At a BDO economic outlook breakfast I attended at the Brisbane Convention Centre this morning, Treasurer Tim Nicholls announced that the Government would consider asset leases as an alternative to the previously announced sale of the power generators and the (weird) non-share equity interests in Energex, Ergon and Powerlink (see my previous criticism of non-share equity interests in Government should just sell Energex, Ergon and Powerlink). I would prefer the originally proposed sale, rather than the long-term lease of the power generators, because I expect selling them would raise more money and would allow the operators to fully realise efficiency gains. However, leases of electricity distribution and transmission network assets currently on the books of the government-owned Energex, Ergon and Powerlink are probably a better option than the non-share equity interest alternative, which I thought was a weird, slightly tricky financial instrument.
As I’ve commented before, my feeling is that we’d be better off selling all of the assets. But leasing assets over a very long-term (e.g. 50 years) gets us a large part of the way toward private ownership, even if it isn’t perfect and there is always the risk of government interference down the track. The Government is still putting up a proposal that should yield significant efficiency gains (i.e. long-term leases), even though those gains may be lower than if the assets were sold. Unfortunately, Strong Choices was a weak, uninformative and unconvincing campaign (see my post Failure of Strong Choices now obvious), and the Government has had to accept political reality and find alternatives for politically toxic though economically desirable asset sales.
I more or less made these points in my interview with Rebecca Levingston on 612 ABC Brisbane this afternoon: