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Privatisation: Just Who Is It For?

New South Wales is following Canberra’s lead in adopting what the Abbott government is referring to as “asset recycling”, which in practice translates to privatisation, securing 2 billion dollars under the deal.

Abbott’s five billion dollar scheme encourages states and territories to sell assists to fund infrastructure development.

The Baird leadership intends to funnel the money garnered from leasing 49% of the state’s electricity network into road and rail projects, though it is unclear as to whether this will actually take place and if it does, whether the decision is in the public interest.

Proponents of privatisation describe it as conferring a multiplicity of benefits to the public by boosting the efficiency and quality of remaining government activities, reducing taxes and shrinking government. The argument rests on the presumption that the profit seeking behaviour of private sector managers and owners will produce ever more efficient, cheap and customer focused services.

We mustn’t forget that the raison d’être of a business is to provide profit. People do not start up or buy a business for the sole purpose of serving the public, that sort of behaviour is more likely to be found in a monastery than in McDonalds. This basic profiteering function of business is primary in capitalist society, and we often see that rather than being customer or human centric, the businesses that make it to the big time cut corners when it comes to ethics and the treatment of their employees and customers.

It is not unreasonable to assume that the same profit hungry managers and owners the evangelists of privatisation refer to may have no second thoughts about implementing practices that make service unaffordable to large segments of the citizenry. Profit seeking organisations may decide that spending on the disabled or the poor is money wasted, and those affected may find it far more difficult to seek accountability than they would were the services government owned.

It is worth noting that efficiency is not the only goal of services like electricity, healthcare and water. One must also take into account quality, ease of access and sustainability when building a picture of what a successful service should look like.

Privatization was billed under Jeff Kennett’s Victorian government as leading to a more efficient and productive industry, passing on the savings to consumers. Despite Kennett’s comments to the contrary, electricity prices in the state have remained consistent with non-privatised states, only falling below the mean between 2004 and 2008.

There is evidence that companies running Victoria’s electricity services increased prices by up to 175% for “off-peak” periods, a decision which affects a sizeable portion of the populace who conduct their business during those times, perhaps the most notable example being agriculturists and farmers.

The notion that productivity would increase under privatisation has fallen apart, with the industry becoming an anchor on national productivity since the turn of the century. The private sector’s tactic of employing a higher percentage of managers and salespeople has contributed to further bureaucracy rather than having the intended effect of streamlining the industry.

Selling off government assets is typically coupled with the promise of the revenue being funnelled into new and needed infrastructure such as roads and rail networks, however the promise does not always carry through to reality. Economist John Quiggin noted that investment in infrastructure did not occur in Queensland under Bligh’s leadership despite almost ten billion dollars being made from the sale of government assets.

A 1991 report from the Harvard Business Review raised three key conclusions on the issue of privatisation that may help us frame the issue a little better:

1. Neither public nor private managers will always act in the best interests of their shareholders. Privatisation will be effective only if private managers have incentives to act in the public interest, which includes, but is not limited to, efficiency.

2. Profits and the public interest overlap best when the privatized service or asset is in a competitive market. It takes competition from other companies to discipline managerial behavior.

3. When these conditions are not met, continued governmental involvement will likely be necessary. The simple transfer of ownership from public to private hands will not necessarily reduce the cost or enhance the quality of services.

There are hidden costs of privatisation rarely spoken of by the politicians and their friendly counterparts in business. When a public service is privatised, much of the time employees are paid less on average and lose their existing benefits. On the surface this seems like a saving, but the costs of poverty and ill health must fall somewhere, and it seems it’s generally into the waiting arms of another state agency. The profits increase for those at the top of the pyramid, and those underneath carry an ever-increasing burden to support them.

It is also unclear as to whether privatisation actually does save governments money, with a study by the Project on Government Oversight finding that in 33 of 35 occupations, using contractors cost the United States Federal Government billions of dollars more than using government employees.

