Editorial: First step in wiring economy

Budget day brings any Government publicity it could not buy. Today, no matter what the Budget contains, it will lead tonight's new bulletins and be dissected and discussed over many pages in tomorrow's newspapers. Budgets compel attention in a way that even election campaigns cannot, because Budgets are about action rather than words. They are the moment when a party in power must put its money where its mouth is.

Or, if money is not the solution, it can use its power to regulate or liberate economic resources in a way it believes will improve the national welfare. Either way its actions, or lack of them, will speak louder than all the fine words Finance Ministers try to deliver on the day they command the country's undivided attention.

The centrepiece of today's Budget was to be a very significant strategic step: the compulsory opening of Telecom's line network to competitors. But that decision was leaked and Michael Cullen has led us to expect little else of interest, certainly not tax cuts. So the regulation of the line network might still be the most important feature of this year's financial statement, but maybe the decisions will not be confined to telephone lines. The national electricity transmission grid presents the country with a contrasting problem.

Line networks are natural monopolies. That did not deter the previous Labour Government from selling Telecom as a complete package. When it came to opening the electricity supply to private ownership, however, National separated transmission from production and consumer services and kept the grid in public ownership. That has given the competing providers of electricity the equitable distribution that Telecom's competitors have been denied. But public ownership has presented the opposite problem.

The national grid has not had the investment it needs. Bottlenecks have developed at several points in the system and the lines to Auckland, in particular, need increased capacity. The state operator, Transpower, wants to erect giant pylons for that purpose across the Waikato landscape. The plan is opposed by the Electricity Commission which has assessed it against the possibility of generating more power closer to Auckland. That would be an option for an integrated service provider like Telecom but Transpower's brief is to be a carrier for electricity generated by others.

In short, neither complete privatisation nor public ownership of a line monopoly has produced both the competition and investment desired. Telecom has maintained investment in the network but discouraged competition, while the "unbundled" electricity supply has produced plenty of price competition but insufficient investment in the network or in alternatives to hydro generation.

The present Government has already put the power supply under closer co-ordination by establishing the Electricity Commission. A similar supervisory agency may be considered for the telephone service to ensure investment is maintained once the transmission network has been opened to competition. But it is easier to state the objective of regulation than to devise the precise powers and incentives needed to achieve it.

This Budget should be about wiring the economy best for the "transformation" the Government continues to talk about. The shock already delivered to Telecom and its shareholders is just the first step. We hope to see signs of progress on the finer points of ensuring we get maximum value from our vital arteries.