Conference, the Premiers,
Chief Ministers and I cut through the remaining
disagreements to set in place fundamental reforms in both
road and rail operations in this country.
As I made clear earlier this year in calling the Special
Premiers' Conference, our rail systems in this country
cannot operate efficiently with their present structure.
Inter-state freight alone loses $ 300 million a year,
excluding efficiency losses from traffic now on the roads
which might more appropriately be handled by rail.
Our commitment to improving competitiveness required us to
redress these imbalances through seeking State agreement to
form a National Rail Freight Corporation: this will involve
new investment, new industrial relations standards and new
rail management. A Heads of Agreement has been signed by
the Commonwealth and the States and Territories, committing
all Governments to work towards a start-up date of
July 1991.
Following the Premiers' Conference, the hard bargaining on
asset values, equity considerations, reform of labour
practices and other issues will commence. The
Commonwealth's role is clear. We are prepared to contribute
significantly to the success of the venture. We expect the
States and the unions to do so as well, including
particularly in respect of manning levels and work
practices.
9.
The new Rail Freight Corporation will not justify the effort
necessary from unions and governments if the heaviest road
transport vehicles do not themselves bear a proper share of
the costs of using roads. Current efforts by some States to
recover costs through registration fees have been frustrated
because transport operators have simply been able to
register thei~ r vehicles interstate. But the damage to the
nation's roads continues.
The Commonwealth, States and Territories have agreed to the
following objectives:
first, introduction of nationally uniform technical and
operating regulations and driver licensing
arrangements; second, the progressive introduction of nationally
consistent road user charges having regard to
principles established by the Interstate Commission,
with a view ultimately to achieving full recovery of
the cost: of road use; and
third, clearer definition of responsibilities between
different levels of Government for funding and managing
elementS Of the road system, aimed at eliminating
duplication.
I intend to take a continuing interest in the implementation
of these changes. I expect that the Premiers will do
likewise. We all recognise that the road transport industry is vital
to our future. It is the lifeblood of many of our
industries. As we introduce the changes I have detailed
today, we will keep the industry informed and respect its
views. In turn, we expect that the industry will
acknowledge -the common sense underlying these reforms.
Thea Wterfroit
Mr Speaker, more has been said about the waterfront than
perhaps any other industry issue in this country. This
Government has not, however, joined the queue of people who
complain but don't act.
The waterfront reform plan which we adopted last year has
already yielded significant results:
new stevedoring arrangements for bulk grain ships,
reducing manning levels by
retirement of 280 gangway watchmen
recruitment and training of 200 new waterside workers
development of an interim award agreement to facilitate
award riestructuring and the negotiation of enterprise
agreements; and
most importantly, enterprise agreements currently being
concluded at two of the largest terminal operations in
Sydney and Melbourne.
These agreements are expected to be forwarded shortly to the
Waterfront Industry Reform Authority for its independent
assessment. National Terminals ( Australia), the company
negotiating these agreements, has publicly stated that it
expects productivity gains of up to
The continuing process of waterfront reform also includes
involvement by the Trade Practices Commission and the Prices
Surveillance Authority to enhance the competitive
environment on the waterfront and ensure that users receive
the benefits of reform.
Improvements in the efficiency of the Australian shipping
fleet continue to be made under our Shipping Reform
Strategy. To date, in excess of 350 seafarers have accepted voluntary
early retirement packages. At the end of June 1990, the
average crew size for the Australian fleet was 25 compared
with 33 six years ago. By June 1992 it is expected that the
average crew will be 21. All this continues to be achieved
with no industrial disputation.
Mr Speaker,
At the outset of my comments today I described this
Statement as a progress report. I emphasise the word
" 1progress"; Australia is now making progress, achieving
fundamental and lasting reform, in industries that for
decades had seen no progress, no reform.
So I repeat my challenge to the Opposition. Let them point
to a period -of Australian history that has seen faster or
more profound micro-economic reform. That challenge remains
unanswered of course because, as I have said in the past,
there is no -earlier period that comes within a bull's roar
of the progress we have made and are continuing to make.
For 31 of the 34 years before we came to Office, Australia
was ruled by the dead hand of conservative inertia in which
notions of reform to achieve productivity and efficiency
were totally alien. That legacy of neglect and of abrogated
leadership is a heavy burden still borne by the Coalition
parties. Let me conclude by discussing the method of progress: its
pace and process.
11.
The House should note that the progress we have made has
been with little industrial disputation and with the
emphasis on patient negotiation with all the parties
involved. The Government has not failed to be firm where
firmness is rneeded, but we have refused to indulge in the
confrontationiist tactics that are so often urged on us.
That is why i~ t has been swift reform.
Against this, some professional commentators outside this
House, and most of the amateur ones opposite, often call for
a faster pace of reform. The secret of faster reform, we
are told, liets in the amount of hair on the chest of
Government: solutions should be imposed unilaterally by
Government and let the devil take the hindmost.
One can tell these commentators are not living in the real
world by the way they float new proposals. When they are
presented with irrefutable evidence of Government progress
in micro-reform, their sole response is to play catch-up:
" Oh, we'd do that and more" as if the mere wish could be
the father to the deed.
Fortunately for the nation, those in this House who indulge
in these stupidities do so from the safe impotence of
Opposition. It is fortunate, because their whole approach
is a recipe for disaster.
Lacking any sort of detailed strategy of how they would
actually achieve reform, they are forced to peddle the
pleasant deception that easy reform and painless change can
be won through confrontation.
Of course real progress is not made by bringing the nation
to a stand-still in some pointless industrial confrontation;
real progress can only be made by harnessing businesses,
trade unions, and governments in a cooperative pursuit of
their common interests.
Mr Speaker,
There are no easy reforms or painless changes to be made.
Reforming entrenched community attitudes and institutions is
hard work but it is hard work this Government is
determined to undertake and to bring to effective
conclusion. That way, Mr Speaker, there will be many more progress
reports from this Government describing our continued,
effective and. rapid progress in micro-economic reform,
creating an increasingly efficient, productive and
competitive nation.