NSW Premier Kristina Keneally’s decision to defer the sale of the second tranche of the state’s electricity assets may be an embarrassing backdown – but that doesn’t mean it isn’t smart politics.

By admitting that the second round sale “may well be a matter for an incoming government after the election”, Keneally has turned up the heat on Opposition Leader Barry O’Farrell to make his privatisation position clear.

Mr O’Farrell has repeatedly refused to say whether he supports privatisation of the state’s electricity assets.

Neither advocates nor opponents of privatisation were happy with Keneally’s hybrid “halfway house” model that left generation in the state’s hands but sold off retailing rights. O’Farrell will find it similarly impossible to please them both.

The Liberals’ traditional big business backers want to see O’Farrell pursue the full privatisation model attempted by Morris Iemma and Michael Costa in 2008.

But opinion polls consistently show around 80 per cent of the NSW population are opposed to privatisation. National Party voters in particular are concerned about price rises and service cuts to country areas. The unions would also like to see state ownership continue, as would many in the Green movement.

Influential figures from opposing sides of the debate have welcomed the second round sale delay and hope that the entire process can be wound back so their preferred model can be implemented.

NSW Business Chamber spokesman Paul Ritchie told Crikey that the second tranche was the “last leg of a bad dog”.

“Clearly the government has rushed it to get it out of the way before the caretaker period that starts in four weeks,” he said. “We would like this thing to stop.”

“It’s a process that everyone has condemned. When the business chamber – which has been the biggest supporter of privatisation and private investment in the electricity industry – says not to do it then something is wrong.”

Fierce privatisation opponents Bob and Betty Con Walker, authors of Privatisation : sell off or sell out?, agreed.

Ms Walker, a former NSW Treasury official, said, “We think they should negate the first tranche. It’s such a dud deal that it should never have happened.”

Ms Walker said she had received emails from National Party MPs worried about the impact of power privatisation in their local area.

Both Mr Ritchie and Dr ConWalker disputed Treasurer Eric Roozendaal’s oft-repeated claim that the sale was needed to secure the state’s triple A credit rating.

“It’s not in danger and hasn’t been in danger,” Dr Con Walker said. “And even if it was downgraded the cost is $15-20 million a year in interest payments. It’s a minimal increase on interest rates when you’re talking about a budget of $60 billion a year.”

Mr Ritchie said that the state government could easily negotiate with ratings agencies to keep its credit rating intact by outlining its future privatisation plans.

But such furious agreement will not last. The opponents and advocates of privatisation are welded to long held ideological positions and are loathe to accept any compromise.

Barry O’Farrell has some tough decisions to make before he releases his energy policy next month.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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