The Liberal Values of Freedom and Opportunity in a Globalised Economy: Malcolm Turnbull

16/01/12

YOUNG LIBERAL NATIONAL CONVENTION 2012

The Liberal Values of Freedom and Opportunity in a Globalised Economy

Sydney, 14 January 2012

Federal President Michael van Dissel, NSW State President Simon Fontana, and 2012 Conference Convenor, Amy Houston – thank you very much for inviting me to speak to your 2012 Conference. It is great to be with you – the future of our Party.

And the future of our party is important, because in the contemporary Australian political system it’s the Liberal Party (and only the Liberal Party) which remains unequivocally committed to government that encourages and embodies the values and principles that for over 30 years have made Australia so strong and prosperous.

Values such as self-reliance and enterprise.  Personal freedom and personal responsibility.  Opportunity and competition.

And at the very heart of the matter the difference between our Party and Labor is that we, Liberals, believe that Government’s job is to enable you to do your best whereas Labor, on the other hand, believes that Government knows best.

So at its core the Liberal Party is a party built on freedom and opportunity.  We value freedom because it allows each of us to choose our own course and achieve our highest potential and most deeply-held goals.  We value opportunity  because it ensures these freedoms are accessible to everyone.

Over the past generation or so the way that our party approaches economic policy, in the broadest sense, has been the most important area where these philosophical values have been expressed as practical matters of government.  During the period since the 1980s, as the Australian economy was transformed from a protected, over-regulated and inefficient laggard into an open, dynamic and prosperous leader, the Liberal Party was consistently on the correct side of economic policy debates.

When our political opponents, to their credit, introduced market reforms in the 1980s, we backed them.  Without bipartisanship and support from Liberals such as John Hyde, Jim Carlton and John Howard, Hawke-Keating reforms such as the dismantling of tariff barriers or the floating of the dollar could never have happened.

When the Coalition regained office, John Howard and Peter Costello pushed ahead with economic reform – often initially unpopular reforms, as in the case of the GST or the spending cuts needed to restore a Budget surplus – despite the lack of such bipartisanship from a Labor Party that in opposition, and now in Government, has quickly turned away from the economic liberalism of Hawke and Keating.

And as we reflect on the great arc of reform in Australia from the start of the 1980s through to 2007, and weigh the current success and strength of our economy against the troubles of so many others, we should pause and recognise how much of that success is built on what we as Liberals know to be true about managing a modern economy:

·         As Liberals, we know that the Budget cannot stay in deficit year after year, and that tough decisions across the board are necessary especially if we are in the red at a time when record terms of trade and continuing growth tell us we should be solidly in the black. 

·         As Liberals, we know that a relatively small and open economy such as Australia cannot control its exchange rate, and that the large movements in the value of our dollar we see from time to time are the lowest-cost way for our economy to adjust to changing circumstances – be they favourable or adverse. 

·         As Liberals, we know that free, open markets and vigorous competition are the most powerful tools we have to serve the interests of consumers and ultimately the national economy, and must be pursued at every opportunity. 

·         As Liberals, and especially with so many of our members from business, we know that picking winners is hard enough for the private sector, and well nigh impossible for the public sector. We know that when tax revenues are handed out to one firm or industry they come at the expense of all the other firms and families that  paid that tax. That is why we should always ensure that Government support for industry, be it in the form of cash payments or protection, is rigorously analysed and justified so that its economic costs are well understood by the community which ultimately will have to bear them.

 It is important to remember that these economic principles will always be tempered by practicality, as great Liberal economic such as John Howard or Peter Costello demonstrated from time to time. Commitment to our economic principles is not justified by ideology but by a hard headed, practical analysis of what will deliver the greatest economic opportunities for our whole community.

