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Selling off the family jewels

The following is an excerpt from a report on privatisation commissioned by The Unitarian Church of East Melbourne prepared and written by Henrike Brussaard and Bronwyn Price, with the support of Prof. Rob Watts (RMIT University).  It is the first in a series of reports designed “to promote and reinvent the Australian commitment to democracy and equality.”

Into the 1970s the rich paid super income tax and the wealthy paid a wealth tax. Full-time work was the norm and an elaborate system of industrial regulations meant everyone was paid a decent ‘basic wage’ – because that was the law. Governments also invested in and provided basic public services to make Australia a great place in which to live.

Into the late twentieth century, governments owned and provided the electricity and gas supplied to homes. They ran the trams, trains and buses, and supplied the telephone system. Even the universities were seen as public institutions, while Australians banked with fully government-owned banks, including the Commonwealth Bank, providing long term, low-interest mortgages so everyone could own a house. Governments built freeways and bridges. These were all cheap and efficient and met the needs of ordinary Australia for reliable, affordable services.

And then governments and politicians in the major parties were seduced by the new idea that governments needed to step back and allow ‘markets’ to do more and more of what governments had been doing so well. The Age of Privatisation was upon us.

Privatisation is a policy idea that began in the UK in the 1980s and which Australian governments picked up and began to implement in the late 1980s and 1990s.

Privatisation in Australia started with the privatisation of relatively small, government-owned businesses that were active in relatively competitive markets. Allegations made by state Liberal parties and the media in Victoria and South Australia that the governments in these states were either ‘bankrupt’ or ‘sunk in debt’ were used in 1990–1991 to justify a first wave of privatisation. This was followed with the sale of a number of banks and financial institutions by both federal and state governments.

Between 1990 and 2001 Australia engaged in a frenzy of privatisation. The second half of the 1990s saw the start of a long, sustained burst of privatisation in Australia under the Howard government (1996–2007). It was a world leader in privatisation, selling off public assets worth 20% of its total economy over this decade. This compares with countries like the UK that sold public assets worth less than 5% of its economy or the USA that effectively sold nothing.

Between 1987 and 2013 Australian governments sold off public assets worth $194 billion (in constant dollars). The Australian government sold off the Commonwealth Bank, the domestic and international airlines, naval dockyards, defence-related aircraft factories, communications satellite systems, the natural gas pipeline system, the national railway service, serum laboratories, the management of the superannuation fund for public sector employees, and a housing network for ex-servicemen.

In most cases this represented decades or more of public investment by taxpayers and governments in entities such as buildings, factories, trains and buses, power, phone and rail lines owned by public entities that returned high levels of revenue to governments for reinvestment or to meet the needs of ordinary Australians.

We have also seen the sell-off of public airports ($4.1 billion), the distribution and retail arms of state electricity in SA ($3.5 billion), six state insurance offices ($3.1 billion), WA’s Dampier-Bunbury natural gas pipeline ($2.3 billion) and Qantas ($2.1 billion).

This is a lot of wealth that was once in public hands and used for the public benefit that has now been shifted into the hands of wealthy investors and big corporates.

Governments have sold off public assets because politicians, policymakers and many economists claim that selling public assets gives governments a big pot of money that will allow them to increase public spending, cut taxes or pay off their ‘debt’. Here, the word ‘debt’ only means that they have borrowed money to invest in public assets such as roads and bridges, rail, tram and bus transport, electricity and telephone networks, schools, universities and hospitals.

Our governments have also convinced themselves that the privatised services will be more efficient, cheaper and better because they believe ‘competition’ between private enterprises is ‘naturally’ more efficient. Businesses and wealthy people have also spun the value of privatisation, saying it promotes productivity, efficiency and lower prices. These arguments are either largely spurious or are simply not borne out by evidence. In effect, these arguments are really myths.

Despite some excellent research by Australian researchers, little interest and initiative has been shown by governments and other proponents of privatisation to promote careful, evidence-based research into its efficacy for the public good. This is not surprising given that there is very little evidence to support the main arguments advanced by those promoting privatisation.

Rather, we see how corporations and investors have seen privatisation as an easy way to get their hands on very valuable assets and to do so at often rock bottom prices. As Sharon Beder put it:

“The privatisation of essential government services is not about competition and efficiency; it is about the redistribution of wealth and control.

Privatisation is promoted by a group of powerful vested interests greedy for low-risk financial investments, consultancy and legal fees, or banking business. They are aided by business-funded think tanks and economic advisers who spread the ideologically based belief that private management is superior, despite the plethora of examples contradicting this.

Privatisation has become the final resort of governments that need funds but are afraid to tax the wealthy and prevent tax evasion by big businesses. Instead, government assets are sold in a scramble for cash at the expense of ongoing dividends and government control of essential services. Struggling families and small businesses suffer most from the inevitable price rises that follow.”

