Privatisation debate continues

It’s unsurprising that former Queensland Treasury supremo Sir Leo Hielscher supports asset sales (as reported in the Brisbane Times today), given that as one-time head of the Treasury Corporation he was very concerned with actually finding the cash to pay the bills – a practical matter that is arguably more challenging than the more abstract task of preparing Government Budgets. During the financial crisis, Treasury officials in Queensland, and no doubt their counterparts in other States, were very worried about where they’d find the cash to pay the bills – i.e. they were worried about whether investors would buy their bonds. Ultimately the Commonwealth stepped in with a temporary borrowing guarantee and their fears were allayed, but no doubt the concern about the availability of cash is still front of mind for many Treasury officials.

As many readers will know, over the last year or so I’ve been a strong supporter of asset sales, and I will once again present my views at an upcoming seminar for the Queensland Branch of the Economic Society on 23 July:

Productivity and Privatisation – Panel Discussion

My previous comments on privatisation include:

7.30 Qld interview on asset sales

Government should just sell Energex, Ergon and Powerlink

Brisbane Times article on asset sales

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2 Responses to Privatisation debate continues

  1. Katrina Drake says:

    The problem with the current planned Government assets sales, is that the assets are sold to maximize the sale price. The government does everything it can prior to sale to legislate so that the asset is sold as a monopoly, with no competition in the market place, with the sole intention to maximise the sale price.

    This might be good in the short term to get a high price to pay down debt, but it means the consumer pays more in the longer term, as there is no competition for the services the monopoly controls and sells.

    Qantas and CBA were sold at a time when there were healthy competitors, albeit a small number, to guarantee consumers got the benefits of competition after the sale.

    The government strategy nowadays is to legislate and control the market to sell the assets as a high-yield monopoly. Electricity, ports to the highest bidder, with no competitors, no control and little regard for what price the consumer pays after the sales. The government manipulates the market to create this monopoly prior to sale, purely to maximize the sale price.

    You might be able to convince me of the benefits of assets sales, if the assets were being sold into a market where consumers would benefit from real competition.

    Also, as corruption watch dogs are pulled apart, the tax-payer has little confidence assets will not be sold at ‘mates rates’.

    Good luck at the seminar, I am sure you presentation will be riveting !

    • Gene Tunny says:

      Thanks Katrina. These are good points and I will have to try to respond comprehensively in a future post. Broadly speaking, the electricity network and rail lines are good examples of natural monopolies. It doesn’t make economic sense to duplicate them, but because of the potential for monopoly profits it’s important they are regulated. This is why the natural monopolies we have are regulated by bodies such as the QCA, ACCC and AER.

      Regarding corruption, there is certainly potential for it where large sums of money are involved. Hence It’s important we have a strong CMC.I didn’t agree with the recent changes made to it.

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