Entry No.03c

IT Writers Awards

A $1.3 BILLION revenue bonanza from the ``new economy'' sale of mobile phone airspace yesterday has boosted Howard Government coffers, as economic growth continues to outstrip official forecasts. The view that Australia has shifted from the farming and mining-led ``old economy'' to the ``new economy'' was promoted yesterday by Peter Costello. ``I just want to make the point that on the empirical evidence, the Australian economy is a very technologically sophisticated economy,'' the Treasurer said. ``The uptake of new technology in Australia is very quick and very widespread by world terms.' But the unexpected boost from the spectrum auction undermines Mr Costello's campaign to rein in expectations of a big-spending Budget for regional Australia.

Mr Costello said new figures showed economic growth this year would exceed the Government's 3.75 per cent forecast, improving the Budget bottom line by as little as several hundred million dollars. He warned that the Budget position remained too finely balanced to permit big spending on the bush, following suggestions the Government was considering a multi-year, $1 billion package for regional Australia. ``There's a cut in tax -- and another word for that is fiscal stimulus -- of around $5 billion to $6 billion and that's what's got to be funded in this particular Budget, and it doesn't leave room for great new spending,'' he said. Playing down evidence yesterday that the economy grew by a hefty 2.7 per cent in the first half of 1999-2000, Mr Costello said low inflation had reduced the Budget windfall from stronger-than-expected growth and the boost to tax revenues would be ``down near hundreds (of millions)'' rather than the $1 billion mark. However, the Government's auction of spectrum that closed yesterday resulted in four companies -- Hutchison, One.Tel, Telstra and Vodafone -- paying a total of $1.327 billion, the biggest price paid in the world in a spectrum sale. 

The prices paid for spectrum in the latest auction staggered observers and forced at least two bidders -- Optus and Primus -- to drop out of the bidding. Hong Kong company Hutchison has spent more than $670 million and One.Tel splurged $523 million, with both buying licences to operate in all five markets up for sale -- Adelaide, Brisbane, Perth, Melbourne and Sydney. Telstra and Vodafone have also bought licences. 

The spectrum is expected to be used mostly for mobile phones, including the next generation of Internet-capable handsets. Last year's Budget contained no forward estimates of the proceeds, partly because the Government did not want to alert bidders to the expected value. But the last auction of a smaller amount of spectrum netted about $350 million. Mr Costello's warning on rural spending came after Treasury secretary Ted Evans pointed out that parts of the bush were prospering during the current record-breaking period of economic growth.

Mr Evans said the current period was one of Australia's best on the growth front, but was not uniform. ``Some parts of the bush are doing extremely well, but not others,'' the federal Government's chief economic adviser told a Sydney audience on Tuesday. December quarter national accounts published yesterday by the Australian Bureau of Statistics showed GDP expanded by 1 per cent in the final three months of last year, and by 4.3 per cent through the year to December.

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