Apart from the loss of value in the sale process, there have been other major costs, not all of them purely economic. There are strong social, economic, accountability and control reasons for maintaining public ownership and the operation of a range of services. This is because quality public services are the foundation of democratic societies and successful economies. They ensure that everyone has equal access to vital services, including healthcare, education, electricity, clean water and sanitation. When these services are privatised, maximising corporate profits replaces the public interest as the driving force.

Privatisation is a dangerous trend that must be reversed.


34 comments

  1. Jennifer Meyer-Smith

    Good on you, Kaye. Yes, privatisation must be stopped and reversed.

    We have the money to afford public ownership of all public amenities because of our sovereign currency.

    Privatisation has snuck in also because people perceive government departments as being large, cumbersome bodies, which may also be perceived as fiscally wasteful.

    I want to see MORE but smaller government departments with their own separate Ministers each.

    It seriously irks me that such portfolios such as Child Support are lumped in under the same banner of Human Services along with ALL the other important portfolios that deal with the bread and butter issues of vulnerable people on Welfare.

    This is but one example of how greater diversity of public administration will simplify the delivery of the important roles of each department so that each duty is given the weight of importance it deserves.

    Such a concept is ofcourse a win-win for all of us because that would provide greater employment in the public sector and greater run-off to private industries operating as sub-contractors only.

  2. ozibody

    Spot on Kaye! …Now aged 83, I lived through all of what you accurately describe!

    I well recall the pollies I knew, and their general anguish about ‘public apathy’ … lack of any relationship to the business of running the country ….. the growth of Mc Mansions …. the ‘aspirational society’ … ! … etc. etc.

    I well recall the sales pitch from Governments about ‘business’ being better qualified and situated to take over much of Government ‘affairs’, and the public general disinterest!

    So now this is where we are ….. basically stripped of social services.as a consequence! .Let’s not mention Quality of Life!!

    Btw. do NOT lose your Medicare card like I did recently (another story) … and go to your nearest Centrelink/ Medicare office only to be ‘brick walled’ at reception and told to get an ‘app’, go on line, or contact the ‘help line’ … which I eventually did, and waited for 35 mins for an ‘ operator ‘….. who, after the usual security checks advised that the card will will arrive in the mail within 3 -4 WEEKS! … providing the Number in case I needed a Doctor’s service within that time!!

    Plus your ‘ nearest ‘ of the above ( plus Motor Transport office) can be ” Suburbs ‘ away … and far from local!

  3. sandrasearle

    As another older Australian, I too remember just how well off this country was. Privatization has really killed off all of the good local services we used to have (which also used to employ lots of people – full time).
    Turnbull is still blaming Bill Shorten & the ALP for another boat turnback this morning. Warning, warning. warning!

  4. Terry2

    Just received in the mail my ‘how to vote’ card for the Senate from the Queensland LNP. – seems they acknowledge finally that there is no Liberal Party in Queensland.

    Above the line :

    1. LNP
    2. Family First
    3. Christian Democrats/Fred Nile
    4. Shooters Fishers & Farmers
    5. Katter’s Australian Party
    6. Australian Christians

    I’m not kidding, that’s their how to vote recommendation for Queenslanders ; put’s Bob Katter in very dubious company.

    This is going out to every registered voter in Queensland, probably paid for by Parakeelia, so we’re paying for this rubbish.

  5. helvityni

    …I was shocked when I found out that sending a slim paperback book to Europe would cost me over thirty dollars in postage; I decided to add that to the amount I was planning to put on my niece’s bank account. She can now buy a better birthday present herself…. 🙂

  6. Kaye Lee

    The report does several case studies which tell a sorry tale.

    In 2014 the Australian Communication and Media Authority (ACMA) fined Telstra for failing to meet service standards that were a requirement of the company’s privatisation.

    From 1995 to 2012 the cost of electricity has increased across Australia by 170 per cent, an increase four times higher than the rise in the consumer price index (CPI). Over that period, productivity across all workers increased by 33.6 per cent, while in the electricity sector it declined by 24.9 per cent. 

    In 1995 the NSW Fahey government sold the State Bank. The net sale proceeds were as little as $80– 100 million. This was less than one year’s profits.

    And on and on it goes….

  7. Möbius Ecko

    Roads is another example.

    A short time ago one major tolling company stated they planned to have every major road into and out of Sydney tolled in 30 years time.

  8. Jennifer Meyer-Smith

    I live in Victoria and I refuse to pay road tolls in Melbourne.

