Global Policy Forum

By David Fickling

The bus journey from Darwin to Perth takes 51 hours, and in the more remote parts of the outback, mail is still routinely delivered by aeroplane. Australia is a big country, and the services that connect it require big investment.

That's the justification for prime minister John Howard's plans to fully privatise the telephone company, Telstra. It's also the reason that Qantas executives have been pushing for a relaxation of the regulations requiring the airline company to be majority-owned by Australian investors.

The two issues are linked. When Mr Howard gave the cold shoulder to the Qantas board last week, the move was widely interpreted as an attempt to quell fears that a privatised Telstra would go the same way. Both cases have highlighted fears that international ownership may affect the companies' frail footholds in the Australian bush.

Telstra has been spending millions in the past few years improving its service in the outback as it gears up for full privatisation. Rural telephone users worry that a fully privatised company would be reluctant to spend money on such an extensive and unprofitable project.

Similar concerns fuel the desire to limit foreign investment in Qantas. Many feel that majority foreign ownership would lead to a cutback in loss-making bush services to places such as Paraburdoo, a mining town of 1,500 people situated 1,000 miles north of Perth on Western Australia's Pilbara plateau.

Fears of foreign ownership are familiar to any country affected by globalisation, but there is a particular resonance to the issue in Australia.

According to historian David Day, Australians have always seen their ability to populate the empty corners of their continent as crucial to their moral claim to the country. If foreign investment prompts too severe a "rationalisation" of coastal Australia's outposts in the bush, the result could weaken rather than strengthen the nation.

Worse still is the possibility that a foreign company may simply choose to take its investments home in the event of a downturn. Commentators routinely talk about the danger of Australia becoming a "branch-office country", and former prime minister Paul Keating caught the mood of uncertainty most famously in 1986 when the then-treasurer warned that the country was in danger of becoming a "banana republic".

Such concern is not confined to the activities of Australia's commanding height industries. The autarchic desire to shore up the economy is most obviously visible in a stroll through the aisles of a supermarket - preferably an Aussie store such as Coles, rather than feared German newcomer Aldi. On every shelf there are products emblazoned with the Australian flag, with silhouette maps of the country or national emblems such as the kangaroo and koala. Entrepreneurs such as Tom Potter, Dick Smith and Kevin "Big Kev" McQuay have built business empires on little more than nationalistic appeal and their own perma-tanned charisma.

Smith, a sort of Australian Richard Branson who made his first fortune flogging imported electrical goods before turning to record-breaking helicopter endeavours and an all-Australian line of groceries, has long been the most vocal of the breed. His diverse product range includes peanut butter, vegetable oil, cheese and jelly. He is even developing Ozemite, a yeast extract product that he intends to rival Vegemite, the iconic sandwich spread now owned by American cigarette giant Philip Morris.

Such campaigns appeal to the sentimental feelings that lament the sell-off of favourite national foods, from the purchase of Tim Tams biscuits by Campbells Soup to the sale of Cherry Ripe chocolate bars to Cadbury Schweppes. But they are also clearly effective tools of business, with polls showing that more than 80% of Australians think it is important to buy home-owned products. Dick Smith's peanut butter, Tom Potter's Eagle Boys pizza company, and the family-owned Herron pharmaceuticals all gained up to 20% in market share after advertising campaigns highlighting the foreign ownership of their leading rivals.

Defenders of the "buy Australian" campaigns say there is also a more serious intent. They point to the level of Australia's foreign debt and warn that the exchequer is being drained of tax money because of Australian dollars being skimmed off by multinationals. One Dick Smith campaign even claimed that choosing his products would help the government pay for schools and hospitals.

But such activities are not confined to foreign-owned companies. Rupert Murdoch's News Corporation still holds its annual general meetings in Adelaide, but its complex web of international subsidiaries pushes its tax payments well below the Australian average. Between 1994 and 1998 it paid just A$325m (£128m) in corporate taxes, despite raking in profits of A$5.4bn - an overall tax rate just one-sixth of the national rate.

Many analysts have also pointed out that the government's jingoistic policy on Telstra and Qantas gives the flag-carriers the worst of both worlds. Cut off from the protection of state investment, they risk being unable to draw on the wealth available through full engagement with the international markets.

Instead they may have to pay for themselves, largely through Australia's small pool of share capital - meaning that those loss-making bush services will be scrutinised more than ever by the city bean-counters with an eye for streamlining.

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