Friday, March 22, 2013

Sale means cash for state and better power for people

Privatisation has never been popular electorally.

There is a range of reasons for this.

Many people believe a business that is under political control can be forced to provide services below cost, some feel a sense of satisfaction in shared ownership, and others consider private ownership may unduly cut costs.

In a recent survey published by Essential Media, 58 per cent of Australians disapproved of privatisation.

While ALP and Greens voters were more opposed than average, this view was also shared by 54 per cent of Liberal or National voters.

The survey indicated that Queenslanders were even more antagonistic to privatisation than others.

Similar views are seen in opinion polls across the world.

But, although such polls intimidate governments, there is no case of privatisation policy contributing significantly to an election loss and no case where privatisation has been reversed when a government lost office.

Across all countries — even communist ones such as China — governments have divested businesses they once owned.

In some cases, as with Labor's privatisation of the Commonwealth Bank in 1991, government ownership is recognised as serving no purpose and, instead, hamstringing management.

With the Commonwealth Bank, the Hawke-Keating government needed the money.

Queensland is relatively more debt-ridden after years of unrestrained government spending, a situation similar to Victoria in the 1990s.

Under Jeff Kennett, the Victorian government raised $30 billion from asset sales ($60 billion in today's money).

Electricity accounted for the bulk of this, though it also included gas, ports, trains and forests.

But in all cases, government- sponsored privatisations also recognise the greater efficiency of shareholder-owned businesses.

Government ownership brings with it poor value due to unprofitably low prices to certain customers and featherbedding with unproductive jobs.

Unions support such over-employment in heavily unionised workforces and the Electrical Trade Union has been a major campaigner against privatisation in Queensland, as it was in the southern states.

Queensland's electricity transmission and distribution providers — which own the ''poles and wires'' that deliver the product to homes, shops and factories — are among the few Australian commercial activities remaining in government hands.

A number of reviews all point to Queensland's existing monopoly businesses — Powerlink, Energex and Ergon — incurring higher costs than their counterparts in other states, especially the privatised businesses in Victoria and South Australia.

The Productivity Commission is due to issue a final report on electricity networks next month.

Its draft report estimated the government-owned networks are 80 per cent more costly in terms of dollars per kilometre of line.

The Energy Supply Association of Australia puts the networks in Victoria and South Australia well ahead of Queensland in terms of system reliability.

Examining the Queensland network businesses against suppliers in southern states, the Australian Energy Regulator points out that the Queensland operations seem to require more capital than should be necessary and persistently exceed the spending limits set for them.

Queensland consumers and businesses pay the cost of these deficiencies in higher electricity prices.

But privatisation will also allow a paying down of the debt accumulated through the excessive spending of the Beattie and Bligh Labor governments.

The audit conducted by Peter Costello estimates the sale of the electricity networks would bring in $25-30 billion.

This would eclipse the $806 million the State Government got for selling half its stake in rail transporter Aurizon Holdings and be sufficient to clear enough of the state's debt to restore a AAA credit rating and bring lower borrowing costs, as well as reducing pressures on state taxes.

Premier Campbell Newman considers he has a commitment not to privatise the electricity assets until after another election.

But every delay in this inevitable measure costs the taxpayer and postpones the improved supply that would be delivered to customers.

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