11 March 1996 - 3 December 2007
Transcript No. 2000/94
Interview with Philip Williams
Tuesday, 12 September 2000
SUBJECTS: Australian Economy, IT, Telstra
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 hed 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 thats 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 were 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 lets 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, youve 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. Its another reason why we are determined to run good economic policy. But youve 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 Id make is that when youre assessing whether an economy is new or whether it is old, its not whether or not it makes semi-conductors, its not whether or not it manufactures PCs, its 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 its not the usage thats a question, is it, its the level of production that the IT involvement in a major Australian company? For example, we dont have a single major IT company thats on the global scene.
Let me finish the first point and Ill come to the second. The first point is, it is the use. Its the use of information technology in industries that counts. Thats the most important thing. Its not whether or not youre making semi-conductors, or whether or not youre making personal computers. Its 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 points 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 economys 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 points 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 youre saying Telstra could be our flagbearer, would that could be our international IT representative, if only it was privatised?
Telstra, of course, is Australias largest telecommunications stock. Until we began the privatisation of Telstra, we didnt 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 points 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.