  9. Max Gross

    The LNP are just working their way through the IPA check list

  10. Pingback: The TPP/TISA Trade Agreements Will Force Australia to Privatise Education – The Indespensable Blog

  11. Pingback: Government Betrayal Revealed as TPP Trade Agreement is Linked to Secret Plan to Privatise Health Care – The Indespensable Blog

  12. Kaye Lee

    The IPA get a mention in the report….

    “‘Project Victoria’ was the initiative of two Melbourne-based, neoliberal think tanks (the Institute of Public Affairs (IPA) and the Tasman Institute) and some thirteen employer groups. Its aim was to develop a radical neoliberal agenda for the Kennett-led Liberal Party. The relationship between Project Victoria and electricity privatisation helps us to see what happens when neoliberal think tanks exercise undue influence over governments.

    In 1992 the Kennett government took the advice of ‘Project Victoria’ and the government broke the SEC-V into five distribution and retail companies, five generation companies, and a transmission company. These businesses were all corporatised and then privatised between 1995 and 1999.”

    They also point out that “expanding the relationship between politicians, policymakers and private business interests actually increases the likelihood of corruption, secret deals and fraud. Private interests put pressure on governments to endorse projects that may or may not be required but that will make big profits for business interests.”

  13. Pingback: TTIP/TPP/TISA Trade Agreements Mandate Corporatism and Sound the Death Knell of Social Democracy – The Indespensable Blog

  14. jimhaz

    I’ll look at that report when I’ve more time – should be interesting.

    The meme being promoted 20 years ago was that private industry could provide services 20% cheaper than the public service. This sort of thing was promoted by the large consultant companies and we have seen just how honest they are absolutely not. By the 00’s public servants had to outsource for non core services whenever they could (includes the big one, IT) – but now that is stretching even further into core services (including OS provision). TAFE is purposefully being ruined in this way – forcing them to tender for government funds.

    In NSW the ALP was actually worse than the LNP – I think due to the Terrigal mob and their strong links into Treasury policy, but Baird being at heart an investment banker will set the high mark I’m sure (already has with planned infrastructure sales).

    Of course what the new service providers do is to offer a cheap initial or upfront cost so they meet the 20% reduction, but the service quality goes down by 20% or often much more as they cut jobs to ensure the 20%. Anything slightly out of scope tends to attract highly inflated charges. Now that they have their hands in the game, when the contracts come up again, you will always find that the 20% has disappeared and there is no saving and the provision of less service.

    The public service used to be fairly spendthrift (if there was a cheap way we’d choose the cheap way), but with the influx of people from private industry, some of which are used to throwing money at a problem to make themselves look successful, and with the loss of in-house expertise due to the horrid executive contract system, you can now class the public service as big spenders.

  15. Kaye Lee

    Ironically, the ad I see on this article is from Energy Australia telling me that if I make a phone call I could cut as much as $340 from my bill. Whatever happened to providing essential services at the cheapest possible price? If they can reduce my bill why don’t they just automatically do it?

  16. totaram

    The ultimate joke on Victorians: Jeff Kennett felt it would be more efficient than ownership by the Victorian govt. if our electricity assets were “privatised”. My current distributor is Jemena. I have no choice because it owns the poles and wires connected to my street. Jemena is owned by the Chinese govt. SP Ausnet, the other distributor is part-owned by the Singapore govt. We have gone from having some of the lowest electricity prices in the world to having some of the most expensive.

    As for selling off medicare, Turnbull keeps saying it’s a Labor lie. Why doesn’t Labor point to the IPA web-site, where it is listed clearly on their agenda? End of argument, I would have thought.

  17. John

    Do you remember the signs all over Sydney in the early 90s that read “Privatisation is for Everyone” as Greiner started on his toll roads?
    And how ActUp graffitied “Nick” over “Everyone”?

  18. Jack Russell

    We could start tearing up sale and contract documents and renationalise everything.

    We could tell the carpetbaggers the game is over and to get lost.

    We could tell them that if they don’t go quietly then we’ll also seize their liquid assets.

    We could also seize the lot and just reimburse the original purchase price.

    We could do that … but will we?

  19. Jennifer Meyer-Smith

    I like your thinking, Jack Russell.

  20. Andreas

    John @ 12.55: Was that not BugaUp?

  21. Jack Russell

    Thanks JMS … and I like the way we think here too. ??

  22. paul walter

    It’s typical Kaye Lee..gets to the heart of it with a properly prepared and executed case presented in unambiguous form. I’m probably just saying it because I feel that way on the issue and it’s always beaut when you find someone else is wondering the same sort of things.

    Atomised folk we are, some things are off limits with press and media, part of the mushroom farm process they implement (darkness, bullshit) that isolates we plebs by means of an information/communication vaccuum.

  23. John Piro

    What ever happened to government serving the interests of the people. If they keep privatising services there will be no point in government existing. What we then get is anarchy! Capitalism in its purest form.

