Month: May 2000

The fiasco over Treasurer Peter Costello’s comments on Telstra highlight again the unsatisfactory nature of current telecommunications set-up in Australia. Mr Costello said on Budget night that he had asked the boards of Telstra and the Reserve Bank what the dividends to the Government would likely be. “”When the message came back from Telstra and the Reserve Bank it was bad news, very bad news,” he said. It is one thing to deal with the Reserve bank this way. It is fully owned and controlled by the Government. But it was a very imprudent thing to say about Telstra. The Government only owns 51 per cent of Telstra. The statement indicated that Telstra was doing badly. It resulted in Telstra making a statement to the market that its was on track for a double-digit profit result for the full year as predicted earlier and that the company was doing well. Nonetheless the share price fell on Wednesday.

Mr Costello denied he had any knowledge that was not known to the market. That is scarcely credible. He used the words “”when the message came back from Telstra”. That indicates a reply to a query. What other Telstra shareholder get the chance to ask the board for knowledge about dividends? None. The Government was writing down dividends on the basis of exclusive, early knowledge. It is unsatisfactory for the Government to at once be a 51 per cent shareholder in Telstra, to be able to get messages back from its board, and to have to reveal via the public Budget papers an estimate of what it thinks its dividends will be. It is not fair to other shareholders.
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The federal government’s policy on digital television is now in tatters. This week the Government was forced to withdraw the auction for national datacasting licences. These licences were an integral part of the Government’s overall policy on digital television. That the auction has been withdrawn is not only a blow up to the Government’s budgetary position but a blow up to its overall broadcasting policy.The policy or was doomed from and the start. This week’s events merely hasten the inevitable: that the Government must revisit its digital television policy and extensively rewrite it.

The original policy allocated the extra spectrum that has become available with digital technology. It would have extended the present triopoly of the commercial networks until 2007. In an the meantime, they would have been required to broadcast a minimum of the 20 hours week of high-definition digital television. The requirement for high-definition digital burns up a lot of the additional spectrum. In particular, it prevents extensive use of multi-channelling of standard definition digital. The three commercial networks and the two public broadcasters were denied the option of producing, say, three or four completely different program streams of standard definition instead of a single high-definition program stream. The commercials were quite happy with that because it is cheaper to produce at one rather than four program streams for about the same amount of audience and about the same amount of advertising revenue.
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Government’s tend to spend their way out of trouble. This Government is in trouble, if opinion polls are anything to go by. Indeed, it was in a fair degree of trouble from the day of the last election when it got fewer votes than Labor, but got them in the right seats. As a result, the laudable fiscal rectitude that was the hallmark of the Government’s first term has been steadily eroded. Last night’s Budget saw a further erosion. Treasurer Peter Costello says he has brought in a surplus of $2.8 billion. This is a smokes and mirrors surplus. Mr Costello has included in his figures the $2.6 billion the Government will get from selling extra mobile-phone spectrum. Arguably, this is an asset sale. Without it, it would have been a balanced budget, or when other fiddles are included, it is a deficit Budget. Mr Costello has conveniently increased his estimate of growth and hence revenue to beyond what is tenable.

And this means more money to spend on vote buying. The Government is doing what it accused its Labor predecessors of doing: selling the silver to pay the grocery bill. And it is doing it at precisely the wrong time in the economic cycle. Australia is at the high point of the economic cycle. Now is the time for a real surplus Budget in preparation for the inevitable economic downturn ahead as the business cycle takes its course.
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The people of Canberra have inherited a wonderful legacy. In this season of mists and mellow fruitfulness, we admire it more than at other times of the year, but it here all year round – the canopy of trees. Canberra trees, native and exotic, make this city unique and are one of the reasons it is a joy to live in. They enable us to connect with nature as move about the city engaging in work or play. The legacy has taken 87 years to build. It has required a huge amount of work, experimentation, investment and commitment. But in the past decade we have watched the legacy being eroded. Less seems to be done to maintain streetscapes. In new greenfields developments, there is less public space, higher densities and a higher ratio of building to land, so there is less room for trees. And worst of all, in-fill development in inner areas is resulting in the gradual erosion of the Canberra treescape. Dual occupancies are resulting in the destruction of established gardens for second dwellings. Block amalgamation and unit development is resulting in less land for trees. It is possible that the slinging of datacast cable along the power poles will lower the height of tree canopy along the electricity easements.
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A ruling in the High Court this week has left the federal-state co-operative scheme of corporate law under threat. The upheld the validity of parts of the corporations law on very narrow grounds. But it warned that the next challenge to the law might be successful. The court gave a clear warning to state and federal parliaments or governments to fix the problem.

The difficulties arise from the words of the Constitution. It provides that the Commonwealth Parliament has power to make laws with respect to “”foreign corporations and trading or financial corporations formed within the Commonwealth”.

It means the corporation has first to be formed before the Commonwealth power over it arises. It presumes, therefore, that corporations must be formed under state law. The present co-operative scheme has a single Australian incorporation process and a single Australian Securities and Investment Commission. This is constitutionally wobbly. It is likely that ASIC, as a federal body, has no constitutional power to investigate and prosecute crime committed during the formation of companies. Further, it probably has no power over trusts and other entities that feature so strongly in the corporate world.
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It was just as well that the treasurer, Peter Costello, was in Washington when the memo from the Federal President of the Liberal Party, Shane Stone, to Prime Minister John Howard came to light. If Mr Costello had been in Australia, it would have been easier for the Liberal Party to have closed ranks and for the Australian public to have been denied an insight into the state of dissension that plagues the ruling party in this country.

