The Premier’s interesting comparison of the proposed leasing out of Queensland Government assets to the long-term lease of Hong Kong, which was eventually returned to China, made me think about how important the eventual return of assets should be in Government decision making (see Brisbane Times coverage of the Premier’s comments). Given that very few Queenslanders alive today will be around when the assets would revert back to Government control next century, it seems obvious to me that very little weight should be given to the fact the assets are eventually returned.
In any cost-benefit analysis of the decision to lease out assets or not, the Government should be mostly concerned about the benefits and costs to Queenslanders over the next few decades. Under typical assumptions for the time value of money (i.e. the fact a dollar today is more valuable than a dollar in the future), the value of the returned assets in 99 years time would be relatively tiny, and likely have very little if any influence on the bottom-line result for the cost-benefit analysis of whether to lease out assets or not (see chart below).
The return of assets to the Government after the lease period ends provides some cover for the Government in the privatisation debate, but it really shouldn’t be a major consideration in the debate. The eventual return of the assets isn’t that important from our point of view today, so we may as well sell off the assets and maximise the privatisation proceeds.