Pitfalls of privatisation: ideologues will repeat mistakes

Past lessons demand a pragmatic approach to privatisation, weighing up costs and benefits and considering each case on its merits. Blind faith in ideology leads to costly mistakes.

Government services are on the auction block, and a contestability mantra is ringing out in Canberra. They’re decisions steeped in political ideology, but with management outcomes the bureaucracy must get its head around.

With the assistance of private sector legal and business advisors, two taskforces within the Department of Finance are currently working on $11.7 million worth of scoping studies to assess four candidates for outright sale: the Australian Mint, Defence Housing Australia, Australian Hearing Services and the Australian Securities and Investments Commission registry. The recent Mid-Year Economic and Fiscal Outlook also confirmed Finance would look at privatisation options for the sensitive Intra-Government Communications Network, a web of fibre optic cables between hundreds of government sites in Canberra.

The ICON study will be paid for out of the department’s normal budget and, according to a spokesperson, Finance Minister Mathias Cormann is to make further announcements about it “in due course”. The government will consider the studies and make a decision on each as it crafts this year’s budget.

There’s calls for those studies to be conducted as impartially as possible, given the mixed report card on privatisation — in Australia and elsewhere — over many years. According to public management professor Janine O’Flynn, the research literature clearly shows decisions about whether to privatise or retain an area of business inside government must be made on a case-by-base basis. Nevertheless, it has become a political battleground, with “two very distinct camps”.

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  • roger dennis scott

    There are clear lessons here for the current Queensland election campaign, where the electorate is expected to decide between the devil they know – state-owned enterprises – and the devil which might be in the detail of privatisation. Yet the government still seeks to bribe the taxpayers with their own money to pay for the electoral sweeteners called targeted infra-structure projects.