In her terrific book On Speaking Well, former Presidential Speech Writer Peggy Noonan argues convincingly that people ultimately are moved by logic, and you shouldn’t underestimate the intelligence of your audience. She writes:
A good case well argued and well said is inherently moving. It shows respect for the brains of the listeners. There is an implicit compliment in it. It shows that you’re a serious person and understand that you are talking to other serious persons.
Peggy Noonan’s words came to mind when I learned about the Queensland Government’s Strong Choices campaign, which unfortunately doesn’t present the strongest case it could for privatisation. The campaign seems vulnerable to the standard attack that privatisation doesn’t really improve the budget balance because of the forgone earnings (e.g. see John Quiggin’s post The “People’s Budget” that doesn’t add up), and, alas, it seems a bit of a gimmick.
A problem with the campaign is that it appears to assume it is absolutely necessary to cut the State debt by $25-30 billion. Well, in my view, it’s highly desirable to do so, but it isn’t absolutely necessary. The Government faces higher borrowing costs because of its large debt, but the Government is not at risk of defaulting on its debt. The Queensland Government can borrow at a rate of 4.44% p.a. for a ten-year term, which doesn’t suggest the bond market is too panicked about our capacity to repay. (We are, of course, penalised by the bond market for our level of debt and lack of a AAA rating though. Compare Queensland’s borrowing rate of 4.44% p.a. with the Commonwealth’s borrowing rate of 4.02% p.a. for a ten-year term).
The Government needs to explain more clearly why it needs to sell assets. In my view, the two strongest arguments are:
- the assets will be better managed by the private sector, boosting efficiency and productivity across the economy and improving the State Budget (see Brad Rogers’s great post Queensland ports for sale), and
- the Government will save hundreds of millions in borrowing costs every year (through a lower interest rate) if we can regain our AAA credit rating by using the proceeds of asset sales to pay down debt.
I’ve made these points in several posts, including:
It’s not too late for the Government to win the debate on asset sales, but it needs to present more compelling logic. The Government’s current arguments for asset sales are too simplistic and probably won’t persuade the public. The Government should ask the Treasury to produce a solid report presenting the pros and cons of privatisation – analysing in detail the merits of selling particular assets such as energy businesses and ports, directly addressing the question of whether they would be better run by the private sector. The Government should then present this analysis to the public in speeches and informative publications and websites.