  24. nexusxyz

    The Trade in Services Agreement (TiSA) is nastier than the TPP.

  25. TuffGuy

    One just has to look at electricity as an example of how privatisation does not work. Over the past few years, here in Canberra at least, prices have been increasing annually at around 7% which is miles above inflation. These requests are always approved by government. They claim to require these price rises to purchase wires and poles, provide infrastructure, etc. At the same time they are making record profits? Gas is the same. As too are private health funds.
    And the increases seem to be getting bigger and bigger. Most of our gas is exported at cheaper prices than we have to pay and we are subsidising their cheap prices. And it will only get worse.

  26. Jennifer Meyer-Smith

    Might I suggest TuffGuy,

    you are in a prime position since you live in Canberra, to say it in the pollies’ faces that these privatisation increases to essential services are excessive and exploitative.

    Tell Sussan Ley that private health funds are exploitative. Tell Josh Freydenberg that resources and energy are being exploited by their imported BIG CORP retail energy providers and some other merchants, so that ordinary people are paying more for less than they should.

  27. jimhaz

    I think I agreed with everything in that report.

    The Leunig cartoon was so apt…and sad.

    The survey results were interesting – ample numbers got things right.

    Btw…sure wish more churches were like Unitarian church that sponsored the report.

    “Associated with a free and responsible search for truth and meaning, Unitarian Churches are creedless and non-dogmatic. This liberal and tolerant approach to religious ideas has enabled us to adapt, remaining remarkably relevant in a changing world”

  28. Denis

    Privatization has been the biggest rip off for the Australian public. Before privatization, all Federal, State and Local governments provided real, full-time, secure job for thousands of school leavers every year. Governments have now lost the considerable income these public assets provided governments which helped to pay for our health care, education of our children. These public assets also provided secure, full-time jobs for hundreds of thousand of people who were able to support their families. Now full-time jobs have been largely replaced by part-time casual jobs with no security at all.

    I have been working for the same organization for nearly seven years and I am employed on 12-week contracts and never know if I still have a job until about two weeks before the end of my current contract. I am paid a minimum wage despite needing a Degree and Masters to continue working while the CEO who is one of eight Board members receives and annual salary package of $2.3 million for attending 8 meetings a year.

    I do not know how governments can legally sell assets that do not belong to them, but belong to all Australians who actually paid for them. We have sat back and allowed ourselves to be “conned”. Despite the sale of all these assets, governments are still spending huge amounts of money on god knows what. Their spending certainly is not in the public interest. I firmly believe that at some stage Governments need be buy back our assets or just Nationalize them and take them back.

    As best as I can tell, every public asset that has been sold, has resulted in massive increases in fees that we now have to pay to use these services. We are being price gouged by greedy, large corporations whose only interest is profit.

  29. Zathras

    Privatisation is how the wealthy plunder the public purse by transferring those things built up by taxpayers – usually over generations – into their own hands.

    It’s a dividend granted by the conservatives to their financial donors and part of a global trend.

    The WTO is behind efforts to privatise water assets, particularly in African nations and this will probably be the next big thing to be sold off here.

    Once assets are gone, they are gone forever. Attempts to re-nationalise such things typically end up with military solutions, as the older governments of Iraq and Iran found when they tried to take back their own oil resources.

    Remember when Australia and Botswana were “the only two countries who had fully government-owned telcos”?
    Now were are one of the very few countries who do not have at least a part government-owned telco. Almost every other government had the strategic sense to maintain a majority stake in theirs.

  30. Jennifer Meyer-Smith

    Denis,

    my first reaction is to totally support what you say; however, Zathras has some sage advice and upon reflection, I think if we are going to have national assets, we need to be smarter with the way we set them up and keep them in public ownership for perpetuity.

  31. Denis

    Zathras and Jennifer,
    I am not sure of this, but I think I read some time ago in the US one of the Railway systems were sold to private interest who then made as much profit from the Railway before running it into the ground so that the Government had to take it over again to keep it running.

  32. Hotspringer

    Privatisation also mean the shedding of any responsibility by the regime onto some unaccountable transnational corporation.

  33. Zathras

    Another overlooked aspect of the Telstra saga (for example) was that it was not only previously self-funding but also paid a financial dividend to the government/taxpayer.

    Now if the consumer wants improved mobile coverage or ongoing maintenance for their lines, the taxpayer now subsidises Telstra to provide those services at a significant cost.

    It was sold to establish the Future Fund which is intended to finance only Public Service/Politicians defined benefit Superannuation (not pensioners generally as some assume).

    Not only was it a transfer of a valuable public asset into private hands but also a way to ensure retired politicians are funded in perpetuity.

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