Chasing the Norm

Australian academic and blogger on politics, international relations, and culture

Memo to Business: Hire better political advisors

From an article on the new NBN draft legislation:

“The talk in Canberra is that Telstra senses the government is on the ropes, and with an election coming it thinks now is the perfect time to play hardball.The closer we get to the election date the more desperate the government is likely to get and the better compensation handout it will consider.

The Rudd Government is on the ropes ? In what reality? Going by the Polls, Labor is at ahead a comfortable, 53-47% spread, while the markets have Labor at around $1.20 to the Libs $3.80 (ie around 75% odds on favourites), add in the honeymoons due to end for Abbott, that the public always give govts a 2nd term (at least since ww2) and that the government hasn’t yet switched to an election footing, you’re kidding yourself you think this government is “on the ropes”. And even if those numbers suggest to you Labor could lose, why would anyone in the government believe that giving in to Telstra would be good politics? Their original plan for an NBN and split Telstra was popular with both the public and the press, and the government’s already taken heat over being too close to business (utegate, Free-to-air tv handout, wasteful stimulus spending).

Conroy has goofed in opening up the NBN to some retail sales (though it is only for servicing government departments), but you really have to wonder just who is advising Telstra over the years on politics. Everyone thought getting rid of the yanks would put the company back into the mainstream, but if this is the sort of political analysis they are endorsing, pushing ahead in ways that will only annoy a government almost sure to win re-election they’re fooling themselves.

I’ve never quite understood the lack of political acumen in the Australian business community. Those rare few who venture outside the pack (such as Heather Ridout of the Australian Industry Group) gained significant benefits for sensing the political wind and working with Labor in 2007. Yet they remain a rare exception at least in public comments. Rupert Murdoch may have lately rung his colours up the conservative flagpole, but if you go back a decade or two, he and Packer knew how businessmen should play the political game: Support the winning side. But you almost never find even that basic political common sense in most of the Australian business community.

Then again maybe the ideological blinders are less at Telstra than on the reporter:

That’s the game the previous Telstra regime played with the previous government, and a dance repeated too often since 1983 when then minister Kim Beazley made the mistake of not splitting Telstra.

Other than as part of a privatization platform, there was no reason to split Telstra in 1983. It made a healthy earner from both its retail and wholesale arms, and control of the retail side meant the Government could guarantee phone access to all homes in the country. A basic individual right/important economic backbone esp for rural communities. It was only when the company was (rightly) sold in 1996 that there was a need (and a pressing one) to split the company. But Howard didn’t because he wanted a higher sales price (much of which he used as election handouts). So how is it Beazley’s mistake?

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4 ResponsesLeave one →

  1. Nabisco

     /  February 26, 2010

    Who was the reporter?

  2. John Durie @ The Australian.

  3. roowhoboowhothegovtwilldecideforyou

     /  March 2, 2010

    I find it mildly amusing that Labor having voted against selling Telstra off, immediately recreate a new Telstra in the form of the NBN.
    Labor can’t let go and is still trying to get the Government to pick winners. So we have this crowd-out of any fibre investment since 2007. If the private sector was sure of a positive NPV on investment in fibre, it would already be happening, the Government announcing the NBN has just made any NPV negative due to rule number 1, don’t compete against Government monopoly as tax payers can be fleeced longer than your lifetime to cover losses.

    The Government already knows that 4G wireless is a big threat as they threatening to ban companies (such as Telstra) from competing any spectrum auction. It is little wonder Australia got a bad rap on Sovereign risk due to this.

    Your premise “(Big) Businesses need political advisors” is mostly correct, it just shows that the Government will make or break businesses depending on who its wants as winners, instead of just getting the … out of the way. Latest example, home insulation business prior to and after the current fiasco.

    Have Fun

  4. G’day
    The draft legislation creating a wholesale organisation with ministerial discretion to allow the sale of services to specific government departments does not make for “a new telstra”. It was a mistake politically, but given their unique needs, the idea of the NBN providing special deals to federal govt departments is that harmful to the overall industry (and better than in house ISP’s being developed either). The new NBN is nothing like such a threat, and if managed properly will ensure that there is great incentive to built a world class broadband infrastructure, something the bush and big business have been crying out for, for years.

    Secondly, if you know your history you’ll see that Telstra’s monopoly was the reason we have slow internet in this country. The technology and capability were here years before much of the world, but with internet users having very little choice and profits rising, Telstra used the tech boom years not to upgrade but to sit complacent. Thankfully a number of ISP’s have sprung up and the ACCC (sometimes against the wishes of the government) has forced Telstra to somewhat open the market (ie at least selling them wholesale prices below what Telstra charges its retail customers) which is finally and reluctantly forcing Telstra to invest in the market. This was the fundamental problem with turning a government owned monopoly into a private monopoly, had the Howard Government done that, they would have probably gained a lot of labor support.

    As for picking winners, well sure but all governments do, and it’s not a bad thing either if done right. We “picked winners” (via tariffs) at the start of the 20th century as we built up a farming sector, and we “picked winners” (via regulation/tax breaks) at the end of the 20th century as we expanded our mining sector. Hopefully we will “pick winners” in encouraging the many innovators in green and high tech industries to stay in Australia, rather than heading overseas as so many have to. When governments try and support industries that are obviously unsustainable (say cars) then there is a significant problem, and when they do this through distorting and harmful means (such as tariffs) then there is also a problem. But when there are clearly developing niche market areas that government merely aids along, the country and the people benefit. If nothing else it may be the minimum these days to ensure many industries even have a chance.

    Still it’s worth noting that historically it has been Labor during Whitlam and then Hawke/Keating which got rid of the vast majority of tariffs in this country, and that Rudd has not added any new ones, nor substantively changed any industry support from how it was configured under Howard, so your characterization of Labor is wrong. It supports the free market as much (if not more so ie ETS/means testing private health insurance etc) than the Coalition.

    Thanks for your comments.