The abandoned Snowy Hydro float will probably generate the biggest
privatisation debate we’ve seen in Australia and talkback this morning
has been full of joyful citizens railing against the sale of any
publicly owned assets.
Therefore, it’s important to lay down a few debate guidelines in
assessing what should be privatised in future and what has been
successful in the past. There’s no doubt that water is the most
politically sensitive asset to sell, with only the South Australians
trying what turned out to be a disastrous outsourcing arrangement in
the mid-1990s. Snowy will ensure the rest of the water industry remains
in government hands for the foreseeable future.
ABC Melbourne’s Jon Faine this morning claimed that the privatisation
of Tabcorp was a great success yet the sale of Victoria’s public
transport assets was a disaster. In my view, the exact opposite is
true. The Tabcorp sale was a disaster because Victoria got nothing like
the full value for the two gambling licences and the privatised company
has brutally targeted Victoria’s poorest suburbs with their insidious
Sure, National Express withdrew from one of the public transport
franchises in 2002, but the whole privatisation arrangement ended up
saving taxpayers at least $500 million because the private companies
all failed to turn a buck despite driving efficiency gains and keeping
the trams and trains running.
IPA executive director John Roskam was trying to argue this morning
that all privatisations have been good because they lead to lower
prices and he cited gas and electricity privatisation in Victoria. This
is absolutely true because the $30 billion Victorian energy sell-off
represented more than full value, totally transformed the state’s
balance sheet and delivered lower prices to consumers.
However, the same can’t be said for bank privatisation because since
the Commonwealth Bank and the various state banks were privatised, an
enormously powerful private cartel has emerged and Australians now pay
more for banking services than virtually any other citizens in the
world. The same applies with Sydney Airport when the Feds happily
pocketed $5.6 billion but have since tolerated gouging that has lifted
its value to more than $7 billion.
However, bank privatisation could well have worked if the Reserve Bank,
ACCC and Peter Costello hadn’t allowed the cartel to gouge away with
its ears pinned back for the last decade, so much so that the
privatised banking assets are now worth about $75 billion yet taxpayers
only collected about $15 billion. Indeed, there were tremendous
efficiency gains after bank privatisation but none were passed on to
consumers so you have to declare it a failure.
Finally, it is important to recognise that some assets perform well in
government hands. Victoria’s Transport Accident Commission should be
running a national monopoly in third party insurance given its amazing
success over the past 17 years and Australia Post has also done
tremendously well under managing director Graeme John for the past