This seems yet another example of cosy relationships between politicians and businessmen taking priority over the wellbeing of the public. A more thorough, nonpartisan investigation into the history of privatisation in Australia, a cost benefit analysis and a public debate over the issue would go some ways to clarifying the relationship of privatisation to the people it affects.

This article was originally posted on the author’s blog, which you can find here.


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  1. Rosemary (@RosemaryJ36)

    All of us need a roof over our heads, some form of power for lighting, heating, cooking, etc, access to effective health services and equality of opportunity in accessing a good education at all levels.
    We do not all have these necessities and one function of any government should be to limit as far as possible the number who are deprived of any of these necessities of life.
    Paying taxes and levies which are calculated to enable the government to achieve that aim is acceptable as long as the burden is shared equitably.
    Privatisation ensures that shareholders in the private companies providing power, health services etc receive income from the profits made by the companies. This is achieved without their having to do any more than let their money do the initial work in establishing the business. Meanwhile, without competition, those actually working in the business usually earn less than if it were conducted by government.
    Thus governments MUST NOT privatise essential services and SHOULD be prepared to subsidise low cost rental housing while providing power, medical and hospital services as well as schools and universities.
    .The taxes and levies used in this process are actually an investment in the future of the country.

  2. flohri1754

    @Rosemary …… my feelings and beliefs exactly …..

  3. flohri1754

    I like the caption of the photo … “NSW Premier Mike Baird” (and someone otherwise unidentified behind him …. most probably nodding his head in unison with whatever the NSW fellow was going on about …..)

  4. M-R

    Maybe you should write a post or two, Rosemary ? – you’re certainly sufficiently good with words|ideas ! At the moment, Kaye needs some backup, or her typing fingers will drop off (and her jammies wear out !) … 🙂

  5. musicinhills

    I just love the PPP, Private Public Partnership, that’s where the Public pays the maintenance and the Private company makes the profit, but I must have it wrong some were because I am either lying, cause I’m a fuken leftie
    or I am against any one making a profit etc.

  6. Harquebus

    Privatization is socialism for the rich and capitalism for the poor. Where the rich get all the profits and other classes pay for all the losses, including to our environment. Aka Fascism.
    Vital infrastructure does not belong if private hands.
    Wholeheartedly agree with the author and will be passing this article along.

  7. Kyran

    The propensity for disconnection in the ‘privatised’ model rates a special mention. It also just happens to demonstrate points 1, 2 and 3. Down here in Victoria, these have been highlighted in recent reports detailing extraordinary increases in the rates of disconnection of gas, electricity and water. As Rosemary pointed out, these are essential services.
    “We mustn’t forget that the raison d’être of a business is to provide profit.”
    Another great observation. But the business of government is to ensure the minimum standard for everyone. And Music, if it’s going to be PPP’s forevermore, why are the public excluded from the negotiations? How have we slipped so far?
    Thank you for the read, Mr Marsh. Take care

  8. Florence nee Fedup

    Asset recycling is Abbott speak for selling assets off. If states do not do so, there will be no Federal money. Hockey will pay bonus for every asset sold. All in last budget. VIC/QLD worked it out. Are we going to let ourselves be fooled. Heard talk of privatising hospitals/ One of Abbott’s pet beliefs.

  9. Florence nee Fedup

    Abbott and his ilk want all in the private sector. That includes all health, education, skill training, employment agencies, infrastructure, prisons. health insurance, super and anything else one can think of.

  10. diannaart

    Indeed Kyran, as a fellow Victorian I can commiserate.

    Is there anywhere in the world where privatisation of public necessities has worked in favour of the consumer? ….. Didn’t think so, yet we are expected, time and again, to vote in favour of such obvious profiteering by big business in collusion with government.

    People in NSW – you don’t have to be treated like sheep – do not vote for a neo-con government – all you get is conned.

  11. :Lyle Upson.

    business requires competition, so what is with this nonsense of selling monopolies ???

