Why the Telstra Agreement will haunt the National Party: Lessons from the Democrats’ GST Deal

By Andrew Macintosh and Debra Wilkinson

The deal agreed by the National Party in return for its support for the sale of Telstra is remarkably similar in structure to the deal made between the Australian Democrats and the Howard Government over the Goods and Services Tax (GST).

Under the GST deal the Howard Government made a commitment to invest a large amount of money in a collection of initiatives that formed part of the Measures for a Better Environment package (MBE). These spending initiatives were intended to offset some of the adverse environmental consequences of the new tax system.

Similarly, under the Telstra agreement, the Government has promised to provide over $3 billion to guarantee 'parity of service [and] parity of price' in the provision of

telecommunications services to rural and regional areas. Like the Democrats, the Nationals made the Telstra deal despite widespread opposition from many of their core constituencies.

The Government has reneged on many of the commitments made to the Democrats to secure their support for the GST. An analysis of the GST/MBE deal reveals the following.

· Only a small fraction of the promised funds has been spent in accordance with

the terms of the deal.

· Where funds have been spent, they have generally been poorly targeted and have

led to few significant environmental benefits.

· The GST/MBE deal may have contributed to the stagnation in greenhouse policy

development by providing the Howard Government with an excuse for failing to

implement more effective and efficient policy mechanisms.

· The MBE deal failed to shield the Democrats from the adverse electoral

consequences of supporting the GST.

The Australia Institute; Discussion Paper Number 82 September 2005