Faced with reporters’ questions in Washington, Mr Costello expressed surprise and innocence at the existence and contents of the memo. He even questioned whether it was authentic. He told reporters that they should seek answers from the author of the memo. He did his best to be as the least damaging as possible to his party. But it was apparent that Mr Costello was unaware of when that the memorandum had been written and when it had been delivered to it Mr Howard. If he had been, his reaction would have been differently constructed. As it happened, his display of innocence exposed poor communication and a critical lack of trust within various elements of the party.
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High Court Justice Michael Kirby went about as far as a judicial officer should go in commenting about public affairs when he called for greater funding for public schools in a speech at a graduation ceremony at the University of South Australia last week.

The public should not expect judges to be completely silent outside the courts, however, it is important that judges do not enter debates of major current political controversy. Justice Kirby has never been afraid speak on a wide range of topics. His words are usually chosen carefully and his tone is usually measured. In his role as chair of the Australian Law Reform Commission in the 1980s, Justice Kirby got into the habit of commenting on a wide range of topics. That was a critical part of his job. But now he is a High Court judge. And while no one expects him up to go into a cocoon, it would be more prudent for him to be a little more circumspect about what topics he talks about and what he says on those topics.

Last week, for example, he picked at particularly controversial topic – – the balance between public and private schooling. It has been a policy objective of the current government to set new parameters in this balance. Moreover, these have been roundly opposed by the opposition and key community groups. Whatever it one thinks of the Government’s position and the actions it has taken in the past five years on school funding, it is a matter of concern that a High Court judge should be seen to be taking sides in this debate.
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The move by the Reserve Bank yesterday to raise interest rates by 0.25 per cent reveals a major flaw in Australian economic policy making. The rise comes the week before the Federal Budget is to be brought down. The rise happened because the Reserve Bank board’s monthly meeting happened to fall on Tuesday. Surely, the Budget should have been a factor in the setting of monetary policy? The Reserve board must have ignored the possibility of fiscal policy having any effect on inflation, or second-guessed it. Either way it is a unsatisfactory situation. The Reserve says that inflation is its primary consideration in setting interest rates. Treasurer Peter Costello has long stated that the Coalition’s fiscal responsibility has been a major factor in delivering low interest rates. The Coalition has often taken credit for lowering the burden of mortgage repayments. Yet here we have the Reserve board raising interest rates because of a fear of rising inflation without waiting to see whether the Treasurer’s Budget will have an effect on inflation. The Reserve has been premature in raising rates, unless it has assumed that the Federal Government will not be as fiscally responsible as in the past and that its Budget will have a neutral or negative effect on inflation.

Unfortunately, it is probably a fair assumption. It is likely the Budget will not help on the inflation front so the Reserve feels that it must use the blunt instrument of interest rates to attack inflation.
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It was a dribs and drabs Budget. A little for everyone and nothing large to offend anyone. And yes, there is an election in October.

A cynical view of yesterday’s Budget would be that it was a vote-buying one. And there was a certain amount of that. Treasurer and Chief Minister Gary Humphries found his way to dish a few goodies out to a great variety of groups and individuals: cyclists and motorists; public and private school attendees; high culture and petrol heads. A little bit here and a little bit there. Something for everyone.

But several factors soften this cynical view. First, the framing of the Budget and the allocation of the goodies has not been done on an overtly ideological basis, in the way that Mr Humphries’ federal counterparts have engaged in. Secondly, the additional spending (or vote-buying) has not been done in an economically irresponsible way. The Budget remains in surplus. The ACT retains its triple-A credit rating. The economic projections are not hopelessly optimistic. Indeed, the budgetary position now is in far better shape than was projected three budgets ago when it was predicted that the Budget would still be in deficit by $57 million and be some distance from turning the corner to surplus — and at the time that was thought to be optimistic.
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In Kentucky last month, details emerged about how a jury decided on the verdict in a murder case by the throw of coin. It came out accidentally. In NSW we learnt this week of how one juror held out in a murder case in what was obviously perverse circumstances.

In the ACT things are worse. It is impossible to publish articles which show examples of how the ACT jury system works, or more correctly how it doesn’t work. Our Legislative Assembly has passed laws making it an offence to publish details of jury deliberations or voting, no matter how long after the case has closed. NSW bans such publication, but only while the trial is running.

NSW quite rightly protects jurors from being named against their will or for being harassed by the media to give details about a trial. But if jurors later voluntarily give information, it can be published. But in the ACT, our Assembly has decided not only to protect jurors, which is fair enough, but also to protect the jury system itself from any exposure. The deliberations of the jury room are to remain secret. Secrecy almost invariably spells trouble. Several hundred years of propaganda about the jury system being the bastion of liberty and the safeguard against oppression. This propaganda is hard to expose for the twaddle it is because we rarely get to see the perversity of the jury system.
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