  12. Florence nee Fedup

    I can still remember back to when the express way was built from Wyong to Hornsby. Built with the state borrowing money, paid off by a tool worked well.

    PPP, Private Public Partnership seem to have many problems.

    With interest rates so low, maybe government borrowing maybe by bonds is the way to go. Worked in the past, why not now. We own the roads from day one.

    Harbour Bridge built the same way. Opera House and hospitals from lotteries.

    Do not have to sell off family silver to invest in needed infrastructure.

  13. stephentardrew

    Well lets just look at this private sector efficiency. Now after the GFC the banks received quantitative easing. Rather that help stimulate the economy they initiated share buy backs rather than investing in expansion and employment. The wages of boards were inflated as masses of people lost their houses and became unemployed. Meanwhile venture capitalist buy up companies, break them up, cream of the benefits and resell them as leaner, meaner employers of minimum wage workers. We in Australia went into debt stimulating the economy which worked a treat until this mob decided to destroy the economy with austerity. Now we have deflation and are selling off the public assets to the greed mongers. A housing bubble is growing and we could well end up with another collapse. Trust me I couldn’t possibly repeat my mistakes again, and again and again could I?

    People are you listening and watching?

    Meanwhile we loose capital assets from the balance sheet and profits that are returned to treasury or for reinvestment in maintenance and expansion. What a wonderful success selling off the energy sector has been for consumers. They just ripped off our great five hundred dollar benefit for removing the Carbon Tax. See how energy prices fell as they became more competitive? Planet warms up so we need more energy to deal with climate extremes. Its win, win all the way for the corporations and lose, lose for consumers.

    As for all those lost jobs which now become contracted employees that works well for nobody but the energy sector.

    Nah let’s just sell off the crystal for zilch and let the rewards go to the already well healed one percent.

    Now would the private sector buy public utilities unless there were substantial profits in it for them and greater losses for us?

    But no we are just the uninformed public sheep who need to be herded into the great prison of the one percent.

  14. crypt0

    As someone once said …
    “White man in suit ALWAYS speak with forked tongue.”
    The first mistake you make is to believe a single word they say.

  15. @RosemaryJ36

    I did try to sum it a post but I don’t think I succeeded

  16. stephentardrew


    though your post was great.

  17. Harquebus

    Quite often I hear people say, “Why are they selling that? Are they stupid or what?” and I have to reply, “No. They are not stupid, they know exactly what they are doing.” The bastards will screw their dead mothers if they don’t bury them quick.

    Something I came across a while ago.
    “Private industry is not going to step in and save people from drowning, or help them rebuild their homes without a solid profit.” In order to stay afloat as a nation we need each other, not savvy businesspeople who presume to tell us all how to be rich. We can’t all be rich. We just want to keep from drowning.

    Something that I came across recently.
    “We need to deal with the narcissistic sociopaths and psychopaths who have slithered into power positions in church, state and industry and take back the high ground of bottom-up values that embrace the consciousness that we are all connected to each other and to the ecosystem”


  18. O'Bleak

    Government of the rent seekers. Bought and paid for; so cough up. Privatisation of public assets has been demonstrated time and again to be nought but a means of stealing from the public to feed the ever growing appetite for the free lunch by business. In this instance Abbott’s government wishes to curry favour with its’ political supporters whilst attempting to appear to be the great infrastructure builders of the age by taking what we already own and replacing it with a damn sight less.( Anybody remember what we got in exchange for Telstra?). Business loves the exercise. Gets a great profit making enterprise to squeeze and then makes additional fat profits building the new stuff. Yahoo! What’s not to like about a deal like that? Unless you’re the muggins who foots the bill. That’s you and me folks. Wonderful isn’t it.

  19. Kerri

    Privatisation of public assets should be legislated as only possible after a successful referendum.
    They are our assets we should decide if they can be sold?

