The still undecided Queensland election has given many of us reason to think about the future of our State, and I’m delighted to publish a guest post from Keiran Travers, a Brisbane-based infrastructure expert, who wonders whether Queensland has kicked the can down the road?
On January 31 Queenslanders made a choice that Asset Leases (or sales) weren’t for them. Anna Bligh and now Campbell Newman have experienced the wrath of an angry electorate. Both results were devastating for the respective premiers and their parties. Where to from here?
In 2012 I felt for Anna Bligh. With economic conditions turning, she led a tired government and went into a campaign with several key ministers announcing that they were not seeking re-election. She was fighting an election alone facing a LNP with momentum.
Three years down the road and the LNP has expensed its valuable political capital on what seemed needless fights and the massive majority was eroded. A stunning turnaround no doubt.
Ross Gittins, the left leaning Fairfax columnist, has written a great article over the weekend about privatisation and more importantly competition (Searching for our salvation in privatisation). He correctly states that the general public doesn’t like or want “their” assets in private hands. I agree with him. He also makes a point about what happens afterwards: “though many people disapprove of selling off government businesses, once it has happened we get used to it pretty quickly.”
I say that the sale of the Port of Brisbane and what is now called Aurizon by Queensland, the Port of Newcastle by the NSW Government and the many airports by successive (including Labor Governments) and Telstra and Qantas really has not affected the daily lives of the average punter. Nearly all of the businesses have improved and are supplying good service. They are competing in a very competitive market.
More importantly these business operate free of government budget issues and restrictions. Since the previous Qld Labor Government (led by Bligh) sold what was then called QR National (now Aurizon), the new company has invested in new infrastructure and widened its asset base. Could this have occurred under government ownership? I think not. Can you imagine the public outcry if a government entity invested in a private port when hospital waiting lists are still long?
A hidden saving of an asset sale is that it relieves the government of excessive capital expenditure on future improvements. For example, the now sold Port of Newcastle can expand using private sector money rather than government money.
However, assets sales, or more importantly losing government ownership and control, is what the public voted against. Another option that now needs to be considered is the New Zealand option of a partial sale. This allows the government to sell say 49% and retain control (and most Board positions), but allows the new company to attract private capital (debt and equity). In effect the government is the key shareholder only, but still an owner and controller, and the business can get on delivering products and services. Are the Kiwis showing us the way (again)? Telstra, which followed a similar but slower path than what was done in New Zealand, is a much better business than 15 years ago.
I have heard that there should be no asset sales anytime. A fair point but where is the capital coming from? Most Government Owned Corporations operate with a ROI of less than 5% so they don’t provide the profit to reinvest in infrastructure. Meanwhile our competitors (other states) are moving ahead, as evidenced by the latest net migration results.
The recent LNP Government ran a poorly advertised but technically sound exercise in 2014 when they asked the public what to do with the $80 billion debt. The choices were sell / lease assets, increase taxes or cut services. Well now we have to cut services or increase taxes. I don’t hear anyone saying they want that. A colleague of mine said to me in 2014 ‘the public want another choice – kick the can down the road and let someone else worry about it”. Sadly this attitude seems to be right.
When a family is under financial stress they can either sell their house or car, get a new job or cut back on spending. The government needs to do the same.
But are we kicking the can down the road? 2015 will be an interesting year.