Australian Competition and Consumer Commission (ACCC) head, Rod Sims, has warned that the recent spate of asset privatisations undertaken across the country have not been in the national interest because they have tended to lessen competition in key markets, harming consumers and stifling the economy’s productivity. From The AFR:
[Sims] said he was now “almost at the point of opposing privatisation” because state and federal governments were becoming increasingly blatant about structuring sales to maximise proceeds at the expense of competition.
“I am getting more exasperated. I just think governments are more explicitly now privatising to maximise the proceeds – including the Commonwealth,” he said…
“They are explicitly saying the reason they don’t want to do this or this is that it’ll damage the proceeds they are getting. They’re not even playing the rhetorical game any more.
“I see it getting worse. I think a sharp upper cut is needed in this area. That’s why I am saying, ‘let’s just stop the privatisations’. It is increasing prices – let’s just call it out”…
“I believe it’s severely damaging our economy,” he said… “I think it’s a serious issue facing Australia. I think it’s damaging our cost structure considerably.
Sims specifically singled-out the sale of ports, the deregulation of power poles and wires, private provision of vocational education and training, and proposed road user charges as examples of poor privatisations.
The first rule of any asset privatisation should be that it boosts competition within the relevant market, and at a minimum does not lessen competition. But as Sims notes, most recent privatisations have broken this golden rule, placing achieving a heavy sale price (or fees) above the interests of users, in turn stifling competition and productivity.
The Coalition Government’s policy of providing states with financial incentives to sell-off their assets (“asset recycling”) is particularly concerning since it presumes that private ownership is superior in all cases, rather than basing decisions on objective economic criteria, on a case-by-case basis, and ensuring that adequate regulatory frameworks are put in place first.
Indeed, the Productivity Commission’s (PC) report on the provision of public infrastructure, released in 2014, noted that the Coalition’s financial incentives to the states (“asset recycling”) “could act to encourage privatisation in circumstances that are not fully justified and encourage the selection of new projects that do not have demonstrable net benefits”.
The Coalition’s privatisation agenda also raises broader questions about non-stop population growth via high immigration. That is, the main reason why the states are looking to sell-off their major infrastructure assets is to raise the funds necessary to overcome infrastructure bottlenecks caused, to a large extent, by their own population growth fetish (chicken meet egg).
Surely, a more sensible approach would be to dramatically slow the immigration intake, alleviate pressures on infrastructure, and overcome the need to sell-off assets and build new expensive projects?