  20. Zathras

    After all the misleading bleating about “leaving a mountain of debt for our children”, politicians are happy to flog off their legacy – entrusted to us by our own predecessors – for political reasons.

    It has nothing to do with economics but everything to do with ideology.

    This is an International push instigated and promoted by the World Bank who offer indebted nations interest breaks on their loans in exchange for privatising natural resources such as water supplies.

    Locally it’s a way of transferring public wealth into private hands.

  21. Tony Rabbit

    I recall a time, not so long ago, when a utility would give a few days grace to pay one’s bill, before sending a reminder notice (or two).

    Now these privatised monopolies immediately add a late fee and, almost as quickly, a disconnection notice. Hence the reason for the increase in disconnections being seen in Victoria.

  22. Rossleigh

    The basic proposition of privatisation is that some private company can run something more efficiently, provide the same level of service for less cost and still make enough of a profit that it’s shareholders wouldn’t make more money investing the money in a term deposit.
    As a government, anyone who is saying that somebody else can run something we own more efficiently and cheaply, provid the level of service and still make a large enough profit as a return on their investment to make it viable, is virtually telling you that they’re too incompetent to manage a chook raffle.

  23. Colin

    Privatisation of public utilities does not work and is not in the Public Interest – nor does it save money in the long term and consumers are the big losers – FACT!

    PROOF – John Howard progressively sold off Telstra – not just the end of line services and technologies, but the whole box and dice, including a monopolistic network that was decades in the making (and the condition of the POTS network proved that).

    Initial Impact – we immediately lost the legislatively assessed community service obligation which underpinned the requirement to supply a ubiquitous service (including network expansion and improvement). This was replaced (usurped) by a new priority – private enterprise shareholder dividend.

    Subsequent and Current Impact – we now have Telstra who is all but completely focused on 90G (or whatever we are up to now) in CBDs which, for country folk, is as useless as an ashtray on a motorbike!

    Additionally, we have the farcical, unprofitable, wasteful and inefficient role out of networks by each major Telco with Optus and Vodaphone (as the two main alternatives), desperately trying to play catch up.

    Case in point – I live in a Great Southern WA town and cannot get decent Telstra coverage, so I write to Telstra and undertake all their pro-forma processes, finally culminating in a high gain antennae test – only to find out (no surprise) that the signal attenuation is too great for a high gain antennae. So I write to Telstra again, and what reply do I get? “That we have no plans to expand the network at this time.

    Next step, the wonderful “Black Spot Program” – their response? Contact your local politician or the media! So we have a political initiative telling me to contact other politicians.

    But, the damning element here is the term “We’ll Fix The (mobile) Network” promulgated by the same side of politics that broke it in the first place! So no, privatisation does NOT work and is not in the public (voters) interest – Case proven!

  24. jimhaz

    Note also the treachery that Baird is playing with this privatisation.

    Firstly, they say they are only going to sell of 49% to give the illusion half the profits will remain in State Gov hands – you so it “aint so bad and not risky”.

    We all know that is a trick for full privatisation later on.

    Secondly, he is calling on Allan Fels to assess whether prices will rise due to privatisation. Although I once liked Fields, what I noticed was a decline in consumer protection during his reign. He did a lot of winging but no real action, even with something as clear cut as petrol pricing. I don’t think he is smart enough to properly judge. More than that though is the time period. Companies purchasing government assets all give lower pricing guarantees and tend to achieve them – but only for about 2-3 years. After that prices start to rise rapidly so that there is no gain.

    Thirdly he is phrasing the lease as rent to make it appear more short term in nature.

    Lastly, Abbotts offer of billions to outsource is bribery – 2 billion in this case. It is forcing adherence to their ideology. Either the asset sale stands up without this money or it does not.

  25. Martin

    I work in the Victorian power industry. Saw it move from the pubically owned SECV to a corporatised then privatised industry.

