One the notable things about the Australian economy is how most sectors are dominated by a handful of corporations.
The concentration of Australia’s business power has its roots in the 1980s where the then Hawke Labor government decided the nation’s corporations couldn’t be globally competitive unless they had scale in the home markets, and so a wave of mergers and acquisitions started.
An industry that was particularly problematic was telecommunications. At the time Hawke came to power in 1983 there were three government owned telcos; Telecom Australia that operated the domestic network and the Overseas Telecommunication Corporation which handled the nation’s global links along with a small satellite provider, Aussat, intended for remote access and some defense functions.
David Havyatt at InnovationAus describes the late 1980s thinking that lead to Telecom and OTC being merged to become Telstra, the company that dominates the Australian telecommunications industry today.
The then political troika of Prime Minister Bob Hawke, Treasurer Paul Keating and communications minister Kim Beazley decided allowing OTC and Telstra to merge would give the company global scale, as Havyatt quotes from a policy discussion around 1990.
“A strong vertically integrated national carrier which is able to provide a one-stop-shop for Australia’s telecommunications services both domestically and internationally, providing economies of scale and scope and the prospect of a unified and enhanced international profile.”
Despite the lofty ambitions and a few half hearted attempts to grow global business operations, a quarter century on sees Telstra’s international returns at an almost derisory level.
Dodging global bullets
One could argue that Telstra’s shareholders dodged a bullet – Canada’s Nortel followed the same path and, after early successes, failed spectacularly in the early 2000s.
For Australians in general though, Telstra’s insular focus has been a disaster as maintenance and investments were deferred to make the company’s yields more attractive and the Howard government’s compounding the Labor party’s mistakes in fully privatising the business without breaking its monopoly power.
Which lead Australia into the folly of the National Broadband Network – while the original intention of investing in the telecommunication sector and breaking Telstra’s lock on the industry was a good idea and supported by this writer – it quickly morphed into a massive waste of money and remains so today. If anything, the NBN will only increase Telstra’s market power while delivering more expensive services to the nation.
Missed opportunities
The tale of regulatory mis-steps and dashed political hopes illustrates the failure of Australia’s ‘go big, go global’ policies of the 1980s. Today, Australia is more dependent on mining exports than it has been in more than 50 years while manufacturing and services have actually fallen since the 1980s as a proportion of outward trade.
Notable in the above graph is how in the 1990s it appeared the ‘go big, go global’ was working but by the turn of the century, the combination of the mining boom and the nation’s business elites – particularly in banking, insurance, retail and media – had starting looking at exploiting their domestic markets rather than competing internationally.
While there have been successes such as Westfield in shopping centres, Lend Lease in construction and Brambles in logistics management, the bulk of Australia’s corporate leaders are inwardly focused on extracting maximum revenue from their captive local companies.
Global ownership
Increasingly, those dominant companies aren’t even Australian. The brewing industry is a good example where locally owned beer producers make up less than ten percent of the market dominated by New Zealand’s Lion Nathan and British based global conglomerate SAB Miller. Australians, it seems, cannot even brew their own beer any more.
Australia’s managers have been the greatest beneficiaries from the nation’s failed business policies as it’s insulated them from global competition, life is good when you’re the biggest fish in a tiny pond.
While good for managers, the lack of business diversity competitiveness and insular focus leaves Australia’s economy deeply exposed. The failure of the 1980’s grand vision where Australia developed a cohort of globally leading businesses is one that will be regretted by future generations as they pay higher prices for poorer products.