 The truth is that developed economies today  face a double challenge – not only is technology reducing the need for labour in many sectors – manufacturing, retailing, logistics, financial services to name a few – but at the same time globalization and the Internet mean that more and more jobs and industry sectors are trade exposed than ever before so that what had traditionally been non-trade exposed occupations (accounting, law, financial analysis, retail for example) are now increasingly trade exposed – which means that their competition is not across the street or in another State, but anywhere in the world where there are many people as well educated and as hard working as Australians but prepared to work for lower wages.

All of this is putting pressure on both employment in the developed world – hence the sluggish jobs free “recovery”, such as it has been, post the GFC in North America, and on incomes – hence middle incomes have flatlined or dropped in real terms in the USA over the last twenty years.

One of the greatest challenges we face today, and you as the leaders of tomorrow, will face in public life in years to come is how to maintain all of the dynamic benefits of a free society and a market economy in a globalised world, where the two largest economies are China and very likely India and at the same time maintain full employment and high standards of living and income for all Australians.

It isn’t easy as we can see from the United States experience at present. For the time being we have benefited from the resources boom courtesy of China and other emerging Asian economies. We should not assume, however, that this boom will last forever and that is why I am firmly of the view that we must as Liberals articulate a clear strategy both for managing that boom, preserving not squandering its benefits and ensuring that Australians’ living standards are maintained in the brave new world that awaits us.  

This brings me to the key economic policy in my portfolio area, the National Broadband Network, which is a woeful example of Labor ignoring the economic policy successes and lessons of the recent past.

Now before I say any more about the NBN, I do want to stress the Coalition is committed to ensuring all Australians have access to fast, reliable and affordable broadband, regardless of where they live or work.

But we don’t support Labor’s NBN, and we don’t believe it can achieve that objective.  Let me concisely summarize our main objections for you:

·         The NBN is expensive – far more expensive than it needs to be.  Completing the network and migrating customers onto it will cost $50 billion and very likely more.  More capital employed in the network inevitably means higher prices for consumers and businesses.  It is plain that a more rational approach involving running fibre closer to end users but not all the way to every house or business in Australia could achieve largely similar performance for almost all users at perhaps a third of the cost.

·         It is important never to forget that over 75% of the cost of a telecom network rollout is not in the electronics but in the civil works and that up to half of that cost is in the last mile – running fibre in this case into every house and apartment in Australia.

·         The vast majority of residential users have no near-term use for the very high speeds of 100 mbps plus that a fibre to the premises (FTTP) network can deliver, and international experience tells us that even fewer will pay much of a premium for it.  So the increased cost of the network won’t be shouldered mainly by those who take advantage of its capabilities; they will be spread across all users.

·         The NBN is profoundly anti-competitive, and hugely restricts economic freedom.  As it is rolled out, three existing networks – Telstra’s copper, the Optus HFC cable network, and Telstra’s HFC network – will no longer be permitted to carry voice or broadband, and the first two will be decommissioned.  This is economically wasteful and detrimental to competition.  But it no doubt will prove helpful to an over-capitalized government monopoly keen to recover its costs.

·         The NBN will take years to rectify every area with substandard broadband.  Much of Australia has good communications infrastructure but not all; at least 2 million premises cannot access broadband or are constrained by limited speeds. [1] Given the scale and logistical complexity of the NBN rollout, it will take a decade to reach all of them even if it rolls out on schedule.

·         And the NBN puts the Government back in a conflicted position as the owner of a large player (that at some stage will likely be privatized) in a market it regulates.  It goes directly against the economic liberalism, the successful policy lessons, of the economic reform era that I spoke about earlier.

 Not as obvious but no less appalling in terms of poor quality public policy is the Labor Government’s desperate determination to minimize scrutiny of the NBN.

Labor refused to have the project evaluated by either Infrastructure Australia or the Productivity Commission; largely exempted it from FOI laws; has refused to release un-redacted versions of NBN Co corporate documents or forecasts; and has curtailed Parliamentary committee scrutiny.

We don’t even know if NBN Co has actually earned any revenue from selling communications services yet, after spending a billion dollars of taxpayers’ funds.