    Most of the assets were sold to foreign companies, some of which are owned by foreign governments. Take SP Ausnet (as it was then called) as an example. Owned by the Singapore government, this means that all profits are moved out of the country. And they also participate in tax minimisation schemes such as “transfer pricing”.

    So, once, the SEC used to provide a reliable, cheap and reasonably efficient power service for Victorians, now we all suffer from massive energy bills, no more training for apprentices (the SEC was an excellent, world class training provider) and the government no longer receives dividends from the industry.

    Yeah, privatisation sucks, big time. PPPs are just as bad too. Take the desalination plant. Melbourne Water should have been able to construct and operate it. We can argue whether or not we need it (we will one day soon), but what’s not in doubt is the dodgy and scandalous way that it was built and funded. Foreign owners get massive payments for nothing. Whereas, if Melbourne Water owned it then whatever debt that it accrued to pay for its construction could still be shared amongst consumers, but at least ALL of the money would be returned to Victoria, not to Belgian or French governments and shareholders.

  26. Kyran

    Good points, Martin. The Singaporean government decided nearly twenty years ago to invest in foreign infrastructure, noting the tendency of western governments to sell off ‘assets’. They bought into many countries and are continuing to do so today. When the bushfires went through Victoria and Ausnet were implicated by way of poor maintenance on infrastructure in rural Victoria, the parent company started investigating ways of transferring the assets of the company to another entity to leave the potential liability with a shell company. As far as I know this did not occur and they recently settled in a large class action. They seemed to be operating from the Hardy’s play book.
    During the 90’s, I was involved in discussions with VicPol (on behalf of an industry group) to enhance the co-operation between the private security industry and VicPol. During the early part of the talks, the senior Police started referring to various units within VicPol as “Business units”. When we questioned them on this change of terminology and it’s likely result of changing attitude of policing from providing a service to running a business, they were nonplussed. The emphasis of much of the remaining talks was on cost benefit analysis (conversations went for longer when we could demonstrate to them a cost plus or neutral cost scenario for VicPol). It became evident, after some time, that the desire was to shift security costs to the private sector (and, ultimately, consumer) rather than to streamline the provision of the services. I am not a big fan of this thinking, or lack thereof.

  27. Bruce R Whiteside.

    I was interested to read the comments of Rosemary. I am a New Zealander, who will turn 81 next week. I have lived in this country since 1979. I am convinced that most people when they go to the polls to vote they have no real handle on the value of what they hold in their hand. I am at the moment reading a book that every child in this country should be compelled to read from cover to cover. It is entitled the Big Bust and its author was a big man who was surrounded by equivocators who bowed to the dictates of the bondholders of Mother Britain. His name, known doubtless to many of the older generation was J T Lang. So well written that is hard not to put yourself inside the bodies of the poor wretches who endured the Great Depression. I have always maintained the Conservative elements of politics have the ‘born to rule mentality’. To read Lang’s account and to see the champions of Labor wilt in the face of outrageous compounded debt, whilst he stood as a barrier makes any politician today look like apologies for men and women. Of course as a New Zealander born at the end of the Depression my recollection’s of hardship are lost in time, but I do have one very vivid memory of a Minister of Railways and Works a dry tall New South Welshman in the image of your Jack Lang, a Bob Semple making his valedictory speech in the New Zealand Parliament. He was recalling in 1949 the hardships that he and his people suffered compared to those of a few years later. He said this and it is etched into my memory ; ” The only time the worker thinks is when he is wiping the tears from his eyes with the flap of his belly.”

    I would urge all who take what is happening today and read this thought provoking narrative. Lang may well have been a maverick, but he was a giant in more ways than one.

  28. Wally

    @Martin spot on as an electrical industry employer I can confirm that everything you say is correct and add my 2 bobs worth. As well as keeping prices lower the SECV made a profit that was returned to state government to fund infrastructure. The skills developed and technology advancements were second to none, high voltage distribution from a central generation area (Latrobe valley) was a world first, the technology was pioneered by the SECV. Private power companies by comparison do nothing that does not return a profit, they have no vested interest in our economy or developing a skilled workforce, as far as corporations are concerned they are bottom feeders who will only service their own needs.

