The prime minister has got the praise for
saving Snowy Hydro – and the states have got the bill.

The Commonwealth was the smallest
shareholder and has a strong surplus. It had little to lose. New South Wales’s
busted budget bottom line forced the sale of the state’s 58% holding – and
Victoria followed suit to have a little more for some handy pre-election
largesse. The states are the big losers. Or so the conventional wisdom has
said. Up until now.

The Age reports today that the Bracks
Government is considering legal action against the Commonwealth over the
aborted sale:

Still
reeling from the loss of $600 million he had promised schools through the
proposed sale of Victoria’s Snowy Hydro share,
Premier Steve Bracks yesterday said he had sought legal advice to ensure the
Commonwealth paid for most of the advertising and legal expenses associated
with the deal.

…Speaking
at a Public Accounts and Estimates Committee hearing in Parliament yesterday,
Mr Bracks said he did not know exactly how much Victoria had spent planning the
float, which included the cost of merchant bankers, lawyers, advertising, and
international “roadshow” promotions.

But
he vowed the government would pursue Canberra for most of the bill given
the deal was “stopped in its tracks” by Prime Minister John Howard.

The NSW state budget will be handed down
today – not doubt with some frantic re-writes after NSW residents had $1.3
billion taken from them thanks to the scuttling of the sale.

Finance Minister John Della Bosca and
Treasurer Michael Costa have flagged action of their own. They told Channel 9
over the weekend that the Commonwealth should now buy out the states’ interests
in Snowy Hydro. “If (the prime minister) wants it to stay in public ownership,
the only course of action that seems to me to make any sense is for the
commonwealth to purchase NSW and Victorian shares,” Della Bosca said.

That’s unlikely, but the Feds may find
themselves with less money in their pockets. Investment analysts warn the Snowy
back flip will damage Australia’s reputation as a place to invest and reduce the returns on the
sale of the final tranche of Telstra later this year.
So pain all round.

And what’s all the fuss been over? Alan
Kohler took a nice reality check on Inside Business on Sunday:

There
have been so many lies and half truths in this debate it’s hard to know where
to begin. How about: the water is not owned by Snowy Hydro and selling it will
make no difference to irrigation or to the Snowy River. Or how about: Snowy Hydro
is not a national icon, it is an insurance company that also makes a bit of
electricity… Anyway, life will go on. The timing has ensured that the Victorian
and NSW governments are now scrambling for funds for their budgets. Snowy Hydro
will remain a company and will keep selling insurance to electricity companies
and paying dividends to its government shareholders. The best staff will
probably drift away to other insurance and investment banking jobs and those
left behind will have to eke out some capital from retained earnings to grow the
business instead of issuing shares, but that won’t be so bad. Small earthquake
hits three parliaments – only politicians injured.

That gets it about right – but one
important detail is missing and that’s when politicians get injured, taxpayers
also tend to feel the pain.

Peter Fray

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Editor-in-chief of Crikey

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