QR-Aurizon experience shows benefits of privatisation – Steel on Steel is recommended reading

Steel_on_SteelIf you’re interested in the issue of privatisation, I recommend you read a new book, Steel on Steel, published by UQ Press, on the QR float from Aurizon insider Stephen Baines. The book contains an excellent description of the political and economic considerations involved in the float, particularly the important issue of whether QR’s freight business should remain vertically integrated (i.e. keeping the rail lines and the trains together in the one business) or broken up.  There is a solid defence of the decision to maintain vertical integration, which it is argued is the best way to provide incentives for the rail company to invest in capacity augmentations, as may be needed during a resources boom.

I’m also a big fan of the book because of its accurate description of the constraints and inefficiencies that affect government-owned corporations. For example, the 2008 Riverfire party controversy was indicative of the overlay of political consideration that constrained the best management of the railway. As Mr Baines notes in Steel on Steel:

There was significant day-to-day interference by government, and every aspect of the organisation was restricted to some degree by government ownership. The dead hand of government was palpable, and was felt all the way from the operating sites across Australia to the CEO’s office in Brisbane. (from p. 29)

Also instructive is the brilliant description of the perverse workforce culture that can afflict a government-owned corporation:

The old QR could boast many highly skilled people who wanted to do a worthwhile job. It was also home to many who had a strong sense of entitlement and believed the company owed them a living, and indeed a ‘job for life’. Inefficiencies were tolerated or ignored. Materials would mysteriously disappear regularly from storerooms. (from p. 153)

Mr Baines’s book makes it very clear that privatisation has done a lot of good for QR’s privatised freight business, and I expect similar stories of efficiency improvements in years to come as a result of the currently proposed privatisations.

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4 Responses to QR-Aurizon experience shows benefits of privatisation – Steel on Steel is recommended reading

  1. KT says:

    The LNP government needs to (should have) advertised this

  2. Katrina Drake says:

    The LNP are certainly not getting their message across on privatisation. I bought Qantas, Aurizon and Medibank shares are have certainly been happy with their performance since privatisation. Yet I oppose Qld asset sales.

    Why? I think many people are alarmed by Clive Palmers predictions that Chinese companies are cashed up and ready to pounce.

    The LNP is not explaining how our assets will be sold, and who too, and whether Queensland citizen will have the opportunity to buy shares. It is a real problem.

    • Gene Tunny says:

      Yes, I expect existing infrastructure players from across Asia-Pacific will be ready to pounce. There possibly won’t be the opportunity for Queensland citizens to buy shares because the nature of the lease transaction probably means there won’t be a public float. Thanks for the comment, Katrina, and it was great to see you at the event last night with the rest of the Drake Group!

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