    Then we can look at the charges to consumers when they need to have work done on their property; service truck visit in 2011 was $212 is now over $450; pit installed to connect power was free $0 and now cost minimum of $2000. We pay nearly $100 a quarter for meter and line maintenance but they claim the increases in power charges are due to maintenance/repair/improvements to infrastructure. Seems that we are paying the same thing twice? As Martin stated these International companies are very good at sending their massive profits overseas without paying any tax, in fact they are that good at sending money off shore it comes out of the till before tax so it doesn’t even appear as profit on the balance sheet. If I was too do anything like this with my companies funds it would be embezzlement, tax avoidance, money laundering, fraud or theft, they would lock me up and throw away the key!

  29. totaram

    Well, it was Jeff Kennett who “retired debt” by selling off the SECV. He still appears in public and gives us his wisdom on some topic or the other, without any hint of shame. “Retiring debt” is the mantra which is raised again and again by the neocon politicians, and in spite of clear evidence that it only impoverishes the state (by raising costs to the population — an indirect tax actually), they are still at it today. What is more, there are still poor mugs who believe this rubbish and vote for these crooks. I am glad that people here are confirming that privatising something that is a natural monopoly does not make it more efficient, but just increases costs, because the costs of capital to a private entity are always higher than they are to any reasonably well governed state. I hope the voters of NSW will understand this and put the coalition last.

  30. Rob Marsh

    Thanks everyone for your comments, they’ve all been insightful and Wally and Martin’s experiences in the power industry seem to go a long way to confirming that the negative effects of privatization are not simply theoretical.

    Hope to see you all around 🙂

  31. Paul Gerard O'Brien

    With the electricity industry ” sell off ” in NSW why haven’t people been informed about the number of workers in that industry that have suffered and are still suffering from depression , and also , much to my disgust , disappointment and suffering , the suicides that have occurred over what I consider to be the bloody minded slashing and the name of job descriptions changed where extra work ( from other areas ) had been added and the wages remained the same . The unseen pressure and the lack of information and the fact that one man that was put in charge of the whole , what I call ” THE NEW REGIME ” and given total control over the situation and answering only to the share holders ? of the industry . Very heavy handed tactics by those didn’t have to answer to virtually anyone but themselves . Whoever implemented this from the start should have to answer for the total failure of their duty of care and for letting the situation get to the stage where employees took their own lives . I personally told company safety officers at least 6 ( six ) months before the first suicide that if something wasn’t done about the total lack of morale within the whole of the company ( Ausgrid ) that people would die , nobody seemed to care . I’ve since had to leave the company, I was a National Serviceman , that didn’t break me but unfortunately the company did . I am informed that even though the ” ONE BAND MAN ” has gone there are still people there that are on ” the edge ” because of the way that things are still being approached , so what do I do now , I have been told ” to let it go ” , that’s like telling someone with depression to ” get over it ” . Someone out there , surely , must have the power AND the GUTS to stand up and ask questions .

  32. jimhaz

    Kaye’s NBN-Telstra problems are a direct result of privatisation – it seems to be due to organisational division and no one taking ultimate ownership of the need to provide a solution. The privatisation has lead to systems complexity.

    The current milk farmers going broke problem is a direct result of deregulation – if the Milk board still existed, there would be no way Coles and Woolworths ILLEGAL AND IMMORAL contracts would be allowed.

    The death of that asylum seeker with the infection was possibly due to privatisation – it lead to the gov not having the right system in place to rapidly deal with the request for transfer.

    To me CSL has been the sole successful privatisation. The CBA was successful, but the unintended consequences in the hyena like behaviour of the private banks have negated that success.

  33. diannaart


    No advantage for public that privatisation was followed by deregulation…

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