Transcript No. 2000/94

Good morning Treasurer. The Reserve Bank Governor, Ian Macfarlane, says the dollar

doldrums are uncomfortable, unhelpful, potentially damaging. Then we hear of David Hale

just then, and he added to what he’d just said, saying that the weak dollar could

mean up to half a per cent interest rate rise. Not an encouraging outlook is it?

I think what the Governor said in his speech was that the Australian economy is

exceptionally strong. And he actually went through the major industrialised economies

which shows that second only to Ireland, Australia had the strongest growth over the

course of the last decade or so. And in fact I think he also referred to the finding of

the OECD, that in fact, Australia is placed as one of the six economies of the world which

has been able to harness improvements in productivity, which has contributed to the high

growth and low inflation. So the story of the Australian economy is a strongly growing,

highly productive economy, with, as we know, unemployment falling to its lowest level in

10 years. And I would characterise that as the story of a strong economy which is creating

better opportunities for Australians.

If that’s the case Treasurer, why is the dollar doing so badly? Could it be that

as part of this recurring theme, which has emerged at the World Economic Summit, that

Australia is seen as hamstrung by its image as an old economy, that we’re missing the

information technology boat.

Well, let me make a couple of points. The first is, as I think most people would

concede, the story on world currency markets is a story of US dollar strength. And not

just against the Australian dollar, but let’s look at one of the major currencies of

the world, the Euro, where the US dollar has appreciated considerably, and in fact, more

than against the Australian dollar. So, you’ve got a story where investors are coming

back into US dollars, and all things American are currently the flavour of the month. And

that explains a lot of the position in relation to the $A. This is not to say that either

the Government or the Bank is complacent about it, we watch that very carefully. We take a

very, very careful interest in it. It’s another reason why we are determined to run

good economic policy. But you’ve got to bear in mind, that where you get movements in

exchange rates, it can be as a result of the yardstick, which in this case is the US

dollar. Now can I come to the new economy/old economy point. I think there has been a view

in the past, a wrong view, that Australia must be an old economy because it has mining and

agriculture industries. The point I’d make is that when you’re assessing whether

an economy is new or whether it is old, it’s not whether or not it makes

semi-conductors, it’s not whether or not it manufactures PCs, it’s the extent to

which it can harness new technology including E-Commerce and the Internet in all of its

industries. All of its industries, by the way, including its mining and agricultural

industries. Now on any measure when you look at the productivity of the Australian

economy, we have been one of the six outstanding performers in the world. We have high

penetration of personal computers, high rollout of optic fibre, high penetration of

cellular phones, and high use of technology, which puts us either second or third on all

of these indicators in world terms, which is now feeding back into a more productive

economy . . .

But it’s not the usage that’s a question, is it, it’s the level of

production that the IT involvement in a major Australian company? For example, we

don’t have a single major IT company that’s on the global scene.

Let me finish the first point and I’ll come to the second. The first point is, it

is the use. It’s the use of information technology in industries that counts.

That’s the most important thing. It’s not whether or not you’re making

semi-conductors, or whether or not you’re making personal computers. It’s the

degree to which you use personal computers in manufacturing, in mining, in education, in

agriculture, in financial services. This is a point that was found by the OECD, and found

that because we have a high penetration of the use of technology in all of those

industries, we are one of the six most productive economies in the world. Can I come back

to the second point that you asked me about? It is true that when international investors

look for high-tech stocks, they often look for world leaders with world reach. I think the

point’s been made, for example, a country like Finland which has a company like

Nokia, it becomes a pacesetter, it becomes if you like emblematic of that particular

economy’s position in world terms. And it would help, frankly, yes, it would help if

we had some companies that were world leaders in telecommunications and information

technology. It would help if Telstra were a fully privatised company that had world

leadership in that area. And I think the point’s been made, one of the best things

that you could do if you wanted to have a pacesetter or an emblematic leader in this

particular area would be to have Telstra out there promoting Australia as a fully

privatised company. We, at the moment, are facing Senate blockages in relation to that.

But if those Senate blockages were overcome, that would be a very, very strong and useful

thing for Australia.

So you’re saying Telstra could be our flagbearer, would that could be our

international IT representative, if only it was privatised?

Telstra, of course, is Australia’s largest telecommunications stock. Until we

began the privatisation of Telstra, we didn’t have telecommunications stocks on the

Australian Stock Exchange. At the moment Telstra is hamstrung because it is not actually

fully privatised, and it always has this difficulty in relation to Government ownership.

And I think the point’s been made, I think by David Hale among others, that if you

actually had Telstra, which is out competing in the international market, it could

actually become an emblematic Australian good company, which could become a world leader

in telecommunications.

Treasurer, thanks for your time.

Thank you.