Nor do we know the timeframe for the NBN in areas where broadband is inadequate or unavailable, unless they are on its recently-released 12 month schedule, which only covers about 5 per cent of the country. 

Perhaps the most glaring recent example of excessive secrecy over NBN Co – an agency which every Australian taxpayer is supporting, and which will have no direct competitors as they have all been paid off or prohibited by the Government – was the November release of a Greenhill Caliburn review of the NBN Co 2011-2013 Corporate Plan.

Over its last 25 pages only 15 paragraphs were entirely free of redaction.  Now that is a whole new slant on open and transparent government.

One thing we do know, thanks to the last paragraph of a press release NBN surreptitiously slipped out on January 2, is that NBN co did not run its fibre optic cables to a single new premise in Australia between mid 2011 and the start of this year.  But don’t worry – apparently that’s all part of the plan.

The only rationale for an NBN in the first place was to ensure regions with substandard broadband where market forces had failed were properly served.  Yet this priority seems to have been abandoned on the way to NBN Co.

As NBN Co’s CEO Mr Michael Quigley explained to a Senate hearing on October 18, NBN Co is choosing sites for its early rollouts based on access to Telstra’s dark fibre and exchanges or the deals it has agreed with its contractors – not on how urgently households and communities need access to good quality broadband.

Mr Quigley stated, and I quote: “Overwhelmingly in these early stages the availability of Telstra infrastructure dictates where we can go in the roll out. That is one factor.  The second factor is what deals we have done with which construction contractors and how they can load, level and mobilise their workforces.” [2]

So six weeks ago, when NBN Co announced a three-year plan to run fibre past 485,000 premises, only a fraction of the areas chosen were broadband blackspots.  

It is simply unbelievable that after bungling its first tilt at an NBN and wasting its first term, the Government now cannot get its wholly-owned taxpayer-funded monopoly to prioritize the neediest areas.  Ed Husic, the ALP Member for Chifley in Western Sydney and a former president of the telecommunications union, was sufficiently frustrated about this to risk retribution from Senator Conroy and other factional bosses and speak out in October.

Allow me to quote him: “NBN Co is making a big deal out of rolling out broadband in new estates where people haven’t even moved in, while down the road people are tearing their hair out to get ADSL or decent wireless access.  I don’t begrudge new areas getting access – I’m happy for them.  But how do you explain NBN Co’s priorities to residents in Woodcroft and Doonside, who are struggling to get decent internet access?  It seems to me NBN Co is just reaching out for easy targets, hugging geographic areas within close proximity of exchanges.” [3]

One of my concerns is that as the rollout confirms the NBN to be logistically daunting and financially untenable, NBN Co and the Government will try to obscure this by focusing on the easiest areas, not those most in need.  That would be a travesty of social justice from a party that so loudly claims to believe in it.

There are still only a handful of Australians connected to the NBN – around 4000, according to the latest figures, or a thousand a year over the four years Senator Conroy has been in charge of delivering better broadband to Australians.

As I noted earlier, the policy approach taken by Labor is utterly at odds with best practice, and with the values and principles that for a quarter of a century informed successful policies in other areas, and under Australian governments from both sides of politics.

It is not too late to take stock and get the NBN right.

[1] McKinsey & Co/KPMG (2010) ‘NBN Implementation Study,’ p.190 & p.282.
[2] Michael Quigley, NBN Co (2011) Evidence to the Senate Environment & Communications Committee, Estimates hearing, 18 Oct 2011, pp.115-116:  http://www.aph.gov.au/hansard/senate/commttee/s380.pdf
[3] Ed Husic MHR (2011) “NBN Co Should Act Now for Woodcroft & Doonside Residents,’ Press Rel. 19 Oct  2011: http://www.edhusic.com/2011/10/19/nbn-co-should-act-now-for-woodcroft-and-doonside-residents/