It’s not surprising privatisation has become unpopular, as it’s common for governments to trade off long-term public interests for immediate gain, says head of the Australian Competition and Consumer Commission.
It’s become “severely damaging” for the economy, ACCC chair Rod Sims told the Melbourne Economic Forum on Tuesday.
Despite having been an advocate of privatisation for the past three decades, the competition regulator is now “almost at the point of opposing privatisation”, he argues.
The culprit is governments wanting a revenue bump to help pay off debt. Too often they make promises that inflate the price of assets by giving the company free rein to squeeze more money from consumers.
“It’s been done to boost proceeds, it’s been done to boost asset sales, and I think it’s severely damaging our economy,” Sims told the forum.
Too many public assets have been sold as monopolies with inadequate regulation to prevent price hikes, he says. Ports have been a big example.“They’re explicitly saying the reason they don’t want to do this or this is it will damage the proceeds they’re getting — It is increasing prices, let’s call it out.”
“So what happens is they become privatised, of course you get these lovely headlines in the Financial Review saying, ‘gosh, what a successful sale, look at the multiple they achieved’,” he remarked.
“Well of course they bloody well did — the owners have factored in very large price rises, because there’s no regulation on how they set the prices in the monopoly. How dopey is that?”
So it’s not surprising many oppose privatisation, given this history.
“I think it’s a serious issue facing Australia, I think it’s damaging our cost structure considerably. And when you meet people in the street who say ‘I don’t want privatisation because it boosts prices’ and you dismiss them — no no, they’re right. Recent examples suggest they’re right.”
Poorly implemented deregulation has had similar impacts.
“We deregulated poles and wires … in 2006-07, almost automatically in Queensland and NSW over five years power prices doubled. Again, not giving thought to where you want deregulation and where you don’t.”
It’s gotten so bad that governments aren’t even pretending not to be fattening up assets before sale.
“Governments are more explicitly now privatising for maximising proceeds, including the Commonwealth. Absolutely including the Commonwealth. They’re explicitly saying the reason they don’t want to do this or this is it will damage the proceeds they’re getting,” he argues.
“It is increasing prices, let’s call it out.”
Former minister for trade and competitiveness Craig Emerson agreed with Sims.
“I’ve probably taken the same journey over the years,” he said.
“The instincts of politicians is to get behind privatisation and say, this is all about efficiency. It’s actually not, the way they’ve implemented it. It’s all about maximising returns to the budget so they can say what jolly good fellows they are for an improved budget bottom line, but unleashing onto the economy unregulated monopolies, which I think has set back the whole cause a very long way.”